HomeFed Corp. Has $112-Million Loss in Quarter
The parent company of HomeFed Bank, one of the nation’s largest thrifts, reported a net loss of $112.5 million in the second quarter, heightening the prospect of a government takeover of the troubled savings and loan.
HomeFed Corp., once considered an industry leader, has fallen on hard timesbecause of bad commercial real estate loans. The thrift has been bleeding for the past five quarters, losing $247.5 million in all of 1990 and $173.9 million for first quarter 1991.
The loss for the second quarter ended June 30 left HomeFed out of compliance in core and risk-weighted capital, two of the three minimum capital requirements imposed by regulators. The thrift has adequate tangible capital but only by a margin of $44.3 million, a surplus that could be wiped out if the losses continue.
Joseph Jolson, a stock analyst with Montgomery Securities in San Francisco, said the fate of HomeFed may depend on the recovery of the economy, particularly in real estate. He is not optimistic about HomeFed’s chances.
“Will it get a lot worse? The answer is, ‘What is the outlook for the economy and interest rates?’ ” Jolson said. “We believe that the deterioration in the economy is over, but there is not going to be a robust recovery.”
The second-quarter loss, which is equal to $5.24 per share, compares with a $108.2-million loss, or $5.04 per share, over the same quarter in 1990.
The loss mainly was caused by an addition of $150 million in provisions for probable loan losses. The provision was taken to reflect “realistic” values of the real estate securing HomeFed loans, said thrift President Thomas Wageman.
Wageman, who recently replaced Robert Adelizzi after he resigned under pressure from regulators, declined to predict whether the worst was over at HomeFed.
“If I could answer that question I wouldn’t need to work,” he said. “It’s kind of one of those things that people ask stockbrokers: ‘Has the market turned or not?’ The bottom or the end will finally come when real estate markets bottom.”
HomeFed, the nation’s seventh-largest thrift with $16.4 billion in assets and 209 branches, has been struggling with a mounting portfolio of problem loans in and outside the state during the past 15 months. MORE EARNINGS NEWS: D2, D3
