FCA Says Deposit Activity Normal at S&L; Unit
Retail deposit activity at American Savings & Loan Assn. branches has been normal following Friday’s forecast of larger-than-expected losses at the thrift’s parent company, Financial Corp. of America, a spokeswoman for FCA said Monday.
Since Friday, when FCA announced that it is facing a loss of between $500 million and $700 million in 1984, deposit activity “has been business as usual,” said spokeswoman Layna Browdy.
While declining to disclose whether there has been a net inflow or outflow of deposits, Browdy said deposit activity was “a little heavier” Monday morning after being “very light” Saturday, when American Savings took the unusual step of opening its 122 branch offices to be available to answer depositor questions. The branches, which normally are closed Saturday, will also stay open until 8 p.m. this week.
However, against the backdrop of apparent tranquility among small depositors, whose money is insured by the Federal Savings & Loan Insurance Corp., some large institutional investors--whose accounts are larger than $100,000 and therefore not insured by the government--expressed concern about FCA’s predicted losses.
An official of the City of Fresno, for instance, said some of the city’s deposits would be moved once they matured.
“We are concerned with the reports in the newspaper about them (FCA), so we are reducing our position with them,” said Henry J. Paulsen, deputy controller for Fresno, which has about $9 million in deposits secured by first trust mortgage notes and Treasury bills. Paulsen said about half of the $9 million would be moved when it comes due in the next six months.
Although the number of institutional investors expressing concern about FCA is small, their apparent nervousness mimics a pattern that developed last summer, when lack of confidence in FCA management prompted depositors--mostly those with millions of dollars on deposit--to withdraw $6.84 billion from July through September, or about 27% of the savings and loan’s deposit base. Some of those institutionally invested funds never returned. Kern County Treasurer John R. Doty, for example, said the county has not invested any money at American Savings since January, when it moved $5 million in deposits that had become due.
“We don’t have anything on deposit with American Savings now. We are waiting for them to get in a little better shape,” said Doty.
The massive withdrawals of last summer led to the forced resignation of FCA Chairman Charles W. Knapp. His successor, William J. Popejoy, launched a series of steps to restore depositor confidence, including scaling back lending, cutting staff and reducing overhead.
Nevertheless, the expected losses announced Friday would make a major dent in shareholders’ equity, which stood at $703 million last Sept. 30. It would be the second-largest loss ever sustained by a U.S. financial institution--behind Continental Illinois Corp. which suffered a loss of $1.09 billion in 1984.
However, Friday’s announcement drew a quick endorsement from the Federal Home Loan Bank Board, the regulatory body for most thrifts, which said it had full confidence in Popejoy’s management and approved his efforts to identify and remedy the problems that he inherited.
And the loss prediction apparently did not trouble one of American Savings’ largest depositors, the state of California.
“We have been supportive and will continue to be supportive of them,” said Ken Kramer, chief of investments at the state treasurer’s office. “Even with this latest (expected) loss, they are still better off than a lot of other savings and loans.”
FCA’s stock closed at $7.375 per share Monday, up 87.5 cents.
