Loan problems are deepening at $2.2 billion-asset Corus Bankshares.
Corus, one of the largest independent banking companies in Chicago, charged off $11.3 million of loans in 1996, up an eye-popping 1,284.7% from 1995.
And nonperforming loans shot up 72.8% to $35.3 million, according to a yearend earnings release.
Corus' woes stem from a deteriorating real estate portfolio and student loans under federal investigation for fraud. Bank officials say the situation could get worse.
"It is very difficult to tell," said Tim Taylor, chief financial officer for Corus.
David E. Mudd, a banking analyst for Howe Barnes Investments Inc., urged investors to approach Corus with caution.
In a report published last month, Mr. Mudd expressed confidence in the bank's management and noted the bank's history of above-average earnings. But he downgraded it to "hold" from "long-term buy."
"We would recommend that investors not add to positions until the outlook for asset quality becomes more clear," he wrote.
The student-loan problems were caused by former Corus employees who didn't follow servicing requirements necessary to maintain the federal guarantees, the bank said. It now is stuck with $6.7 million of nonaccruals for which it won't seek guarantee payments.
Corus charged off $4 million of student loans in the fourth quarter, the first such action since the federal investigation began more than a year ago. And more chargeoffs are possible, Mr. Taylor said.
He said the bank is in the dark as to when the government will wind down its investigation.
Corus has an additional $15.2 million in nonaccruing student loans that company officials say they believe will remain guaranteed.
The bank also has problems in the real estate area.
Nonperforming residential loans and home equity loans jumped 185% in 1996 to $25.5 million. Most of those loans - $22.7 million worth - are in home mortgages, and on them the bank anticipates minimal losses.
But Corus is more worried about home equity loans. It charges them off after 120 days of nonpayment. The bank charged off $6 million of such credits in 1996.
Mr. Taylor attributed the real estate credit problems to factors ranging from excessive consumer debt to increased bankruptcy filings. He said the problems have caused the bank to reevaluate its underwriting. "Over the past three to six months we have really tightened down," he said.