Investment S & L Hikes Loss Fund
Investment Savings & Loan Assn. said it increased its loan loss reserves because of its $8 million in loans to real estate partnerships arranged by Craig Hall, a big, financially troubled investment syndicator from Dallas.
Investment Savings beefed up its reserves by $450,000 in its second quarter, ended Sept. 30, from a provision of $225,000 a year ago. But Richard G. Voll, the chief financial officer, said no further set-asides are likely to be required for the loans.
He expressed confidence that the six Phoenix apartment developments securing the borrowings are adequate collateral, adding, “We’re not sure the reserves we’ve set aside will have to be used for the loans.”
Voll said the S & L acquired the loans through a broker from Westwood Savings & Loan of Los Angeles, which loaned Hall partnerships $132 million before it was declared insolvent in March.
He said the $8 million in Hall loans are non-performing assets. Investment Savings’ second-quarter profits were off 42.4% from a year ago, to $239,237, largely because of the increased provision for potential losses on the Hall loans.
A college dropout, Hall built a fortune as the nation’s largest real estate syndicator, but lower inflation, slumping Sun Belt economies and high vacancy rates combined to produce a financial crunch this year.
Voll also said his S & L’s capital-to-assets ratio, a gauge of its ability to withstand losses, has been below regulatory standards since June 30. The ratio is now 2.17%.
He said, however, that Investment Savings’ ratio would be back to 2.5%, in compliance with regulatory requirements, when it completes the sale this week of its Pacific Palisades branch to Great Western Savings.
He added that a federal rules change effective March 31 will require the S & L to have a 3% capital-to-assets ratio, but that Investment Savings is not now seeking additional capital and hopes to generate the added net worth through earnings.
