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FirstFed Increases Single-Family Loss Allowance as Portfolio Faces More Stress.(Financial report)
Santa Monica, CA -- FirstFed Financial Corp., parent of First Federal Bank of California, expects to substantially increase its allowance for loan losses related to single-family home loans.
The bank expects to report a loan loss provision of between $140 million and $160 million for the first quarter, resulting in an after-tax operating loss of between $65 million and $75 million for the company.
The company also released data on single-family characteristics that show the bank has a high ratio of stated-income loans and that the LTV ratios have deteriorated as home values have slid in California.
Almost all of the increased loss reserve for the first quarter relates to the company's single-family home loan portfolio, FirstFed said. The increase will bring the company's total allowance for loan losses to about 5% of the outstanding loan balances at the end of the first quarter, roughly double the loan loss allowance ratio at the end of 2007.
Actual loan losses for the first quarter are estimated at $28 million, with single-family home loans again accounting for the lion's share of the total.
The bank said its multifamily and commercial real estate loan portfolios, which together account for about 30% of the total loan portfolio, are not experiencing significantly higher delinquency or default rates.
The "continuing decline in California real estate prices" during the first quarter is the primary factor behind the bank's decision to sharply increase its loan loss reserve.
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