Great American Bank Sees $70-Million Loss in Quarter
Great American Bank of San Diego said Thursday that it expects to report a $70-million loss for the second quarter ended June 30 and also announced the completion of the sale of the last of its California branches to Wells Fargo.
In a separate announcement, San Francisco-based Wells Fargo said that it would close or consolidate 24 of the 38 Northern California branches of Great American acquired Thursday and that an undetermined number of layoffs could result.
The second-quarter loss will be caused mainly by setting aside $66 million to cover bad real estate loans. The projected loss will follow a $46.8-million loss for the first quarter of 1991 and a $173-million loss for all of 1990.
The loss will lower the thrift’s tangible capital, the most stringent measurement of an S&L;’s financial health, to a negative $83 million--far below that required. Great American said it will remain in violation of capital requirements despite completion of a two-part, $491-million sale of branch offices to Wells Fargo. Proceeds from the second phase of the branch sale will be realized in third-quarter results.
The S&L;, which has been hit hard by real estate loan losses in Arizona and California, also said it had submitted a revised capital plan to regulators.
The branch sale will reduce Great American’s assets by about $1.8 billion from the $10.1 billion reported as of March 31. The sale ends Great American’s 106-year history as a California financial institution, leaving it with 56 branches in Arizona, 24 in Washington and one in Colorado.
Great American first announced last year that it was selling a total of 130 branches in California and $6.4 billion in deposits to Wells Fargo. In the first phase completed last November, Great American sold 92 branches in San Diego, Riverside and Orange counties.
Great American sold the branches to try to save itself from insolvency and a government takeover. But the move simply may have forestalled the inevitable. Continued losses have sapped the S&L; of nearly all the gain from the transaction, and the S&L; is severely deficient in all three regulatory capital standards.
Some observers have said they expected the S&L; to be taken over once the branch sale was complete. Others expect the S&L;’s headquarters to move to Arizona, where most of its remaining branches are located. Great American Bank President Robert Kemper declined to be interviewed Thursday.
