2 Thrifts Break the Mold

When savings and loan regulators talk about “high-flying entrepreneurs� and “untraditional� loans or investments, they’re using buzzwords to express their displeasure with institutions that stray from the industry norm.

State and federal deregulation laws in 1982 and 1983 allowed banks and S&Ls; to engage in an array of investment activity, but regulators want S&Ls; to remain primarily home lenders and to curtail their use of the new powers they received.

Yet two Orange County savings and loans--Downey S&L; and Western Financial Savings Bank--have broken the industry mold with their unconventional ways. And they have done so with the blessing of regulators.

Downey and Western Financial are among the state’s top performing public companies, and the envy of other S&L; executives.

In its 31 years, Downey has become the state’s biggest developer of neighborhood shopping centers, the type of direct investment normally frowned on by regulators. In the process, it has earned a reputation as one of the best-managed S&Ls; in the nation and one of the best-kept secrets among investors.

Western Financial, created five years ago in the merger of an S&L; and a thrift and loan, is the industry’s third-largest originator of automobile loans. Half of its portfolio is devoted to car loans, an amount regulators normally would view as too risky. In its brief life, its assets have grown an average of 62% a year, the kind of pace that killed many a bank and S&L; in the volatile 1980s.

Because of their success, the two institutions have received wide latitude from federal regulators. Downey has been allowed to place 25% to 30% of its assets into its real estate operations, exceeding the customary 10% limit on direct investments. And Western Financial has been allowed to exceed the annual asset growth limit of 25% imposed on other S&Ls.;

“They’re doing what they know how to do, and they’re doing it well,� said William J. Crawford, commissioner of the state Department of Savings and Loan. “I think you leave alone people who know what they’re doing.