Saturday, January 29, 2011

First Trust Bank Annouces Not So Surprising 4th Quarter Loss

The "Local Paper" is reporting that Charlotte-based First Trust Bank lost $2.3 million in the fourth quarter.

"First Trust added heavily to its reserve for potential loan losses throughout the year, as its borrowers struggled with the continuing weak economy. Nonperforming assets rose to 9.7 percent of total assets, up from 1.6 percent a year ago. "

Bank analysts consider 5 percent of total assets an eye popping bench mark but not a tell all, by comparison Bank of America's Non performing assets ratio is less than 1 percent.

According to an August 2010 report by "More than 150 publicly traded U.S. lenders own nonperforming loans that equal 5 percent or more of their holdings, a level that former regulators say can wipe out a bank’s equity and threaten its survival.

The number of banks exceeding the threshold more than doubled in the year through June, according to data compiled by Bloomberg, as real estate and credit-card defaults surged." More from Bloomberg here.

First Trust management stated that the increase reflects its "aggressive management" of the loan portfolio. But Cedar Posts has learned that "aggressive management" means foreclosing on any customer who has fallen behind, relentless telephone harassment and complete inflexibility when it comes to small business owners under stress due to the economic downturn. This heavy handed strategy may work out, if not the bank is a time bomb.

Cedar' Take: Why in a city were dozens of banks compete, does First Trust president Jim Bolt think it wise to build a reputation as the most unreasonable bank in town? Forcing small business owners into foreclosure seems odd considering that the bank's corporate motto and tag line is "strength, experience.... understanding".

Even more surprising is that Mr. Bolt as president and other officers continue to draw large salaries and bonus while cutting staff.

For the year, First Trust lost $3.9 million, compared to earnings of $2.8 million in 2009.

You might recall First Trust's Jim Bolt proudly proclaiming that First Trust did not take any "TARP" money without disclosing that First Trust wasn't eligible for the Troubled Asset Relief Program due to the small size of the bank. Now a year later perhaps Mr. Bolt wishes he was eligible.

Digging deeper Cedar Posts finds, that First Trust's non performing assets rose from to 22 million as of September 30, 2010 up from 8.5 million in 2009. None of the troubled loans are SBA backed and more data from the FDIC is here. provides a list of troubled banks nationally here. As of September 30, 2010 only Charlotte's New Dominion Bank made the list. New Dominion is approximately the same size as First Trust with considerable fewer non-performing loans so you can expect First Trust will be added to the "unofficial list" in the next few days.

"Despite disappointing results for 2010, the bank remains well-capitalized by all regulatory standards and committed to operating in a safe and sound manner," said chief executive Jim Bolt. "We look forward to an improving economy and a return to profitability."

Cedar's Take: If you read between the lines, smoke and mirrors, this is a bank that is on the edge of the abyss. More information on First Trust Bank's trouble loan portfolio can be found at the North Carolina Commissioner of Banks office which is here.

First Trust Bank stock traded under $4 again yesterday down from a high of $18 in 2007.

No comments: