Thrift Being Confused With S&L; in Trouble
Juliet may have convinced Romeo that names aren’t important, but the argument probably wouldn’t go over that well at Imperial Thrift and Loan in Burbank.
In early January, customers rushed to withdraw $10 million in deposits from the modestly sized thrift and loan association when news stories revealed that federal regulators might seize “Capital-poor Imperial thrift.”
That sounds like logical behavior for depositors--except that Imperial Thrift and Loan, a small, conservative financial company based in Burbank, has nothing to do with Imperial Savings, the once high-flying savings and loan in San Diego with a fat junk bond portfolio that federal regulators seized two weeks ago.
Confusion among borrowers and depositors at the little Burbank thrift and loan has intensified in recent weeks, and Imperial Thrift and Loan’s Chairman William Yates says it’s too early to know how many depositors have taken their money out.
With assets of about $275 million, Imperial Thrift is pretty small, so January’s $10-million deposit runoff hurt. And trying to stop any more runs on the thrift has been tough.
Yates says some of his depositors were convinced the thrift was going out of business. Suppliers, too, have expressed surprise that Imperial Thrift is still in business, but no one has cut off deliveries, Yates says.
Yates is a bit puzzled about how to clear up the confusion. He already sent out a letter to all of his 25,000 depositors. Imperial Thrift, he wrote, “is a very sound financial organization, well capitalized, successfully operating, and producing excellent profits.”
Now the thrift is worried that another such letter would just make depositors more suspicious, according to Gary McCoy, the assistant to the president of Imperial Thrift. Raising interest rates on certificates of deposit to attract money would be costly and might make Imperial Thrift look like some undercapitalized S&Ls; that use the same strategy.
Even changing Imperial Thrift’s name might backfire. “It might cause more unrest than anything else,” McCoy says.
So Imperial Thrift is relying chiefly on personal reassurances to worried customers to weather its sound-alike public relations problems.
San Diego-based Imperial Savings got into trouble with its $1-billion junk bond portfolio. The S&L; bought the risky, high-interest bonds--which are issued by companies with low credit ratings--and made itself a big player in the bond market.
“We’re not big players,” says Yates, contrasting his little thrift to Imperial Savings. “We are conservative lenders. We do not have excess funds to invest in the manner they do.”
In fact, Yates says, Imperial Thrift’s capital levels are well above government standards. And Imperial Thrift, which is owned by Lake Co., Ltd. of Osaka, Japan, makes no loans out of state because Yates says the company wants to stick to its local territory.
Imperial Thrift concentrates on attracting bigger, longer-term deposits than typical banks and S&Ls;, and lends money out mostly for auto loans and small commercial loans. Imperial Thrift, in fact, is not a savings and loan, rather, it’s a member of the little-known thrift and loan industry, which was established under state law to lend money to blue-collar workers just after the turn of the century. But its deposits are federally insured up to $100,000 per account, just as savings and loans are.
Imperial Thrift’s mistaken identity problem is a familiar one to John Keating, the chairman of Lincoln Bancorp, the Encino parent of Lincoln National Bank.
His bank is often mistaken for Irvine-based Lincoln Savings & Loan, a failed institution that’s come to epitomize the national S&L; scandal. And Keating is often confused with Charles H. Keating Jr., who ran Lincoln S&L.;
Lincoln is hoping to change its name at its upcoming annual meeting in May. The bank set up an employee contest to think up a new name for the bank, with a Hawaiian vacation as the prize.
