HomeFed Profit Sinks; Citicorp Plans Big Layoff : Banking: Beset by a bad real estate market and a slowing economy, financial institutions everywhere are hurting.
HomeFed Corp. on Wednesday joined the ranks of large thrifts and banks reporting relatively poor third-quarter profits linked to worsening real estate markets and a slowdown in the national economy.
HomeFed Corp., the San Diego-based parent company of HomeFed Bank, reported that net income for the third quarter ended Sept. 30 fell 92%, to $1.9 million from $23.9 million a year ago.
Besides HomeFed, other major financial institutions reporting lower earnings on Wednesday included Glenfed, NCNB and Fleet/Norstar Financial Group. Separately, New York banking giant Citicorp warned in a meeting with securities analysts that it will lay off thousands and that the cost of the layoffs has yet to be taken. The analysts said the job cuts will likely total 5,000, at a cost of $100 million.
This has been a terrible week for banks and thrifts as major institutions throughout the country have posted weak earnings or losses. Earlier this week, such major institutions as Great Western Financial in Beverly Hills, Security Pacific Corp. in Los Angeles and Citicorp reported sharp declines in earnings stemming from real estate-related problems and the softer economy.
HomeFed was hurt by having to set aside additional money for possible losses on loans and reduced income from real estate operations. While the thrift experienced continued weakness in its commercial real estate and apartment loan portfolios, HomeFed was also hampered by a statewide slowdown in single-family home construction, said Chief Executive Robert F. Adelizzi.
HomeFed stock closed down $.50 to $6.625 Wednesday in New York Stock Exchange trading.
While HomeFed continued to be plagued by its commercial real estate loan portfolio, its performance was “in line” with third-quarter reports by other major banks and savings and loans in California, said Gary Gordon, a PaineWebber analyst in New York.
“It’s a case of misery loves company,” Gordon said. “There’s a clear problem, no question about it, in the commercial real estate market. It’s been growing outside of California, and now it’s a growing problem within California.”
HomeFed’s non-performing assets increased over the quarter to $749 million, or 3.92% of total assets on Sept. 30, up from $708 million, or 3.73% of total assets on June 30.
The company recorded $49.2 million in new provisions for losses, compared with a massive $234-million loan-loss provision the previous quarter, which led to a $108-million loss for the three months ended June 30. HomeFed set aside a $34-million loan-loss provision for its third quarter in 1989.
HomeFed now has adequate capital to meet a tougher, risk-based capital ratio that federal regulators will institute on Dec. 31. “If all things stay the same between now and Dec. 31st, we . . . (would meet) the requirements,” Adelizzi said.
HomeFed reported that about 40% of its non-performing assets are in California, 22% are in Florida and 8% are in Arizona. The remaining 30% are scattered across other states.
“This (third-quarter report) is obviously a continuation of a slow real estate trend that we have seen over the last several months,” Adelizzi said. “We’re not pleased with the level of the (loan-loss) provisions, but all other elements of the report are meeting our expectations.”
HomeFed, which has laid off nearly 290 employees, or about 6% of its work force in recent months, has no plans for additional layoffs, Adelizzi said. “I would expect that constitutes the vast majority of any layoffs that will be experienced,” Adelizzi said.
Although down, earnings for Glenfed Inc., parent of Glendale Federal Bank, were better than most. Its profit fell 9.6% in the third quarter from a year earlier, when the thrift had substantial gains on the sale of fixed-rate loans a year earlier.
Times staff writer James Bates contributed to this story.
