Crenshaw S & L Viewed as Model for Inner-City Banks

In a corner of Wayne-Kent Bradshaw’s office rests a desk-size cardboard check, heavy with zeros.

The chief executive of Family Savings Bank cannot yet deposit the $1-million investment promised in late March by First Interstate Bank. The same goes for another $1 million earmarked a few days earlier by Walt Disney Co. That awaits a definitive agreement and a few other formalities.

But Bradshaw, head of the Crenshaw-based savings and loan, keeps the ceremonial check in his comfortable, wood-paneled office just the same. It represents a very good week--in fact, a very good few months--for the state’s largest black-owned financial institution. In addition to the investments, Family Savings last month bought Enterprise Savings in Compton, which added a third branch to the S & L.

“We’ve had a heck of a first quarter,” Bradshaw said. “I hope no one holds us to this standard.”

Family Savings is viewed as a model of how to make money while making loans to lower and middle-income home buyers in the inner city. Bradshaw and his staff have proven adept at the neglected art of inner-city banking as well as the finer points of attracting new capital, aided by corporate community investment programs that were reborn after last year’s riots.

“Family Savings has stayed in the community,” said Gilda Haas, founder of Communities for Accountable Reinvestment, a coalition of minority and consumer organizations that monitors banking practices. “They haven’t strayed from the constituency that they’re serving.

“We don’t need any more billion-dollar campaigns from banks who want to keep deposits but don’t serve the community,” said Haas, whose group has been critical of the lending practices of large banks.

Despite the recent good news for Family Savings, life has not been easy for the thrift, which has faced the same economic problems as other financial institutions in Southern California. Add to that were job losses after the riots, which make it harder for borrowers to cover mortgage payments.

Family Savings had divested all but about $300,000 of its repossessed and other unwanted real estate late last year, but the level is now back up to between $1 million and $1.5 million.

“1993 is going to be a rough year, and we’re going to use all our energies to weather this year,” Bradshaw said. “We feel if we can weather this year--and we will--we will be in great shape.”

Even with its problems, the S & L has come a long way from the late 1980s, when its chairman and chief executive, Oliver A. Trigg Jr., was forced out by regulators after allegations that he had defrauded the institution of nearly $3 million. A run on deposits followed, leaving Family Savings in poor shape when Bradshaw was brought in at the suggestion of regulators in 1989.

Family Savings is tiny by market standards. With about $124 million in home mortgage loans--about 85% of them in South-Central Los AngeleL is barely a blip on the radar screen of local lending.

But the 45-year-old thrift remains committed to serving many potential home buyers that bigger lenders cannot or will not accommodate, Bradshaw said. The $2 million in new capital will translate into $40 million in home mortgage loans. Bradshaw, however, is perhaps most proud of another infusion of capital, $1 million from Texas billionaire Robert M. Bass that arrived before last spring’s civil unrest.

“If you’re going to invest $1 million into trying to improve the situation in South-Central Los Angeles, the best place to invest is here,” the 47-year-old executive said with conviction. “Home equity is the real underpinning of the growth of the community” because homes can later be used as collateral for loans to send children to college or to start businesses.

Family Savings’ customers frequently “are going to be the last persons hired and the first persons fired,” Bradshaw said. “We can look at a single mother and know that she probably is going to be late making her payments sometimes, but that doesn’t make her a bad person”--or a bad credit risk.

This, clearly, is not banking suburban style.

Every two weeks, Bradshaw takes staff members cruising through the community to monitor properties they have financed and to look at new prospects. Files on potential borrowers are unusually thick, Bradshaw said, because the S & L looks for non-traditional ways to prove that borderline applicants are credit-worthy.

“We’re part of the community. We have a much more heightened awareness of the subtleties that make up the community,” Bradshaw said, his voice tinged with the accent of his Jamaican youth. “We can tell the difference between kids that are wearing their clothes inside out and wearing Kris Kross (rapper-style clothing), and those who are gang members. We know if an apartment building is a valuable property or one we’re not interested in because it has been overrun.”

Indeed, Family Savings is one of only three minority-owned S & Ls to receive “outstanding” ratings from the Office of Thrift Supervision, the thrift regulatory agency, for complying with the Community Reinvestment Act, said William Cunningham, who analyzes minority financial institutions as president of Creative Investment Research in Washington.

The act mandates that financial institutions make loans in all areas, including low-income and minority communities. Community groups have complained that many large financial institutions are not living up to these responsibilities and have been using such charges to try to block mergers.

Family Savings has been rewarded for its efforts with a return on assets that is better than the average minority thrift, Cunningham said.

“They’ve done pretty well,” Cunningham said. “They’ve pretty much stuck to their knitting. They’ve really stuck to their area and made mortgage loans.”

