UPDATE 5-IndyMac Bancorp net down 57 pct on mortgage pain

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By Jonathan Stempel

NEW YORK, July 31 (Reuters) - IndyMac Bancorp Inc. IMB.N, one of the largest independent U.S. mortgage providers, said on Tuesday second-quarter profit fell 57 percent amid a deepening U.S. housing slump, as more customers fell behind on payments.

Results nevertheless topped forecasts, suggesting IndyMac is faring better than many rivals, especially lenders that specialize in riskier "subprime" loans, in confronting the U.S. housing slump and the accompanying downturn in credit quality.

IndyMac specializes in "Alt-A," or "Alternative-A," mortgages, which fall between prime and subprime in quality.

"Those of us at IndyMac get a little sick of hearing that Alt-A is near subprime," IndyMac Chief Executive Michael Perry said on a conference call.

Net income for the Pasadena, California-based parent of IndyMac Bank, which is also one of the largest U.S. savings and loans, fell to $44.6 million, or 60 cents per share, from $104.7 million, or $1.49, a year earlier.

The quarterly decline was the second straight, but profit beat the average analyst forecast by 4 cents per share, according to Reuters Estimates. Revenue fell 21 percent to $297.8 million, topping the average $280 million forecast.

IndyMac did not provide its usual financial forecast with earnings, citing "significant" market uncertainty.

Like Countrywide Financial Corp. CFC.N and other lenders, it has suffered as credit quality concerns spread to lenders that make, and try to sell, higher-quality loans.

IndyMac shares closed up 31 cents, or 1.4 percent, at $22.00 on the New York Stock Exchange.

They had earlier soared as much as 20 percent after Perry said IndyMac had sufficient liquidity to sustain its 50 cents per share quarterly dividend, equal to a 9.1 percent annual yield, for "several quarters." He also said mortgage loan operations were unlikely to lose money in the second half.

The shares gave back most gains as credit problems surfaced elsewhere in the industry. American Home Mortgage Investment Corp. AHM.N, which also makes Alt-A loans, said it can no longer fund loans and may liquidate assets. Its shares fell 90.1 percent.

"SAFETY AND SOUNDNESS"

IndyMac's mortgage industry market share fell to 3.07 percent from the first quarter's 3.90 percent, ending a long string of increases, as it tightened lending standards.

Mortgage production fell 12 percent from the first quarter to $22.5 billion, including declines of 31 percent in subprime loans and 49 percent in home equity lines of credit.

Nevertheless, nonperforming assets more than quadrupled from a year earlier to $515.7 million and as a percentage of total assets rose to 1.63 percent from 0.49 percent.

Lenders forced IndyMac to buy back $219 million of loans because borrowers missed early payments, up from $48 million a year earlier.

Still, Perry said IndyMac's Alt-A losses are one-sixth the industry rate, which in turn is much smaller than the subprime loss rate.

Perry said his "strong goal" is to keep IndyMac's dividend payout, but that he might revisit it a year from now if earnings do not improve. "What we're focused on right now is safety and soundness," he said.

IndyMac laid off about 400 workers this month and expects a $6.5 million pretax charge in the current quarter for them.

The company's shares are down 51 percent this year.