First City Loses $58.9 Million In 3d Quarter
First City Bancorp. reported on Thursday a $58.9 million loss for the third quarter, making the company an increasingly likely candidate for a government-assisted takeover.
The loss further eroded First City's capital base, cutting the company's equity-to-assets ratio to 3.03%, down from 3.89% at June 30.
Dec. 31 Deadline
First City said regulators have given it until Dec. 31 to revise its capital plan. Prior to the latest loss, First City had planned to raise $200 million in capital by early next year. The company said the new plan will require "a substantially higher amount, or an acquisition of First City by another institution."
"Reading between the lines, it basically says: if you don't come up with some capital pretty soon, we're basically talking about a regulatory related acquisition," said Frank Anderson, a banking analyst with Stephens Inc. in Little Rock, Ark.
The Houston-based company said it is in "active" negotiations with potential investors and acquirers, but declined to elaborate. BankAmerica Corp., San Francisco, and Ban One Corp., Columbus, Ohio, are reportedly eyeing the troubled banking company. Both companies declined to comment.
Cutting Work Force
First City is taking aggressive steps to stop its hemorrhaging. It said it has reduced its work force by 8%, or 524 employees, in the past 12 months. It said it eliminated 25 of its top 100 jobs during the past three months.
The severity of First City's problems have long been known. The company, with $11.4 billion in assets, reported a $130 million loss for the first half of the year.
First City's stock was trading at $1.75 a share, unchanged from Wednesday.
The company's capital position continues to deteriorate with each quarterly loss. Tier 1 risk-based capital now stands at a paltry 3.07%, compared with the required regulatory minimum of 3.63%.
One positive sign is First City's deposits, which fell only 2%, to $9.1 billion. The company hasn't had a significant drop in deposits since the first quarter, when they fell 8.5%.
Loan-Loss Provisions
First City's third-quarter loss, which was equal to that reported in the previous quarter, was due to the need to set aside $66.8 million for bad loans. The loan-loss provision was down 30% from third quarter 1990.
Nonperforming assets totaled $497 million, representing 7.61% of total loans and foreclosed real estate. That compares with $499 million at the end of the second quarter and $589 million at the end of the first.
With BankAmerica currently occupied with its pending acquisition of San Francisco-based Security Pacific Corp., Banc One is considered better positioned to acquire First City. Banc One is known to be eager to expand its Texas franchise, currently the state's third largest, with $13.9 billion in assets.
Government Assistance
But given the troubled state of the national and Texas economies, analysts say any acquisition of First City is likely to include government assistance. "I would be surprised if there's a transaction without some form of credit protection for the buyer," said Mr. Anderson, with Stephens Inc.
In its 10Q filing, also released Thursday, First City warned that, however it resolves its capital shortfall, "existing preferred shareholders will likely be required to make substantial concessions and existing common shareholders will experience substantial ownership dilution or other modification to their interests."
PHOTO : First City Continues To Post Big Losses
