East West Bancorp Inc. in Pasadena, Calif., surprised analysts with a $25.9 million loss for the second quarter, due to an $85 million provision for dicey residential construction and land development loans.

The $11.8 billion-asset company said Friday that it lost 41 cents a share. Analysts on average had expected the company to earn 5 cents a share, according to Thomson Reuters.

East West chief executive Dominic Ng said the large second-quarter provision — nearly 2.5 times net chargeoffs of $34.8 million — will help boost the company's future profits. "We are comfortable we are well reserved and will be able to meet future credit challenges with less provisioning in the last half of the year," he said on a conference call.

The company said it expects third-quarter earnings of 8 to 10 cents a share, fourth-quarter earnings of 11 to 13 cents, and 2009 earnings of $1.35 to $1.40.

Aaron Deer, an analyst at Sandler O'Neill & Partners LP in San Francisco, gave East West credit for aggressively addressing its issues. Still, he said, "they've got a very challenging year or two ahead of them based on the construction and land development credits that are in their portfolio."

The company is particularly exposed to the housing construction market in the Inland Empire region east of Los Angeles, one of the fastest-growing in the country and one of the hardest-hit by the mortgage crisis, said Joe Morford, an analyst at Royal Bank of Canada's RBC Capital Markets in San Francisco.

"It's not a huge exposure," he said, "but you don't have to have a lot of exposure there to take a lot of loss."

East West's nonperforming assets were 1.64% of total assets at June 30, compared with 0.63% the previous quarter.

East West said the results are preliminary and it may take an additional goodwill impairment charge for the second quarter.

East West's stock slipped 0.81% by late Friday, to $11.01. In his note, Mr. Morford said that, despite the big loss, some investors may be covering their short positions, thinking the company "may be through the worst for now."

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