Troubled Loan Torpedoes Bank’s Profitable Quarter : Earnings: CommerceBank adds $1 million to its loss reserves and turns revenues of $329,907 into a deficit of $240,093. A senior executive has resigned.

Stung by the failure of a borrower to make payments on a major loan, CommerceBancorp said Tuesday that it has added $1 million to its reserve for loan losses and restated its third-quarter earnings to show a $240,093 loss.

At the same time, the Newport Beach holding company for CommerceBank confirmed that Thomas Poulos, the bank’s senior credit officer and executive vice president, has resigned and that the bank is searching for a replacement.

Poulos’ departure was by “mutual agreement” and was not directly related to the troubled loan, said Clyde H. Gossert, the bank’s chairman and chief executive. Gossert wouldn’t comment further, saying that more details would be available soon. Poulos could not be reached for comment.

In restating its earnings for the third quarter, the company’s previously reported $1.2-million profit for the first nine months was cut to $608,090. Before restating net income, the company had posted third-quarter earnings of $329,907.

The addition to the loan-loss reserves brings that total to $4.2 million, or a little under 2% of loans outstanding at the end of September. Regulators become concerned when that figure rises above 3%.

Despite the setback, Gossert said, “We anticipate a profitable year.”

One of Orange County’s larger banks, with $301.9 million in assets at the end of September, CommerceBank is healthy and well-capitalized. It is one of the few county banks that caters almost entirely to a business clientele. But tougher regulations and the continued recession have hampered its operations this year.

Early this year, the bank decided to stop construction lending, which has caused the most concern among regulators because of the slowdown in the local real estate market. As a result, the bank dropped about $30 million in assets and its earnings declined “significantly,” both of which were expected, Gossert said.

“We’ve also had a weak economy and our profit margins are lower,” he said. “And we’ve had a significant amount of loans going on non-accrual (non-paying) and a significant decrease in loan volume.”

While the bank is cautiously making some construction loans again, he said, it won’t become as heavily involved as it was previously.

It was a large commercial loan that caused the recent unexpected problem. Gossert wouldn’t identify the borrower or the nature of the unsecured business loan, but he did provide other details.

The loan had been going sour for more than three months while the bank worked with the borrower to resolve the issue, Gossert said. But in the last few weeks, the borrower’s credit weakened seriously, diminishing the bank’s prospects of repayment.

The borrower has not filed for bankruptcy protection.