SoCal Financial Corporations Still Slumping
Investors are increasingly throwing in the towel on Southern California-based savings-and-loan mortgage lenders IndyMac Bancorp, FirstFed Financial Corp. and Downey Financial Corp.
Defaults keep climbing on the nontraditional mortgages made by the companies, and bond buyers still shun securities backed by such loans. The lenders are awash in red ink, and their stocks are down by about half or more since the beginning of the year.
The companies — which operate IndyMac Bank, First Federal Bank of California and Downey Savings & Loan — have managed to survive long after nonbank sub-prime lenders such as Ameriquest Mortgage Co. of Orange and New Century Financial Corp. of Irvine melted down more than a year ago.
That’s partly because IndyMac, FirstFed and Downey didn’t specialize in sub-prime loans, so they didn’t lend to the category of borrowers considered most likely to default. In addition, as outside funding for mortgages dried up, the thrifts retained access to money from another source: their depositors. And because the S&Ls’ deposits are federally insured, regulators require the thrifts to maintain extra capital and reserves against losses — cushions that have served the firms well during the mortgage crisis.
But the losses keep coming.
On Monday, Pasadena-based IndyMac reported a loss of $184.2 million, or $2.27 a share, compared with a profit of $52.4 million, or 70 cents a share, a year earlier. To conserve cash, the company suspended dividend and interest payments on some preferred securities.
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