GBC Bancorp, the parent of General Bank in Los Angeles, has run into trouble with a loan to a Las Vegas casino.
The $1.7 billion-asset company said Monday that an unnamed borrower has filed for bankruptcy, leaving GBC on the hook for $31 million. The loan was for construction of an unspecified, casino-related project.
The announcement sent GBC's stock tumbling to a 52-week low. In heavy trading Monday, it fell 22% to $15.687. At midday Tuesday, it was trading at $13.75.
The loan is collateralized by a first trust deed on the building and an undeveloped land parcel. It is also held by second trust deeds on a nearby hotel and a recreational vehicle park in Las Vegas.
In an interview, GBC chief financial officer Pete Lowe said the loan was funded solely by the bank and is one of the largest-if not the largest-on its books. He said the company is confident that it will recapture the loan's full principal, interest, and estimated expenses.
"We believe the loan was over-collateralized and prudently underwritten," Mr. Lowe said.
David H. Winton, bank analyst at Keefe Bruyette & Woods Inc., said he was caught off guard by the announcement. He immediately downgraded the stock to "market perform" from "attractive."
"It makes you wonder what else is in the portfolio," said Mr. Winton. "There are likely to be other large loans."
Mr. Winton also questioned whether GBC would recover the full amount of the loan.
Mr. Lowe added that he was unsure what effect the loss would have on GBC's earnings.
The loan is the second to have gone sour on GBC in recent months. A $12.6 million loan was deemed nonperforming at yearend after another borrower-a semiconductor company in California-filed for bankruptcy.