Move to Ease Depositors’ Fears : Balboa Bank to Open on Sunday, Monday

Federal regulators, who on Thursday declared Balboa National Bank insolvent, will open the troubled bank’s National City branch on Sunday in order to pay off depositors, a federal regulator said Friday. The bank branch on West 24th Street also will open for business on Monday, a federal government and bank holiday.

The highly unusual Sunday and Monday openings were ordered “in the hope that it will keep people from thinking that they’ve got to run over here to get their money,” said Jim Thompson, a manager of the Federal Deposit Insurance Corp., the federal agency that is serving as receiver for the bank, which was declared insolvent on Thursday.

Only a handful of Balboa’s 3,700 depositors will lose money because of an FDIC insurance program that covers federally insured bank accounts of up to $100,000, Thompson said. All but about $75,000 of the $25.2 million that was on deposit on Thursday was covered by that insurance. However, about 15 depositors will lose money because of the closing, Thompson said.

The troubled bank’s end came late on Thursday, when the U.S. comptroller of the currency asked a U.S. District Court Judge in San Diego to declare the bank insolvent. When the insolvency order was signed shortly after 5 p.m., FDIC personnel moved in and spent Friday going through Balboa’s records.

Federal regulators will spend the weekend “determining if all or part of the assets and liabilities can be sold or worked out,” Thompson said.

Earlier in the week, the FDIC unsuccessfully tried to find buyers for all or part of the bank’s assets and liabilities. Some offers were received, but regulators were “unable to arrange anything that was satisfactory,” Thompson said. “At this point in time, there are no other possibilities on the table other than liquidations.”

As part of the liquidation process, the FDIC will begin to pay off depositors, using money from the agency’s insurance fund.

During the past year, Balboa’s board of directors struggled to find enough capital to keep the institution solvent until it could rid itself of problem loans dating back to 1984. The bank at that time was making riskier loans to generate interest income needed to pay out the high interest rates that Balboa was offering to attract deposits.

Federal regulators in the bank on Friday had yet to determine how many of Balboa’s loans were non-performing.

The bank lost $4 million in 1986 and anticipated a $3-million loss for 1987. Balboa had predicted it would absorb a $500,000 loss in 1988 and return to profitability in 1989.