Seven months after regulators forced Fremont General Corp. to quit making sub-prime mortgages, the Santa Monica banking company disclosed the damage Wednesday: more than $1 billion in losses stemming from loans to people with bad credit or troubled finances.
Filing long-delayed financial reports, the parent of Brea-based Fremont Investment & Loan said it lost $202.3 million, or $2.72 a share, in 2006, a year in which harsh competition led it and rivals to loosen lending standards for their high-risk clientele.
The first half of 2007 was still worse, according to filings with the Securities and Exchange Commission, as Fremont lost $879 million on the sale of its portfolio of $6.9 billion in sub-prime loans. Its net loss for the six months was $856 million, or $11.19 a share, compared with earnings of $83.6 million, or $1.10, during the first half of 2006.
Third-quarter financial reports issued Wednesday by other lenders further underscored the depth of damage from the mortgage meltdown -- and the fact that some banks not exposed to the sub-prime sector have so far weathered the storm.
Citing rising foreclosures and other problems related to mortgages and the housing market, Newport Beach savings and loan Downey Financial Corp. reported a loss of $23.4 million, or 84 cents a share, compared with a profit of $55.6 million, or $1.99, a year earlier.
Downey specializes in adjustable-rate home loans, providing several payment options including a payment so low that the loan balance rises.
Chief Executive Daniel Rosenthal expressed disappointment in the quarterly results but said Downey's capital and retail bases were strong enough that it could "continue funding quality loans."
Downey's stock sank $1.77, or 3.8%, to $45.23 on Wednesday.
By contrast, Beverly Hills-based City National Corp., which caters to businesses and their affluent owners, said its profit rose 2% to $60.1 million, or $1.22 a share, from $59 million, $1.20.
And Pasadena's East West Bancorp, mainly a business lender with a large base of Chinese American depositors, said its profit rose 16% to $41.3 million, or 67 cents a share, from $35.6 million, or 58 cents. East West also said its acquisition of Victorville-based Desert Community Bank closed in August.
City National and East West released their results after the stock market closed. They and Downey are among the biggest lenders based in Southern California. City National has $15.5 billion in assets, Downey has $14.4 billion and East West has $11.6 billion.
In addition to exiting the sub-prime mortgage business, Fremont sold its large commercial lending arm this year. In February, the Federal Deposit Insurance Corp., its chief regulator, criticized both businesses as too risky and said the mortgage operation was making loans that borrowers couldn't afford.
Massachusetts sued Fremont on Oct. 5, saying it had deceived homeowners and driven them into bankruptcy. Fremont said the lawsuit had no merit.