Already on life support due to substantial loan losses, FirstFed Financial Corp. has submitted to regulators a plan to liquidate itself if it cannot raise capital immediately.
The L.A. holding company for First Federal Bank of California, which has been operating under a cease-and-desist order for eight months, recently missed a deadline imposed by regulators to raise capital to acceptable levels.
Under the terms of the agreement with the Office of Thrift Supervision, FirstFed executives developed a disposition plan, which analysts said is sometimes a precursor to failure.
“The bank submitted to the OTS a contingency plan to accomplish either a merger of the bank with, or an acquisition of the bank by, another federally insured institution or holding company thereof or voluntary liquidation of the bank,” the institution said in a document filed last week with the Securities and Exchange Commission.
FirstFed executives could not be reached for further comment.
One analyst, who asked not to be named, said the plan is a dire sign for the beleaguered thrift because “there’s no hope that they’re going to find a buyer.”
The thrift recently reported a $46 million third quarter net loss. Though FirstFed has pursued an aggressive loan modification program, its large portfolio of option adjustable rate mortgage loans has deteriorated rapidly since the housing bubble burst.
FirstFed has a total risk-based capital ratio of 8.91 percent, below the 10 percent level regulators consider “well-capitalized.”
The institution was ordered to boost its capital by Sept. 30, but it was unable to find investors by the deadline. Another institution that was also ordered to raise capital by Sept. 30, California National Bank, was closed by regulators Oct. 30.
But FirstFed is not giving up without a fight.
On Oct. 29, Jesse Casso Jr. stepped down from the thrift’s board in order to help raise capital for the institution.
According to a recent SEC filing, Casso “plans to assist the company by attempting to raise a fund that would recapitalize the bank” and he resigned from the board to avoid any conflicts of interest.
After a rough third quarter in which it lost nearly $60 million, Hanmi Financial Corp. said last week that it has entered into agreements with regulators ordering the institution to raise capital and improve asset quality.
In a Nov. 5 SEC filing, the Koreatown institution said it received a so-called final order from the California Department of Financial Institutions and entered into a similar order, known as a written agreement, from the Federal Reserve Bank of San Francisco that place restrictions on Hanmi’s lending and direct it to improve liquidity, strengthen board oversight and resolve problem assets. The final order also requires the bank to raise $100 million by July 31.
Sharp increases in the bank’s loan loss reserves in recent quarters have drained capital and recently dropped Hanmi below the “well-capitalized” threshold.
The institution recently secured a $6.95 million infusion from a South Korean investor and is looking elsewhere for additional capital.
“We are currently in active negotiations with certain Korean institutional investors relating to a larger capital infusion sufficient for Hanmi to weather this credit environment,” the bank said in a release.
Small business lending appears to be picking back up in Los Angeles.
In the third quarter, $224 million in so-called SBA-504 loans, used primarily for office and industrial properties, was approved by the L.A. office of the Small Business Administration, according to data released by CDC Small Business Finance, a not-for-profit small business lender. That total was up 34 percent from the previous quarter.
“We’re seeing consistent progress and are cautiously optimistic things will continue to improve,” said Dean Aloe, a senior loan officer for CDC, in a statement.
Meanwhile, 98 loans were approved in the third quarter, up 14 percent from the previous period.
First Private Bank & Trust, the Encino-based subsidiary of Boston Private Financial Holdings, announced that John Tellenbach has been appointed executive vice president and chief lending officer. … California United Bank announced that Bill Nethercott has been appointed senior vice president and regional manager of the institution’s Encino office.
Staff reporter Richard Clough can be reached at firstname.lastname@example.org or at (323) 549-5225, ext. 251.
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