Feds Reject Santa Barbara Savings’ Plan

The parent company of Santa Barbara Savings disclosed Monday that federal regulators rejected its plan to restore its capital level, an action that puts the firm perilously close to being seized.

The action also makes Financial Corp. of Santa Barbara, among the state’s 20 largest thrifts, the first S&L; in California to publicly disclose that its capital plan was rejected.

Philip R. Brinkerhoff, chief executive of Financial Corp. of Santa Barbara, said in an interview that investors or buyers are being sought for the institution. He said there has been interest by prospective bidders, but he also acknowledged that investors would have to pump about $93 million into the thrift to bring it into compliance with the tougher capital standards that federal regulators put into place for all thrifts two months ago.

Any action against Financial Corp. of Santa Barbara will not effect most customers because deposits up to $100,000 remain insured by the federal government.

Officials with the Office of Thrift Supervision, which turned down the thrift’s capital plan, would not comment specifically about their action. They did say that, barring the infusion of major new sources of capital, they generally will recommend that the federal Resolution Trust Corp. seize thrifts whose capital plans are rejected. The RTC is an agency created last year to mop up the thrift mess.

Capital is the money that thrifts maintain to protect against losses. New thrift rules, enacted last year in the wake of the nation’s S&L; debacle, require higher levels of capital to force owners to put more of their own money at risk.

Financial Corp. of Santa Barbara, like several other thrifts, has been hurt by losses in its risky, high-yield junk bonds. The company lost $23 million in the nine months ended Sept. 30. Santa Barbara Savings, which has 44 branches, operates mostly in Ventura, Santa Barbara, San Luis Obispo and Kern counties. The company is based in Santa Barbara.

The firm, already under severe restrictions that include a prohibition against making new loans, disclosed Monday that it is under even more limits. It must receive permission from regulators to sell or transfer assets worth more than $1 million and to enter into a lease for more than $500,000. Also, salaries have been frozen for employees making more than $50,000 a year.