38 More Savings and Loans Seized : Regulators Take Control of 12 California Institutions
The Federal Deposit Insurance Corp. seized control of 38 more troubled savings and loan institutions Thursday, including 12 in California and 11 in Texas, under President Bush’s plan to shore up the thrift industry.
The government takeovers brought to 215 the number of savings and loans, located in 31 states, enrolled in the so-called joint regulatory oversight program, which Bush launched in February.
Under Bush’s plan, the FDIC would take over many of the oversight responsibilities now performed by the Federal Home Loan Bank Board and its insurance fund, the Federal Savings and Loan Insurance Corp., which is broke.
The FDIC, which now insures deposits at banks, said the 38 thrifts brought under its control Thursday would maintain normal operations and depositors would continue to be protected up to the $100,000 insurance level.
Negative Net Worth
Of the 38, six are in Southern California. Four of the six had already been seized by S&L; regulators, who hired management teams to operate them while seeking buyers.
The Southern California thrifts are all relatively small. The figures that follow are all as of Dec. 31. The institutions are:
First California Savings, Orange--$168 million in assets, $204 million in deposits and a negative net worth of $75.1 million, which means that its liabilities exceeded its assets by that amount.
Founded 19 years ago as Camino Real Savings, the S&L; had a history of bad loans and foreclosed real estate. Its foreclosed commercial properties--office buildings and apartments mainly in California--continue to plague the institution.
It was sold in 1985 to developer Mervyn Phelan of Orange, who claims in a lawsuit against regulators that they misrepresented the institution’s financial health. S&L; regulators seized it in August, 1987.
At the end of last year, it had $167.9 million in assets and a negative net worth of $75.1 million.
Founders Savings & Loan, Los Angeles--$132.6 million in assets, $160 million in deposits and negative net worth of $37.2 million.
Founders suffered losses from bad commercial and construction loans. In addition, much of the books and records were in disarray when S&L; regulators seized it in September, 1986, threw out top management and hired new operators. At the end of 1988, Founders had $132.6 million in assets and a negative net worth of $37.2 million.
Arrowhead Pacific Savings Bank, San Bernardino--$57 million in assets, $81 million in deposits and negative net worth of $26.5 million.
Already Under Supervision
Arrowhead Pacific had not been seized by thrift regulators previously, but regulators did force the institution to replace a number of top managers nearly three years ago. The ousted managers were held accountable substantial losses from loans in which Arrowhead participated with other S&Ls.; Many of those loans were poorly underwritten and eventually went sour.
Unified Savings, Northridge--$37 million in assets, $53 million in deposits and a negative net worth of $18.5 million.
Unified already had been under regulatory supervision since October, 1986, when it was declared insolvent and seized by federal thrift officials. Organized in 1982, the S&L; had been beset by bad loans, costly deposits and fraud by certain customers.
City Savings & Loan, Westlake Village--$32 million in assets and $31 million in deposits. It had negative regulatory capital of $1.1 million.
Perpetual Savings, Santa Ana--$23.7 million in assets, $34 million in deposits and a negative net worth of $10.2 million.
Perpetual’s insolvency was the result of losses from the purchases of over-valued stock in a metal mining company and overvalued commercial property in Los Angeles. The deals were financed with high-cost jumbo certificates of deposit brought in from money brokers. Perpetual was seized March 18, 1987, and regulators sued its founders three months later alleging that they were trying to profit personally from the two deals.
Largest S&L; in Texas
Thursday’s action should not have any effect on the operations of the S&Ls;, except that interest rates on new deposits and on certificates of deposits that are renewed will likely be reduced, said David Barr, a spokesman for the FSLIC.
“The institutions will be competitive, but they won’t be known as the rate leader in their communities,” he said.
The largest thrift of the 38 seized Thursday is Murray Savings Assn., Dallas, which had assets of $1.45 billion. Also involved were 10 other thrifts in Texas, five in Mississippi, three in Missouri, two in Colorado, two in Indiana, two in Illinois and one in Kansas.
The FDIC heads the joint regulatory oversight teams, which also include staff from the Federal Home Loan Bank Board, the FSLIC, the Office of the Comptroller of the Currency and the Federal Reserve.
