This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

IndyMac Wreck Could Lead to S&L Pile-Up

Updated from 10:18 a.m. EDT

IndyMac Bancorp's (IMB) precipitous fall Monday is a bad sign for other savings and loans on the brink of financial disaster.

After the last session, IndyMac posted a "stakeholder letter" on the company's blog, announcing that it was no longer considered well-capitalized by its regulator, the Office of Thrift Supervision.

Unless it quickly raises capital or finds a way to sell major portions of its business, IndyMac can't survive for the next several quarters unless overall housing prices show some signs of life. A rebound in housing would make the mortgage-backed securities market much more liquid, supporting prices and curtailing writedowns. It would also help to stabilize IndyMac's loan quality and enable it to pare down its quarterly provisions for loan loss reserves.

Unless any of those things happen, however, IndyMac and other troubled S&Ls like Washington Mutual (WM) and Downey Financial (DSL) are in trouble, putting the OTS is in a very difficult position.

The regulator of the nation's approximately 815 federally chartered S&Ls has already seen the second-largest institution it supervised, Countrywide, acquired under duress by Bank of America (BAC). And WaMu and Downey are both prime candidates for actions similar to IndyMac's.

Close to Throwing in the Towel

In order to be considered well-capitalized under regulatory guidelines, a bank or S&L needs to maintain a leverage ratio of at least 5% and a risk-based capital ratio of at least 10%. IndyMac's risk-based capital ratio, which takes loan quality into account, had fallen to 10.26% as of March 31.

IndyMac stated it was too early to announce just what its capital ratios were as of June 30, but the company did say that its second-quarter net loss was expected to exceed its first-quarter loss of $184 million. Shares fell more than 50% Tuesday, to 34 cents at their lowest point.

Shares of IndyMac, which traded as high as $31.32 in the past 52 weeks, were losing nearly half of their remaining value, falling 31 cents, or 44%, to 40 cents.

Following the lender's announcement, Fitch Ratings cut its long-term issuer default ratings for IndyMac further into junk territory. Research firms Friedman Billings Ramsey and RBC Capital Markets lowered their price targets on the stock all the way to $0.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs