Sun S&L; Loss Puts Net Worth Below Standard

Stung by an 82% increase in delinquent loans, Sun Savings & Loan, San Diego, on Friday reported a first-quarter loss of $234,000. As a result, Sun’s net worth dropped below the regulatory minimum.

Sun’s $6.1 million in net worth is only 1.25% of its $485 million in assets as of March 31. Under complicated federal formulas, Sun’s net worth can be no less than 20% of its “scheduled items,” which include primarily problem loans. As of March 31, that figure had climbed to $36.1 million. To meet the 20% regulatory minimum, Sun would need net worth of $7.2 million.

The first-quarter results “reflect effects that we anticipated would occur” from Sun’s previous identification of non-performing assets and loans, Sun President and Chief Executive John M. McEwan said.

The level of non-performing assets will decline from an “extensive workout and recovery program,” he said.

Sun also is trying to obtain capital and is “now in active negotiation of a letter of intent” with one unidentified party, he said.

Walker Scott Posts Loss of $410,258 for the Year

Walker Scott Corp., San Diego, which soon will be acquired by Los Angeles-based Desmond’s & Associates, reported a loss of $410,258 for the year ended Feb. 2. In the prior fiscal year, the 12-outlet department store chain reported earnings of $202,218.

Sales for the year dropped 3% to $42.9 million.

The loss included a write-down of about $244,000 for a promissory note given the company after it sold 22 acres of land in Santee late last year.

President and Chief Executive Robert J. Dicker blamed the sales drop on increased retail competition in San Diego as well as on last year’s phase-out of major appliances at Walker Scott and the closing of its La Jolla and downtown stores.

Dicker said the loss will not affect the pending merger with Desmond’s. “The prospective buyers were aware of the . . . year-end loss” when they signed a letter of intent to buy the 50-year-old company, he said.

The proposal is for Desmond’s to buy Walker Scott at $12 per share, or about 74% of the San Diego firm’s book value. However, if Walker Scott’s pretax loss for the first quarter ending May 4 exceeds by more than 10% the company’s $240,404 loss in last year’s first quarter, then the price will be reduced.