Piedmont Federal Corp., parent firm of Manassas-based Piedmont Federal Savings Bank, said it lost $7.7 million in the second quarter because of increased problems in the thrift's real estate loan portfolio.
In contrast to the problems reported at Piedmont, District-based Washington Federal Savings Bank said it earned $3.1 million ($1.02) for the year ended June 30, compared with a profit of $325,000 (11 cents) recorded last year.
"Compared to everybody else in this business, we're smiling," said William F. Sinclair, the thrift's chairman. "We've been on the road to recovery for a long time."
Piedmont's announcement follows an earlier warning by the thrift's chief executive, A. Pickens Butler, that Piedmont would report a substantial loss for the quarter and, eventually, an overall loss for the year.
Butler said that in the past three months, Piedmont has seen its problem real estate loans increase to $26.1 million from $9.6 million, with most of those located in Loudoun and Prince William counties, where Piedmont conducts the majority of its business.
Because of the dramatic increase in problem loans, Piedmont was forced to add $6.6 million to its loan loss reserve, the cash cushion that protects against possible loan defaults. Piedmont said it also had to write down the value of several properties during the quarter. The recognition of those declining values resulted in a $2.2 million loss. The struggling thrift recently adopted a "poison pill" anti-takeover defense.
Butler said regulators recently completed an examination of Piedmont's assets, which totaled $590 million as of June 30, and he said the actions taken during the quarter reflected the regulators' recommendations.
For the first six months of 1990, Piedmont said it lost $7.4 million, compared with a profit of $3 million ($1.15 per share) in the first half of 1989.
At Washington Federal, the $3.1 million profit for the year came despite a $198,000 loss recorded in the fourth quarter. Washington Federal's profit is the strongest recorded since Sinclair took over as chairman in 1984. That year, Washington Federal had a negative net worth of $34 million and had $125 million worth of problem real estate loans on its books.
The remainder of those problem loans was disposed of this year, leaving Washington Federal with only 1 percent of its total real estate loans in the "troubled" category. Still, Sinclair said the thrift increased its loan-loss reserve by $1 million during the year "just to be prudent." That increase resulted in the fourth-quarter loss, he said.
Sinclair said yesterday that Washington Federal plans to expand in the future and has purchased at least one Northern Virginia branch of United Savings Bank, which was taken over by federal regulators last week.
He said he expects to raise $10 million to $15 million in capital in the coming months through the sale of convertible preferred stock, which will allow the thrift to grow. Washington Federal currently meets all of the federal government's capital requirements.
Sinclair attributed the thrift's dramatic increase in income for the year to a $1.3 million drop in administrative expenses and a $1.4 million gain in interest income, and he said he expects that trend to continue.