Ocean Bank (Central Madeirense) Q1 earnings picture mixed

southflorida.bizjournals.com 4:36 PM EDT Tuesday Jim Freer

Ocean Bank of Miami reported earning $10.1 million for this year's first quarter ended March 31, according to the bank's quarterly Call Report to the Federal Deposit Insurance Corp.

Those earnings are a 17 percent decrease from Ocean Bank's $12.1 million profit for last year's first quarter.

Ocean Bank had $4.1 billion in assets as of March 31, making it the largest commercial bank based in South Florida.

On May 1, Ocean Bank client Terremark Worldwide (Amex: TWW) announced that the bank had agreed to convert a portion of the Miami-based computer networking firm's loans into equity and to extend the term of its remaining loans to Terremark.

Bankers in South Florida have been wondering whether Terremark's financial problems might have an impact on Ocean Bank, which is the largest lender to Terremark.

Ocean Bank executives were not available for interviews, according to a spokesman for the bank.

The bank's latest report to the FDIC shows a continuation of two recent trends - profitability, but a ratio of non-performing loans that are more than twice the banking industry average.

Ocean, which is privately held by owners based in Venezuela, had a 2.1 percent ratio of non-performing loans and real estate owned to total assets on March 31.

Non-performing loans are loans that are delinquent for 90 days or more and no longer accrue interest.

Ocean Bank's non-performing ratio was 2.4 percent on Dec. 31.

The bank's non-performing loan ratio has been above 2 percent for each quarter since the quarter ended June 30.

The national average was .9 of a percent for commercial banks and savings and loans as of Dec. 31 - the latest date for which data is available.

Ocean Bank's report for March 31 listed $525,000 in loans 90 days or more past due and $87.9 million in loans not accruing interest.

The report also indicated Ocean could soon be dealing with additional non-performing loans.

The bank's loans between 30 and 89 days delinquent increased from $29.2 million to $134.3 million during this year's first quarter.

The report did not identify any non-performing loans or borrowers on those loans. But in a Feb. 14 filing with the Securities and Exchange Commission, Terremark said it was negotiating restructuring $44 million in debt it owed Ocean Bank. Terremark added it owed $1 million in unpaid interest on that credit.

On May 1, Terremark said that Ocean Bank had agreed to convert $15 million in Terremark debt to equity at 75 cents a share.

Terremark also said the bank extended the terms of its remaining $28.9 million in debt to Ocean Bank for three years - until April 30, 2006.

Despite its problem loans, Ocean Bank has continued to generate significant income on loans that are current, and thus report quarterly profits.

The bank reported earning $45.5 million in 2002, with a profit in every quarter.

For this year's first quarter Ocean Bank reported interest income of $57.3 million - primarily interest earned on loans. That compared with $62.5 million in interest income for last year's first quarter.

Ocean Bank added $11 million to its loan loss reserves during this year's first quarter. That put the bank on a pace similar to 2002, when it added $47 million to its reserves.

Analysts do not regard those additions as alarmingly large for a bank of Ocean's size. Large additions to reserves can significantly reduce a bank's net income for a quarter.

Ocean Bank had $80.9 million in loan loss reserves on March 31.

That gave Ocean Bank a reserves-to-problem loans ratio of 92 percent - a level regulators consider very strong for covering potential losses.

During this year's first quarter, Ocean Bank's equity capital declined from $334 million to $329 million.

As of March 31,the bank's ratio of equity capital to assets was 7.72 percent - almost twice the 4 percent regulators require for a bank to be considered adequately capitalized.

For the remainder of this year, rival bankers will be watching Ocean to see if it can resolve problems with its delinquent borrowers - and thus continue its run of profits.