Western Liberty posts third-quarter loss

Western Liberty Bancorp, the holding company for Service1st Bank of Nevada, said it lost $6.9 million, or 46 cents a share, in the third quarter.

The Las Vegas-based company attributed the loss to a noncash charge of
$5.6 million and additional set-asides for loan losses, partially offset by a
$1.8 million reduction in the company's fair value related to the Service1st acquisition.

The $206 million-asset company, which released earnings on Wednesday, said it lost $11.9 million, or 79 cents a share, for the first nine months of the year.

Before Western Liberty's October 2010 acquisition of the struggling Service1st Bank of Nevada, it had no operating entity. Because of this, year-over-year financial comparisons were not meaningful, the company said.

"We continue to see the impact of the recession on our asset quality this year," Western Liberty Chief Financial Officer George Rosenbaum said. "Nonaccrual loans increased to $18.9 million, of which, $10.7 million are loans that have been modified or restructured."

Nonperforming assets totaled
$23 million, up $63 million from the second quarter. The provision for loan losses totaled $1.7 million, down 60 percent from the second quarter, bringing the total provision for the year to date to $7.4 million.

"During the year, these troubled debt restructured loans were written down to $10.7 million from $14.5 million," Rosenbaum said. "As a result of the decline in asset quality, we are increasing our reserve for loan losses. Consequently, the allowance for loan losses is now 2.95 percent of total portfolio loans."

Total loans were $101.8 million in the third quarter, compared with $101.5 million in the second quarter. Commercial real estate loans accounted for 51 percent and commercial loans comprised 41 percent of the loan portfolio, with the last 8 percent a mix of construction and land development loans and residential real estate loans.

The company said Tuesday that a September 2010 consent order from the Federal Deposit Insurance Corp. and the Nevada Financial Institutions Divisions for Service1st had been lifted.

The bank is now under a memorandum of understanding that requires it to maintain a Tier 1 leverage ratio of
8.5 percent and forbids it from paying dividends without approval. Service1st must also revise its business plan to achieve profitability and reduce total adversely classified assets.

Western Liberty, formerly known as Global Consumer Acquisition Corp., was formed as a blank-check company almost four years ago for the purpose of buying banks. The company bought Service1st Bank in September 2010 and was required to invest $25 million of new capital in the bank, since it was purchased while under a consent order.

In June, Western Liberty announced that it had hired Sandler O'Neill & Partners L.P. to consider strategic alternatives, including a possible sale, merger or share buybacks.

The company bought back 639,413 shares in the third quarter and completed the program with total shares repurchased of 754,400 as of Nov. 1, at an average cost of $2.63 per share.

Contact reporter Chris Sieroty at
csieroty@reviewjournal.com or 702-477-3893.