News of a possible federal government takeover of Trustbank Savings Bank four years ago panicked thousands of depositors, who withdrew $125 million from the Tysons Corner savings and loan in less than a week.
But when federal regulators actually took control of Trustbank last Friday, the area's third-largest S&L, they got a much different reception.
"It's been business as usual for employees and customers," said Andrea Plater, a spokeswoman for the Resolution Trust Corp., the agency charged with resolving the problems of failed thrifts.
To many who have watched Trustbank fall in and out of trouble with federal regulators throughout the 1980s, the normalcy surrounding the takeover is more a reflection of Trustbank's checkered past than of the way the government handled the situation.
"This was no surprise to anyone," said Bert Ely, an Alexandria-based S&L consultant. "Trustbank had always been a highflier."
"Depositors who were concerned about losing their money left this institution a long time ago," said one federal regulator, who asked not to be identified. "There weren't many big customers left by the time we got here."
Deposits at Trustbank remain insured by the Federal Deposit Insurance Corp., up to $100,000 per account.
The takeover of Trustbank follows nearly a decade of financial turmoil and risky lending practices under Chairman William L. Walde, who co-founded the S&L in 1974 as Dominion Federal Savings and Loan Association. Back then, Walde's headquarters was in a strip shopping center in Tysons Corner.
But by the mid-1980s, Walde occupied a palatial office high atop Trustbank's office tower on Leesburg Pike. Walde, who started his S&L with $30,000, built the institution by pursuing innovative and risky deals, according to fellow bankers.
Instead of running Trustbank the old-fashioned way, taking in deposits and issuing 30-year home mortgages to borrowers, Walde operated his S&L like a big mortgage bank, making residential loans and quickly selling them in the "secondary" mortgage market of Wall Street investors and other financial institutions.
Using this strategy, Walde practically guaranteed himself a steady stream of fee income -- fees for originating mortgages, fees for processing payments, even fees for promising to buy a mortgage.
He used much of that money, plus customer deposits, to take his institution far beyond conventional mortgage lending into the more ambitious field of commercial and construction ventures. He lent money for shopping centers, office buildings, condominium-hotels in Florida and housing subdivisions in Texas. His S&L also bought direct ownership stakes in some of these ventures.
Although these business ventures generated millions of dollars in profit for a time, they were risky, a danger that was not lost on federal government regulators who first criticized Walde's operations in 1982.
At that time, bank examiners cited Dominion for a number of improper and questionable lending activities in connection with a series of construction ventures. Among the examiners' criticisms was the S&L's failure to ensure that borrowers had put enough of their own money into the projects, lax control over regular loan payments and inadequate property appraisals.
Despite these warnings, federal regulators -- some of whom had nicknamed Walde "Wild Bill," according to one former official -- were forced to take stricter action against Dominion just two years later, making the S&L sign a "supervisory agreement" that limited growth and set new standards for capital, the financial cushion that S&L owners provide to protect against losses.
But Dominion continued to make headlines. Walde was one of the lenders to Equity Programs Investment Corp. (EPIC), a Maryland real estate tax shelter partnership that went bankrupt in 1986, leaving scores of angry investors empty-handed. The EPIC loans cost Trustbank millions of dollars.
In 1987, Walde gained national attention when his S&L was sued by Penthouse International Ltd. over a loan to Penthouse publisher Bob Guccione for a casino in Atlantic City. Although the judgment was ultimately overturned, depositors withdrew $125 million after it appeared Dominion would lose the lawsuit and be seized by the government.
Banking analysts said yesterday that Walde's S&L never really recovered from any of these earlier debacles.
"It was one thing after another for Trustbank," said Arnold Danielson, a Rockville-based banking consultant. "Trustbank played fast and loose. It was just a matter of time before it all ended."
Last year, regulators made Trustbank sign another supervisory agreement after massive losses on real estate loans threatened to wipe out the bank's capital. But efforts to comply with the agreement failed, and the federal government finally seized control of Trustbank on Friday, saying it was "operating in an unsafe and unsound condition."
After seven consecutive money-losing quarters, the S&L was left with $19 million in capital, far below the amount required. Trustbank's assets, which totaled $1.8 billion, exceeded liabilities by only $2 million.
Danielson and other analysts predicted that the government should be able to sell Trustbank relatively easily after removing the troubled loans and investments from its books.
With 38 branches in the District and Virginia, Trustbank has an attractive franchise for any bank or S&L that wants to expand its presence in metropolitan Washington. Among the potential bidders are Central Fidelity Banks Inc. of Richmond and First Maryland Bancorp.
A sale should be completed by the end of the year, these analysts said. In the meantime, Trustbank's 150,000 customers continue banking there, withdrawing and depositing money as if nothing has changed.