FDIC seeks housing - for new L.A. office; agency says plan should not spur more failure fears.

In a move that may signal future failures of Los Angeles area banks, the Federal Deposit Insurance Corporation, the federal agency which provides insurance for depositors of insolvent institutions, is looking to open a new liquidation office in the San Fernando Valley, FDIC spokesman Andrew Porterfield told the Business Journal last week.

The new office will serve the dual purpose of handling the overflow work of liquidating Southern California banks already in receivership as well as dealing with any future bank failures in Los Angeles County and in Central California, Porterfield said.

"Throughout the country we are expecting banks to fail. ... It's no secret that we have been looking at California," Porterfield said. "If there are a lot of failures in a concentrated area, we put staff right there to handle the assets."

FDIC liquidation offices serve two purposes. First, they are set up to pay insured depositors of failed institutions, and secondly, they are in charge of liquidating assets, loans and real estate of seized banks, Porterfield explained.

The FDIC is currently negotiating with four landlords in the San Fernando Valley to lease office space and a deal should be final in November, said John Holly, who will serve as manager and liquidator of the L.A. office.

Holly and about 100 FDIC staffers have been working out of two floors of the former headquarters of Independence Bank of Encino since that institution failed in January, Holly said.

Holly declined to give specifics about many aspects of the pending deal. But he did say the FDIC is looking to lease a space at least three floors larger than what it currently occupies, to accommodate a staff of 125.

Since January, when Independence Bank, with $534 million in assets, was taken over, FDIC staffers from other offices have handled the liquidation of about $210 million of the bank's assets. But once a new site is found, Holly said, he plans to begin hiring about 80 local residents with banking experience to staff the office so the FDIC staffers from other parts of the country can be sent home.

Holly said the office will be able to handle future bank failures but he was not aware of "any list" of local banks which regulators expect to take over.

Porterfield cautioned that "we cannot predict" how many banks may or may not fail and the public should not regard the news that the FDIC is opening an office "as a reason to believe that every bank in California is going to fail."

He said the decision to open the office was made by a "liquidation committee" in Washington, D.C., and it is the first time "in a few years" that the group has opted to open a satellite office in the Western U.S. region.

FDIC officials in Washington have also decided to open new offices in Massachusetts and Connecticut this year, Porterfield said.

Before the decision was made to open the Los Angeles satellite office, there were four liquidation offices in the FDIC's Western U.S. region, which oversees operations in California and 12 other western states. The regional headquarters are in San Francisco and the liquidation offices are in San Jose, Irvine, Denver and Anchorage, Porterfield said.

The new San Fernando Valley office, in addition to handling the liquidation of Independence Bank, will help the existing Irvine office in liquidating assets of 86 institutions the FDIC has in receivership within this territory, Porterfield said.

Altogether, the Irvine office manages a portfolio of 10,764 assets with a book value of $1.9 billion, Porterfield said.

By selling off assets, which include loans as well as foreclosed real estate from failed institutions, the Irvine office collected $434 million so far this year and $649 million in 1991, Porterfield said.

"They've pretty much got their boat loaded," Holly said of the working conditions in the Irvine office.

Sal Serrantino, president of California Research Corp., a Santa Monica-based bank consulting firm, noted that eight California banks were closed down by federal regulators so far in 1992, more than he can recall being closed in California in any 12-month period.

The FDIC's action to open another office may signal that "they are gearing up to speed up bank closures in Southern California," he said. Serrantino added that the decision to open the office comes at the same time that federal regulators have approved measures that will make it easier to close banks.

Just last week, on Sept. 14, the Federal Reserve Board adopted a rule that will allow it to close banks which have less than 2 percent capital and have failed to improve their condition in the last 90 days, said Joseph R. Coyne, spokesman for the Federal Reserve, which regulates about 1,100 banks nationwide.

Previously there were no set guidelines governing the level of capital which necessitated a closure, said Coyne. "If you tried to close a bank that had positive capital," the institution would have an easier time fighting the action in court, he said.

At the request of the Fed, the FDIC, which regulates 8,500 banks nationwide, also adopted the new rule, Coyne said. That adoption came on Sept. 16, two days after the Fed's adoption.

The Office of the Comptroller of the Currency, which regulates the rest of the nation's 12,000 banks, as well as the Office of Thrift Supervision, which regulates savings and loans, are also expected to adopt the rules soon, Coyne said.

Nationwide there are at least 50 banks which fall into the category of having less than 2 percent capital, the amount specified under the new rule as possibly triggering bank closure. The new rule becomes effective in December, Coyne said. He declined to identify the 50 banks or say how many of them are in California.