IndyMac: Mini Bank Run, Thanks to Schumer

IndyMac Bancorp, Inc. (IMB) felt the pain of a mini bank run this past week, thanks to a leaked letter from New York Senator Charles Schumer that questioned the bank’s solvency and led to widespread press coverage last week, the Pasadena-based thrift said in a filing with the Securities and Exchange Commission late Monday. “As a result of Sen. Schumer making his letters public and the resulting press coverage, we did experience elevated customer inquiries and withdrawals in our branch network last Friday and on Saturday of roughly $100 million, about ½ of 1% of total deposits,” the bank said. The bank said that while traffic in its banks remains elevated, and further withdrawals likely, it was “hopeful that this issue appropriately abates soon.” IndyMac acknowledged that its financial position “has deteriorated since last quarter,” and said it was working with regulators to develop a plan to “improve the safety and soundness” of the thrift — now the nation’s largest independent mortgage lender, after Bank of America Corp. (BAC) on Tuesday completed its purchase of Countrywide Financial Corp. Concerns over the bank’s future are a far cry from the exuberance exhibited by CEO Michael Perry in very early May, who said then that “we have turned a corner and that our business is improving.” The bullish comments temporarily boosted stock prices at the lender; but not long after that point, IndyMac posted a $184.2 million loss for the first quarter, and warned it likely wouldn’t be profitable in 2008. Shortly thereafter, in mid-May, Fitch Ratings cut its core credit ratings on the bank for the second time this year, moving the troubled lender further into junk territory over concerns about the bank’s “ability to manage capital.” Shares in the lender have sat below the $1 low-water trading mark for nearly a week, and were up 8 percent to $.67 on the New York Stock Exchange in early trading Tuesday morning. Should the bank’s stock trade below $1 for an entire month, it would be in danger of delisting from the stock exchange. Disclosure: The author was long BAC, and held no positions in IMB, when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.