IndyMac Posts $184.2 Million Loss; Doesn't See Profitability Until 2009
Less than two weeks after CEO Michael Perry infamously told investors that IndyMac Bancorp, Inc. (IMB) had "turned a corner", the Pasadena-based thrift said Monday that it lost $184.2 million during the first quarter -- and suggested that it wouldn't return to profitability during 2008. "We do not expect that Indymac will be able to return to overall profitability until the current decline in home prices decelerates," Perry said in a statement. Perry pointed to the fact that IndyMac had narrowed its net losses by 64 percent during the first quarter, although investors clearly weren't sold. The company's stock took a beating to the tune of nearly 10 percent in trading on the New York Stock Exchange, dropping to a $3.08 share price when this post was published, giving back all of its previous gains from Perry's earlier remarks -- and then some. The IndyMac CEO had said as recently as mid-February that he expected the lender to return to profitability by the second quarter. Monday's drubbing in the stock market signals that investors may be tiring of the endless optimism: Perry had suggested last March, for example, that fears of subprime woes spreading into Alt-A were "overblown." In the face of a renewed forecast of year-long losses in 2008, Perry said that IndyMac had made the decision to defer interest payments on trust preferred securities at the bank's holding company, and to suspend the dividend payments on its preferred stock. Despite having to reel in the company's latest forecast, and despite investor sentiment, IndyMac is set on a path to become the nation's largest independent mortgage lender after Bank of America Corp. (BAC) completes its anticipated purchase of Countrywide Financial Corp. (CFC) in the third quarter of this year. IndyMac said its production of single-family residence mortgages reached $9.6 billion by the end of the first quarter, down 62.5 percent from one year ago -- and off 21.0 percent from the fourth quarter -- as it looks to reinvent itself as a conforming/FHA lender. Once the largest Alt-A mortgage lender in the country in 2006, IndyMac saw 84 percent of its first quarter production sold to either Fannie Mae (FNM), Freddie Mac (FRE) or Ginnie Mae. While production shifts towards conforming product, the bank also said that overall portfolio delinquencies are now worse than the industry average -- and have been for roughly two quarters. IndyMac attributed this fact to a heavier concentration of loans in the 2005-2007 vintages; it also suggested that its Alt-A losses were below industry averages for the same collateral. For more information, visit http://www.indymac.com. Disclosure: The author was long CFC, and held no other relevant positions, when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.