Shares of Preferred Bank fell more than 17 percent on Friday after the downtown Los Angeles commercial bank said it would take loss provisions on two loans, which will result in a second quarter loss.

The company said it expects to report a net loss of between $5.5 million and $5.7 million, or roughly 43 cents a share, for the quarter ended June 30. Analysts surveyed by Thomson Reuters had expected the bank to report net income of 15 cents a share.

Preferred Bank, which has $1.4 billion in assets, said late Thursday that management discovered “significant irregular borrower activity” associated with a $16.9 million account. The account already had been classified as substandard. It consists of four loans including a line of credit collateralized by accounts receivable and inventory as well as real estate financing. Initial estimates indicate the potential loan collateral shortfall could be as high as $8 million, the bank said.

“The potential loss in this case appears to be the result of irregular activity which is isolated to this particular loan relationship,” said bank Chief Executive Li Yu in a statement. “Bank management is working aggressively with outside legal counsel in order to maximize the recovery.”

The second affected loan is Preferred’s $13.9 million piece of a $219 million shared national credit line administered by a “very large national bank” that was not identified. The loan matured April 30 and is current, but the bank said that the collateral backing it was changed to cash flow from a shopping mall. The collateral is being revalued as part of the loan renewal.

Analysts at both B Riley & Co. Inc. and Sandler O’Neill & Partners downgraded the bank’s shares on Friday from “buy” to “hold.” Sandler analyst Aaron Deer told the Business Journal that investors shouldn’t read too much into either his downgrade or the stock’s selloff today. Shares had gained 85 percent since the beginning of the year through Thursday.

“The downgrade has as much to do with the incredible gains the stock has posted year-to-date as it does the disappointing credit losses,” Deer said in an e-mail. “In fact, notwithstanding the losses, most trends at Preferred Bank are very good and most of the investors I know are quite pleased with the company’s performance over the past several quarters.”

Shares closed down $2.42, or 17.2 percent, to $11.67 on the Nasdaq.