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Santa Rosa among 19 Fireside Bank closures

NORTH BAY – One of California’s largest subprime auto lenders is closing the doors to its only North Bay office after suffering heavy losses from bad loans.

Pleasanton-based Fireside Bank is closing its location at 130 Stony Point Road in Santa Rosa, along with 17 other California offices and one branch in Arizona, according to a filing with the California Department of Financial Institutions.

Fireside uses deposits to purchase loan contracts from more than 5,000 car dealerships throughout California and 14 other states in the West and Midwest.

“The borrowers under these contracts typically have marginal credit histories,” the bank’s parent company, Chicago-based financial services provider Unitrin Inc. (NYSE:UTR), said in its most recent annual report, released last month.

Fireside’s closures come amid concerns that problems in the home mortgage sector could be spreading into other markets. In January, national auto loan delinquencies reached their highest levels in 10 years, according to an analysis by the research firm Fitch Ratings Ltd. According to Fitch, delinquency rates increased more than 40 percent for both prime and subprime loans, with more than 4 percent of subprime loans going delinquent.

Officials from Fireside Bank and Unitrin did not return calls seeking comment last week, but Unitrin said in its annual report that Fireside is taking action to reduce high-risk lending.

“In early 2008, Fireside Bank implemented an improved risk-based-pricing, credit-scoring model to aid in the underwriting process,” the report said. “The implementation of this model is expected to result in the prospective elimination of certain unprofitable tiers of business that comprised approximately 20 percent of the loans originated by Fireside Bank in 2007.”

Fireside had more than 150,000 contracts and loans outstanding, totaling more than $1 billion, as of Dec. 31. It had $87 million in net charge-offs from bad auto loans in 2007, up from $56 million a year earlier. The charges caused the bank to record a net loss of $39 million in 2007, compared with a profit of $26 million in 2006.

Fireside in Santa Rosa had just a fraction of the local deposit market share, with less than 1 percent of all local deposits as of June 30, 2007.

At Dec. 31, Fireside reported $1.5 billion in total assets.