A New Direction for Lincoln Savings & Loan : Irvine Firm Hopes New Focus, New CEO Will Improve Status With Regulators

In a move that should improve its strained relations with regulators, Lincoln Savings & Loan said Wednesday that it has hired a new chairman and chief executive officer and will begin restructuring itself as a more traditional savings institution.

William D. Hinz, 49, who left high-ranking positions six weeks ago at Great American First Savings Bank in San Diego, will take the reins at Lincoln Savings beginning Monday. Hinz replaces Robin S. Symes, 35.

Symes, a finance and computer specialist who had been promoted to chairman only last July, will become a senior vice president with the thrift’s holding company, American Continental Corp. in Phoenix. He will stay in Irvine, however, as an executive vice president with Lincoln Savings. Hinz will be based in Phoenix.

Hinz’s hiring and the movement toward a traditional approach would also help put the Irvine-based S&L; in a better position to be sold should industry changes or regulatory restrictions deflate its earnings or stock value, said a spokesman for its holding company, American Continental Corp. of Phoenix.

With $4.9 billion in assets, Lincoln Savings is the 18th-largest S&L; in the state and the second-largest savings institution in Orange County. It has 27 branches in Southern California.

‘Change Is Coming’

“A lot of change is coming, and we have to sit back and see where the industry is going,” said Robert J. Kielty, a senior vice president at American Continental. “We’re not trying to sell the S&L; now, but we’re constantly looking at the direction regulators are taking.”

American Continental Chairman Charles H. Keating Jr. has long been a proponent of deregulation and expanded investment powers for thrifts--a stance that brought him and his institution into conflict with the Federal Home Loan Bank Board.

Industry sources said they believe that Keating has become frustrated with the restrictions regulators have imposed on thrifts.

“Frankly, I think Keating is at a point right now where he would like to get out of this thing,” said William Davis, chief deputy commissioner of the California Department of Savings and Loan. “It didn’t turn out to be what he thought he bought, and perhaps he would be open to some kind of offer.”

Keating could not be reached for comment.

Pressure From Regulators

Lincoln has been under pressure by state and federal regulators, particularly from the bank board, to make more home loans and engage in more mortgage banking and other traditional thrift activities and to cut back on the unconventional direct investments in real estate development, high-yield securities and stock purchases.

“There has been a lot of dialogue with Lincoln about its role in the traditional sense,” Davis said. “They’ve made a number of internal moves toward that role. I see that direction as a positive move on Lincoln’s part.”

Kielty of American Continental denied that federal regulators pressured Lincoln into hiring a leader who could take it down a more traditional path. But company executives had been talking since July about bringing in someone with more industry experience, he said. Symes acknowledged that he had expected his stewardship to be temporary.

Audits Nearing Completion

Hinz is a 25-year veteran of the S&L; business who was an executive vice president at Great American and president of Home Federal Savings & Loan, its subsidiary, in Phoenix. He also was in charge of Great American’s units in Washington, Colorado and Montana.

Hinz’s hiring comes as federal regulators reportedly are nearing completion of a 20-month-long regulatory audit. State regulators have finished their review of Lincoln, Davis said.

The unusual length of the audit, which five U.S. senators tried in April to expedite, has been seen by some industry observers partly as retribution by regulators working for Edwin J. Gray Jr., whose term as chairman of the federal bank board ended in June. Keating had been a major critic of Gray’s administration and what many in the industry saw as its efforts to re-regulate it. The two carried on a feud during much of Gray’s four years in office.

Lincoln’s executives, as well as industry leaders in general, have welcomed the new style of the bank board Chairman M. Danny Wall, whose administration is seen as more accepting of the broader investment powers given S&Ls; under 1982 deregulation laws.

Ironically, Lincoln not only plans to start doing more of what Gray had wanted it to do, it also has hired an executive from Gray’s former employer--Great American.

Change Will Take Some Time

“The plan for Lincoln Savings is to make it a more traditional thrift,” Hinz said. “It will take every bit of three years, maybe five, to convert this thrift to a traditional savings and loan.”

Kielty cautioned, however, that converting Lincoln into a more traditional thrift does not mean it will abandon its unconventional investments. He said the industry is broadening its definition of what traditional means and that Lincoln Savings has expertise in pursuing its non-traditional operations.

Davis acknowledged that regulators are concerned with the types of assets Lincoln holds, not with the quality of its assets or the expertise of its management. In fact, he said, he and his boss, Commissioner William J. Crawford, went to Phoenix to review Lincoln’s investments personally and were impressed with what the company has done.

But direct investment in real estate--Lincoln’s is primarily in hotels and undeveloped land--is a risky business for an S&L;, Davis said. Many of the institutions in the state that failed had problems with investments in undeveloped land because such does not produce a steady income.

Lincoln has about 17% of its assets tied up in direct real estate investments--nearly twice the percentage federal regulators normally allow--about 10% in high-yield securities and about 3% in other companies’ stocks, Kielty said.

Lincoln has been profitable. In the first nine months of 1987, it reported a net income of $42.6 million, a 22% increase over the $35 million earned in that period last year. Its annual income was $79.9 million in 1985 and $49 million last year.

Lincoln also has an excess regulatory net worth of $114 million, Kielty said. Its ratio of net worth to liabilities--a key indicator of a thrift’s financial condition--was 7.1% at the end of last year and 6.7% at the end of September, well above regulatory expectations of 3% to 4% for most thrifts.

LINCOLN SAVINGS & LOAN AT A GLANCE

The Irvine-based savings and loan is engaged in such traditional thrift activities as making home loans and selling loans in the secondary market. At least 40% of its assets, however, are now in direct investments such as hotels, undeveloped land, high-yield securities and stock in public companies--investments permitted under deregulation but still considered unconventional for thrifts.

(in millions) 1987 1986 1985 1984 1983 9 mos. Revenue $497.5 $712.3 $535.4 $201.4 $109.1 Net income $42.6 49.0 79.9 3.2 2.0

Assets $4.9 billion S&L; employees 500 Subsidiary employees 700