FirstFed shares hit new low after lender reports huge loss
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With a massive fourth-quarter writedown on its high-risk adjustable-rate mortgages, FirstFed Financial Corp. today may have been trying to persuade investors that the worst has passed.
But Wall Street isn’t buying it: The Los Angeles-based thrift’s shares have fallen to yet another record low, down 6 cents to 79 cents at about 10 a.m. PST. With the company’s market capitalization now less than $11 million, investors obviously don’t see a future for the lender, which operates 39 branches in the Southland.
FirstFed, the parent of First Federal Bank of California, reported a fourth-quarter loss of $244.8 million, or $17.91 a share. The tsunami of red ink stemmed largely from a $220-million provision for loan losses, ‘the result of continued high levels of loan delinquencies and foreclosures, further deterioration in the California real estate market and the significant increase in unemployment in the fourth quarter,’ the company said.
The loss provision was 10 times the amount the company set aside in the fourth quarter of 2007, and double the $110-million provision of the third quarter.
Charge-offs -- loans categorized as uncollectible -- jumped to $163.5 million in the latest quarter, compared with $9.2 million a year earlier and $103.4 million in the third quarter.
FirstFed, which had $7.5 billion in assets as of Dec. 31, remained ‘well capitalized’ by the standards of federal bank regulators -- though just barely. The lender’s ratio of ‘tangible capital’ to assets was 5.35% as of Dec. 31, compared with the 5% level that regulators regard as well-capitalized. FirstFed’s ratio was 11% a year ago.
The company already is on warning: In a cease-and-desist order issued last week, the Office of Thrift Supervision said it would require FirstFed to find a buyer or shut down should it fall below the minimum well-capitalized threshold.
In today’s harrowing environment for lenders, regulators have required some banks to maintain tangible-capital levels of as much as 7% of assets, although FirstFed hasn’t received a formal order to that effect.
The Office of Thrift Supervision order also required FirstFed to stop writing new home loans. During the housing boom it had specialized in mortgages offering artificially low initial payments. Many of those borrowers now can’t afford the loans as payments adjust higher.
Babette Heimbuch, FirstFed’s chief executive, said the lender was “focused on modifying our adjustable rate loans where possible so that borrower payments are affordable and stable.”
Home loans more than 90 days in arrears or in foreclosure totaled $403.8 million on Dec. 31, down from $445.2 million on Sept. 30. Still, Heimbuch said, ‘while non-performing assets have stabilized, they are not decreasing as fast as we had hoped.’
-- E. Scott Reckard
