SAN FRANCISCO -- Citadel Holding Corp., which is trying to complete a restructuring plan, reported a first-quarter loss of $14.8 million, against a $135,000 profit in the corresponding period last year.

The Glendale, Calif.-based company's deficit for the March 1994 quarter was expected and was narrower than the $37.3 million loss posted in the 1993 fourth quarter.

In a statement, the parent of Fidelity Federal Bank said it expected to register another loss in the June quarter.

Earthquake Hurt

Citadel's results reflect a growing portfolio of problem real estate assets, which expanded as a result of the January Los Angeles-area earthquake. Fidelity Federal was one of the major lenders to the area's apartment market, which has been badly hit by recession and natural disasters.

Nonperforming loans and foreclosed property jumped 12.9% in the latest quarter to $266 million. In addition, delinquent loans still classified as performing soared to $373.5 million from $155 million at the end of December mainly because of the earthquake, the company said.

Citadel, which has $4.1 billion of assets, noted it was running short of cash at its holding company and would be forced to raise capital, diluting shareholders, if its restructuring plan was not completed soon.

The company also said that, without the reorganization, a second-quarter loss would drive capital at the thrift unit below the regulatory minimum, triggering official sanctions.

Distressed-Asset Transfer

Citadel's restructuring plan involves the transfer of $450 million to $490 million in distressed real estate assets from Fidelity Federal to the holding company and the simultaneous sale of the cleaned-up thrift.

The operation would transform Citadel into a real estate management company.

One possible buyer of Fidelity Federal is Citadel's management team, which is trying to obtain financing, according to analysts.

The analysts said that prospects for a management buyout or sale to a third party were good. Purchase of the thrift would cost an estimated $80-$100 million. But, said James M. Marks, a San Francisco-based analyst with Sutro & Co, "if they don't do the restructuring, Citadel is worth close to zero."

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