An otherwise banner day for the stock markets was painful for Hanmi Financial Corp. of Los Angeles and Capitol Bancorp Ltd. of Lansing, Mich.
Both companies warned of loan portfolio troubles, and investors punished their stocks. Hanmi shares plunged 12% Friday, to $16.84, and Capitol's fell 17.45%, to $30.34 - both well below their previous 52-week lows.
Meanwhile, shares of Corus Bankshares Inc. fell to a 52-week low early Friday after the Chicago company reported a 39% drop in earnings and its chief executive said that "things could get worse before they get better." The stock later rallied, though, and closed at $17.27, down just 4 cents.
Analysts were most surprised by Hanmi's announcement that it expects to report a quadrupling of its loan-loss provision for the first quarter, to $6.4 million. The $3.7 billion-asset company will not announce its results until next month, but it said Friday that it could report an earnings drop of up to 30% from the $17.3 million it reported for last year's fourth quarter.
Steven Marascia, an analyst at Anderson & Strudwick in Richmond, Va., said investors are accustomed to hearing good news from Hanmi, which targets Korean-American business owners.
"The company has been growing their earnings above the industry norm, with high returns on asset and equity, which had gave them a very high multiple," Mr. Marascia said. "But with this recent news, investors are rethinking" the value of the stock.
But Brett Rabatin, an analyst at First Horizon National Corp.'s FTN Midwest Securities Corp. in Nashville, said investors may have overreacted. Mr. Rabatin said he does not believe Hanmi's credit quality will deteriorate much further - at least for the next several quarters.
Nonperforming assets are expected to be $20 million for the first quarter, compared with $14.2 million at Dec. 31, Hanmi said.
About two-thirds of Hanmi's problem loans were made to four business customers, Michael J. Winiarski, its chief financial officer, said in an interview Friday. "The increase in provisioning is really derived by events in each of these companies and there's no particular pattern to them," Mr. Winiarski said. "We don't think it's attributed to a slowdown in the economy."
Still, it is likely that other factors - namely weak loan demand and further margin compression - are behind in the expected drop in Hanmi's first-quarter earnings, and those factors concern overall economic conditions, said James Abbott, an analyst at Friedman, Billings, Ramsey & Co. Inc.
Hanmi's business customers "are sitting on inventory because the sales aren't there, so there's no demand for credit," said Mr. Abbott, who lowered his 2007 earnings per share estimate on Hanmi from $1.39 to $1.15.
The $4.3 billion-asset Capitol reported earnings of $6.3 million, down 37% from a year earlier.
Capitol, which owns more than 50 banks 14 states, increased its provisions for loan losses 60%, to $3.9 million, largely because of loans in Michigan, whose economy has slowed. In addition, Capitol's noninterest expense rose 31%, to $41.8 million, as the company continued to invest in technology and risk management.
Joseph D. Reid, Capitol's chairman and CEO, said he would not "let the stock market dictate" how his company is run. "When you run the banks properly, you have to reserve for loan losses and have the right people and the right infrastructure," Mr. Reid said.
Brian Martin, an analyst with Howe Barnes Hoefer & Arnett, said Capitol has had good balance-sheet growth but is struggling with the same interest rate and economic pressures as all banks. "The way I looked at the quarter, outside of the infrastructure spending, all the other metrics are pretty much in line," Mr. Martin said.
The $9.8 billion-asset Corus said first-quarter earnings fell to $26.4 million. Diluted earnings per share also fell 39%, to 46 cents, well below consensus estimates of 72 cents, according to Thomson Financial.
Corus' loan portfolio consists almost exclusively to condominium developers, and the president and CEO, Robert J. Glickman, said in a news release that the nationwide housing slowdown has led to a decline in originations and an increase in problem loans.
"We anticipate that both loan originations and problem loans could get worse before they get better, Mr. Glickman said. Nevertheless, he said, "we are bullish that in the long run condominiums and condominium construction will remain a permanent fixture in the U.S. housing market."
Corus also recorded a $15.3 million pretax security loss because of the decline in the stock price of the troubled subprime lender Fremont General Corp.
