First California : Big Write-Off Would Leave S&L; in the Red

Directors of First California Savings Bank are expected to approve a $47-million write-off Monday--an action that would clean out the institution’s regulatory capital and leave it $38.3 million in the red, said Gilbert Fuentes, president of the savings and loan.

First California, which has branches in San Fernando and the City of Commerce and its corporate offices in Orange, would be technically insolvent but able to continue day-to-day operations, Fuentes said.

“We have excellent rapport with state and federal regulators and can continue to operate,” he said.

Fuentes acknowledged, however, that the S&L; “has long been a troubled institution” and has been operating under regulatory orders since before owner Mervyn A. Phelan of Orange bought it in June, 1985.

Fuentes said the write-off involves the amount of “good will” on the books, which the S&L; had been writing off at about $2 million a year. But First California’s accountants are recommending that the entire amount be written off now to reveal an accurate financial condition.

First California, called Camino Real Savings Bank until February, had $274.7 million in assets and $8.7 million in regulatory capital at the end of March, according to federal regulators.

It does expect a little help soon with the addition of $8 million in new capital, Fuentes said.

Expected sales of four S&L-owned; properties over the next six months should bring in about $6 million, Fuentes said, and developer Phelan must still contribute real estate with $2 million in equity to the capital base as part of his purchase agreement.

Phelan had paid $2.5-million cash for the S&L; and put the four real estate properties, then having a total equity of at least $14.2 million, into the S&L;’s capital base. The equity has since appreciated by $6 million, Fuentes said.

Meanwhile, the S&L;’s losses have continued to mount. It lost more than $7.5 million in the last three years, including $1.6 million last year. The S&L; posted a $2.4-million net loss in the first quarter this year.

Fuentes said the S&L; has closed three unprofitable branches in the San Fernando Valley in the last year, consolidated three loan offices and stopped making construction and commercial loans.

First California now has about 100 employees at the two remaining branches and at headquarters.