Michigan Bank Expects Millions in Loan Losses
Independent Bank Corp. here said that it expects to add between $13 million and $16 million to its credit provision and report a loss when the company reports second-quarter results.
The company said that the additional loss reserve is higher than historically is the case and exceeds what the company expected to report for the quarter. company said that the additional loss reserve is higher than historically is the case and exceeds what the company expected to report for the quarter.
The after-tax effect of the higher-than-expected loss provision will be to reduce earnings per share by $0.37 to $0.46, ICB said.
Michael Magee, president and CEO of ICB, attributed the increase in anticipated loan losses to "a weak Michigan economy, particularly in the real estate development sector."
He said the hiring of a new chief lending officer will help ICB manage the adverse credit cycle.
"We expect other components of our operating results in the second quarter, including net interest income and non-interest income, to be solid," Mr. Magee said in the company announcement.
"Unfortunately, the elevated level of credit costs will likely result in the company reporting a small loss in the second quarter." Losses related to commercial real estate loans are largely to blame for the stress on credit quality.
ICB said increases in reserves or charge-offs of $6 million were related to lending relationships totaling $24 million of credit. Most of those relate to loans to real estate developers that are experiencing cash-flow problems because of the slow residential housing market. (c) 2007 Mortgage Servicing News and SourceMedia, Inc. All Rights Reserved. http://www.mortgageservicingnews.com http://www.sourcemedia.com/