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OTS PUTS SECURITY SAVINGS, MISSISSIPPI, IN RECEIVERSHIP; DEPOSITORS PROTECTED

 OTS PUTS SECURITY SAVINGS, MISSISSIPPI, IN RECEIVERSHIP;
 DEPOSITORS PROTECTED
 WASHINGTON, Oct. 16, /PRNewswire/ -- The Office of Thrift Supervision (OTS) today placed Security Savings & Loan Association, Jackson, Miss., in receivership and chartered a new federal mutual institution to take its place.
 The new institution, Security Federal Savings & Loan Association, will assume certain assets and liabilities of the old thrift, and will operate in conservatorship under the management of the Resolution Trust Corporation.
 The receivership did not result in any interruption of Security's day-to-day operations. The institution and its 17 branches will remain open for business as usual. Holders of insured accounts are not affected by the action, which was taken by OTS to protect insured depositors and the interests of the thrift insurance fund. Deposits remain insured to the $100,000 legal limit.
 OTS initiated the action because Security was operating in an unsafe and unsound condition in that it had insufficient capital, with no reasonable prospect of replenishment without federal assistance.
 Security's condition is due primarily to substantial losses on commercial real estate loans and investments, many of which were made outside the institution's market area. As of June 30, 1992, assets of $69.8 million, or 25.4 percent of total assets, were classified as substandard, doubtful or loss.
 The expense of maintaining and improving real estate owned has steadily drained capital. A high level of non-accruing loans has caused interest paid on liabilities to exceed interest income, impeding Security's earnings potential. Moreover, the depressed real estate market has hindered asset sales, while loans to finance the sale of repossessed real estate in a weak market continued to expose the institution to credit risk.
 Management has reduced operating expenses, and has cut back on commercial real estate loans and investments in recent years. Nonetheless, the rising level of loss revenues against bad assets continued to erode earnings.
 In September 1990, Security filed suit in federal court against OTS contending the agency breached agreements allowing the institution to count $9 million in government notes, $3.5 million in cash assistance and $15.7 million in supervisory goodwill as part of regulatory capital. The assistance and goodwill were assumed in a 1984 merger with New North Mississippi Federal Savings & Loan Association and a 1985 acquisition of Security Trust Federal Savings & Loan Association, Knoxville, Tenn. The trial court subsequently ruled in Security's favor.
 In May 1992, a federal appeals court reversed the lower court's decision on the government assistance and goodwill issues, resulting in a deduction of those elements from regulatory capital. Even when credited with the assistance and goodwill, however, Security failed its core and risk-based capital requirements.
 In September 1992, Security unsuccessfully sought a temporary restraining order in U.S. Claims Court, Washington, D.C., to delay regulatory action. Security then asked the U.S. Court of Appeals for the Federal Circuit to stay the Claims Court's denial of the temporary order. The appellate court denied that request Oct. 14, 1992.
 The institution had a net loss of $5.94 million for 1991 and earnings of $676,000 for the six months ended June 30, 1992. Earnings in 1992 were derived from Security's investment in its subsidiaries. The thrift had been operating under regulatory growth and lending restrictions since December 1989.
 Security Savings & Loan Association was a state-chartered stock association. Shareholders will retain no interest in the new institution.
 As of June 30, 1992, Security Savings & Loan Association reported assets of $275.1 million, liabilities of $275.4 million and tangible capital of negative $16.1 million, for a tangible capital-to-tangible assets ratio of negative 5.98 percent.
 -0- 10/16/92


CO: Office of Thrift Supervision; Security Savings & Loan
 Association ST: Mississippi IN: FIN SU:


TM -- NY090 -- 1224 10/16/92 20:04 EDT
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Publication:PR Newswire
Date:Oct 16, 1992
Words:625
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