<code id="izrdx"></code>
<code id="izrdx"><u id="izrdx"></u></code>
<var id="izrdx"></var>
  • <label id="izrdx"><legend id="izrdx"></legend></label>

  • <acronym id="izrdx"></acronym>
  • <var id="izrdx"></var>
  • <cite id="izrdx"></cite>
    <dl id="izrdx"><legend id="izrdx"><blockquote id="izrdx"></blockquote></legend></dl>

    Goodwill charges emerge amid pandemic

    Register now

    Bankers face a difficult decision about the goodwill sitting on their balance sheets.

    The coronavirus pandemic has punished the economy and the stock market, undermining the value of many banks’ intangible assets. That convinced a handful of banks, including PacWest Bancorp, Umpqua Holdings and Cadence Bancorp., to take goodwill impairment charges in the first quarter.

    Many more will likely do the same this summer, barring a sudden and unexpected reversal of fortune, sending goodwill impairment to levels that haven’t been seen since the financial crisis, industry experts said.

    The KBW Nasdaq Bank Index has fallen by more than 30% since early March.

    “I think the likelihood of more impairments to come is pretty high,” said Rick Childs, a partner at the accounting firm Crowe LLP.

    Goodwill represents the premium an acquirer pays when buying an asset for more than its actual value. Accounting rules require the buyer to evaluate goodwill annually, though a triggering event such as fallout from the pandemic can also prompt a review.

    Banks tend to take impairment charges after concluding that the fair value of an asset — or what it would reasonably fetch in a sale — has declined. Some banks opted to write off goodwill in the first quarter after the value of their stock fell below their tangible book value.

    Accounting guidelines call for banks to book goodwill impairments after a “sustained” drop in share price, Childs said. While that leaves banks some leeway on timing, many will face pressure to proceed with charges if bank stocks remain under heavy pressure through June.

    Some opted to take their lumps sooner rather than later.

    PacWest, of Beverly Hills, Calif., reported a $1.4 billion loss in the first quarter after recording a $1.5 billion goodwill impairment charge. The $26 billion-asset company, a prolific acquirer after the financial crisis, also set aside $112 million to cover potential loan losses stemming from the pandemic.

    PacWest faces “bleak economic forecasts,” President and CEO Matt Wagner said in the company’s quarterly release. He noted that the impairment was a noncash charge that had no impact on regulatory capital, cash flows or the bank’s liquidity position.

    Aggressive merger activity, and a consistently expanding economy, has created an abundance of goodwill on banks’ balance sheets.

    Goodwill and other intangible assets at banks increased by nearly 14% over the last five years, totaling $409 billion on Dec. 31, according to data compiled by the Federal Deposit Insurance Corp. It is the industry’s largest amount of goodwill since mid-2009, just before the last series of goodwill impairment charges took place.

    “It’s an incredibly difficult time right now — you could see a lot of this happening again,” said Charles Wendel, president of Financial Institutions Consulting.

    Goodwill impairments not only make for ugly quarterly losses, Wendel said. They also serve as a leading indicator of profitability challenges, making it more difficult — and more expensive — for banks to raise capital.

    Those factors, along with low stock prices, could hamstring acquisitive banks and stunt industrywide consolidation, Wendel said.

    Cadence, which is based in Houston, provided a sobering economic outlook after it booked a $412.9 million goodwill impairment charge and a $399 million quarterly loss. The $17 billion-asset company is facing a slump in oil prices that hit its energy portfolio.

    “We expect to be dealing with credit stress" resulting from COVID-19 "for a meaningful period of time, and that will be our primary focus,” Chairman and CEO Paul Murphy Jr. said during a conference call to discuss quarterly results.

    The experience of Umpqua, of Portland, Ore., demonstrates the fluid nature of the downturn.

    The $27.5 billion-asset company did not initially book an impairment charge, though it noted in a release announcing a $28 million loss that a review was underway. It disclosed a $1.8 billion write-down two weeks later in its quarterly filing with the Securities and Exchange Commission.

    Umpqua wrote off all the goodwill in its wholesale and retail banks, leaving it with $2.7 million tied to its wealth management business.

    Market volatility, forecasts of prolonged low interest rates and a drop in Umpqua's stock price informed the assessment, Ron Farnsworth, the company’s chief financial officer, told analysts during a quarterly call.

    “It's something that just came on so fast late in the quarter,” Farnsworth said.

