Black-owned S&L sells majority stake to Washington firm.

Black-owned S&L sells majority stake to Washington firm

A majority interest in Family Savings of Los Angeles, the nation's second-largest black-owned S&L, is being sold to a Washington, D.C. organization that specializes in investing in minority-owned businesses.

Officers of the $149 million (assets) S&L have already approved the purchase of 310,000 shares, or a 51 percent controlling interest, in the S&L by Opportunity Funding Corp. Inc. The deal must still receive approval from federal regulators.

Opportunity Funding filed an application with the San Francisco regional office of the Office of Thrift Supervision last month for permission to acquire controlling interest in the 40-year-old S&L. Family Savings officials, including Chairman William Shearer and President Wayne-Kent Bradshaw, met with federal regulators last week to discuss the stock sale. Officials hope to receive federal approval for the sale by the end of this year.

The shares Opportunity Funding wants to buy were once owned by Family Savings' former chairman and president, Oliver A. Trigg Jr.

The stock has been held in a voting trust since the beginning of the year, when Family Savings and its parent company, United Family Financial Corp., filed suit against Trigg in Los Angeles federal court, alleging he acquired the stock through fraud, misrepresentation and deceit. At that time, the shares were placed in the trust in an agreement between Trigg and the Federal Savings and Loan Insurance Corp.

Trigg resigned from Family Savings in June 1988 after it was discovered that a number of real estate loan and investment transactions he brought to the S&L violated its policies and failed to meet regulatory requirements.

For the past two years, Family Savings has been battered with million-dollars losses that have eroded its capital base - the cushion of cash and stock S&L owners are required to set aside to protect the institution from losses.

In 1988, the S&L lost $2.6 million, according to Sheshunoff Information Services Inc., an Austin, Texas-based financial institutions consulting firm. In the first half of 1989, it lost another $128,000.

At June 30, the S&L's tangible capital - the cash and other liquid assets S&Ls are required to set aside as a main component of capital - was negative $19,000, or negative 0.01 percent of total assets. Under the nation's new S&L law, called the Financial Institutions Reform, Recovery and Enforcement Act of 1989, tangible capital must make up at least 1.5 percent of an institution's total capital by year-end 1989.

Ron Walker, president of Opportunity Funding, would not reveal how much his organization would pay for its controlling interest in the S&L. Trigg acquired the stock in July 1987 for about $1.24 million, according to Family Savings officials.

Opportunity Funding and Family Savings officials do not know when the regulators will give the final nod to the stock sale.

"It will hopefully be completed by year end," said Bradshaw, president of the S&L. "We would like to go into 1990 recapitalized and free of inhibiting restrictions."

When an S&L falls below minimum capital requirements, regulators place restrictions on its operations, often requiring approval for certain loan transactions and limiting growth.

Opportunity Funding plans to retain the Family Savings name, as well as the S&L's management, according to Walker.

"All that will remain intact," he said. "But we will charter a new course for growth and profitability."

Opportunity Funding's purchase of a controlling interest in the S&L is a positive move, said Shearer, the S&L's chairman and president and chief executive officer of East West Broadcasting Co., owner of Los Angeles-based KGFJ-AM radio.

"It is imperative that black communities all over the world have businesses that relate to them," he said. "It is important that Family Savings continue, but it has to grow stronger, as all banks and S&Ls must."

Once it is recapitalized, Family Savings will try to acquire other S&L assets, according to Walker, who said he wants the S&L to "at least" double in size within the next several years.

"At that point, we'll have a long-term, viable institution," he said.

Opportunity Funding, which also owns a controlling interest in Freedom National Bank, a commercial bank in New York, has been studying the possibility of an S&L investment for some time. The nation's S&L crisis, brought into widespread public attention with the passage this summer of a massive $166 billion bailout law, led the organization to study the future of minority-owned thrifts, Walker said.

"When we found Family was threatened with insolvency without an infusion of new capital, and new ownership, we made some general inquires," he said. "Inquiries were then made of us, and one thing led to another."

Opportunity Funding, formed in 1970 with a seed grant of $7.5 million from the federal government, invests in minority-owned businesses across the country.