Ailing FCA Reports Loss of $160.5 Million in Quarter
Hurt by continuing loan losses and higher interest rates, Financial Corp. of America reported a $160.5-million loss in the second quarter, a further indication of its worsening condition as regulators scramble to sell its troubled American Savings & Loan unit.
The net loss, while slightly lower than the $176.8-million deficit in the same quarter of 1987, follows a much-smaller $63.2-million loss in this year’s first quarter. The Irvine-based firm’s operating loss also widened from the first quarter.
The net loss--which raised FCA’s red ink to $223.7 million in the first half of 1988 and $1.13 billion since 1984--swelled FCA’s negative net worth and will boost pressure for a sale of American Savings as a way to infuse new capital. The Federal Home Loan Bank Board has been conducting extensive negotiations to sell Stockton-based American Savings, the nation’s second-largest S&L;, to a group of private investors led by Texas billionaire Robert M. Bass, with a deadline of Sept. 1.
“We are hopeful that capital relief will come soon and that it will provide the boost needed for us to stop the further financial deterioration of the association,” William J. Popejoy, chairman and chief executive of FCA, said Friday in a prepared statement.
“In this environment, we don’t see improvement,” said E. Gareth Plank, analyst at the Shearson Lehman Hutton investment firm. “They have too many non-earning assets and too many problem loans on the books. It would take a decline in interest rates and a lot of time to change that.”
FCA blamed its loss principally on troubled real estate loans, the problem that has plagued the company for the past five years. It also cited higher-than-expected accounting and legal expenses.
Deposits Decline
The company’s operating loss for the second quarter totaled $47.8 million, compared to $27.4 million for this year’s first quarter and $9.7 million for the 1987 second quarter.
FCA added $113.4 million to its loan-loss reserve in the second quarter, bringing the reserve to $1.3 billion as of June 30.
FCA’s shareholders’ equity--the total of assets minus liabilities--fell to a negative $387 million as of June 30, from a negative $226.5 million on March 31 and a positive $140.3 million in mid-1987.
The firm reported that it suffered a net decline in deposits of $979.1 million in the second quarter, despite a move on March 8 by regulators to extend federal deposit insurance to all American Savings deposits, regardless if they exceed the normal $100,000 limit per depositor.
