Thrift & Loan Receives OK to Join FDIC
The nation’s thrift industry has been buffeted by bad news in recent years, but one small Orange County financial institution reported some good tidings Friday.
North American Thrift & Loan, a Corona del Mar institution with $18 million in assets, said it has won approval to join the Federal Deposit Insurance Corp., thus satisfying a California law that requires T&Ls; to obtain FDIC coverage by July 1, 1990.
Ernest George, North American’s owner, said he now hopes to use his federally insured T&L; to buy a failed savings and loan. Twice before, he said, he tried to buy failed S&Ls; but federal regulators balked, in part, because of his thrift’s private deposit insurance.
“We’re open to purchasing something else,” George said. “It depends on what kind of deal is offered.” George, who at first resisted the state law because he likes the idea of a locally controlled insurance fund, is familiar with the FDIC, which is being renamed the Bank Insurance Fund. He also owns a 54% stake in First American Capital Bank in Laguna Beach, which is a member of the FDIC.
T&Ls; are something of a hybrid between banks and finance companies, which do not accept deposits and are not regulated. T&Ls; are regulated by the state Department of Corporations and must adhere to FDIC rules to maintain their insurance.
The institutions specialize in making short-term, higher-interest loans for automobiles, boats and junior mortgages and in providing small commercial loans and equipment leasing to business customers. They also can make 30-year mortgages, a recent power obtained under state law.
The state’s 56 T&Ls; have been quietly chugging along their profitable paths while converting their deposit insurance to the FDIC.
Only 13 T&Ls; in the state, including four Orange County institutions, are still covered by the Thrift Guaranty Fund, a privately financed fund that insures deposits up to $50,000 per account. Thomas Cunningham, the fund’s executive vice president, said he expects the remainder to convert or be sold before the deadline.
Three county T&Ls; still covered by the fund--Centennial in Fountain Valley, Savers in Laguna Hills and Tustin Thrift--are seeking FDIC insurance. A fourth, Chase Manhattan Thrift in Newport Beach, has no deposits and is in the process of being sold, a state official said.
Often, T&Ls; are lenders of last resort because their customers have had bad credit or have not established their credit.
The terminology can get confusing, especially since S&Ls; are sometimes called thrifts. California is one of nearly two dozen states that have industrial banking laws, but is the only one to refer to its industrial banks as thrift and loans.
Since 1980, a total of 83 T&Ls; have operated in California. Of that total, seven have failed and 20 others have been converted to banks or S&Ls; or have merged into other institutions. The state moved to force T&Ls; to obtain FDIC coverage after the failure of a large T&L; in 1984.
Last year, Orange County’s thrifts posted an aggregate profit of $9.2 million, a 44% increase over $6.4 million posted the previous year and more than double the $4.4 million earned in 1986, according to figures compiled by Southport/Carpenter Group, a Santa Ana consulting firm for financial institutions.
ORANGE COUNTY THRIFT & LOANS
Orange County thrift and loans posted an aggregate profit of $9.2 million in 1988, a 44% increase from $6.4 million the previous year.
(in thousands) Total Total Net Net Assets Assets Income Income Name 1988 1987 1988 1987 First Fidelity $224,399 $140,090 $6,044 $3,124 Investors 156,230 129,631 297 1,104 Liberty 15,381 13,211 31 (9) South Coast 59,279 47,210 1,045 830 Citizens 63,312 44, 712 728 618 Heritage 51,064 39,064 262 173 Assured 40,309 35,522 446 601 Huntington Pacific 31,337 27,864 (14) 208 Centennial* 24,186 24,224 (334) 292 Tustin* 25,667 22,053 256 143 Franklin 15,645 18,202 (576) (732) North American 16,967 11,100 420 102 Freedom Financial 11,028 9,605 346 103 Savers* 9,097 9,677 152 (248) Chase Manhattan* 1,760 1,669 56 68 TOTALS 745,661 573,834 9,159 6,377
*Deposits not insured by Federal Deposit Insurance Corp. but covered up to $50,000 by Thrift Guaranty Fund.
Source: Southport/Carpenter Group, Santa Ana
