Top executives of Arizona's Western Savings & Loan Association, which has a Salt Lake branch and bases its credit card operations in Murray, have resigned and the company is negotiating an operating agreement with federal regulators, a local vice president said.

Stephen Coltrin, assistant vice president and manager of the institution's Main Street office in downtown Salt Lake, confirmed reports that three members of the Driggs family, which founded Western Savings 29 years ago in Phoenix, have stepped down after the board agreed to "a long-term change" in management.The operating agreement, under negotiation with the Federal Home Loan Bank Board in San Francisco, pertains to Western Savings wanting to write off an undisclosed amount of assets at one time and not according to accepted accounting standards, Coltrin said.

A spokeswoman for the FHLB refused to confirm negotiations. She said operating agreements are initiated when an institution doesn't comply with regulations or when its financial health is suspect.

According to a report in Monday's Wall Street Journal, Western has come under fire for various investments, including those in an Ohio thrift and a campground company. A shareholder has also filed suit, alleging Western violated federal financial reporting requirements, the report said.

Coltrin said the suit was not serious but from a disgruntled stockholder who has filed similar actions against other companies he lost money in after the October 1987 stock market crash.

Asked about Western Savings' financial condition, Coltrin said industrywide increases in savings rates has hurt profits and the company's loan loss reserve has been increased, but capital is $21 million above FHLB requirements.

For the first nine months of 1988 Western Savings' profits plummeted to $3.2 million from $28 million after the same period in 1987. Loan loss provisions were shored up $14 million at the end of the third period.

"It's understandable why the directors wanted a long term change," Coltrin said.

Taking early retirement are chairman John D. Driggs, 60, and his cousin and senior vice president Don C. Driggs, 54. The chairman's brother Gary H. Driggs, 53, resigned as president and chief executive and was elected vice chairman until March, a news release said.

Coltrin said Western's $19 million in deposits at its single Salt Lake branch are insured by the Federal Savings and Loan Insurance Corp. Western employs 115 people in Utah at its branch and credit card operation.