OneWest Bank of Pasadena, the savings bank that arose from the ashes of failed mortgage giant IndyMac Bancorp, reported a solid profit of $182 million for the second quarter, its first full quarter under ownership by private investors.
The company's report to regulators, posted on a government website Tuesday, suggested that a loss-sharing arrangement with the Federal Deposit Insurance Corp. was helping the thrift work through its giant collection of soured loans and move toward its goal of reshaping itself as a traditional full-service bank.
"They look incredibly good," said longtime banking industry consultant Bert Ely. "I'm surprised."
IndyMac specialized in nontraditional mortgages that could not be sold to government-sponsored loan buyers Fannie Mae and Freddie Mac. In particular, the thrift was the largest generator of loans made without fully documenting the borrowers' earnings and assets -- a category of mortgage that has produced heavy defaults.
The lender's collapse in July 2008 underscored the severity of the mortgage meltdown, as depositors who had heard of its troubles lined up to withdraw funds.
The run on deposits occurred too quickly for the FDIC to find another bank to take over the failing institution, forcing the agency to operate IndyMac for eight months.
The FDIC sold the lender in March, agreeing to absorb a large majority of the losses yet to be recorded in IndyMac's loan portfolio. Taking the terms of the sale into account, officials projected that the bank's failure would cost the federal deposit insurance fund nearly $11 billion.
While running the thrift, the FDIC worked aggressively to keep borrowers from losing their homes by easing the terms of their mortgages -- an effort that became the model for the Obama administration's loan modification program.
OneWest's report to regulators illustrates what many troubled borrowers have discovered: Despite modification efforts, many loans are too far gone to be saved. The value of repossessed homes on OneWest's books on June 30 totaled $137 million, up from $18 million on March 31, partly reflecting the expiration of moratoriums on foreclosures.
Of the $6.6 billion in mortgages in OneWest's portfolio, nearly $2 billion were delinquent or their borrowers had stopped paying entirely. Nevertheless, the bank's allowances for losses were modest and its profit on par with earnings of the best-performing banks in good economic times -- an apparent reflection of the conditions of the deal with the FDIC, Ely said.
A OneWest spokesman said its new owners would have no comment. The private equity investors, led by Steven Mnuchin of Dune Capital Management in New York, include J. Christopher Flowers, who has specialized in purchases of distressed banks, and hedge fund operators George Soros and John Paulson.
The change of name from the tainted IndyMac to OneWest had yet to be fully realized Tuesday at a branch just outside Laguna Woods, the giant Orange County retirement community, where the sign on the building still said IndyMac.
Posters in the bank's windows reflected the new owners' aspirations, using the name OneWest and touting "great service and great rates" at "a full service bank that's easy to work with."
But a random check Tuesday morning revealed no customers in the branch, compared with a dozen each at nearby branches of Bank of America and Chase Bank, nine at Wells Fargo Bank and five each at Union Bank and California Bank & Trust.