The Bancorp's stock fell nearly 15% Friday after the Wilmington, Del., company reported a large quarterly loss tied to a bad commercial real estate loan.
The $4.2 billion-asset company said in a press release late Thursday that it lost $25.5 million in the third quarter, or more than quadruple what it lost a year earlier. For more than a year, the company has been struggling with a range of issues, including strengthening its anti-money laundering compliance.
Chief Executive Damian Kozlowski said in the release that he was "extremely disappointed" that an issue arose with "a large lending relationship in discontinued operations" that lead to the third-quarter loss.
The quarter included a fair value mark in connection with a secured CRE loan with a principal amount of $41.9 million. The loan became nonperforming because of the borrower’s failure to make principal payments. Based on a preliminary estimate of collateral value, the fair value was reduced by $23.9 million and the amount was recorded as a charge to earnings.
Though the large writedown was disappointing, it's unlikely a sign about larger problems in The Bancorp's loan portfolio, William Wallace, an analyst at Raymond James, wrote in a note to clients.
"We believe the borrower may have attempted to force management’s hand around a potential concession…to which management decided to take a hard-line stance in order to refrain from setting a precedent for other borrowers," Wallace wrote. "As a result, we tend to believe management's stance that the issue is one-time in nature and not indicative of wholesale credit deterioration."
The Bancorp has implemented a plan to emphasize revenue and cost cutting, Kozlowski said. In September, the company said it would cut an undisclosed number of jobs. Kozlowski said in Thursday's release that the company was "moving ahead in multiple areas" to reduce noninterest expenses by 20%-25%, adding that the fourth quarter should show the effects of earlier staff reductions.
Noninterest expense fell about 6% to $44.7 million. Consulting costs tied to a Bank Secrecy Act lookback fell more than 88% to $1.3 million. Kozlowski said the company had completed the BSA lookback and that it should no longer affect earnings.
Net interest income rose 32% to $23.5 million. Noninterest income increased 18% to $20.4 million.