First Mariner Bancorp reported a higher-than-expected $3.58 million loss for the third quarter but the bank said yesterday that it is through the worst of the fallout from a declining real estate market and a flood of bad home loans.
"We have no more loans that have been returned to us. That aspect of it is finished," said First Mariner chief executive Edwin F. Hale Sr. "We've narrowed our losses this quarter from the previous quarter. And we think there's going to be a little bit brighter future for us in the next quarter."
The Baltimore bank suffered in the subprime meltdown with so-called alternative-A loans. Those loans typically are extended to people with slightly better credit histories than subprime borrowers. Even so, consumers who accepted them increasingly have defaulted on payments and their homes are going into foreclosure.
The subprime crisis, which housing advocates blame on lenders extending loans to people who couldn't afford them, has shaken the real estate and stock markets and dampened earnings for several of the nation's banks.
Hale said First Mariner is investigating cases against an array of people it did business with, including independent mortgage brokers who offered such loans.
In the quarter that ended Sept. 30, the bank's level of bad loans from borrowers who are delinquent or in default was $44 million - down from $50 million in the second quarter.
The bank said losses stemming from its bad loans, including a write-down of foreclosed assets, narrowed to $4 million in third quarter, from $5 million in the second quarter.
First Mariner's $3.58 million quarterly loss translated to 56 cents per share, which was worse than Wall Street's consensus of a 13-cent loss. In contrast, the bank reported a profit of $2.04 million, or 31 cents per share, in the third quarter of 2006.
First Mariner reported a nearly $4 million loss in the second quarter.
Assets fell 10 percent to $1.2 billion in the third quarter. Deposits also declined slightly to $902 million.
First Mariner's stock dropped 4 cents to close at $8.02 yesterday on Nasdaq. The bank released its earnings after financial markets closed.
Hale said yesterday that the bank is seeing positive signs for the fourth quarter, including results from cost-saving initiatives, such as closing under performing retail branches and shutting its wholesale mortgage operation, which extended many of the problem loans.
The loans were usually mortgages that required little or no documentation of the applicant's income and finances. Many were second mortgages, which borrowers take out when buying a home because they can't afford the standard 20 percent down payment.
First Mariner packaged those loans and sold them in bulk to Wall Street firms. But when borrowers began to miss payments, the bank was required to buy back the loans under "buyer's remorse" clauses.
The bank stopped offering alternative-A loans through its wholesale mortgage operation at the end of last year. The operation, which opened in Fairfax, Va., in 2005, was closed in July.