During the worst year for the thrift industry since the early 1990s, no company is suffering more than Bank Plus Corp.
The Los Angeles thrift said Tuesday that its chief executive, Richard M. Greenwood, has resigned, after seven years with the company. Bank Plus, the parent of Fidelity Federal Bank, has effectively suspended the subprime credit card lending program it was building aggressively.
Nonperforming rates in its biggest area of real estate lending have doubled in three months.
The company warned Tuesday that it would take an unspecified loss that by yearend that could jeopardize its status as a "well-capitalized" institution.
Bank Plus also reported a second-quarter net loss of $1.2 million, which largely reflects a loss of millions in derivatives.
The plethora of bad news has driven Bank Plus' share price down to $5, off 69% from its peak, and investors are clamoring for management to sell.
Executives and directors said in a conference call Wednesday that they would consider selling for cash or stock, and said some companies have checked their books. But since management has no firm idea of the company's net worth - some analysts speculate it may be less than zero - a sale appears to be some time off.
"The tires have been kicked for 10 years, and no one has ever wanted to take the risk," said Charlotte Chamberlain, thrift analyst at Jefferies & Co. of Los Angeles. "This isn't the first time this company has been in trouble."
For now Bank Plus, is just trying to assess the damage.
"I came back here to build a mortgage banking operation, and was surprised by what I found," said the new CEO, Mark K. Mason. "The quality of the credit card portfolio was much worse than I expected."
Mr. Mason had been chief financial officer since April.
Bank Plus' story highlights the risk companies take when they voyage into subprime lending.
Mr. Greenwood ended the company's mortgage origination business - the plain-vanilla business of thrifts - and in 1996 started building its practice of making loans to consumers. The California real estate crunch forced Bank Plus to turn to the markets for recapitalization in 1994 and 1995.
It signed affinity agreements with several companies that issue credit cards to consumers with bad credit, including a group called Revelation Corporation of America, which was founded by five of the country's largest African-American church groups, the company said.
Typically consumers with bad credit histories can only get secured credit cards - they deposit $300 for a $300 credit line, for example. Bank Plus attracted customers by offering more credit than customers left in deposit.
Rapid growth restored Bank Plus to profitability in 1997, after losses in 1994, 1995, and 1996. This year credit card loans have grown by 50%, according to a person close to the company. But delinquencies have skyrocketed, to 12% in August from 8.6% in June.
Late payment has also grown quickly in its real estate loan portfolio. Delinquencies on apartment loans rose 120% during the second quarter, according to company reports. About 58% of the company's real estate loans are on apartments, defined as properties occupied by five families or more.
Bank Plus has also been rocked by losses in its risk management endeavors. In the third quarter of 1996, according to company reports, it started using derivatives "for trading or yield enhancement purposes." The company tried to hedge against changes in the value of its fixed-rate securities by buying futures of Treasury notes.
But the futures provided an ineffective hedge.
In July, when the company reported the $1.2 million loss, shareholders started to squawk for a sale. The company hired then investment bank Keefe, Bruyette & Woods.
Jeffrey T. Nelson of LaSalle Financial Partners, who owns 7.3% of Bank Plus' stock, called Mr. Greenwood's departure "a step in the right direction."
Mr. Mason said he will assess the company's credit card portfolios in the next two to three months and try to sell them.
But most of Bank Plus' value lies in its 38 branches throughout the Los Angeles area. If these branches can be separated from the company's troubled real estate and credit card loans, then perhaps a buyer can be found, people close to the company say.
Ms. Chamberlain of Jefferies added that for all the thrift's problems, it is in virtually no danger of closing, so depositors' money is safe. But shareholders are unlikely to regain their losses anytime soon.
Much healthier thrifts that wish to sell are having a hard time generating interest from potential buyers, she observed. "It's a bad time to be a distressed company."