Great American Is Seized After a Lengthy Decline
LOS ANGELES - Great American Bank in San Diego was seized by regulators on Friday, ending a long downward spiral by a once highly respected thrift.
"It was not a surprise to anybody; it was just a matter of time," said Campbell Chaney, an analyst at Sutro & Co., San Francisco.
Great American fell on hard times when problem loans soared because of poor underwriting and an ill-timed foray into Arizona. Great American also had a big investment in real estate development, which became a drain on capital for thrifts after passage of the Financial Institutions Reform, Recovery, and Enforcement Act.
|Unsafe and Unsound'
The Office of Thrift Supervision said it put Great American in conservatorship because it was operating in an unsafe and unsound condition and had negative capital. The company estimated that at June 30 it was $559 million short of meeting risk-based capital requirements.
The OTS said the company's long slide resulted from poor underwriting standards by previous management, which "adopted a strategy of liberal refinancing of troubled loans without proper asset review."
Nonperforming assets totaled $1.4 billion at March 31. But using the OTS's broader definition of "classified" assets, the problems totaled $2.46 billion, or a whopping 24% of assets. "Losses due to bad assets are insurmountable," the OTS said on Friday.
Robert L. Kemper, a former Wells Fargo & Co. executive, was hired as chairman and chief executive last year as part of a final effort to turn things around. Mr. Kemper sold Great American's entire California network of 130 branches to his former company. That left the thrift with 24 branches in Washington, 56 in Arizona, and one in Colorado, and all of the problem assets of the institution.
The Resolution Trust Corp., which was appointed conservator for the thrift, may have some luck selling the remaining branches of Great American. The Washington banking market is a healthy one, and Bank America, San Francisco, and Security Pacific Corp., Los Angeles, have been active buyers in Arizona.
Great American lost $173 million in 1990 and $46.8 million in the first quarter of this year. Second-quarter numbers are not yet available, but the company estimates it lost another $70 million.
The seizure is a blow to San Diego. Already one of its big thrifts - Imperial Savings and Loan Association - has been seized by the government, and yet another, HomeFed Corp., is struggling.
Great American, which was once the nation's eighth-largest thrift, with over $16 billion in assets, was particularly respected for its marketing prowess.