Burton L. Mann, president of Okmulgee Savings and Loan Association, has done something many bankers dream of doing: He has dropped federal deposit insurance.
The 67-year-old Oklahoma banker, who has been in the business for 42 years, is fed up with government regulations. He's also miffed about a fight with examiners over Okmulgee's lousy Community Reinvestment Act rating.
Last year, he advised Federal Deposit Insurance Corp. officials that Okmulgee wanted to dump the agency as its insurer. He got his wish on Aug. 22, when the FDIC acquiesced.
"We feel better," Mr. Mann said. "We don't have the damn feds on our back."
The decision has been costly, however. The $4.2 million-asset thrift has seen deposits slip by about a third, to $3.2 million, since it informed depositors of its decision in February.
Older customers pulled their money, but "investing-type people" have stayed on, including a customer who maintains $300,000 in savings, Mr. Mann said. "I'm not a nervous person," he said. "I know what the association is - it is solid."
Okmulgee Savings earned $16,000 for the first six months of the year, and it had risk capital of 25%. The thrift has just $599,000 in loans on its books. Most of its assets are invested in securities.
Okmulgee stopped making loans in 1985, because regulations became too much of a burden for Mr. Mann, whose thrift has two employees in addition to himself - one of them a part-timer. At that time, examiners criticized the thrift because they didn't believe it was making enough loans to minorities. In its last CRA examination, in 1991, examiners gave it the worst possible grade, "substantial noncompliance."
"CRA has been a burr under our saddle," Mr. Mann said. "They [examiners] were harassing us. They were going to come back every six months."
|Operation Great Escape'
Mr. Mann began thinking about dropping coverage two years ago. He started a file called "Operation Great Escape." In June 1992 he advised the FDIC in a letter about Okmulgee's intentions to drop insurance coverage. "We just got to the place where we said: We are going to do this," he said.
He said Okmulgee will save about $20,000 a year in insurance costs and exam fees. With the money, he expects to pay higher interest rates on deposits. He also wants to start making home improvement loans.
Mr. Mann said he's become somewhat famous in banking circles for dumping the FDIC. "We've had a tremendous response," he said. "I had an old fraternity brother I hadn't heard from in 30 years who is chairman of a bank. He was elated. He was living vicariously through me."
