Analysts Expect FarWest S&L;’s Seizure by End of Year

FarWest Savings & Loan Assn. must raise more than $300 million to pull itself out of insolvency and comply with thrift capital regulations, a task so onerous that S&L; analysts expect a federal takeover by the end of the year.

The Newport Beach S&L;, a unit of FarWest Financial Corp., is trying to stay the hand of regulators by coming up with a plan soon to raise more capital. But thrift regulators have rejected previous plans.

“It’s gone,” said Bert Ely, an Alexandria, Va., industry consultant.

Ely discounted industry talk that the wealthy Belzberg brothers of Canada, who have controlled FarWest for 16 years, would rescue the institution. He said such speculation is naive.

“The reason wealthy people are wealthy is because they know when to cut losses,” Ely said. “Deep pockets make rational judgments.”

Other wealthy owners of failing thrifts, such as Frank J. Mola at Charter Savings Bank in Newport Beach, have simply let the regulators seize their institutions rather than pour more money into the thrifts and continue facing regulatory demands.

The Belzbergs have refused in recent months to comment about their plans for the thrift. William Belzberg, chairman of FarWest Financial, did not return telephone calls Friday.

FarWest Financial reported for the first time in a recent quarterly filing with the Securities and Exchange Commission that the thrift had a negative net worth--debts exceeding assets--of $35.4 million.

In addition, the company said FarWest Savings had a capital deficit of at least $112 million. The S&L; needs a cash injection of $307.4 million in order for it to meet regulatory capital requirements. Capital is a thrift’s final cushion against losses.

The thrift has been sunk by writedowns in its junk bond portfolio and in huge amounts of reserves it has set aside for possible bad loans and real estate investments. It has lost $119.7 million in the first three quarters this year.

Should regulators seize FarWest Savings, they would turn it over to the Resolution Trust Corp., a government agency that would appoint a managing agent to continue operating the institution. Deposits under $100,000 would remain insured.

Analysts already are speculating on how much a government-seized FarWest would fetch in a sale by regulators.

With 28 offices in Southern California and assets of $3.5 billion, FarWest Savings has an “excellent branch system that has great value” and could command a sale price of $30 million to $60 million based on its current size, said Edward J. Carpenter, a Santa Ana industry consultant who has advised the Belzbergs previously. The branch system “might be attractive to banks that have a lot of capital,” he said.