4 Out of 31 O.C. Thrifts Fail to Meet Capital Standards
The ravaged Orange County thrift industry has had more than its share of sick savings and loans, but regulatory statistics portend less bleeding and more healing in the future as institutions bolster their levels of capital.
Of the 31 independently owned thrifts operating at the end of 1989, only one failed to pass two major tests of capital strength. Three others failed to pass one of those tests, according to figures supplied by Sheshunoff Informations Services Inc., an Austin, Tex., consulting firm.
Among the healthier institutions, 18 county S&Ls--led; by tiny Irvine-based Sterling Savings & Loan--already meet capital standards that will be required of all thrifts within five years.
The two tests of capital, an institution’s last bastion against losses, were part of three tough standards mandated by federal law last August to bail out the industry’s federal deposit insurance system. No figures were available for the third criterion, which is based on the riskiness of an institution’s investments.
At the end of last year, only Charter Savings Bank in Newport Beach failed to meet the first two standards. Though insolvent under the new law, Charter still was solvent financially because it had more assets than liabilities.
Charter’s situation may seem incongruous, but there have been plenty of similar situations. At the time it was seized by regulators two months ago, Mercury Savings & Loan in Huntington Beach had a negative $33.2 million in capital under one test, but regulators said its net worth--assets minus liabilities--was only $100,000 in the red.
The two capital standards measured by Sheshunoff are tangible and core capital. Minimum tangible capital--cash or cash-like assets--must equal 1.5% of assets, increasing to 3% within five years. Core capital--tangible capital plus certain additional factors--must be kept at a minimum 3% ratio.
At the end of last year, Constitution Federal Savings & Loan, which moved its headquarters to Monterey Park this year, was nearly out of capital under both tests. FarWest Savings and Pioneer Savings & Loan, both in Newport Beach, failed to meet the core-capital standard. Pioneer, the county’s smallest thrift, has since been sold to Spring Mountain Group in Newport Beach.
COUNTY-BASED SAVINGS AND LOANS
Total Tangible Capital Core Capital Assets As % of Assets As % of Assets Savings and Loan (mil.) Dec. 1989 Dec. 1989 American, F.A. (a) $16,290.5 3.00% 3.01% New West Federal (a) 9,534.9 0.00 0.00 Household Bank 7,074.9 2.99 4.49 Downey 4,365.3 6.1 6.3 Far West 4,354.7 1.62 2.01 Lincoln (b) 2,906.3 -44.38 -44.30 Western Financial 2,871.5 4.53 4.53 Mercury (b) 2,158.8 -1.56 -0.06 Beverly Hills 1,525.7 5.79 5.79 ITT Federal 951.8 5.65 6.09 United California 662.9 4.57 4.65 Pacific First 661.9 2.10 3.60 Guardian 607.3 3.35 3.35 Western Empire (b) 406.6 -2.53 -1.03 Fullerton 351.0 8.37 8.39 Charter 331.4 -1.95 -0.45 San Clemente 323.1 3.56 3.91 Universal 268.3 4.53 5.05 Standard Pacific 241.0 6.40 6.65 Malibu 197.9 2.91 3.74 Sterling 168.5 13.87 13.87 Huntington (b) 120.4 -0.49 -0.49 Beach 112.8 5.80 6.75 Irvine City 82.5 4.76 4.76 University 79.8 3.69 3.69 Security (b) 69.4 -6.69 -6.69 Plaza 69.2 7.93 7.97 Constitution 68.4 0.48 0.48 Delta 57.9 2.79 3.61 Cornerstone 56.5 6.54 6.54 American Interstate (b) 19.4 -9.67 -9.67 Pioneer 11.3 2.71 2.71 Orange County Totals $57,001.9 NA NA
(a) Formed in sale of old American Savings & Loan. New West is self-liquidating thrift consisting of old American’s bad assets.
(b) Insolvent and seized by federal regulators.
Source: Sheshunoff Information Services Inc., Austin, Texas.
