First Alliance Reports 73% Decline in Profits

Coming off a disastrous year that saw its stock price slump 80%, home lender First Alliance Corp. is finding the road to recovery longer than expected.

Mounting legal bills and declining loan volume at the Irvine company drove down first-quarter earnings 73% to $2 million, or 11 cents a share, First Alliance said Friday. A year ago, the lender earned $7.3 million, or 35 cents a share.

Like other lenders that specialize in high-cost loans to borrowers with bad credit, First Alliance was hit hard last fall when nervous investors cut off funds to the specialty lending niche, also known as subprime.

First Alliance’s sales practices also landed the company in legal and regulatory hot water. Amid allegations of discriminatory lending practices from borrowers and the American Association of Retired Persons, several states and the U.S. Justice Department launched investigations.

First Alliance Chairman Brian Chisick said Friday that those legal costs helped push first-quarter expenses up nearly 7%.

First Alliance said its loan activity plummeted 39% during the first three months of the year. First-quarter revenue dropped 23% to $19.6 million from $25.4 million a year ago. The company’s stock closed Friday at $3.50, down about 6 cents. .