Business life: My finance news blog

After falling into the red in the second quarter and revising its 2009 results to show an even deeper loss, Espirito Santo Bank got some relief in the form of $10 million in capital from its parent company.

Portugal-based Banco Espirito Santo injected $10 million into its Miami-based subsidiary in the second quarter, according to its filing with the Federal Financial Institutions Examination Council. That boosted its capital ratio to well above regulatory requirements.

It also helped soften the blow of the bank’s recent stumbles.

On June 1, Espirito Santo Bank restated its 2009 results to show a $3.3 million loss. It originally reported a $2.3 million loss for that year. The change came because the bank revised its expense to reserve for future loan losses to $9.2 million, increased from the originally reported expense of $8.2 million.

Sometimes, when banks review the problem loans, they recognize drops in the appraised values of the collateral properties, which causes them to go back and take additional reserves.

In the second quarter, Espirito Santo Bank lost $431,000, but it was still in positive territory for the year because it earned $954,000 in the first quarter.

The bank fell into the red mostly because its expenses to reserve for problem loans grew while it collected less revenue from net interest income.

Espirito Santo Bank made progress in reducing its level of problem loans. As of June 30, the bank had $19 million in noncurrent loans, representing 5.25 percent of its total loans. As of March 31, it had $26.2 million in noncurrent loans, representing 6.87 percent. The bank has restructured many of its loans that were delinquent.

The bank’s $7.3 million reserve for future loan losses covered 38 percent of its noncurrent loans at midyear. The restatement of its 2009 results increased that coverage ratio significantly from where it was originally at year-end.

Espirito Santo Bank was the 21st-largest bank chartered in South Florida as of March 31, with $569 million in assets. By June 30, it had grown to $580 million in assets. Its deposits were up to $480 million from $478 million over that period. However, the bank’s loans dropped to $355 million from $375 million.

Source