HomeFed’s Bad Loans Continue to Mount
HomeFed Bank on Tuesday reported a sharp increase in its bad loans during May, the second straight month of significant portfolio deterioration at the San Diego-based thrift and another sign that California’s real estate market is weakening.
HomeFed, still generally considered among the financially strongest of the larger California thrifts, said its gross non-performing assets (foreclosures and loans delinquent 90 days or more) increased during May by $81 million from the previous month. That brought the thrift’s total bad loans to $579 million, or 3.12% of its $18.2 billion in assets. Many analysts see a bad-loan ratio of more than 2.5% of assets as a danger sign.
HomeFed, which has begun disclosing “material” financial and asset-quality information on a monthly basis, last month reported a $44-million increase in its total problem loans and foreclosures during April. But the 211-branch thrift’s capital is in no immediate danger. Its tangible capital--one measure of its financial cushion against losses--is 5.03% of assets, far above the 1.5% minimum set by regulators.
The increase in problem loans was announced after the stock market had closed. HomeFed stock, whose price had increased sharply during the past week on the strength of several buy recommendations from Wall Street analysts, closed Tuesday at $33.25, down 37.5 cents on New York Stock Exchange trading.
In an interview, HomeFed President Robert F. Adelizzi attributed most of the new loan problems to one borrower, a Northern California commercial real estate developer who in May was classified as delinquent on loans totaling $54 million. The developer’s loans had previously been restructured after he had trouble making payments.
Adelizzi declined to discuss the financial impact of the added non-performing loans, saying it was “too early” to predict how much in loan-loss reserves HomeFed may have to set aside during the current quarter to account for the bad loans.
