Citadel Cites Problem Loans in $37-Million Quarterly Loss : Thrifts: The parent of Fidelity Federal Bank faces regulatory restrictions on operations because of its shrinking capital base.

Citadel Holding, parent of troubled Fidelity Federal Bank, said Monday that it expects to report a loss of more than $37 million for the last three months of 1993 because of large write-offs in its growing portfolio of problem loans.

The Glendale-based thrift holding company also revealed that the Office of Thrift Supervision will soon impose restrictions on its activities because of diminishing capital--moves that federal regulators typically take when a thrift is in serious trouble.

The restrictions include limits on Citadel’s asset growth and give banking regulators veto power over new directors and senior executives. The news drove down the value of Citadel’s stock $2 a share to close at $8 on the American Stock Exchange. The stock traded as high as $24 a share last year.

While Citadel’s capital still exceeds regulatory minimums, the OTS is concerned that the financial institution will be in danger if its losses continue at their present pace, said Andre Shih, Citadel’s chief financial officer.

Marginally profitable in recent years, Citadel lost $29.8 million the first nine months of 1993. It expects to release its fourth-quarter losses later this month.

Citadel also reiterated a previous announcement that the 42-branch financial institution is for sale. But it now says that it wants to transfer about $450 million in problem assets to a new subsidiary in an attempt to make it more attractive to prospective buyers.

Under the plan, the holding company would manage the sale of the problem assets, but such a reorganization would occur only if a buyer is found. Citadel said the transfer would probably require the financial institution to add another another $150 million to loan-loss reserves.

Citadel’s problem loans ballooned to $355 million--or 7.9% of its $4.5-billion assets--on Sept. 30, a figure that was basically unchanged on Dec. 31, Shih said. A large percentage of Citadel’s loans are secured by apartment buildings and commercial real estate, most of which are clustered in Southern California.

“They are hit by double whammy,” said financial analyst Charlotte Chamberlain at Wedbush Morgan Securities in Los Angeles. “Their portfolio is concentrated in multifamily and commercial projects in the part of California that’s at ground zero for the recession. That’s tough to work your way out of.”