Delta Savings Closed; Deposits Transferred to East-West Bank

Delta Savings Bank, seized 28 months ago amid claims of blackmail and racist treatment by federal regulators, has been closed and its $3.5 million in deposits transferred to East-West Federal Bank.

The tiny thrift’s lone office in Westminster was shuttered Friday. Customers were able to resume banking Saturday at a nearby branch of East-West, a thrift based in San Marino.

Besides assuming all of Delta’s 1,100 deposit accounts, East-West bought $700,000 worth of assets, mainly cash, out of $15.8 million in total assets. It paid $168 for the franchise. Delta’s failure is expected to cost taxpayers $9.5 million.

Delta’s demise in November, 1991, would be a forgettable failure amid the debris of the industry were it not for the legal action regulators took to ban certain directors and officers from banking and to seek restitution. But in a rare court defeat, a judge ruled in September, 1992, that regulators had failed to prove their case against two directors.

The judge also concluded that a federal examiner had blackmailed the thrift’s executives into hiring her and then gave the thrift bad advice to follow. Evidence at the hearing also showed that federal examiners were racially biased against the Korean-born owners of Delta.

Nevertheless, the Office of Thrift Supervision last year partially overruled the judge by ordering a lifetime ban against the directors but dropping its demand for damages. It was the first time the OTS ever overruled one of its judges.