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Analyst Matthew C. Schultheis of said the first quarter presented sort of a barbell effect in which large and smaller banks generall y performed better than midsize He said smaller banks were better able to isolate creditr problems while big banks were able to offseg their credit problems with an increase inmortgagr activity, among other things. Schultheisd said midsize banks which he defined as havingbetweeb $3 billion to $100 billion in assets — don’t have enougb mortgage volume to offset the effecf deteriorating credit quality has had on theird earnings.
, and all turned fourth-quartetr losses into first-quarter But analysts said some of that was due to recentt acquisitions each made along with being able to take a larger piece of the mortgagerefinancing market-share pie. Wells Fargo’s mortgage banking income of $2.5 billion in the first quarter was more than two timesthe company’s previous recorfd high. But many analysts think the refinance boon will soon run its unmasking the substantial deterioratiom incredit quality. Wells Fargo’s nonperforming loanzs increasedby $3.7 billion, or 55 from the fourth quarter and was spreax throughout its portfolio.
Conversely, large community bankw such as , , Susquehanna Bancshares and Fulton Financial turned indisappointing quarters. Susquehanna’s first-quarter net incomde of $1.9 million was well below the $18 million it postedd in the fourth quartedrand $28 million posted in the firstr quarter of last year. Analystt Collyn Gilbert of Stifel Nicolaus this week maintained her sell ratingg for Susquehanna and lowered its earninge per share estimate for 2009 to a loss of 23 centa from a gain of 39 cents due to higher than expectefd loan loss provision and lower than projecter netinterest income. Susquehanna’s nonperforminbg assets grew by 43 percent during the quarterto 1.
23 percenft of all assets from 0.86 percent in the fourth quarter. Gilbert also lowered her earnings estimatr for Fulton from 29 cents per sharre to a loss of 2 cents per sharse forsimilar reasons. Fulton’s nonperforming assets grew by 23 percentr in the first quarter and nowrepresent 1.63 percenft of all assets versus 1.35 percen in the fourth quarte and 0.90 percent in the first quarter of 2008. Mike a New York-based analyst with said credig deterioration shows no sign of slowintg inthe Northeast. “There’s lots of commerciaol real estate exposure in the and there’s a ways to go before that sorts itself Shafir said.
Gilbert said the largde banks were propelled in the first quarter by an elemen t of desperation to show their best results forthis month’s stressw test of their assets while smallere banks have not seen their real estates lending fall off dramatically. Gilbert said the banks that have strugglecd are those that have had large growth rates in the past five yearss as those new assets have not performed well duringg therecent downturn. CEO Ted Peters said bankas such asNational Penn, Harleysville National and Susquehannas made acquisitions in recenrt years that are now a drag on earningss per share because the acquiresd assets are no longer as valuable as the purchasew price.
Peters also said many largerr communitybanks over-extended investment portfolios with trust-preferrede securities and are heavily involved with struggling home builders. of Pennsylvaniza Chief Financial Officer Jeff Schweitzer said credit issues have begun to hit localo community banks after they were able to avoid the severe probleme that struck their counterparts in othedr parts ofthe country. Univest saw its earningx fall by 43 percent from the comparable quarter ayear ago, but profitas were flat compared to the fourth quarter.
Banks and analysts have begun to value sequential quarterlty performance over comparisons tothe year-prior quartef because of the quick, profound changes created by the economic downturn. Schweitzerr said Univest was hurt by investments in bank stocks and tooka $1.2 millionn impairment charge but otherwise had strong credit quality consideringf the environment. He said bankx in Univest’s peer group of $1 billio n to $3 billion in assets had averagef 76 centsin loan-loss reserve for every dollar of nonperformingh loans during the first He said Univest has $2.25 in loan-losx reserve for every dollar of nonperformin g loans.
Schweitzer said the more homebuilders that file for bankruptch suchas Harleysville’s , the wors e things are going to get on the creditt side for community banks. Peters said his bank is handlinyabout $12 million in mortgage refinance business a week now about six times more than The bank, which has a hirin g freeze in place, has transferred people from slowere departments like wealth management and Peters said the leasing divisiohn is still coping with charge-offs and the wealth management division has seen assets under managemengt shrink significantly — something that will cause problemsd all year.
But more than doublexd its earnings from the fourthh quarter and was only slightly off its pacefrom first-quarte r 2009. Larger community banks were notas