Nationwide S&L; Rescue Begins; Thrifts in State Will Wait Turn
The regulatory mopping up of problem savings and loan associations in California is likely to involve small institutions at first and probably will not start in earnest for a few weeks, thrift experts predicted Thursday.
Federal authorities, empowered by President Bush’s signature on S&L; bailout legislation Wednesday, are expected to put more priority on closing or selling thrifts in economically troubled areas such as Texas and Arizona. Soft real estate markets there are causing increasingly bigger losses each day.
On Thursday, the Resolution Trust Corp., the agency created this week to clean up the nation’s thrift mess, closed the first of the problem S&Ls;: Liberty Federal Savings & Loan in New Port Richey, Fla., Park Cities Savings of Dallas, and First Savings of America of Orland Park, Ill.
In all three cases, the insured deposits of the failed institutions were transferred to healthy banks or S&Ls;, and the branches of the closed thrifts will reopen today under the names of the institutions acquiring the deposits. The acquiring institutions may buy loans and other assets of the failed thrifts, but the government will have to sell what they do not take.
Most of the initial $20 billion allocated to the Resolution Trust Corp. is expected to be used to support the operations of troubled thrifts that now are offering excessively high interest rates to depositors. These thrifts are operating under regulatory supervision.
Savings and loans that have been seized by regulators often offer high rates to attract deposits because they desperately need funds to keep going, and that drives up costs for the healthy thrifts with which they compete.
The initial $20 billion from the bailout bill must be spent during the seven weeks between now and the end of the federal fiscal year Sept. 30.
It is not yet certain which California thrifts will be the first to be closed, dismantled or sold.
Operates 22 in State
Regulators prefer to resolve the cases of troubled thrifts by selling them. But small ones are difficult to market because they have no branch network, well-known name or loyal depositors that buyers might find valuable. The alternatives are to close them and pay off the depositors, or to strip off the bad assets and sell the deposits to another institution.
The Resolution Trust Corp. now operates 22 troubled thrifts in California, ranging in size from Gibraltar Savings, the biggest with $13.42 billion in assets, to small ones like Perpetual Savings Assn. in Santa Ana, with only $24 million in assets. Most of the institutions that have been seized are small to mid-size thrifts, with only three--Gibraltar, Lincoln Savings & Loan in Irvine and Pacific Savings Bank in Costa Mesa--having more than $1 billion in assets.
The largest institutions will probably not be the first to go. On Wednesday, FDIC Chairman L. William Seidman indicated that the RTC’s top priority will be dealing with small institutions. The reason, he said, is that officials are still developing policies on how to deal with the more complex problems of the larger institutions.
“The thing to do is clear the decks so you can train your guns on the larger ones,” said Robert L. Lackovic, chairman of First Nationwide Bank in San Francisco.
Some of the smaller thrifts have been under supervision for years. Unified Savings in Northridge was initially seized by regulators in October, 1986. The thrift was declared insolvent, the victim of fraud, bad loans and a willingness to pay high interest rates to attract deposits. There have been no reports of interested buyers.
Perpetual was seized in March, 1987. Last December, Wells Fargo Bank showed interest in buying Perpetual, but negotiations reportedly fell through.
Potential buyers clearly have the most interest in Gibraltar Savings, the Simi Valley-based unit of Gibraltar Financial of Beverly Hills. With 108 offices, most in California, Gibraltar has a valuable branch system that thrifts, banks and private investors may want to buy.
At least 10 parties have shown interest in buying part or all of Gibraltar, according to thrift executives and consultants working for buyers. Those parties include other thrifts, an Asian firm and private investors in businesses unrelated to the savings and loan industry.
Because of the widespread interest, thrift executives speculate that government authorities will take time to evaluate the offers and try to negotiate the best deal.
In a statement, John Carr, chief executive of Gibraltar Savings, said the decision on selling Gibraltar will be made by the RTC and “we hope we are high on the list” to be sold.
STATE S&Ls; OPERATED BY U.S. REGULATORS
California thrifts (listed alphabetically) now being operated by the Resolution Trust Corp.:
Assets Deposits Institution (millions) (millions) American Interstate Savings $27 $26 Los Angeles Arrowhead Pacific Savings Bank 57 81 San Bernardino Cabrillo Savings Bank, Hayward 86 73 City Federal S&L;, Oakland 22 31 City S&L;, Westlake Village 32 31 First Federal S&L;, Bakersfield 133 127 First California Savings, Orange 168 204 Founders S&L;, Los Angeles 133 160 Gateway Savings Bank, San Francsico 81 132 Gibraltar Savings, Beverly Hills 13,420 7,410 The Guardian Federal S&L;, Bakersfield 29 28.65 Independence S&L;, Vallejo 442 377 Lincoln Federal S&L;, Irvine 5,500 4,400 Pacific Savings Bank, Costa Mesa 1,100 1,000 Perpetual Savings, Santa Ana 24 34 Royal Oak S&L;, Manteca 37 37 Sierra Federal S&L;, Beverly Hills 49 43 Southwest S&L;, Los Angeles 962.5 836.8 Unified Savings, Northridge 37 53 Washington S&L;, Stockton 70 71 Westco Savings Bank, Wilmington 203.3 194 Westwood S&L;, Los Angeles 341.5 413.7
Source: Federal Deposit Insurance Corp.
