Shares of Republic First Bancorp Inc. soared Wednesday after the Philadelphia company announced that it had sold $59 million of mostly problem real estate loans to a single investor.
While the bulk sale will wipe out the company's profits for the year, it will substantially improve its asset quality without harming its capital ratios, the $952 million-asset company said in a news release.
In mid-afternoon trading Wednesday, Republic First's shares were up more than 25% from Tuesday's close, to $1.79.
The portfolio had a balance of $45.1 million and included $28.4 million of loans that were no longer accruing interest or were already in foreclosure.
Republic First netted $30.6 million on the transaction and said it expects to incur a loss of $14.5 million in the quarter that ends Dec. 31. The company earned $1.4 million last quarter and was projecting a profit of $1.1 million this quarter.
The bulk sale, which included commercial real estate loans and foreclosed properties, would shrink Republic First's level of nonperforming loans to total loans from 5.05% at Sept. 30 to less than 2%. Though its key capital ratios are expected to decline as a result of the sale, they will still remain above regulators' definition of "well-capitalized," the company said.