FirstFed Financial CEO Babette Heimbuch to resign
The chief executive of FirstFed Financial Corp. is resigning after 13 years at the helm of the Los Angeles savings and loan, whose fortunes rose and fell with the boom and bust in pay-option mortgages.
Babette E. Heimbuch, 61, stepped down as chairwoman of FirstFed and its subsidiary, First Federal Bank of California, on Wednesday, the company said Friday. She is to retire as CEO and as a director of the thrift and its holding company Dec. 31.
Brian Argrett, an independent FirstFed director and head of private equity firm Fulcrum Capital Group, was named the new chairman.
The company named James Giraldin, FirstFed’s president and chief operating officer, to succeed Heimbuch as CEO.
Independent director William Rutledge, former CEO of Allegheny-Teledyne Inc., was named vice chairman of the board.
Beaten down by losses on billions of dollars in pay-option adjustable-rate mortgages, or “option ARMs,” FirstFed has been pursuing a last-ditch effort to raise capital through a stock sale to ward off a seizure by bank regulators.
The announcement that Heimbuch would depart came after the close of regular stock trading, during which FirstFed shares fell a penny to 32 cents. The stock, down 82% this year, peaked at $69.23 less than three years ago.
Heimbuch, an accountant who joined FirstFed in 1982 as chief financial officer, became its chairwoman and CEO in 1996.
In the company’s announcement of her departure, Heimbuch was quoted as saying that she had hoped to retire earlier but stayed at her post to help the thrift address its problems by working with regulators and potential investors and by negotiating with distressed borrowers to modify their loan terms.
“Now, both the bank and the economy are experiencing positive trends, and I am confident that the executive team at First Federal Bank of California is well positioned to complete our capital-raising effort,” Heimbuch said.
She couldn’t be reached to elaborate on the announcement.
Option ARMs allowed borrowers to choose how much to pay each month during the early years of the loan. They could pay the accrued interest and some of the principal, pay the interest only so the loan balance stayed the same, or pay so little that the amount owed rose instead of fell.
During the housing boom, borrowers commonly paid the minimum. That left them, as home prices began to tumble, owing significantly more than they initially borrowed. Now the periods of low-payment options on loans written during the boom are running out, often sending payments skyrocketing.
FirstFed’s assets more than doubled from $4.8 billion at the end of 2003 to $10.5 billion at the end of 2005 as the bank and its customers gorged on option ARMs. It backed away from making the risky loans before many others in the industry did, and its loan volume plummeted.
The company recorded a $402-million loss last year and has booked $145 million in losses so far this year. Its assets have shrunk to $6.2 billion.
In the bank’s statement, Giraldin, the CEO-to-be, noted that FirstFed has reported nine consecutive months of declining delinquencies and six straight months of decreasing loss rates.
“Our loan modification program has reduced the risk of losses in our mortgage portfolio, and our retail deposits are growing,” he said.
