Northeast Bancorp late Monday restated second-quarter results to reflect a $67 million loss, a move that angered analysts and caused its stock price to plunge.
The ailing Connecticut-based banking company, which has $3.1 billion in assets, had reported a $39.9 million loss. It said the restatement was a result of an examination completed last week by the Federal Deposit Insurance Corp.
By late afternoon Tuesday, Northeast's stock was down 33.3%, to $6.75.
"This is unbelievable," Gerard Cassidy, an analyst at Tucker Anthony Inc., said. "The credibility of management is down to zero now."
Delay Surprises Analyst
Mr. Cassidy said he was surprised that management didn't delay releasing the original results until after the exam or until they were sure there would be no surprises.
He said he doubted that existing management could turn the company around, particularly if the Connecticut economy does not improve soon.
John Kline, Northeast's spokesman, said the FDIC exam went on too long for the bank to delay the release of its financial results.
"We [had already] held the release long beyond our normal release date ... and felt we were in the range of what we expected the results of the exam would be," he said. "But the aggressiveness of this review far exceeded the review we had last year."
Mr. Kline said he expected the company to be profitable in the third quarter, the result of onetime gains that will exceed $28 million.
The restatement was necessitated by a $77 million provision for loan losses and foreclosed real estate writedowns, compared with $52 million before the restatement. That, in turn, reduced the company's equity capital to $101.2 million, or 3.01% of assets, compared with $128.7 million, or 3.7% of assets, before the restatement.
As a result, Northeast said it would fall short of the 5.25% leverage capital ratio it said it would achieve in the third quarter. Regulators have given the company until yearend to achieve the ratio.
The FDIC also forced the company to raise chargeoffs to $68 million from $24 million. That lowered the company's ratio of nonperforming assets to loans and foreclosed real estate to 11%, compared with 13.3% before the restatement.