Financial Corp. of America, parent of the nation's largest savings and loan association, said yesterday that its financial health improved in September and the first three weeks of October, following problems earlier this year that led to a crisis of investor and depositor confidence.

The California S&L reported a slim third-quarter profit of $1.2 million, compared with a profit of $46 million for last year's third quarter and a loss of $107.2 million during the second quarter this year. The profit reported yesterday is attributable to nonrecurring gains on the sale of assets during the quarter, according to Financial Corp. Chairman William J. Popejoy.

The company reported a nine-month net loss of $78.4 million, versus a profit of $116.1 million during the same period last year.

Financial Corp.'s chief operating subsidiary, American Savings and Loan Association, had a net deposit outflow of $6.48 billion during the third quarter, leaving it with $18.18 billion in deposits, compared with $25.02 billion on June 30. The company said the majority of the outflow during the period was in August, and the company began to show positive inflows during the last week of September.

"Since the conclusion of the quarter Sept. 30 , the company has experienced significant restoration of depositor confidence," Popejoy said. "In fact, through Oct. 19, the company has a net deposit gain of approximately $725 million."

About $650 million of the $725 million came from the sale of certificates of deposit by an investment group headed by Prudential-Bache Securities. Financial Corp. hopes to raise $1 billion through the offering, which has slowed recently as the company has reduced the rate of interest it is willing to pay.

Popejoy said that his goal is to rely less on institutional deposits and more on consumer deposits as the size of Financial Corp. is scaled back.

Under pressure from the Federal Home Loan Bank Board, Popejoy also said he has asked Charles W. Knapp, the former chairman of Financial Corp., to return the $2 million in severance pay that Knapp received when he resigned under pressure from bank regulators. Popejoy, who got a strong endorsement from the bank board when he was selected as chairman, said Knapp has not responded.

Popejoy said published reports that the payment to Knapp was placed directly into a bank account in Switzerland, beyond the reach of bank regulators, were false, adding that he does not know what Knapp has done with the money since it was placed in a California bank account by Financial Corp., following Knapp's resignation.

Knapp was forced out because of concerns about Financial Corp.'s rapid growth, bad loans, declining profits and other operating procedures.

In the third quarter, Financial Corp. raised approximately $11 billion from the sale of about $2.3 billion in assets, an increase of $3.3 billion in borrowings from the Federal Home Loan Bank Board and about $5.4 billion through financing techniques, including regular reserve repurchase agreements and whole loan reverse repurchase agreements.

At June 30, Financial Corp.'s borrowings from the bank board were $682 million. At Sept. 30, the borrowings were about $4 billion, which represented 12.3 percent of total assets. Popejoy said the company recently repaid $280 million to the bank board and has not borrowed any money from the government since Sept. 27.

The complex combination of transactions during the third quarter increased the company's assets from $30.6 billion on June 30 to $32.4 billion on Sept. 30. The company increased its reserve for losses on loans and real estate held for sale to $90.5 million, 42.6 percent more than as of June 30, a move Popejoy called "prudent."

Financial Corp. also announced yesterday that John J. Borer Jr., Gerald Tsai Jr. and Edward D. Marks resigned from the company's board of directors and that six new directors were named.

Financial Corp. stock, which traded as low as $4 a share during the crisis, rose 3/8 yesterday to 9 1/2.

"Interest rates came down during the period, so Financial Corp. could sell a lot of assets at a gain because they clearly wanted to show positive net income," said Thomas D. Klingenstein, an analyst with Wertheim & Co. "The earnings don't mean a lot, because the basic business is not making any money. My concern is, what happens to the company if interest rates don't come down and assets can't be sold."