    For reprint and licensing requests for this article, click here.
    翁源| 长治| 望奎| 龙井| 畹町镇| 阿尔山| 禹城| 临西| 保山| 汉沽| 乡城| 襄樊| 东海| 永川| 文县| 阿拉善左旗| 喀喇沁旗| 和平| 乌苏| 永吉| 招远| 新乡| 隆德| 文安| 阿城| 宁蒗| 剑河| 新源| 阿图什| 荣昌| 宁国| 建昌| 高台| 上高| 剑川| 板栏| 方山| 廊坊| 巴马| 祁县| 巴塘| 纳溪| 厦门| 博兴| 尚义| 双峰| 永和| 光山| 政和| 涪陵| 尉犁| 祁门| 仁化| 伊春| 香河| 沙坪坝| 钦州| 壶关| 信都| 乐清| 获嘉| 科尔沁左翼中旗| 黄骅| 金州| 信都| 紫阳| 天河| 抚宁| 马祖| 华安| 招远| 洛隆| 弋阳| 河口| 白城| 黑山| 锡林浩特| 诏安| 安阳| 渭南| 三亚| 灌南| 佛坪| 高邮| 柏乡| 泽当| 六盘山| 新安| 中江| 通江| 东乌珠穆沁旗| 丹阳| 崇武| 当雄| 讷河| 政和| 子长| 镇赉| 民勤| 汉沽| 临安| 维西| 深泽| 陇西| 海晏| 肥西| 资阳| 揭阳| 南澳| 松桃| 吴江| 榆社| 察哈尔右翼后旗| 石拐| 宁化| 海林| 定日| 长乐| 雷波| 辛集| 丰县| 萧县| 耿马| 清兰| 德庆| 施秉| 南川| 岳阳| 闽侯| 巴林左旗| 浩尔吐| 万年| 吉县| 旌德| 五指山| 那日图| 鄂尔多斯| 郑州| 宿州| 桃源| 华坪| 松溪| 壤塘| 安吉| 当雄| 勃利| 田阳| 嵊泗| 西吉| 辉南| 若尔盖| 得荣| 前郭| 仙居| 永和| 阿合奇| 苏尼特右旗| 伊吾| 富平| 东乌珠穆沁旗| 汝南| 金湖| 红柳河| 阳原| 隆子| 集贤| 鹤城区| 栾城| 新沂| 蒙山| 长武| 十堰| 镇赉| 延边| 根河| 桦川| 阿鲁科尔沁旗| 泰兴| 潼关| 北宁| 仁怀| 万年| 东明| 寻甸| 新干| 青龙山| 鸡西| 宝应| 贡山| 临洮| 芜湖县| 咸宁| 美姑| 镇康| 昌黎| 帕里| 广河| 长武| 伊春| 遮浪| 崆峒| 石岛| 元阳| 华阴| 荔浦| 西峰| 栾城| 苍南| 河口| 和林格尔| 泾川| 南澳| 恒春| 广水| 武宣| 西沙| 都兰| 云和| 曲麻莱| 高雄| 乌当| 泌阳| 五莲| 毕节| 昌邑| 来凤| 潞西| 肥乡| 昌都| 孝感| 怀远| 开化| 鹰潭| 旬邑| 本溪县| 治多| 延安| 贡山| 罗定| 民权| 烟筒山| 沾化| 保定| 汉寿| 闻喜| 定远| 来宾| 乾安| 禹州| 钟祥| 马鞍山| 昌黎| 乌鲁木齐牧试站| 德庆| 淮南| 哈巴河| 江山| 陵县| 灵石| 呼玛| 古田| 柏乡| 金湖| 汤河口| 牡丹江| 宾川| 胡尔勒| 黄平旧洲| 新安| 元氏| 青龙| 桓台| 子洲| 佳县| 阿巴嘎旗| 安丘| 化德| 石拐| 巧家| 崇州| 贺兰| 元阳| 华县| 宜黄| 新泰| 巴中| 科尔沁右翼中旗| 多伦| 三原| 钟祥| 余庆| 寻乌| 保靖| 鲁甸| 个旧| 四会| 鹿邑| 沾化| 齐齐哈尔| 潮阳| 五河| 宝清| 东阳| 通州| 洛阳| 开远| 桦南| 内邱| 宁津| 潜江| 黑水| 蒲江| 汉源| 淮南| 临安| 封丘| 茶卡| 三河| 奉新| 米林| 丰顺| 莱州| 纳溪| 新林| 清水河| 桓仁| 宁强| 荔浦| 宽甸| 香日德| 峨边| 连州| 佛山| 康山| 镇海| 黄泛区| 仙居| 博乐| 宾县| 宜兴| 方山| 温江| 固安| 蓝山| 左贡| 元谋| 克什克腾旗| 东沙岛| 招远| 贵德| 赫山区| 河曲| 肥乡| 桐城| 襄樊| 老河口| 横峰| 若羌| 朝克乌拉| 景东| 巴东| 河口| 射洪| 定州| 鸡公山| 黎城| 德安| 通道| 峨眉| 景洪电站| 故城| 河津| 华山| 伊和郭勒| 泰山| 化隆| 汨罗| 朝城| 额尔古纳| 昌图| 邻水| 临沭| 建始| 哈尔滨| 灵璧| 高雄| 井陉| 郸城| 罗定| 富裕| 索伦| 微山| 沁县| 鄂托克旗| 武乡| 牙克石| 朝克乌拉| 勃利| 青川| 哈巴河