Regulatory Agency Data Analyzed : Losses Continue at 18 Ailing S&Ls; in State

The 18 California savings and loans placed under special regulatory supervision in the past 18 months lost a total of $155 million in the first three months of this year after losses of $706 million in 1985, figures from the Federal Home Loan Bank Board show.

The red ink reflects both heavy losses on operations and losses on the writeoff of problem loans, according to bank board figures compiled for The Times by the Glendale consulting firm of Kaplan, Smith & Associates. The S&Ls; also owned $653 million worth of foreclosed real estate on March 31, the latest date for which figures are available.

The 18 financial institutions also had an estimated combined net worth, based on generally accepted accounting principles, of a negative $1.53 billion. Their combined “regulatory net worth,” resulting from a considerably more generous accounting method, was a negative $444 million. (Net worth measures assets minus liabilities.)

At the same time, though, savers do not appear to have lost confidence in these institutions, presumably because deposits are insured up to $100,000 per account should the institution fail. Individual deposits of $100,000 or less in these S&Ls; rose to $9.41 billion on March 31, almost 8% higher than at the end of 1984.

The bank board figures provide an unusual inside look at the severity of the problems facing California’s most seriously troubled savings and loan firms. S&L; regulators discuss specific problems only with reluctance, but the balance sheets are available by special request.

As the losses suggest, the 18 S&Ls; are a major blemish on the face of the U.S. savings and loan industry. Most were taken over by the regulators because their rapid growth, financed by costly and unstable deposits, led to heavy losses in real estate and other investments, regulatory and industry leaders say.

The institutions have been placed in what is known as the “management consignment program,” a controversial program that includes 35 S&Ls; across the country. All of the MCPs, as the firms are known, were initially kept open for business, but savings and loan regulators have installed new managements from healthy S&Ls; and new boards of directors.

Two of the MCPs in California--Presidio in Porterville and Consolidated in Irvine--were closed this summer, and Golden Pacific Savings was bought by a Buffalo, N.Y., savings and loan. The others are open for business.

Losses at the 18 S&Ls; in California have remained heavy after regulators took control. However, project supporters say losses would have been far worse, perhaps by tens of millions of dollars, had the old managements remained in place.

The management consignment program was begun in California last year as a means of putting off loan losses to the Federal Savings and Loan Insurance Corp. The FSLIC is the federal agency that insures customer deposits up to $100,000 and takes over savings and loans when they get into severe financial trouble.

The FSLIC could not afford--and still can’t--the more than $3.5 billion necessary to close down the 18 California institutions and liquidate their assets, according to Peter Stearns, a former FSLIC director.

“The reason for the program is that we didn’t have enough money to close them down. Period,” said Stearns, who headed the FSLIC when the program began.

Only Realistic Alternative

Beverly Hills Savings & Loan was the first and largest of the financial institutions to be placed in the MCP program. It was declared insolvent and placed in receivership in April, 1985. The last California savings and loan put in the program was Sun Savings in San Diego, which was taken over July 18. Its name was then changed to Flagship Savings.

Defenders of the management consignment program say it was the only realistic alternative available last year, given the FSLIC’s inadequate financial resources and the fact that confidence in the S&L; industry was being driven to new lows by deposit runs throughout the country.

Critics, though, say the program has gone on far longer than intended and has driven up the deposit costs for every bank and savings and loan in California. The MCPs often pay hefty premiums for deposits because of their well-publicized poor financial conditions.

A recent study by the Federal Home Loan Bank Board said the MCPs have inflated deposits costs in California by 0.22 percentage point. Though that is good for consumers, it hurts ailing S&Ls; that are trying to cut costs. In California, the losses have been particularly heavy among the five largest of the group, which have total assets of about $9.5 billion.

Regulators are now trying to arrange for buyers of these five: Beverly Hills Savings in Mission Viejo, Central Savings in San Diego, Eureka Savings in San Carlos, Bell Savings in San Mateo and Southern California Savings in Beverly Hills.

