Deposits Again Leaving Troubled American Savings : Outflow Resumes This Month After Gains by S&L; in August
American Savings & Loan experienced a rise in deposits in August, but outflows resumed again early this month when federal thrift regulators seized the firm and placed it into receivership, company officials said Friday. The ailing Stockton-based thrift, which has total deposits of more than $15 billion, said savings levels increased by nearly $125 million last month, a sharp contrast to the $337-million net outflow in July. But another $22.4 million in deposits left the financial institution in the first half of September.
The mixed bag of developments came amid continued efforts by federal thrift regulators to complete the sale of American Savings to private investors led by Texan Robert M. Bass. Last week, Bass, a 40-year-old billionaire from Ft. Worth, agreed to buy the insolvent thrift with $550 million in new capital.
The government, through the Federal Savings and Loan Insurance Corp., agreed to aid the rescue with a $2-billion assistance package. Completion of the deal awaits final state and federal regulatory approvals.
American Savings, the nation’s second-largest thrift, has undergone an erosion of deposits that had picked up speed in recent months. The outflow has concerned Bass and his investors because American Savings’ primary asset is its California branch network and its base of small depositors.
In an effort to shore up customer confidence, American Savings Chairman William J. Popejoy is sending out a letter to customers indicating that the worst is over for the big S&L.; He also touched on the company’s future, saying that Bass “has outlined forward-looking plans to continue to build the branch system throughout the state.”
American Savings’ inflow of deposits in August resulted from a program to attract investment in certificates of deposit, known as CDs, through professional money brokers. That program, which Popejoy has termed a “godsend,” has raised more than $630 million in deposits since July 27.
Confusing to Savers
But, as company officials readily acknowledge, the August inflow masks the fact that deposits in the branch offices are continuing to flow out. “The CDs are a different animal,” Popejoy said in a telephone interview. “The fact is, the branches are still in the red.”
The periodic deposit outflows usually coincide with reports about the company’s financial condition, which has deteriorated markedly in the past year due to heavy real estate loan losses. The latest outflow, though, occurred amid a series of rapid developments that savers found confusing, company officials said.
First, on Sept. 5, thrift regulators announced that they were close to a final agreement to sell American Savings to Bass. Then, the next day, the regulators put the thrift into receivership to pave the way for the expected sale. That was followed Sept. 7 by the news that American Savings’ parent, Financial Corp. of America, intended to file for bankruptcy protection.
Since those developments, the outflow of deposits has moderated, and company officials maintain that the situation is well under control. “There is nothing that really worries us,” a company spokesman said.
American Savings’ deposits now total about $15.1 billion, down from $16.7 billion at the end of 1987. All of American Savings’ deposits are insured by FSLIC, even those that are above the traditional $100,000 federal insurance limit.