Eagle Bancorp in Bethesda, Md., reported a large quarterly loss after it tried to get its hands around deteriorating credit quality.
The $10.6 billion-asset company said in a press release that it lost $69.8 million in the second quarter, reflecting a staggering $138.2 million loan-loss provision. Eagle lost $83.8 million a year earlier after recording a $104.2 million goodwill impairment charge.
The provision reflected “higher office-related reserves and expected exit strategies,” the company said.
Net chargeoffs jumped to $83.9 million in the second quarter from $11.2 million a quarter earlier. Nonperforming assets rose by 13% from the first quarter to $228.9 million, including a $33.6 million nonaccrual data center loan in Fairfax, Va., backed by office collateral that could be disposed of in a short sale and a $9.1 million life sciences office loan.
Substandard and special mention loans increased by 13%, to $875.4 million.
“This quarter’s credit costs reflect decisive actions we are taking to address risk in our loan portfolio. While the charge is significant, it is aligned with our ongoing strategy and reflects our judgment to remediate credit exposures thoughtfully and deliberately,” Susan Riel, Eagle’s chair, president and CEO, said in the release.
“We view this quarter’s loss as a necessary and measured outcome of our risk remediation strategy,” she added. “The resulting impact of these decisions is difficult, yet represents necessary steps in our objective to drive long-term value creation for shareholders.”