Troubled Trust Company Shut by Regulators

The State Banking Department closed a Santa Barbara trust company Friday, saying heavy operating losses had left the company in an unsafe financial condition.

United Security Trust Co. is one of 20 non-banking companies licensed by the state to act as a trustee for individuals and businesses in administering trust funds and employee benefit programs.

United Security had investment authority over 470 trust accounts with a total market value of $89 million. The accounts included employee benefit plans of small businesses and 32 individual trust accounts.

State banking officials said the failure should not result in losses to customers, although some of them may experience a delay in getting access to their money.

Delays Expected

Since its founding in 1984, the company had suffered operating losses every year except 1987, state banking officials said. Losses last year were $532,000 and the company lost $29,000 last month.

Howard Gould, state banking superintendent, said through a spokesman that bank examiners will be on hand at United Security to answer customer questions.

Under a plan submitted to a state court judge Friday, some accounts would be transferred to Bank of A. Levy, which has headquarters in Ventura. In the meantime, trust assets will be protected from United Security’s creditors, Gould said.

The assets were invested in a variety of ways, including real estate, securities and certificates of deposits at banks and savings and loans. Gould said deposits at banks and thrifts will be insured through the other institutions. Some other assets may be insured through the federal Pension Benefit Guaranty Corp.

Gould said bank examiners have begun a detailed review of the books of the company, which was run by Eugene W. Ford, the chief executive, and Frank W. Hamilton, its chief financial officer.