THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Friday, April 26, 1996 TAG: 9604260630
SECTION: BUSINESS PAGE: D2 EDITION: FINAL
SOURCE: BY TOM SHEAN, STAFF WRITER
LENGTH: Short : 50 lines
Despite having strong earnings and abundant capital, Life Savings Bank has been hurt by a continuing disparity in the cost of insuring its deposits, the chief executive officer of Life Savings Bank complained Thursday.
``We are paying $1.5 million before taxes, while banks down the street pay $2,000'' for their deposit insurance, president and CEO Edward E. Cunningham told shareholders of Life's parent company, Life Bancorp Inc.
When the Bank Insurance Fund was replenished last year, the Federal Deposit Insurance Corporation sharply cut the premiums that commercial banks pay for deposit insurance.
However, the FDIC did not reduce the premiums that Life and other thrifts pay into the still fragile Savings Association Insurance Fund.
Having to pay the regular premium of 23 cents for every $100 of their deposits has put Life and other thrifts at a serious competitive disadvantage, Cunningham said at Life's annual meeting.
Life, he said, has responded to that problem by increasing its use of borrowed funds and reducing its reliance on insured deposits.
The Savings Association Insurance Fund, which covers deposits at the nation's thrifts, was depleted by the epidemic of thrift failures in the late 1980s and early 1990s. Although the health of the industry has improved, there are fewer institutions paying into the fund.
One proposal for replenishing the Savings Association Insurance Fund would have the FDIC assess Life and other thrifts a one-time fee. Life estimated that its share of this assessment would be slightly more than $5 million.
During an hour-long meeting at the Norfolk Waterside Marriott Hotel, Cunningham said Life received regulatory approval to buy back another 5 percent of its shares.
The company repurchased 5 percent of its stock earlier this year in an effort to boost its per-share earnings and per-share book value.
Although it posted higher earnings last year, Life generated a lackluster 5.93 percent return on equity for 1995, Cunningham said.
A company's return on equity - its net income divided by its shareholders' equity - is a widely used measure of how effectively the shareholders' investment is being used.
Life, which converted from a depositor-owned thrift to a stock institution in 1994, has 10.76 million common shares outstanding. The price of its shares closed unchanged Thursday at 14 1/4. by CNB