U.S. Seizes O.C. Thrift : Deposits at Mercury S&L; Safe
Long-struggling Mercury Savings & Loan, out of capital and unable to attract buyers, succumbed today to federal regulators, who seized the S&L; and installed a new manager.
The U.S. Office of Thrift Supervision put the Huntington Beach thrift in conservatorship, an unusual move in federal takeovers, and appointed another federal agency, the Resolution Trust Corp., as conservator to operate it.
All of Mercury’s 24 branches continue to operate, and $1.8 billion in deposits are federally insured, said OTS spokeswoman Janis Smith.
OTS seized the S&L; because it failed to meet minimum capital requirements under a strict federal law enacted last fall to rescue the industry’s deposit insurance system. Smith said Mercury also had suffered serious losses and that the losses were likely to continue, driving the institution further into debt and putting the deposit insurance fund at risk.
But Mercury was not put into receivership, which is the typical route for takeovers. Under a receivership, an S&L; would be liquidated. But under a conservatorship, regulators will try to conserve Mercury’s assets and its marketability while searching for a buyer, Smith said.
“Mercury is not deeply insolvent, not way in the hole like so many other S&Ls;,” she said. “There’s a good deal of marketability there, and the conservator will preserve what can be preserved.”
The S&L;, in fact, is only $100,000 in the red under the common definition of insolvency, which is assets minus liabilities. But under the new federal law’s restrictive definitions, Mercury has a negative $33.3 million in tangible capital, the basic cash available to act as a last resort against losses.
Leonard Shane, Mercury’s chairman for the past 26 years, declined to comment specifically on the government’s action.
But with 13 takeovers of S&Ls; planned for today, he said, “This is a day that is going to be remembered.”
Shane said he has been asked to consult with regulators over the management of the S&L.;
“I don’t know where we’re going to be or what’s going to happen, but I’m aware that we’re being treated differently,” he said. “One good thing is that the regulators will be re-examining the whole question of how we got here through these accounting losses.”
Mercury, which has $2.15 billion in assets, lost $13.8 million in 1988 and $5.4 million in the first nine months of last year mainly from accounting adjustments the S&L; was forced to take when adjustable rate mortgages began paying off sooner than expected. The S&L; had claimed future profits based on a longer life of the loans.
Since announcing last month a foreclosure on two hotel loans totaling $60.7 million, Mercury has been under regulatory orders restricting it from making any new loans or new investments. It recently laid off 70 employees, mostly those in the lending operation, in an effort to curtail costs.
Except for the board, all top officers have been retained, Smith said. However, one top officer, Shane’s son William, announced today that he was quitting to become president and chief executive of National Economic Resources, which specializes in financial and estate planning.
