1st National to Sell Mortgage Group to Bass Family Firm : Finance: San Diego-based bank is taking $17-million loss in the sale and will lay off 100 employees.
First National Bank said Thursday it has sold its mortgage banking operation at a $17-million loss, and that it will have to lay off up to 100 of the bank’s employees connected to the operation.
That loss, plus costs related to First National’s plan to close two of its six branches in October, will produce a second-quarter net loss of about $18 million, bank President Robert Richley told reporters Thursday. The bank reports its official results later this month.
Richley also disclosed at the press conference that the bank will not meet the capital guidelines that were imposed on it this spring by the Office of the Comptroller of the Currency.
However, Richley said he is hopeful that the OCC will grant the bank some “relief” in the form of more relaxed guidelines later this month, considering the progress the bank has made in controlling its loan portfolio.
After three quarters in which the bank was forced to set aside a total of $14 million in probable loss provisions to account for deteriorating loan quality, the bank’s bad loan problems have stabilized and reserves for the second quarter just ended will be “negligible,” Richley said.
Still, the bank faces formidable obstacles in its fight for survival. The second-quarter loss will reduce the bank’s capital and its non performing assets--foreclosures and delinquent loans--remain virtually the same as the $38.2 million reported at the end of the first quarter. Only now, that $38.2 million represents a greater proportion of the bank’s shrinking assets.
The buyer of the mortgage banking operation is BancPlus Mortgage Corp. of San Antonio, a loan-servicing operation that is owned by members of the Bass family of Texas. As of Dec. 31, BancPlus serviced $10 billion in loans. Specifically, the Basses are buying servicing rights for about $2.8 billion worth of mortgage loans.
Richley said the bank tried to sell its mortgage loan operation as an ongoing business but could find buyers only for the loan servicing rights. The sale will leave 100 First National employees without jobs, he said.
Selling the mortgage banking operation has been an imperative for First National since late 1990, when regulators tightened capital requirements for the operations to the extent that they are no longer profitable for most banks.
The First National branches to be closed are in Del Mar and Fairbanks Ranch and employ a total of 14 employees. The layoffs of mortgage banking and branch employees will leave the bank with about 163 employees by the end of the year.
The closings are part of a radical downsizing of the bank that Richley has orchestrated since he took over the ailing institution in March. The bank’s assets as of June 30 were about $465 million, down from $586.8 million as of March 31. By the end of September, First National’s assets may be as low as $325 million, he said.
The second-quarter loss will reflect a $500,000 provision for proposed settlement of the banks’s litigation involving its dealings with Pioneer Mortgage, the failed La Mesa-based mortgage investment brokerage.
Richley described the Pioneer Mortgage investors’ suit against First National as “absurd” but said a settlement would be preferable to having litigation drag on.
Not counting the loss on the sale of the mortgage banking operation, First National’s loss on its banking activities over the second quarter will be between $1 million and $2 million, which Richley described as “good news” after the $18 million in losses the bank has sustained over the previous three quarters.
