Sun Savings Negative Worth at $2.4 Million

Sun Savings & Loan Assn., already operating under the specter of a regulatory takeover, continued its fiscal nose dive, as first-quarter red ink reached $1.9 million and net worth plunged to a negative $2.4 million.

The negative net worth--meaning that liabilities exceed assets--dropped after Sun wrote off $1.2 million in bad loans for the quarter ended March 31.

The writeoff brought Sun’s allowance for losses on loans and real estate to $11.6 million, or 3.4% of its loan portfolio, compared to 1.1% at the end of the first quarter last year.

Moreover, Sun’s scheduled items--primarily loans delinquent more than 90 days--now totals $54.9 million, compared to $48.9 million at year-end and $36.1 million at the end of the first quarter last year.

Sun’s $2.4-million negative net worth was calculated by regulators but protested by company management, which claims that the figure should actually be a deficit of $646,000.

At issue is Sun’s 7% involvement in two condominium projects in the San Francisco Bay Area, worth a total of $125 million. Regulators contend that Sun should write off its share of the projects; Sun management disagrees.

“We’ve asked them to rescind their directive,” Sun President and Chief Executive John McEwan said.

Nonetheless, Sun now needs a capital infusion of nearly $14 million to bring its net worth to the regulatory minimum of 3% of its $384.7 million in assets.

McEwan on Monday said that Sun is still “pursuing capital, but have nothing to announce.”

Sun last month entered into a consent agreement with federal regulators that virtually handcuffs management and limits Sun’s asset and liability growth. In addition, the agreement allows regulators to actively negotiate for either a capital infusion or merger for Sun, and enables authorities to eventually appoint a receiver to take control of the troubled thrift.