How to Tell if Your Local S&L; Is About to Die
Q: The S&L; crisis has everyone spooked about the safety of thrift institutions. Yet certificates of deposit can still be a safe investment and some of the thrifts’ stocks may also offer a good return. How does one go about checking out local S&Ls; to find out which are well-run and expected to be profitable, versus those that may be in trouble? --C.L.F.
A: There are several sources of reliable information about California’s banks and savings institutions from regulating agencies and trade associations. However, a good deal of this information is only moderately useful for the real task you have in mind: assessing the solidity of an institution’s business practices and its outlook. For this task, you will need more extensive analysis and understanding of the operations of the individual institutions. Often, major stock brokerages provide such research material about publicly owned banks and S&Ls; to their clients.
Here’s a rundown of the best sources of information.
* The Federal Home Loan Bank of San Francisco, which monitors state and federally chartered savings and loan associations in California and the rest of the 11th bank district, publishes an annual directory of its members in April. The listings include the names of the institutions’ officers, their headquarters’ locations and, most important, a “statement of condition.” This statement includes a summary of an institution’s assets, liabilities and net worth. The 1991 directory, available next April, will cost $25 and can be purchased by writing to the Federal Home Loan Bank, P.O. Box 7948, San Francisco, Calif. 94120.
* The California Bankers Assn. publishes a similar directory, but its includes California banks as well as savings and loan associations. This directory, called the Financial Institution Directory of California, also ranks institutions by assets. It is available for $22 by calling (800) 458-8849.
* The California League of Savings Institutions publishes a quarterly list of all savings and loans in the state and ranks the associations by assets. (A separate list is published for those institutions already taken over by the Resolution Trust Corp., the federal agency handling defunct S&Ls.;) The League cautions that it makes no judgment about the quality of the assets held by its members. Both lists are free. Send a self-addressed stamped envelope to the California League of Savings Institutions, 9800 S. Sepulveda, Los Angeles, Calif. 90045.
* Bauer Financial Reports sells lists of banks and savings and loans for each of the 50 states. Each list details the thrifts’ assets, liabilities and “tangible capital ratio,” one of the three key regulatory benchmarks used to evaluate the health of thrifts. Bauer also assigns its own rating--on a five-star system--to each institution. The lists sell for $25 per state--except Texas and Illinois, which cost $35. Write to Bauer Financial Reports, P.O. Drawer 145510, Coral Gables, Fla. 33114. Remember to specify the state you want.
* Major stock brokerages often develop extensive research and analysis about banks and thrifts whose stock is publicly traded. These reports, which often carry recommendations on whether to buy or sell the shares, are available to the brokerages’ clients. Similar information is available to personal computer users from commercial databases or by visiting a good business library.
Finally, the data used in these and other reports are often three or more months old, and much can change in that period. Also, If you are considering a deposit, remember that accounts under $100,000 are insured by the federal government. Stock investments are not.
Firms Can Shift Pension Funds
Q: In a recent column you said that when a corporation shifts its pension funds into an annuity program, the fund is no longer entitled to coverage by the federal pension guaranty program. I’m a recent retiree. Can my former corporation shift the pensions of its retirees into annuities? The company may not be inclined to do this now, but if it is taken over, this might happen.--W.G.B.
A: Unfortunately, we can do nothing to allay your fears.
A corporation is allowed to terminate its pension fund and transfer its assets to a third party’s investment program, such as annuity. And it may do so with the assets for its retirees as well as its current employees. Of course, the annuity program should match the benefits promised under the plan when the transfer is made. But this does not guarantee that something won’t befall the insurance company underwriting the annuity, leaving it unable to meet its payments. If this happens, the pension funds are no longer under the limited coverage of the federal Pension Benefit Guaranty Corp.
