Write-downs result in loss

The Reno-based parent company of Nevada Security Bank earned $405,000 from its basic banking business during the third quarter.

But once the company folded in write-downs on the value of a couple of acquisitions and the effects of the collapse of Fannie Mae and Freddie Mac, The Bank Holdings posted a loss of $34.5 million for the quarter.

Hal Giomi, chairman and chief executive officer of the company, emphasized that The Bank Holdings remains well-capitalized by federal regulatory standards. The parent company has capital equal to 12 percent of the money it has at risk, while Nevada Security Bank has a capital ratio of 10.59 percent.

Even so, a $34.5 million loss stings.

The auditors for the publicly held company required a $27 million write-down of goodwill associated with The Bank Holding's 2006 acquisitions of Northern Nevada Bank and a company in California that specializes in tax-advantaged real estate exchanges.

The company took another $9 million after-tax hit from the write-down of the value of preferred stock it held in Fannie Mae and Freddie Mac. That stock tumbled in value when the two housing enterprises were taken into conservatorship by the U.S. Treasury this autumn.

The Bank Holdings has applied to participate in the Treasury's Trouble Asset Relief Program, offering to sell between $5 million and $15 million in assets to the Treasury.

"We don't need to participate in this," says Giomi, but he notes that competitors are lining up for the federal money. "It's cheap money. Why not do it?"

The company had about $27.4 million in non-performing loans and other problem assets on its books on Sept. 30, up from about $5.7 million a year earlier. But its $407,000 write-offs of bad loans during the third quarter was slightly less than the $450,000 it wrote off a year earlier.

Giomi said the bank lost $20 million in deposits during the early days of the financial crisis, but some of that money is beginning to return after the Federal Deposit Insurance Corp. boosted its coverage of

deposits.

To bolster its balance sheet, the company sold off $20 million in municipal bonds and $10 million in other government and mortgage-backed securities during the third quarter.

Its loan portfolio during the quarter averaged $458 million, down about 6 percent from a year ago. The weak economy and tougher standards for lending both were factors, Giomi said.

Still, The Bank Holdings executives think the financial industry has touched bottom and will begin to recover.

"We believe the worst is over for 2008," says Jack Buchold, the company's chief financial officer.

The company's stock, which traded near $20 a share in early 2007, was below $2 a share last week.