Central S&L; Management Pact Weighed : Arizona Bank Officials Study Long-Term Deal

Officials of First Federal Savings Bank of Arizona are considering asking federal regulators for a long-term contract to manage troubled Central Savings & Loan, Central’s president and chief executive said Friday.

“We don’t want to acquire the company, but it would be better that we continue and make Central profitable so that nobody will have to buy it,” said George Leonard, First Federal’s executive vice president, who was appointed Central’s president and chief executive May 31. At that time, regulators gave First Federal a 90-day contract to manage Central.

Several companies have shown interest in buying Central, but none has been able to finalize an agreement.

“There’s no reason why the assets (about $2.2 billion) should be sold on a ‘fire sale’ basis,” said Leonard, whose company was retained after federal regulators forced the resignation of Central’s board in the wake of $117 million in losses from 1981 to 1984 and a $11.9-million loss in this year’s first quarter.

Operating in Red

Since June, regulators have issued more than $100 million in “net-worth certificates” to Central, giving the company a positive net worth--on paper--for the first time since early 1984.

Leonard, who has declined to disclose Central’s exact net worth, said the company continues to operate in the red. However, Central’s interest-rate margin--the difference between the interest that it receives from loans and what it pays on deposits--was in the company’s favor in June, the first positive margin in more than a year.

Leonard said his firm has “given every area” of Central’s operation an “exhaustive analysis.” A final report for regulators and Central directors is being prepared, he said.

In addition, executives are working on a long-term plan designed to “return Central to profitability and viability,” Leonard said.

Central will soon rejuvenate its equity lending--or second mortgage--programs, and it plans to start a full-fledged real estate lending effort by year-end, Leonard said.

Finally, First Federal, which recently made the name change from savings and loan to savings bank, plans next year to change its name again, to MeraBank.

The name change will mean that First Federal, with $4.5 billion in assets, can expand its operations into other states, notably Texas, where, Leonard said, there are more than 100 financial institutions using the words First Federal .