Mercury S&L; Stock Takes a 29.6% Dive : Thrifts: A Huntington Beach firm is one of 800 that federal regulators have indicated will not be able to meet standards to be imposed Dec. 7.
Investors abandoned ailing Mercury Savings & Loan Assn. in droves Monday, driving the price of the thrift’s thinly traded stock to a seven-year low of $2.38 a share, down $1 for the day.
In heavy trading on the New York Stock Exchange, 53,200 shares of Mercury changed hands Monday--about eight times the last month’s average daily volume for the stock.
Officials at the Huntington Beach thrift said they know of no new information about the thrift that would account for the trading--a statement echoed by thrift industry analysts.
The plunging stock price slashed Mercury’s market value by 29.6% and gave the S&L; the dubious honor of leading the Big Board’s list of percentage losers for the day.
The $2.2-billion thrift’s stock price has been gently sliding since 1986 but began a headlong dive a week ago.
Mercury common stock slipped below $4 a share for the first time in nearly six years on Nov. 7, the day after federal regulators said 800 S&Ls; across the nation would not be able to meet new financial standards to be imposed Dec. 7. Mercury is one of the 800.
The steep stock decline has been especially worrisome for Mercury because it is actively seeking new capital through a merger or outright sale. A declining stock price greatly reduces value to a would-be purchaser.
Just a month ago, Mercury’s stock traded at $5 a share, giving the company a base market value of $31.6 million. At Monday’s closing price of $2.38, that base has been cut nearly 53%, to $15 million.
The stock of one other California thrift, Columbia S&L;, also dropped sharply Monday. Columbia’s common stock price was down 63 cents to $3.88 a share, a 13.9% loss; its preferred stock dropped 50 cents a share to $3.63, off 12.1%.
Investors who sold Mercury and Columbia shares Monday were probably reacting a few days late to the tough new S&L; capital rules issued last week, suggested Henry S. Peltz, an analyst with Keefe, Bruyette & Woods. The New York institutional brokerage specializes in the banking and thrift industries.
Under the new rules, S&Ls; must maintain much higher levels of capital than most now carry, and the capital requirements are even tougher for thrifts with a lot of untraditional investments.
Columbia, which has executive offices in Beverly Hills and administrative offices in Irvine, has long eschewed the S&L;’s traditional role of making mortgage loans on single-family homes, and instead has operated much as a Wall Street investment firm. It maintains a huge portfolio of so-called junk bonds--risky unsecured corporate debt that pays a high return if the issuing corporations stay in business.
Mercury has stayed largely in the mortgage lending business but in the last year has been forced to restate earnings and revalue its portfolio, as federal regulators mounted a campaign against what they see as lax accounting standards that have enabled many thrifts to artificially inflate the value of their assets.
In Mercury’s case, the regulatory pressure resulted in a reversal of the S&L;’s 1988 annual earnings report. A $6.1-million profit originally reported in February became a $7.4-million loss in March--and was reassessed once again in May into a $13.8-million loss.
Mercury has also reported losses in every quarter so far this year, for a cumulative nine-month loss of $5.3 million.
As of June 30, the ratio of the S&L;’s capital to tangible assets was just half of the 1.5% that will be required Dec. 7.
On Oct. 19, Mercury announced that it had retained Merrill Lynch Capital Markets to help it find ways to raise new capital, through merger or outright sale if necessary.
The S&L;’s previous low stock price was $1.91 a share in the second quarter of 1982--a year when the local and national housing markets were in a major slump and most S&Ls; were losing money. Mercury rebounded nicely, however: By mid-1986 its stock was selling at an all-time high of $15.13 a share.
But federal regulators began worrying aloud in 1987 that the thrift industry was in trouble--worries that have been realized with the failure of hundreds of thrifts across the country--and Mercury’s stock, along with that of most other S&Ls;, began slipping again.
It dropped to $4 a share for a short period at the end of 1987, and for the next 23 months--until early last week--had ranged from $4.13 to $9.67 a share.
