HomeFed Bank Bad Loans Leap 10% in April : Thrifts: The increase adds to evidence that worsening real estate loan problems are hurting S&Ls; in California.
San Diego-based HomeFed Bank reported on Thursday that its problem loans increased by 10% in April alone, a sharp jump that provides yet more evidence of the growing real estate loan woes hurting many California banks and thrifts.
The news sent the stock of the thrift’s parent, HomeFed Corp., down $2 a share to close at $30 in New York Stock Exchange trading Thursday.
HomeFed said its non-performing assets, which it defines as loans in foreclosure or 90 days or more delinquent, increased over the month by $44.3 million, to $498.3 million. That put its ratio of bad loans to total assets at 2.73%, up from 2.5% on March 31 and 2.6% on Dec. 31, HomeFed said. Many analysts consider ratios of 2.5% or higher as a bad sign.
Analyst Allan Bortel of Sutro & Co. in New York said the addition to the problem loans could mean a $3-million reduction in net income for HomeFed on an annualized basis. HomeFed earned $115.7 million in 1989.
Although the bad loans by themselves have a relatively small impact on HomeFed’s bottom line, the stock price drop reflects the nervousness of investors toward any bad news on real estate loans, HomeFed President Robert F. Adelizzi said Thursday.
Sutro & Co.'s Bortel said investors are “extra sensitive” about HomeFed because the S&L; “surprised” Wall Street last December when it announced that it would set aside $115 million in loan-loss reserves for its 1989 fourth quarter.
Most of the growth in problem loans was attributed to five loans to a single borrower totaling $34 million that are secured by five apartment buildings in Florida. The S&L; insists that the delinquent loans are adequately secured. While it expects to initiate foreclosure proceedings during the current quarter, HomeFed said it does not expect to set aside additional loan-loss reserves for the loans.
Adelizzi said that HomeFed’s disclosure of the growth in bad loans was not mandatory but that it was releasing the figures anyway because it has become the S&L;'s practice to discuss its “financial highlights” each month with analysts and institutional investors.