FirstFed Financial Corp., the Santa Monica-based holding company for First Federal Bank of California, has gained some much-needed stability in the past few weeks after nearly collapsing under the weight of Wall Street's fears.
After the July 11 failure of Pasadena-based IndyMac Bancorp, FirstFed topped most dour analysts' lists of the most likely candidate to fall next. The foreboding predictions startled investors, driving FirstFed's stock down sharply, hitting a low during the day of July 14 of $2.91 down 95 percent in the past year.
But the bank weathered the initial storm and now has investors hopeful that FirstFed has the wherewithal to get through the turbulent times that threaten to claim other regional banks. The company's stock closed July 31 at $8, up more than 7 percent for the day and 175 percent since the post-IndyMac scare.
"It certainly looked like investors got spooked by IndyMac," said Douglas Goddard, chief financial officer for FirstFed.
Goddard noted that initial comparisons of FirstFed and IndyMac did not hold up to scrutiny because FirstFed actually got out of some of the riskier mortgage lending activities several years ago that have since tripped up its competitors.
"The biggest difference is how much we withdrew from single-family option ARMs two years ago and we have much, much less exposure," he said. "We've definitely gotten hit harder than some other folks (but) delinquent loans appear to have peaked."
Indeed, the bank, which expects to report second quarter earnings this week, surprised Wall Street on July 23 with monthly data showing that delinquent non-accrual single-family loans decreased to $492 million in June from $507 million the month prior. The unexpectedly positive news sent FirstFed's shares up 54 percent in one day to $10.52 the company's largest single-day stock jump since December 1989.
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