While California's midsize thrifts have received the most attention for their multifamily real estate loans, a small group of Golden State community banks and thrifts is having an equally rough time grappling with the multifamily market.
And not surprisingly, the five institutions with the highest percentage of total loans in multifamily housing are based in or just outside Los Angeles, according to an American Banker analysis.
Well ahead of the rest of the group is Founders National Bank, the $102 million-asset minority bank in Los Angeles. According to the study, 57% of the bank's total loans as of March 30 were for multifamily real estate, by and large apartment buildings. The next closest percentages were less than half that - about 28% of total loans.
Founders' chief executive, Carlton Jenkins, did not return phone calls, and other Founders officials declined comment.
"Those (percentages) are high," said John A. Bailey, analyst at Friedman, Billings & Ramsey in Arlington, Va. He said most existing multifamily loans, those put on the books between 1988 and 1990, have lost at least a quarter of their value.
Besides Founders, Eastern International Bank of Alhambra, Pacific Thrift and Loan Co. in Woodland Hills, and Los Angeles' Brentwood Bank and Topa Thrift and Loan Co. have 20% or more of their loans in multifamily properties.
"The regulators would like the percentage to be not as large," said Wayne Spinner, vice president of lending at Brentwood. "But about 80% of these came through acquisitions. We'd love to bring it down, but unfortunately there's not a market for it."
At the $266 million-asset Topa, things look more troubling. The thrift and loan company has decided not to do any lending at all for the next six to 12 months due to the losses it has suffered recently, said controller Scott Hinkle.
He estimated that about 20% of the institution's losses stemmed from its multifamily lending.
"For the type of institution we are, we probably won't increase our percentage, but maintain it or lower it a bit," said Delia Tanusuputra, chief executive of Eastern International Bank. "We'll be more selective in terms of granting the loans in the future."
Multifamily lending has plagued institutions in California of late, primarily because of sagging realty prices. The Northridge earthquake in January 1994 added to the problems.