But only a few years ago, serious questions began to arise about the thrift, then called Family Savings & Loan.

In 1985, investor Trigg made an unsuccessful bid for the chronically money-losing thrift. His offer was rejected by regulators, but he so impressed Flora Grant, the widow of Family Savings & Loan founder M. Earl Grant, that in 1986 she asked him to become chairman.

Trigg went on to buy controlling interest and pushed the thrift into consumer and business lending and real estate investment. Earnings soared, and Family Savings & Loan looked to be an organization on the move.

But what was not apparent--until it was detailed in an October, 1987, Los Angeles Times article and a subsequent court trial--was that Trigg had acquired the thrift through an elaborate ruse.

Trigg was convicted in 1991 of bank fraud for using his board position to set up a dummy company that sold land to the thrift at an inflated price. Trigg then used the profits to buy 51% of the thrift.

Trigg, forced out by regulators in mid-1988, is serving a seven-year prison sentence. Trigg’s stock was purchased in 1990 by Opportunity Funding Corp., a minority-owned venture capital firm in Washington.

Family Savings “for a time was quite a mess,” said Ivan J. Houston Sr., chairman of Golden State Mutual Life Insurance Co., a black-owned insurance company based in the West Adams area. That has changed considerably, said Houston, who was one of several directors who joined Family’s board in 1988.

“I’ve been on a number of boards of very large corporations and this is a very professional group,” said Houston, who left Family’s board in 1991 because of time conflicts. “It’s so important to have organizations in this community that are perceived as working.”

Family Savings pulled out of the red in 1991 and estimates 1992 earnings at nearly $1 million.

At the heart of the comeback is Bradshaw, who has spent most of his career in banking, and Family Savings’ 36-year-old chief operating officer, Ron Thigpenn. The two first worked together at Los Angeles-based Founders Savings, where they were able to sharply cut the ailing thrift’s losses before Bradshaw left for Family Savings. Founders later was reorganized as a commercial bank and sold to a group of African-American investors.

“There is a marked improvement in attitude and business plan, and (Family Savings has) hit the market at exactly the right time for a small S & L interested in real estate financing,” said Edward Carpenter, a banking consultant.

“I think they’re a model of how an institution can operate in the current low interest rate environment,” Carpenter said. “The challenge is whether there will be new home loans to originate in a higher interest rate environment that we will eventually return to, which is the challenge facing all S & Ls.”

The road back has not been easy for Family Savings, which has struggled to maintain the capital levels required by regulators. That led Family Savings to Bass, an acquaintance of Family Savings and Opportunity Funding Corp. Chairman C. Robert Kemp.

Bass, who owns American Savings, is known for his social conscience and investment savvy. By all accounts, he put Family Savings through a rigorous exam before investing $1 million in the institution less than three weeks before last spring’s riots.

“We reviewed all of the financial records before the investment and talked to the regulators,” said Owen Blicksilver, a Bass spokesman. In addition, “people with (American Savings) spent some time looking at how (Family Savings delivers) service.”

Bass’ Keystone Holdings received a 14.9% stake in Family Savings, and American Savings hopes to continue a mentoring relationship with the L, helping in such areas as teller training and business systems, Blicksilver said.

“Not all of Bob’s investments are measured in a dollars and cents return,” Blicksilver said. “He feels they’re doing a good job serving the community.”

Then came the violence after the verdicts in the state trial of the four Los Angeles police officers accused of beating Rodney G. King. It left Family Savings with minimal physical damage: a bullet hole in one glass door. But the community that Family Savings serves underwent obvious and dramatic change.

Two in the corporate community who accelerated community investment programs, Walt Disney Co. and First Interstate, stepped forward with $1 million capital infusions last month. Both received preferred stock, which carries no voting rights and does not change the ownership structure of Family Savings.

“We were very impressed with their operation and thought they had a handle on things or we wouldn’t have made the investment,” said Ken Werner, Disney’s senior vice president of business affairs. “We invest our cash in many different investments, and obviously Rich Nanula, our chief financial officer, thought this was a good investment for our shareholders.”

A Functional Family

Family Savings rolled up losses during a financial scandal that left its chief executive at the time in jail. But under new management, Family Savings has returned to good health and is lauded for serving low- and middle-income homebuyers in South Los Angeles.

Profits and losses in millions of dollars Feb.-Dec., ‘90: -$9,744 1992 estimate: $900,000 to $1 million

* On Jan. 31, 1990, Opportunity Funding Corp. bought controlling interest in Family Savings. Earnings are reported separately for the month of January because, on Jan. 31, all assets and liabilities were recorded at their fair market values due to the purchase by OFC.

Source: Family Savings Bank