Thrift Fund Recap Plan Unlikely to Trigger Flood Of Mortgage Asset

Thrifts are planning to issue stock, borrow, or take one-time hits to earnings to finance the likely $6.1 billion charge to recapitalize their insurance fund.

Some thrifts may be forced to sell a portion of their mortgage assets as a result, but the sales will probably be small.

Institutions that are on the borderline between the "adequately capitalized" and "well-capitalized" categories may slip into the lower capital category once they pay the charge. Over the long run, that could lead to pressure to shrink their balance sheets through the sale of mortgages, said Manuel J. Mejos, chief executive of Coastal Banc Savings Association, Houston.

But for thrifts with enough capital, that won't be an issue, executives said.

Meanwhile, the Federal Deposit Insurance Commission slashed bank premiums on Tuesday from 23 cents for every $100 in deposits to 4.5 cents.

Under the Clinton Administration's plan, thrift premiums also would eventually be reduced to the same level once the thrift insurance fund is recapitalized.

Here is how a handful of thrifts are planning to pay the special fee that would precede a premium reduction.

Great Western Bank

The nation's second-largest thrift is likely to issue preferred stock or debt in the capital markets, according to spokesman Ian Campbell.

Under the current formula of a fee of 85 cents for every $100 in deposits, Great Western expects an assessment of about $250 million, or $150 million after taxes, Mr. Campbell said.

Chatsworth, Calif.-based Great Western, which has assets of about $41 billion, does not plan to sell any mortgage assets to adjust its capital position after the assessment, he said.

Home Savings of America

The nation's largest thrift also plans to use "internal means," rather than the sale of mortgage assets to finance the fee, according to spokeswoman Samantha Davies.

However, the Irwindale, Calif., thrift, which has assets of about $54 billion, expects to continue selling mortgage securities under favorable market conditions, Ms. Davies said. The sales are not linked to capital adjustments, she said.

Washington Mutual Savings Bank

The Seattle-based thrift will pay the $55 million or so it could be charged out of operating funds, said chief executive Kerry Killinger.

"Our capital position is very strong," he said. "We would meet any assessment just out of our current operating funds."

On the positive side, Mr. Killinger said, the one-time charge should lead to ongoing savings.

The $8 billion-asset thrift does not plan any mortgage asset sales as a result of the fee, he said.

Coastal Banc Savings Association

Mr. Mejos said his institution plans to raise $8 million to $9 million to cover its assessment through borrowings from the Federal Home Loan Bank system or on the repossession market.

With more than 6% capital, Coastal Banc, which has assets of $2 billion, would not sell any of its adjustable-rate mortgages or mortgage-backed securities to meet capital standards after the assessment, Mr. Mejos said.

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