Run at United Bank Spreads to Other Branches : U.S. Reassures Customers of Savings Firm Based in San Francisco’s Chinatown
A run on deposits at United Bank SSB spread Wednesday to several other Northern California branches of the San Francisco-based institution even as it appeared to subside at the Chinatown branch where it began last Friday.
As federal regulators sought to reassure depositors that their savings were insured for up to $100,000 per account, lines of anxious depositors stretched outside the doors of branches in San Francisco, Oakland and Stockton. Most of the depositors were elderly Chinese immigrants panicked by recent bank failures and United’s projection last week that it will post a net loss of $7.5 million in this year’s second quarter. However, other United Bank branches in San Francisco, as well as two offices in Sacramento and six branches in the Southland, were reported calm.
Fast-growing United, founded 11 years ago by Chinese-American businessman Ben L. Hom, has assets of nearly $700 million and bills itself as the nation’s largest minority-owned bank. (United is actually a savings bank, which is more like a savings and loan association than a commercial bank. The initials SSB stand for state savings bank .)
Contributing to the climate of fear among United’s Asian depositors were the failures last week of Golden Pacific National Bank, a Chinese-owned bank in New York, and Overseas Trust Bank of Hong Kong. Overseas, which was shut down June 12 by Hong Kong regulators, had an office in San Francisco. In both of those failures, there were allegations of fraud.
“We have absolutely no connection with those banks,” said Philip Lee, a senior vice president of United. Lee said inaccurate reports in the Chinese-language press and “gossip and rumors” contributed to the run at United. United’s stock, traded in the over-the-counter market, closed up 50 cents at $3 a share Wednesday.
In an effort to regain deposits, United offered to waive early withdrawal penalties for customers who bring their funds back within 30 days. Bank officials also distributed a mimeographed statement in Chinese and English from the Federal Home Loan Bank Board, which has supervisory and regulatory authority over the state-chartered savings bank.
“United Bank continues to have a positive net worth and is a member in good standing of the Federal Home Loan Bank of San Francisco and the Federal Home Loan Bank system,” the statement said. “All depositors of the bank are insured by the Federal Savings and Loan Insurance Corp. up to $100,000. Depositors should carefully consider the above before deciding to withdraw their funds.”
But many of the Chinese waiting in line appeared not to trust or understand the federal insurance guarantees.
“There’s no FSLIC in China,” one overwhelmed branch manager said.
Some customers took their withdrawn cash half a block to branches of Great Western Savings & Loan and First Nationwide Savings, where a sign in the window proclaimed: “When safety means everything, you can count on First Nationwide.”
Delays Called Unlikely
There were Caucasians waiting in line, too, and some of them said they feared that their money would be tied up for months if the bank were to fail.
“I don’t think anyone’s being irrational,” said Debra Norris, a dancer who had been waiting in line at United’s branch on Clement Street in San Francisco. “I live from month to month, from paycheck to paycheck.”
Federal regulators, while declining to discuss United’s specific situation, said delays would be unlikely in the event of the failure of an insured institution. Most failed institutions are merged into healthier ones who assume the failed bank’s or savings and loan’s deposits.
In the rare cases that a bank or thrift is shut down, payment of depositors’ claims begins “within a few days,” a Federal Home Loan Bank Board spokeswoman said.
However, depositors of New York’s Golden Pacific National, which was closed by the FDIC on June 21, have not received their money. The FDIC said Wednesday that the bank would be taken over by Hong Kong & Shanghai Banking Corp., Hong Kong’s largest bank and the majority owner of Buffalo-based Marine Midland Bank.
Net Worth to Be Reduced
An FDIC spokesman, Alan Whitney, said the agency hoped that all four offices of Golden Pacific would reopen Friday.
United blamed its anticipated second-quarter loss on a $4.4-million addition to its reserve for loan losses, reversals of interest income on non-performing loans and “other non-recurring items.”
The bank said its higher than expected loan losses were caused by real estate developments that it financed in 1982 and 1983.
The second-quarter loss will cut deeply into United’s net worth, or the cushion between its assets and its liabilities, which stood at $12.9 million at the end of 1984.
Federal regulators were believed to be exploring ways to shore up United’s net worth.
The savings bank had been on an aggressive lending and deposit-taking program that resulted in assets growing 82% to $697 million and savings deposits 88% to $493 million during 1984. Ranked by assets, United Bank was 43rd largest among California’s 200 savings institutions at the end of last year.
Cash Delivered
However, the savings bank’s lending practices also led to the heavy losses. United lost $1.45 million in 1984 because it had to put nearly $6 million in a reserve to cover troubled loans, according to the company’s annual report. The savings bank earned $3 million in 1983 and $4.25 million in 1982.
United’s strategy for weathering the crisis of confidence is to keep doling out cash in the hope that the run will wind down as customers see that there’s plenty to go around. Armored cars made morning and afternoon deliveries of cash to the Chinatown branch Wednesday, where more than $4 million has been withdrawn so far.
The bank’s officials said there were signs that the strategy was working. At the branch in Chinatown, orderly lines replaced the jostling crowds of Monday and Tuesday and the last of the waiting depositors had been dealt with 15 minutes before the branch’s regular closing time of 5 p.m.
Times staff writer Tom Furlong in Los Angeles contributed to this article.
