IndyMac Sputters to Loss

The independent mortgage lender missed even lowered expectations.
By TSC Staff ,

Updated from 12:19 p.m. EDT

IndyMac Bancorp

(IMB)

swung to a steep first-quarter loss and provided a darkened outlook for the full-year as the company continues to battle a tight credit market.

The independent mortgage lender posted a net loss of $184.2 million, or $2.27 a share, vs. a net profit of $52.4 million, or 70 cents a share, in the year ago period.

The results were much worse than the consensus expectation of a 98-cent-a-share loss prior to IndyMac's

prewarning

earlier this month, in which it said business was improving from the fourth quarter's loss of $509 million, or $6.43 a share. Analysts polled by Thomson Reuters were expecting a loss of $1.92 a share after the warning.

"While many others in the mortgage finance industry saw worsening losses during the first quarter given the current state of the housing and credit markets, we achieved a 64% reduction in our net loss from last quarter as we took the appropriate steps in the second half of last year to get the bulk of our credit costs behind us," Chairman and CEO Michael W. Perry said in a company statement.

Perry noted that 24% of the first-quarter loss is related to staff reduction severance and office closing costs and 22% is from business activities such as homebuilder construction lending, home equity lending and the conduit channel that the company has permanently closed.

IndyMac shares were down 7.6% to $3.17 in recent trading.

Perry said IndyMac does not expect to return to profitability in 2008, but does expect losses to decline each quarter. That is in contrast to his

expectation in February

, when he said the company expected "a small profit of roughly $13 million." Analysts expect a loss of 62 cents a share in the second quarter and $2.97 for the full year.

IndyMac's troubles come as

Countrywide Financial

(CFC)

, another independent lender, is facing headwinds in its efforts to close a deal to sell itself to

Bank of America

(BAC) - Get Report

.

Standard & Poor's earlier this month downgraded Countrywide's debt to junk status and Charlotte, N.C.-based BofA said in a regulatory filing that it is reconsidering whether it will take on all of Countrywide's debt in the deal. Analysts

increasingly are questioning

whether the $4.1 billion deal can get done under the current terms.

IndyMac wrote down $160 million in the value to mortgage-backed securities in the first quarter and increased its provision for loan losses by $132 million.

The company has been converting its loan production from primarily securitized loans to loans that can be either held in its portfolio through its bank subsidiary, sold to one of the government-sponsored enterprises such as

Fannie Mae

(FNM)

or

Freddie Mac

(FRE)

, or those that qualify under guidelines by the Federal Housing Administration. While these loans tend to be better in quality, production at many lenders has been severely curtailed due to the lack of investor demand in the secondary market to buy securitized loans.

Other lenders, including

Washington Mutual

(WM) - Get Report

and

Wachovia Bank

(WB) - Get Report

also have been hit hard by securities tied to mortgages in the housing downturn and credit crunch.

This article was written by a staff member of TheStreet.com.

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