FCA’s Problem Loans Hit Nearly $2 Billion
Problem loans at Financial Corp. of America have continued to mount in 1986, growing to nearly $2 billion at the end of February, the Irvine-based savings and loan company said Monday.
At the same time, the company’s outside auditor unexpectedly gave FCA’s 1985 financial results an unqualified endorsement, due in part to a letter received last week from the Federal Home Loan Bank Board.
The latest news was contained in a 10-K report filed with the Securities and Exchange Commission that summarized FCA’s 1985 progress. FCA--the parent company of American Savings & Loan, the nation’s largest--earned $53 million last year following a record loss of $591 million in 1984.
The bank board, in a letter dated March 24, said it will continue to support FCA’s recovery efforts for another year, even though the financial institution does not meet minimum requirements for fidelity bonds and net worth. (Fidelity bonds protect a company from wrongdoing by its own employees; net worth is a financial institution’s assets minus liabilities.)
The letter, coupled with a tentative settlement of some shareholder lawsuits, allowed the auditing firm of Peat Marwick Mitchell to rescind the qualified opinion that it gave FCA in 1984. That opinion voiced doubt about FCA’s “ability . . . to continue as a going concern,” according to the 10-K report for 1985.
“The receipt of the supportive letter (from the bank board) indicates that this qualification of the 1984 consolidated financial statements is no longer required,” the auditing firm said.
However, the same report noted that American Savings’ problem loans--called scheduled items in regulatory argot--ballooned to $1.98 billion at the end of February from $1.75 billion at the end of December. (Scheduled items are generally loans classified as delinquent, substandard or in foreclosure.)
The figures indicate that FCA Chairman William J. Popejoy still has not been able to rein in American Savings’ loan problems in his tenure as the S&L; firm’s chairman and chief executive. Popejoy succeeded Charles W. Knapp in August, 1984, after Knapp was forced to resign by federal regulators.
Popejoy had been predicting that the problem loans would peak at $1.8 billion. The unexpected increase to $1.98 billion was due largely to “certain large construction loans that became delinquent,” a company spokesman said. Popejoy could not be reached for comment.
American Savings’ problem loans now total about 7.2% of assets, more than double the savings and loan industry’s average and far higher than any of its large competitors. But company officials insist that the overall picture for recovery remains positive.
“The scheduled items are only one facet of the company,” the spokesman said. “The unqualified opinion (by the auditors) speaks to the company’s entire operations.”