U & I Financial in Lynnwood, Wash., restated its fourth quarter results – leading a big net loss – and suspended its dividend after issues surfaced in its equipment finance business.
The $610 million-asset company said it lost $18 million after increasing its loan-loss provision from $3.1 million to $26.1 million. The issues are tied to a business where its finances borrowers purchase of equipment from manufacturers.
A manufacturer went into receivership and a judgment was entered against it tied to fraudulent activities. U & I said its bank is dealing with litigation from certain borrowers who financed loans to buy equipment from the manufacturer.
“The bank has raised substantial defenses to this lawsuit, has asserted counterclaims against the plaintiffs, and will continue to defend this litigation vigorously,” the company said.
U & I said it suspended its semi-annual dividend “as a precaution to preserve capital, despite the capital ratios still being well above the regulatory well-capitalized minimums.”
“The turn of events has been disappointing to say the least,” Stephanie Yoon, U & I’s interim CEO, said in the release.
“We believe … that our exposure is limited to this segment as most of our loans are still real estate related,” she added. “Despite the large increase in the provision … the bank continues to comfortably exceed the regulatory minimum well capitalized ratios and has strong liquidity.”