U.S. Pledges Protection for All Savings at American S

In a move to stem depositor unease at American Savings & Loan, federal regulators announced Friday that they will protect all savings at the Stockton-based financial institution--even amounts over $100,000 that were previously uninsured.

Regulators from the Federal Home Loan Bank Board made their move after American Savings disclosed earlier in the day that it has lost nearly $450 million in deposits since Jan. 1 because of continuing financial problems.

“We want to stem those outflows,” said Karl Hoyle, a spokesman for the bank board.

The deposit-insurance guarantee--which would apply if troubled American Savings should fail--is believed to be the first of its kind ever issued in the savings and loan industry and points up the gravity of the financial problems facing the nation’s banking industry.

On Thursday, commercial bank regulators issued a similar pledge to protect all the deposits of ailing First RepublicBank in Texas. The Federal Deposit Insurance Corp. also lent the ailing Dallas-based commercial bank $1 billion.

The two moves are related, according to M. Danny Wall, chairman of the bank board. “We wanted to eliminate any question (about American Savings) that may arise in people’s minds given what the FDIC did,” Wall said in a telephone interview. The board’s announcement also pledged to protect the thrift’s creditors.

American Savings has about $400 million in uninsured deposits, a minor portion of a deposit base that totals more than $16 billion. The thrift has 185 retail branch offices throughout California and $33.7 billion in assets, making it the nation’s second-largest thrift after Home Savings of America in Los Angeles. It is owned by Financial Corp. of America in Irvine.

If a savings and loan fails, customers’ deposits are normally insured only up to $100,000 by the Federal Savings & Loan Insurance Corp. Funds in accounts of more than $100,000 are paid off as the assets of the failed financial institution are gradually liquidated. But if the asset sales don’t cover the deposits, the uninsured depositors lose their money.

In its annual report filed with the Securities and Exchange Commission and released Friday, American Savings also disclosed that its net worth eroded by another $126 million in 1987 due to debts that it may not be able to collect from its parent company. The resulting writeoff left American Savings with a negative net worth of $106 million using generally accepted accounting principles; the parent FCA already has a negative net worth of $163 million. Net worth is a measure of assets minus liabilities.

The moves by the bank board are another in a series of steps to shore up public confidence in the financial institution, which has been plagued by well-publicized problems for nearly four years.

Earlier this month, the bank board adopted a resolution to reassure Wall Street securities dealers about their $12.6 billion in short-term loans, known as reverse repurchase agreements, to American Savings. The bank board said the loans would be handled without disruption in the event American Savings should fail.

The bank board’s latest moves, though unexpected, were welcomed by FCA Chairman William J. Popejoy, who said he was “appreciative of the vote of confidence.”

FCA has sustained heavy losses in recent years, mainly because of severe problems with residential and commercial real estate development loans in Sun Belt states such as Texas and California. The company also suffered a deposit run of $6.8 billion in 1984.

On the savings side, American Savings noted in its SEC report that it has lost $669 million in deposits of small savers since Jan. 1--losses that were partially offset by $220 million raised from institutional accounts. Small depositors have been unnerved by the barrage of negative publicity about American Savings’ financial condition, company officials said.

Some savers were especially upset, Popejoy said, by news reports that American Savings was going to be carved up and sold to its major competitors. Regulators confirmed that they were studying that alternative, but later said the idea has been shelved.

American Savings’ net worth went into the red because it had to write off receivables from its parent company after FCA’s own net worth was wiped out by a $468-million loss in 1987. As expected, the losses caused FCA’s outside accounting firm, Peat Marwick Main & Co., to qualify its opinion of the company’s 1987 financial statements, citing its substantially weakened condition.

“That’s bad news,” Popejoy said, referring to the capital erosion. “We sure thought we would have better news than this in 1988.”

Regulators say they’re continuing to look for new capital for American Savings, either from outside investors or from FSLIC itself. “Working together, we hope to achieve a solution for the troubled institution equitable to all parties,” the bank board said in a statement.