U.S. Takes Over Security S&L; in Garden Grove

GARDEN GROVE —  Government regulators seized control of Security Federal Savings & Loan on Friday, declared the one-office thrift insolvent and placed it into the federal conservatorship program.

It is the third Orange County-based S&L; to be seized this year. The action does not disrupt normal business, and customers on Friday continued making deposits and withdrawals.

But the action is a prelude to the sale or closing of the 32-year-old community S&L;, which has $77 million in assets and $75.2 million in deposits in 6,035 accounts.

Pending that final disposition, Security--now operating as Security Federal Savings Assn.--will be run by a representative of the new Resolution Trust Corp., an agency created by the thrift bail-out bill to operate and dispose of insolvent S&Ls.;

Security was among seven local thrifts identified by a number of industry analysts as being unable to meet capital requirements that take effect Dec. 7.

The thrift lost $202,000 in the second quarter and since then has lost at least $960,000 more, wiping out its entire capital base.

Security’s problems stem from a series of bad loans made by previous management in the early 1980s, just before the county’s residential housing boom turned into a two-year bust.

While it has not had serious operating problems since then, it was never able to build up enough business to offset the drain on its resources from those loans.

In June, the government stepped in to name a management team after a hoped-for private sale of the S&L; fell through. At the time, regulators said Security needed a minimum of $2.5 million in new capital to remain solvent.