Capital Below Key Ratios At HomeFed
SAN DIEGO, Calif. - HomeFed Corp. said it failed to meet key capital requirements at the end of the second quarter.
Its risk-based ratio of 5.5% fell short of the required 7.2%, and core capital was 2.64% as against a required 3%, the company said. Tangible capital, at 1.78%, topped the 1.5% standard.
HomeFed, the parent of HomeFed Bank, one of the 10 largest thrifts in the nation, took a $150 million provision for losses in the second quarter, resulting in a loss of $112.5 million, or $5.24 a share.
Nonperformers Rise Again
The company lost $108.2 million, or $5.04 a share, in the second quarter of 1990. It said the latest provision primarily reflected continued increases in nonperforming assets and significant chargeoffs.
HomeFed said that, in calculating its capital, it is required to deduct a portion of its investments in subsidiaries engaged in certain types of real estate activities. That deduction was 10% at June 30 but increased to 25% on July 1.
With the higher deduction, the risk-based, core, and tangible ratios would have fallen to 5.04%, 2.39%, and 1.52%, respectively.
New Management in Place
HomeFed said it had filed a capital-restoration plan with the Office of Thrift Supervision on June 21, before a new management team led by Thomas Wageman came on board.
The second-quarter earnings statement showed nonperforming assets at $1.6 billion, one-third higher than the $1.2 billion last Dec. 31. The ratio of nonperforming assets to total assets was 10% as of June 30 compared with 6.4% as of Dec. 31.
Mr. Wageman pointed out that a large part of the increase in the nonperforming ratio resulted from a reduction in asset size. Assets stood at $16.4 billion on June 30, down from $18 billion on March 31.
Moody's Investors Service reduced its ratings on debt of HomeFed Bank, citing continuing losses and increases in nonperforming assets.