New York, USA – First Guaranty Bancshares (FGBI.O) posted a net loss of $45 million for the third quarter, as the regional lender increased reserves for potential loan losses linked to a bankrupt auto parts manufacturer. The loss represents $3.01 per share, a sharp reversal from a net profit of $1.9 million, or 11 cents per share, in the same period last year.

The bank reported a $52 million credit exposure tied to commercial lease financing involving entities related to the unnamed auto parts company that filed Chapter 11 bankruptcy during the quarter. In addition, the lender booked a $12.9 million goodwill impairment charge, reflecting its stock trading below book value and the higher provisions taken against potential losses.

“We are continuing to monitor our loan portfolio and are working to de-risk the bank,” said CEO Michael Mineer in a statement to Reuters. “We have taken proactive steps to reserve against the credit, given the current known facts, and anticipate further clarification in the fourth quarter.”

Broader Impact on U.S. Banking Sector

The bankruptcy of this auto parts manufacturer is part of a broader trend affecting U.S. banks, including Fifth Third Bancorp (FITB.O) and JPMorgan Chase (JPM.N), which have also seen financial exposure linked to bankruptcies and subprime lending issues. While overall credit quality remains strong, these isolated events have heightened investor concerns, contributing to a selloff in bank shares earlier this month.

First Guaranty’s stock has fallen 42.3% year-to-date, hitting a seven-month low following a 17.5% drop in the previous session. On Friday, shares declined another 1.2% after the lender released its quarterly call report, providing a detailed view of its financial position.

Credit Losses and Bank Strategy

The bank’s provisions for credit losses surged to $47.9 million, up from $4.9 million a year earlier, underscoring the impact of the auto parts bankruptcy on its balance sheet. CEO Mineer emphasized the bank’s proactive approach to managing risk and maintaining high reserves against affected commercial lease credits.

“For the time being, we will retain a high level of reserve against these commercial lease credits while continuing to assess our exposure in conjunction with our servicer,” Mineer added.

The third-quarter results highlight the challenges faced by regional banks in managing unexpected exposures to bankruptcies and volatile sectors, particularly in the commercial leasing and subprime lending markets. Analysts note that banks like FGBI must carefully balance loan loss provisions with growth strategies to maintain investor confidence.