A couple of things regarding the future of Fremont General, FMT.
First, Merry Christmas and Happy New Years.
Second, I do not know much about this new mgmt team either. All I know is that the prior mgmt team of McIntyre, Rampino, Bailey, and Faigin, etal were generally competent.
McIntyre founded FMT in 1958 to write workers compensation insurance in southern CA. The McIntyre team diversified into the Fremont Industrial Savings bank, jettisoned the workers comp insurance business, began the commercial lending, and the residential lending business over the years. Showing an adept hand in buying new businesses, understanding the financial market, learning and mastering government rules and regulations regarding finance business. I call the McIntyre team the "cat with nine lives" for good reason.
Although, the subprime lending business was a disaster, remember FMT took its medicine early in Feb 2007 (when it began selling both the residential and commercial lending businesses), and should be commended for that. This was not an act of surrender; it was a shrewd act of survival. I saw that right away when many analyst and commentators were bemoaning the mismanagement of the residential portfolio into subprime, Alt-A, and ARM loans.
Also, the McIntyre team instituted a real employee stock ownership program many years ago and was a pioneer in that area. This is one of the main reasons I continue to admire FMT -- its owners/employees have the other shareholders interest at heart.
Third, I own the FMT Pfd or the FREMONT GEN FING I TOPRS 9% (FMT.PR: NYSE). I bought the FMT Pfd in August 2007 for 1 reason:
1) the annual dividend on the pfd was $9 - 10 mill
2) the entire pfd issue is $100 - 105 mill
3) from 2003 until present FMT kept over $700 mill in its cash account on the balance sheet
4) FMT can easily cover the pfd dividend and retire the entire pfd issue using only its cash.
5) I focused on the FMT financials and ignored the mess of the recently sold residential portfolio.
Fourth, this company will survive because of the rock solid Fremont Industrial Savings Bank. I visited southern California to attend a wedding this summer. I drove by a couple of the banks, and noticed full parking lots and customers in the bank. This man-in-the-street evidence was confirmed when I looked at the Deposits on the 3q2007 balance sheet and noted Total deposits from the Savings Bank were $7,960,526,000. Although this is down from the Total deposits of $9,989,788 held on Dec 31, 2006, the deposits were still substantial and proved to me there was no run on the bank. Or FMT had enough faithful customers depositing their $$$s to allow FMT to weather the current storm.
I noticed the new mgmt team has been buying shares of FMT common stock. Now their money is where their mouth is. This is a good thing.
This new management team profitably ran Commercial Capital Bancorp, Inc. - CCBI - and sold it to WaMu in 2006. CCBI was located in Orange County and mostly made loans for multi family residences (duplexes and above). So the new mgmt knows the southern California real estate market. In the current environment this is equal parts curse and blessing.
On balance, I will buy FMT common over the coming year because of its rock solid Fremont Industrial Savings Bank, its loyal owners/employees, the cash on the balance sheet, and the fact that the messy residential portfolio is behind it. The prospects for a profit in 2008 is favorable.
Please see finance.yahoo.com |
