IndyMac Bancorp (IMB) reported yesterday that it suffered its third-consecutive quarterly loss and will be taking other measures to preserve capital, such as deferring interest payments on some preferred securities.IndyMac said it endured a net loss of $184 million for the first quarter, marking an improvement over the $509 million net loss in the fourth quarter of 2007, but worse than both consensus estimates and the $52 million profit reported in the same period a year earlier. The narrowing of the net loss reflected a reduction in quarterly provisions for loan losses, and $322 million in losses on loans sold during the fourth quarter of 2007. Capital Levels In its earnings release for the first quarter, IndyMac sought to assuage fears of continued capital erosion. Through its direct investment program, the company raised $39 million in capital during the first quarter, after raising $676 million during 2007. IndyMac also announced the painful step of deferring interest on the holding company's trust preferred securities and suspending dividends of non-cumulative perpetual preferred stock at IndyMac Bank, its main subsidiary. These steps will preserve $10.6 million in capital per quarter. Dividends on common shares had already been suspended for the first quarter of 2008, after being cut in half the previous quarter.
Loan Quality Continues to Slide Nonperforming loans totaled $1.85 billion as of March 31, increasing a whopping 40.56% just from last quarter. Loan-loss reserves totaled $483 million, or 26% of nonperforming loans. However, previous markdowns of problem loans transferred from held-for-sale to IndyMac's investment portfolio, created "embedded credit reserves" of $481 million. When these are factored in, IndyMac's loan-loss reserves covered 52% of nonperforming loans as of March 31, according to the holding company's 10-Q filing. On the holding-company level, nonperforming assets, including nonaccrual loans and repossessed real estate, comprised 6.51% of total assets as of March 31, compared to 4.61% last quarter and 1.09% in March 2007. In the 10-Q filing, the company stated it expects "to have an even higher level of non-performing loans in the future due to the continued market disruption." Net loan charge-offs totaled $46 million for the quarter, while loan-loss provisions totaled $132 million. So loan-loss provisions continued to outpace charge-offs. During IndyMac's earnings conference call, CEO Michael Perry stated that the company did not expect to make extraordinarily large quarterly provisions for loan-loss reserves over the next four quarters, as the company had built credit reserves in advance of actual losses.