Deteriorating credit quality slashed Imperial Capital Bancorp Inc.'s third-quarter profits by 75% from a year earlier, to $1.7 million.
The $3.6 billion-asset La Jolla, Calif., company said Tuesday night that its earnings per share fell 74%, to 31 cents, because of a spike in nonperforming loans and chargeoffs.
The third-quarter provision for loan losses increased 253%, to $5.3 million. Nonperforming loans rose 55% from yearend, to $40.8 million as of Sept. 30, and the nonperforming loan ratio rose by nearly half, to 1.28% of total loans.
The parent company of Imperial Capital Bank said two lending relationships accounted for $19.5 million of the $26.6 million of loans that were transferred to nonperforming status in the quarter. It has only one nonperforming construction loan, and that one is related to a $16.9 million residential project in Palm Desert.
Net interest income before the provision for loan losses fell 14.9%, to $20.7 million. Imperial Capital Bancorp attributed the decrease to higher-yielding loans that were paid off and replaced with ones made at lower rates, as well as higher funding costs. Loan originations increased 28%, to $340.1 million.
Imperial's stock, which has lost more than 60% of its value this year, was down about 3% late Tuesday, to $21.45.
"We recognize that there is substantial fear and concern in the financial and credit markets today, as evidenced by the recent decline in our stock price," George W. Haligowski, the company's president and chief executive officer, said in a press release.
However, such a steep decline seems unwarranted, since Imperial Capital Bank remains well capitalized and is taking "a conservative approach" to managing problem credits, he said.
