Continuing to reel from the effects of higher interest rates and problem loans, Financial Corp. of America announced Monday that it lost $75.8 million in the third quarter ended Sept. 30.
FCA, the parent of Stockton-based American Savings & Loan, earned $11.6 million in the third quarter of 1986 and lost $177 million in the second quarter of this year.
The company said its net worth--also known as shareholders' equity--now stands at $61.2 million, down from $294 million on Sept. 30, 1986.
"It isn't over till it's over," a company spokeswoman said, referring to the decline in FCA's net worth. "Keep in mind that regulators look at regulatory capital. That's what they keep their eye on."
The company's regulatory capital, a more liberal standard of net worth established by federal savings and loan regulators, stood at $358 million on Sept. 30, off from $528 million a year ago. But American Savings, the nation's biggest S&L with $33.4 billion in assets, would need to have at least $1.3 billion in regulatory capital to meet government requirements.
FCA's continued red ink resulted partly because the Irvine-based financial institution added an additional $70.4 million to its reserve for loan losses, bringing the reserve's total to $1 billion. Additions to reserves cut directly into operating profit.
FCA also reported only $12.4 million in gains from selling loans and mortgage-backed securities, down from the year-ago level of $93.4 million.
Interest rates, which began going up in March after several years of steady decline, have prevented FCA from selling assets at a profit. Mortgage-security and loan sales were FCA's primary source of earnings in 1985 and 1986.
Savings and loan regulators are considering a variety of ways to pump fresh money into American Savings.
Ford Motor Co., through its First Nationwide Bank subsidiary in San Francisco, has submitted a proposal to acquire American Savings through a $1-billion injection of capital. The proposal is under review by the Federal Home Loan Bank Board.
FCA has also prepared a new variation of an old idea, breaking up the financial institution into a healthy savings and loan and other assets that would then be sold or liquidated. The non-performing loans would be absorbed by the Federal Savings & Loan Insurance Corp.