Magazine article American Banker

Calif. Thrift Dying after Tex. Securitizer Cousin Fell Ill

Magazine article American Banker

Calif. Thrift Dying after Tex. Securitizer Cousin Fell Ill

Article excerpt

A troubled Southern California thrift is quietly shedding its branch offices and will soon close its doors for good.

FirstPlus Bank in Tustin, once a thriving thrift and loan association that focused on high-loan-to-value home equity loans, has closed two branches and made deals to sell its three others.

When the last branch has been sold, which is expected to be next month, FirstPlus will voluntarily surrender to the state its license to operate, said Ed Carpenter of Ed Carpenter & Co., the investment banker helping FirstPlus sell its branches. It will continue to operate as a corporation with a skeleton crew of employees, servicing the remaining $30 million loan portfolio until a buyer is found for these assets, Mr. Carpenter said.

FirstPlus Bank's chief executive officer David Johnson did not return repeated phone calls.

The thrift's woes began in late 1998 when its sister company, FirstPlus Financial Inc. of Dallas, ran into trouble after the market for its securitized mortgage pools dried up.

The Texas company packaged mortgage loans it had either originated or bought from FirstPlus Bank and resold the bundled loans as securities. But when the market for these securities tanked in October 1998 and FirstPlus Financial was unable to find buyers, it was forced to hold the loans on its books, Mr. Carpenter said. Without the anticipated profit on securities sales, FirstPlus Financial lost millions.

In 1999, FirstPlus Financial filed for bankruptcy, and a year later, FirstPlus Bank -- which in 1998 had turned a $12.7 million profit and had assets of nearly $300 million -- was directed by the bankruptcy trustee's credit committee to stop making high-loan-to-value loans and to find a buyer, Mr. Carpenter said. The two companies' parent, FirstPlus Financial Group Inc., is responsible under bankruptcy law for its subsidiary's debts and can be required by the court to draw on other subsidiaries' assets to satisfy the bankrupt unit's creditors, he said. …

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