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First Guaranty said it has a $52 million credit exposure tied to commercial lease financing to entities related to an unnamed auto parts manufacturer that declared Chapter 11 bankruptcy during the third quarter.
“We are continuing to monitor our loan portfolio and are working to de-risk the bank,” CEO Michael Mineer said in an emailed statement to Reuters.
“We are monitoring all events related to our large recent issue and will continue to assess our reserve and are working in conjunction with our servicer of the lease.”
The lender did not respond to Reuters’ request for the name of the bankrupt auto parts maker.
Provision for credit losses vaulted to $47.9 million in the quarter from $4.9 million a year earlier.
First Guaranty’s shares fell another 1.2% on Friday, following a 17.5% plunge in the previous session to a seven-month low. On Thursday, the lender released its quarterly call report, a regulatory filing that provides details about the bank’s financial health.
The bank’s stock is down 42.3% year-to-date.
“We have taken proactive steps to reserve against the credit, given the current known facts. We anticipate further clarification of our position in the fourth quarter,” Mineer said in a statement.
“For the time being, we will retain the high level of reserve against these commercial lease credits.”
The bank swung to a net loss of $45 million, or $3.01 per share, in the three months ended September 30, versus a net profit of $1.9 million, or 11 cents per share, a year earlier.
It booked a $12.9 million goodwill impairment charge in the quarter, as its stock trades below book value and higher provisions.
Reporting by Arasu Kannagi Basil, Ateev Bhandari and Pritam Biswas in Bengaluru; Editing by Vijay Kishore and Alan Barona
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