Baltimore's Sharon Savings & Loan has undertaken a unique but useful public information program that underscores a major weakness of the S&L industry. Full public disclosure of information about business operations is not a strong suit in the S&L industry.
Depositors generally have been kept in the dark about S&L operations, except those of stock associations, which must report to their stockholders. Federally insured S&Ls file financial reports with federal regulators and that information ostensibly is a matter of public record. Seldom, however, do S&Ls bother to inform the public about little else other than savings rates they pay.
That's what makes Sharon's new pitch to the public, albeit sparked by the current S&L crisis, unusual.
Sharon, through a series of newspaper ads labeled "Customer Update," has sought to keep depositors informed about developments in Maryland's attempt to ease the crisis among state-insured S&Ls. The crisis, which led to abolishment of Maryland's privately run deposit-insurance program, began after reports of management problems at Old Court Savings and Loan precipitated a run on S&Ls.
From the beginning, the news media have aggressively reported on attempts by state officials to resolve the crisis. Officials at Sharon concluded, nevertheless, that the complexity of the situation warranted dissemination of information through another channel. Thus, Sharon developed its "Customer Update" series.
The ads contain more information, perhaps, than any nonpublic Maryland savings and loan has ever provided to its customers. Besides providing timely information about the crisis at this stage, Sharon officials obviously are trying to allay customer fears about their deposits and the financial condition of their institution.
While that is not the same as full, or even partial, disclosure of information about management operations and financial results, it is, nonetheless, an attempt to give depositors more information about the firm and the industry.
In one ad, for example, Sharon saw fit to explain in considerable detail the governor's executive order limiting depositors' withdrawals to $1,000 a month, not including allowable exemptions to that order. Sharon also explained to depositors how they may apply any unused portion of their $1,000 limit to the next month's quota.
In its latest ad, Sharon seeks to temper growing pessimism over the inability, thus far, of so many state-insured thrifts to win approval for federal insurance. Emergency legislation passed last spring requires all Maryland state-insured S&Ls to obtain federal insurance by a certain date, depending on the asset size of the institution.
Thus far, only 17 Maryland-insured S&Ls have received final approval from the Federal Savings and Loan Insurance Corp. Fourteen others have won conditional approval. The rate of approvals has led to criticism of the FSLIC by some state officials who contend that the agency has set more stringent standards for Maryland S&Ls than it has for some existing members.
Normally, an application for FSLIC insurance takes 12 months to process, a complex, detailed and lengthy undertaking, according to Sharon. The FSLIC's "in-depth and thorough examination" of an applicant's books is "a time-consuming process," Sharon adds.
"The time it takes FSLIC to process an application is not a comment on the health of any given institution, rather it reflects the asset size and internal structure of the firm," Sharon officials assert in the ad. "Smaller firms take less time than larger firms. Simply structured firms take less time than full-service firms."
Not coincidentally, Sharon uses the explanation as a lead-in to a statement advising customers that FSLIC auditors have just completed an examination of Sharon. With more than $250 million in assets, Sharon is a "strong, stable and profitable institution," officials of the S&L assert, adding that conditional FSLIC approval is expected within three to eight weeks.
On its face, that is the kind of information that is reassuring to Sharon's customers. Ultimately, the FSLIC will have the final word on Sharon's credibility and viability as far as the approval process is concerned.
In the meantime, however, Sharon's public information campaign is a positive development in a nettlesome situation that is filled with much uncertainty and anxiety. Its public statements, though short of being a complete financial report, are examples of the kinds of public assurances that were needed to avert panic among depositors at the onset of the Maryland S&L crisis.
Perhaps if Maryland had required full public disclosure of privately insured S&Ls, its problems might not have reached crisis proportion. There may be a lesson in that for federal regulators who are deeply concerned about mismanagement and risky investments, which threaten much of the industry.