In an effort to reassure depositors and set itself apart from other thrifts, Loyola Federal Savings and Loan Association asked a national financial ratings firm to grade its certificates of deposits.
The Baltimore-based institution got passing marks.
Standard & Poor's Corp. pronounced both Loyola's long- and short-term certificates of deposit as being of investment grade. This means they are suitable for purchase by prudent investors.
The rating firm gave the short-term certificates, which mature in 90 to 180 days, an A-3 grade, its third highest rating. The long-term certificates, which mature in one to five years, received a BBB-minus, the fourth highest rating and the grade above non-investment grades.
Loyola, which has 31 branches in Maryland, is the largest thrift in the Baltimore area with with $2.2 billion in assets.
Like accounts at other savings and loans, accounts at Loyola are insured up to $100,000 by the federal government. But amounts larger than that are uninsured. The S&P rating referred to the uninsured portion of accounts.
"The rating reflects the institution's recent record of stable asset quality and its adequate risk-adjusted capitalization. It also takes into account the thrift's limited vulnerability to weakening real estate markets," S&P said in a press release.
"The rating anticipates that asset quality could worsen slightly in future quarters, hurt by declining local real estate markets and recessionary pressures," S&P said. "Although Loyola's core earnings power is not very strong, the thrift's good capitalization provides a cushion if provisions and charge-offs rise," the rating agency said.
James V. McAveney, executive vice president and chief financial officer, said the Baltimore thrift paid for the rating as a way of demonstrating its financial health to depositors.
He said 60 or 70 savings and loans across the country have asked for such ratings and only 27 have been assigned investment grades.
There are no other thrifts with headquarters in Maryland that have an investment-grade rating, according to Victoria A. Wagner, a rating officer for S&P. Ratings for thrifts are only assigned at the request of a savings and loan.
However, California-based Household Bank FSB, which is the second largest thrift in the Baltimore area, does have have investment-grade rating on its certificate of deposits based on the financial strength of its parent firm, Household International Inc. of Prospect Heights, Ill. That rating is A for its long-term certificates and A1 for its certificates that mature in less than one year.