IndyMac reports annual net loss of $614.8 million; expects to return to profitability in second quarter

By Jennifer Lanning Drey

Portland, Ore., Feb. 12 - IndyMac Bancorp, Inc. reported the first annual loss in the company's 23-year history but said it expects to return to profitability in the second quarter.

The company is forecasting a small profit of roughly $13 million in 2008, Michael W. Perry, chief executive officer of IndyMac, said Tuesday during the company's fourth-quarter earnings conference call.

"Despite our significant loss, we remain a fundamentally sound financial institution," he said.

IndyMac reported a net loss of $614.8 million for 2007, compared with net earnings of $342.9 million in 2006. Credit provisions of $1.45 billion drove the full-year loss, Perry said.

As a result, the company has increased its credit reserves to $2.4 billion, a four-fold increase over the fourth quarter of 2006.

IndyMac also announced Tuesday that it will indefinitely suspend its dividend, for a savings of $81 million in capital per year at the current level, and shrink its balance sheet modestly. The combination of the two actions is expected to raise $403 million of additional capital.

During the call, Perry said IndyMac is already well-capitalized after raising $676 million of equity capital in 2007.

"Even if we are wrong in our forecast for 2008, and the mortgage and housing markets worsen beyond what we are already forecasting ... which could happen given our experience in 2007 ... we have the capital to absorb nearly triple our presently forecasted 2008 credit costs and fight our way though until the housing and mortgage markets do stabilize," Perry said in a letter to shareholders included in the company's earnings release.

IndyMac had operating liquidity in excess of $6 billion at the end of the fourth quarter.

Indymac Bancorp is the holding company for IndyMac Bank. The company is located in Pasadena, Calif.

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