Lincoln S&L; Posts a $163.9-Million Loss

Nearly 18 months after federal regulators seized Lincoln Savings & Loan, the insolvent Irvine-based thrift is continuing to lose big bucks. In the second quarter, it posted a net loss of $163.9 million.

The loss, revealed in a quarterly report that regulators released Thursday, puts the S&L;’s red ink for the first six months of this year at $327.3 million.

Since federal regulators took over the thrift in April, 1989, Lincoln has reported losses of $1.3 billion, most of it attributed to writedowns the regulators say prior owners should have made.

Lincoln’s deteriorating condition raises questions about how much its failure may ultimately cost taxpayers and why the government has failed to sell it, close it or stop the financial hemorrhaging in another way.

Regulators, who refused to comment Thursday, have said the thrift’s collapse will cost taxpayers more than $2 billion, making it one of the most expensive thrift failures ever.

The losses, industry experts said, may simply be part of the territory when it comes to running an institution that once had $5.3 billion in assets but that invested mostly in risky projects like undeveloped Arizona land and junk bonds. Lincoln’s assets at the end of June amounted to $2.6 billion.

“If we think the losses are eventually going to be $2 billion, then what we’re seeing is loss recognition on the installment basis,” said Bert Ely, an Alexandria, Va., industry consultant and analyst.

For others, though, the skyrocketing losses are evidence of the government’s ineptitude at running businesses.

“They just keep writing down assets. That’s how they keep losing money,” said James J. Feder, lead counsel for Lincoln’s former parent, American Continental Corp. in Phoenix.

Feder, in charge of American Continental’s legal affairs while it is in bankruptcy proceedings, said regulators have, for instance, been compromising on resolving troubled loans, settling for less than their true value and writing off the balance as a loss.