Republic First Bancorp, Philadelphia, this week announced that it had sold $59 million of mostly problem real estate loans to a single investor, a move that goes a long way towards cleaning up its balance sheet.
While the bulk sale will wipe out the depository's profits for the year, it will substantially improve its asset quality without harming its capital ratios, the $952 million-asset company said in a statement.
In trading Wednesday, its share price soared by 25% at one point but on Thursday the stock was down 2% to $1.80.
Republic First netted $30.6 million on the transaction and said it expects to incur a loss of $14.5 million in the quarter that ends Dec. 31. The company earned $1.4 million last quarter and was projecting a profit of $1.1 million this quarter.
The bulk sale, which included commercial real estate loans and foreclosed properties, should shrink Republic First's level of nonperforming loans to total loans from 5.05% at Sept. 30 to less than 2%.
Though its key capital ratios are expected to decline as a result of the sale, they will still remain above regulators' definition of "well-capitalized," the company said.
