FirstFed Financial Corp., struggling under the weight of a large option adjustable-rate loan portfolio, said Monday that it has been issued a cease and desist order by regulators directing the thrift to submit a plan addressing how it intends to remain well-capitalized.

Under the order from the Office of Thrift Supervision, Santa Monica-based operator of First Federal Bank of California must receive permission to pay dividends, issue debt or increase lines of credit.

FirstFed also said it will lay off 62 of its employees, or 10 percent of its total workforce. The movewill save the thrift approximately $4.2 million.

"FirstFed has always had great pride in its employees and it is with deep regret that we must take this action," said FirstFed Chief Executive Babette Heimbuch in a statement. "Given the economic pressures we are under, doing so has become necessary."

FirstFed said the cuts will come primarily from the institution's single family lending and commercial lending operations.

During the third quarter, FirstFed reported a $110 million loan loss provision due to a sharp increase in the number of delinquent loans. The thrift has specialized in so-called option-ARMs, which allow borrowers to periodically adjust the interest rate on their mortgage. As the interest rates reset at higher levels, these types of loans have seen a rise in delinquencies and experts expect that trend to continue.

Earlier this month, the thrift, which has $7.4 billion in assets, announced a plan to shed debt by purchasing up to $150 million of its bonds.

Shares of FirstFed closed Monday at $1.57.

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