Lengthy Review of Lincoln S&L; May End Soon

The two-year examination by federal regulators of operations at Lincoln Savings & Loan should be over within a “couple of weeks,” officials of the Irvine-based S&L; and the Federal Home Loan Bank Board said Thursday.

News that the extraordinarily long examination is drawing to a close came as Lincoln’s parent, American Continental Corp. in Irvine, revealed that the Securities and Exchange Commission had initiated an inquiry into some of the same areas the bank board had reviewed.

“We believe we can resolve our problems with the bank board and that, as a result, we would expect that we would resolve this SEC inquiry favorably,” said Robert Kielty, a senior vice president at American Continental.

He said the company hoped for bank board approval of the settlement in two weeks. Karl T. Hoyle, the bank board’s executive director for public affairs, said the examination is “drawing to a conclusion” and that the three-member bank board would act on the proposed settlement “within a couple of weeks.”

Poor Relations

Under a proposed settlement, revealed in American Continental’s annual SEC report, Lincoln will get $10 million in additional capital from the parent company, write down $18 million in real estate assets and limit its direct investments to one-third of all investments.

The bank board has been critical of Lincoln’s untraditional role as a major real estate developer and a heavy investor in high-yield “junk bonds.” Though such investments are legal for a California-chartered S&L;, federal regulators frown on them as too risky for institutions that have low capital ratios and have a stated mission to make mainly home mortgages.

Those untraditional activities, in part, have made Lincoln’s relations with federal regulators among the poorest in the industry. American Continental’s chairman, Charles H. Keating Jr., is a vocal advocate of greater freedom for thrifts in their investments and has been an outspoken critic of regulators.