In taking a massive fourth-quarter write-down Monday on its high-risk adjustable-rate mortgages, FirstFed Financial Corp. may have been trying to convince investors that the worst has passed.
But Wall Street wasn't buying it: The Los Angeles-based thrift's shares fell to yet another record low, dropping 6 cents to 79 cents. With the company's stock market value now less than $11 million, investors don't seem to see a future for the lender, which operates 39 branches in Southern California.
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 earlier.
The company already is on warning: The federal Office of Thrift Supervision said last week that it would require FirstFed to find a buyer or shut down should it fall below the 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 an order to that effect.
The Office of Thrift Supervision last week also ordered 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 Dec. 31, down from $445.2 million Sept. 30. Still, Heimbuch said, "while nonperforming assets have stabilized, they are not decreasing as fast as we had hoped."