FSLIC Embarks on Campaign to Sell off Problem Thrifts; Will Advertise, Send out Sales Crews in Search for Bidders
Easton, Nina, American Banker
WASHINGTON -- The Federal Savings, and Loan Insurance Corp., straining under the weight of the troubled savings and loan industry it insures, has begun an aggressive campaign to sell off problem thrifts.
Early next week, advertisements will appear in the financial press encouraging banks, bank holding companies, individual investors, and insurance companies -- as well as thrifts -- to bid for ailing savings and loan associations.
In addition, the fund's mergers and acquisitions division, headed by Daniel Kaschmitter, is substantially expanding its staff, seeking greater investment banking experience, and turning some of its staff into a traveling sales crew that will tour the country for potential buyers.
The federal insurance fund also is studying ways to quicken the process of selling of thrifts, and to make troubled thrifts more attractive to potential buyers.
"We have to do things more cheaply, quickly, and efficiently or the holding cost of these institutions will eat the fund alive," R. Scott Taylor, deputy director of operations for the fund, said in an interview this week.
So far this year, regulators have closed and liquidated five thrifts. Another 10 insolvent institutions were merged, with injections of financial assistance from the fund.
On top of that, the fund must inject millions of dollars into five other large thrifts that were declared insolvent and are operating under the direction of management teams from other institutions.
Bank Board officials declined to provide any estimates of the fund's current finances, but its reserves at the end of 1984 were $5.6 billion and declining, compared to $6.4 billion at yearend 1983.
The fund currently is trying to find merger candidates for 49 institutions that are insolvent or "marginally" solvent, according to Mr. Taylor. "Some of those cases have been here for four or five years," he said. In addition to these institutions, dozens of others are being handling by local supervisors, Mr. Taylor noted.
On average, it takes the FSLIC about a year to sell off -- or in some cases, to resort to liquidating -- each of these thrifts. Mr. Taylor said the agency's goal is to reduce that processing time to six months and to reduce the number of cases in the pipeline to 27 by the end of the year.
The FSLIC will accomplish this, he said, with an improved computer system, a larger staff, and heavier reliance on contracting with outside firms.
Mr. Taylor added that he expects a resolution by the end of the year for the large institutions that have been declared insolvent and are temporarily operating under management teams appointed by the Federal Home Loan Bank Board.
Those thrifts include Beverly Hills Savings and Loan, a California thrift that had $2.9 billion in assets; Butterfield Savings and Loan Association of Santa Ana, Calif., with assets of $802.6 million; and Sunrise Savings and Loan of Boyton Beach, Fla., with $1.5 billion in assets.
"All the institutions that have entered the consignment management program should have a long-term solution by the end of the year," Mr. Taylor said.
To make troubled thrifts more attractive acquisition candidates, the fund is considering various types of financial assistance.
More important to many in the industry, the fund is also studying a proposal that would give broader interstate branching rights to buyers of ailing institutions. …