Fremont General finally owns up to the losses and come clean. This is painful but needed medicine.
AP
Fremont Posts 1st-Half '07 Loss of $856M
Wednesday October 17, 11:46 am ET
Fremont General Posts $856 Million Loss in First Half of 2007, Restates 2006 Losses
SANTA MONICA, Calif. (AP) -- California bank Fremont General Corp. said Wednesday it restated full-year 2006 earnings and released first half 2007 earnings, posting losses across all periods.
For the six months ending June 30, 2007, Fremont lost $855.8 million, or $11.19 per share, compared with earnings of $83.6 million, or $1.10 per share, during the first half of 2006.
Excluding the charges and costs of exiting the subprime business, net income from continuing operations during the first half of the 2007 totaled $84,000.
For the first quarter, Fremont lost $590.6 million, or $7.74 per share, including the losses tied to shutting down its subprime lending business. Second quarter losses totaled $265.2 million, or $3.45 per share.
All of Fremont General's losses in the first half of this year can be attributed to its exiting of the subprime mortgage lending business. Most of the losses tied to the closure were the result of selling loans Fremont General held in its portfolio at a discount in order to exit the business quickly.
In 2006, Fremont said it lost $202.3 million, or $2.72 per share. The bulk of the losses in 2006 were the result of a $338.4 million loss on the sale and securitization of mortgages during the year. When packaging pools of mortgages and selling them as securities to investors in 2006, Fremont General had to significantly bolster its provisions for losses and repurchase requests on those pools in case the loans defaulted, leading to the losses.
Fremont delayed the earnings to further audit its financials because of the fallout in the subprime mortgage market. In March, Fremont shuttered its subprime lending operations. Subprime mortgages are loans given to customers with poor credit history. In recent months, subprime loans have increasing gone delinquent and into default.
Shares of Fremont General fell 18 cents, or 4.5 percent, to $3.80 in midday trading. Shares have traded between $2.95 and $17.30 during the past year. |
