Shares of FirstFed Financial Corp. jumped more than 30 percent Wednesday after the bank holding company reported that it not only had reduced its exposure to troublesome adjustable-rate loans and mortgage-backed securities, but had seen a drop in single-family home loans delinquencies last month.
The Los Angeles-based parent of First Federal Bank of California said delinquent single-family home loans not earning interest dropped 11 percent from June to July to $437 million, the second straight monthly decline, according to its Securities and Exchange Commission monthly operations report. Even so that's still significantly higher than the $60 million in delinquent loans the bank reported in July 2007.
FirstFed originated $173 million in loans in July, compared with $78.3 million in the same month a year ago. Only 10 percent of those loans were adjustable-rate mortgages, compared with 44 percent in July 2007.
Overall deposits rose to $4.16 billion as wholesale deposits increased, but retail deposits fell 8 percent month-over-month to $2.91 billion.
Analyst Frederick Cannon at Keefe, Bruyette & Woods told clients in a note that the bank's balance sheet growth, increased liquidity and the positive credit trends in delinquencies were promising. Cannon has an "outperform" rating and a $40 target price on the stock.
Shares of FirstFed closed up $2.76, or 30 percent, to $11.86 in Wednesday trading on the New York Stock Exchange after earlier rising 32 percent. The stock has lost 75 percent of its value over the last year.
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