Community Bank posts loss for fourth quarter

Community Bank of Nevada on Monday reported an abrupt turnaround in quarterly earnings -- from $1 million in third quarter profit to a $133.3 million loss in the fourth quarter.

The fourth-quarter loss included $103.8 million in goodwill, which is considered an intangible asset.

The goodwill stems from the premium that the $1.8 billion-asset Community Bank paid for banks in Nevada and Arizona over the banks' value as reported on accounting books, Larry Scott, the bank's chief executive officer, said Monday. Writing off the goodwill doesn't affect cash or tangible equity and the bank remains well-capitalized, he said.

"We went into this economic storm with an excellent strong capital position," he said. "We have taken the brunt of the storm and are still well-capitalized."

"There are very few banks in the country that will be left with goodwill on their books," Scott said, referring to the economic downturn.

In the last few years, the holding company acquired Bank of Commerce and Valley Bank in Nevada and Cactus Bank in Arizona.

Community Bancorp, the Las Vegas-based holding company for the bank and a similarly named bank in Arizona, will issue a statement on fourth-quarter results when it gets final numbers on the goodwill figure from outside consultants, Scott said. He expects the holding company to file a report with the Securities and Exchange Commission and a financial statement by Feb. 15, he said.

At that time, the holding company will consolidate financial results for the holding company and the two banks.

The bank and its sister bank in Arizona are required to file financial reports with federal regulators within 30 days of the end of each quarter, and the banks filed reports Friday.

Community Bank of Arizona lost $2.4 million in the quarter but left $9.9 million in goodwill on its balance sheet.

The Nevada bank reported that commercial and industrial loans past due more than 90 days increased to $11.8 million from $3.4 million at the end of the third quarter. Commercial and industrial loans past due between 30 and 89 days, however, decreased to $2.5 million from $12.2 million three months earlier.

"Certainly there has been an inordinate amount of defaults among borrowers, particularly land borrowers," Scott said.

Community Bank, which has helped finance growth in Southern Nevada, understands the difficulties that residential and commercial builders are encountering, he said.

"We have been aggressively but fairly collecting (on loans)," he said. "In cases where necessary, we have foreclosed."

The Nevada institution increased its loan loss reserves to $53.7 million from $31 million in the third quarter. The bank made adjustments to reflect new appraisals of collateral to be conservative in the current economic conditions, Scott said.

The total amount of construction, land development and land loans dropped to $666 million from $727 million in the third quarter in Nevada.

"There are very few new loan application opportunities, and we have converted a number of properties from loans to real estate-owned (through foreclosure)," he said.

Community Bancorp Chief Executive Officer Edward Jamison previously expressed interest in obtaining a loan from the federal government through the Troubled Asset Relief Program. Scott said the company was not disclosing whether it applied for TARP money but said the company is considering the negatives and positives of various sources of additional capital.

Shares in Community Bancorp fell 28 cents or 10.4 percent Monday and closed at $2.42 on the Nasdaq National Market.

Western Alliance Bancorporation, the Las Vegas-based holding company for Bank of Nevada and institutions in Arizona and California, on Friday reported a net loss of $148.3 million, including $75.3 million in charges for securities and a goodwill charge of $59.6 million. Net operating losses decreased to $12.2 million (excluding one-time charges), down from a loss of $13.9 million in the third quarter last year.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.