State Seizes Long-Ailing S&L;, Names Conservator

State regulators on Friday seized a long-troubled savings and loan based in San Fernando and appointed a conservator to run it.

First California Savings Bank, known as Camino Real Savings Bank until early this year, was taken over by the California savings and loan commissioner’s office after its negative net worth--the gap between assets and liabilities--widened to more than $50 million.

State officials said First California’s two branches, in San Fernando and Commerce, would be open today, and that accounts are insured for up to $100,000 by the Federal Savings & Loan Insurance Corp.

Although its headquarters is in San Fernando, its executive offices are in Orange.

The institution, which has $230 million in assets and holds $225 million in savings accounts for customers, was organized in San Fernando in 1969 by a group of prominent Latino businessmen.

The group’s application for a charter at first was rejected by federal officials. But, after intense lobbying, then-Vice President Spiro T. Agnew brought the thrift’s charter with him on a campaign visit to Los Angeles in 1970.

History of Bad Loans

Camino Real was on the verge of failing in 1985 when millionaire Orange County developer Mervyn Phelan bought it, in part because it had accumulated foreclosed real estate that he wanted. Phelan, who could not be reached for comment, pumped in $15.5 million in cash and real estate shortly after his purchase.

Before Phelan bought it, Camino Real had a chaotic history of bad loans that forced it to foreclose on customers. Executives have said that some loans, purportedly secured by construction projects, went to borrowers who did not build anything.

In 1984, Camino Real’s liabilities began exceeding its assets, giving it a negative net worth of $7.3 million, and the Federal Home Loan Bank Board put it under supervision. Last year, the thrift closed two branches, in Canoga Park and Sylmar.

William Davis, chief deputy savings and loan commissioner and the institution’s conservator, said First California Savings’ problems became more severe in the second quarter because of a $47 million write-off for “good will.”

“Good will” is an accounting term that represents an intangible business asset such as a firm’s name, relations with customers or some other factor. In this case, the amount represents the premium paid by Phelan for the savings and loan over its market price, Davis said.