Eureka Savings reported writedowns and additions to loan loss reserves of more than $100 million in 1985, while Bell Savings reported a similar loss of $97 million. Operating losses accounted for the remainder of their red ink.

And the problems are not over yet. According to President Peter Pickslay, Eureka Savings expects another round of loan losses for the second quarter, which ended June 30. One of Eureka’s problems is an unfinished high-rise condominium project along the ocean in Long Beach that has been plagued by lender failures and a borrower bankruptcy, Pickslay said.

“It’s just a godawful mess,” he added.

Pickslay is one of the dozens of executives from healthy S&Ls; who have been brought in as trouble-shooters for the ailing institutions. He is a senior vice president of Home Federal Savings in San Diego.

Another is George Leonard, who is now acting as president of Central Savings, where the picture appears brighter. Losses there have been cut from $96.3 million in 1984 to $48.4 million in 1985 to $7 million in the first quarter of 1986.

“We’re making a lot of progress,” said Leonard, who is also president of MeraBank in Phoenix.

Nevertheless, the overall numbers suggest that progress has been painfully slow.

One indicator--profits as a percentage of total assets--improved only slightly in the first three months of 1986, noted David Smith, partner in Kaplan, Smith & Associates. It declined from a negative 4.83% to a negative 4.56% in those three months.

“It’s a little better, but at the rate it’s going, it’s going to take a long time,” Smith said. CALIFORNIA’S TROUBLED SAVINGS & LOANS

Total Assets Profits March 31 1985 1. Beverly Hills Savings $2.67 billion -$95 million 2. Central Savings $2.14 billion -$48.4 million 3. Eureka Savings $1.84 billion -$110 million 4. Bell Savings $1.55 billion -$118 million 5. Southern Calif. Savings $1.31 billion -$40.8 million 6. American Diversified $908 million $18.7 million 7. Butterfield Savings $858 million -$32.9 million 8. Westwood Savings $551 million -$11 million 9. Farmers Savings $550 million -$35.8 million 10. Sun Savings $402 million -$5.1 million 11. Centennial Savings $387 million -$88 million 12. Columbus Savings $309 million -$26.5 million 13. Presidio Savings $208 million -$87.2 million 14. Gateway Savings $166 million -$16.9 million 15. Consolidated Savings $85.6 million $2.93 million 16. Mt. Whitney Savings $80.5 million -$3.32 million 17. Manhattan Beach Savings $48.8 million -$2.71 million 18. Golden Pacific Savings $48.8 million -$6.54 million

Profits Jan.-March Estimated 1986 Net Worth* Status 1. Beverly Hills Savings -$24.8 million -$333 million Open, up for sale 2. Central Savings -$6.96 million -$162 million Open, up for sale 3. Eureka Savings -$6.74 million -$152 million Open, up for sale 4. Bell Savings -$21.6 million -$132 million Open, up for sale 5. Southern Calif. Savings -$4.64 million -$218 million Open, up for sale 6. American Diversified -$51.5 million -$64.5 million Open 7. Butterfield Savings -$7.86 million -$147 million Open 8. Westwood Savings -$3.74 million -$36.3 million Open 9. Farmers Savings -$12.1 million -$23.1 million Open 10. Sun Savings -$3.21 million -$3.7 million Open 11. Centennial Savings -$4.84 million -$95.5 million Open 12. Columbus Savings -$1.78 million -$37.4 million Open 13. Presidio Savings Broke even -$93 million Closed 14. Gateway Savings -$1.8 million -$23.1 million Open 15. Consolidated Savings -$615,000 $3.97 million Closed 16. Mt. Whitney Savings -$1.66 million -$4.39 million Open 17. Manhattan Beach Savings -$688 million -$2.3 million Open 18. Golden Pacific Savings -$522 million -$4.53 million Sold

* According to generally accepted accounting principles, as of March 31, 1986

Source: Federal Home Loan Bank Board and Kaplan, Smith & Associates