First Guaranty Bancshares swings to quarterly loss on exposure to auto parts bankruptcy
First Guaranty Bancshares reported a third-quarter loss of $45 million, or $3.01 per share, due to an impairment charge and increased reserves for bad loans linked to an auto parts manufacturer bankruptcy. The bank has a $52 million credit exposure related to the bankruptcy and raised its provision for credit losses to $47.9 million. Despite a recent 17.5% drop in shares, they rose 2.4% after the announcement. CEO Michael Mineer stated proactive steps have been taken to reserve against credit risks, anticipating further clarity in the fourth quarter.
Oct 31 (Reuters) - First Guaranty Bancshares (FGBI.O) on Friday said it has swung to a third-quarter loss, as the lender booked an impairment charge and increased reserves for bad loans linked to an auto parts manufacturer bankruptcy.
Several U.S. banks, including Fifth Third (FITB.O) and JPMorgan Chase (JPM.N) , have recently been affected by the bankruptcies of auto parts maker First Brands and subprime lender Tricolor, raising market concerns.
While overall credit quality remains strong, isolated events have heightened investor concerns about risks in the U.S. banking sector, sparking a selloff in the sector earlier this month.
First Guaranty said it has a $52 million credit exposure to entities related to an unnamed auto parts manufacturer that declared Chapter 11 bankruptcy during the third quarter.
The lender did not immediately 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 rose by 2.4% 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 remains down 41.5% year-to-date as of the last close.
“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,” CEO Michael Mineer said.
“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.
