First City Posts Loss; Capital Ratio at 1.7%
DALLAS - First City Ban-corporation of Texas on Thursday reported a $58.9 million loss for the second quarter, a signal the company may be losing ground in its battle to avoid a second government rescue.
The troubled banking company said its losses this year would rival or exceed the $158.3 million deficit it posted in 1990. It lost $130 million in the first half.
First City's already battered stock Thursday fell 50 cents, or 22%, to $1.75 a share. That is an 84% discount to the company's book value of $10.79 a share at June 30.
Can Capital Be Salvaged?
The open question on First City is whether it can staunch losses before its capital is depleted. The company's common equity has fallen to $204 million, or a slim 1.72% of its $11.9 billion of total assets.
First City has submitted a three-year turnaround plan to regulators that calls for an injection of at least $200 million of capital by January, C. Ivan Wilson, chairman and chief executive, said in a prepared statement.
Although regulators have not yet approved the plan, spokesman James Day said initial feedback from the government "suggests that no material changes will be required."
However, raising the necessary capital will be a formidable task. Houston-based First City has spent more than a year searching for a cash infusion from investors.
The company announced Thursday that it has retained J.P. Morgan to assist in its capital search. First City said it would keep ties with Donaldson, Lufkin & Jenrette Inc., which earlier was hired for the same job.
Some Acquirers Withdrawn
First City has been inspected this year by several potential acquirers, including BankAmerica Corp., First Gibraltar Bank, Dallas, and NCNB Corp. However, it is understood that First Gibraltar and NCNB are understood to have lost interest, making BankAmerica the leading candidate. But the San Francisco-based company, which wants to expand in Texas, may not want to assume the risk.
"I don't think Bank of America is going to buy without federal assistance," said Frank Anderson, a senior analyst with Stephens Inc., Little Rock, Ark.
First City's caseload of foreclosed real estate mushroomed by $85 million or 92.4% during the second quarter, closing at $177 million. The company recorded chargeoffs of $117.4 million, down slightly from the hefty $127.8 million of chargeoffs during the first quarter.
The reclassification of delinquent loans as foreclosed properties, combined with aggressive chargeoffs, reduced First City's caseload of delinquent loans to $322 million at June 30 from $496 million at March 31.
Combined delinquent and foreclosed credits at June 30 equaled $499 million, or 7.05% of gross loans. The comparable ratio at March 31 was 7.72%.
Chicago banker A. Robert Abboud engineered an April 1988 rescue of First City involving $1 billion in federal assistance and $500 million in fresh capital. The company roared to life but later faltered as a series of speculative loans went sour.