Jun
27
American Savings Bank has overplayed its hand a little in announcing it will take a $36 million charge against earnings after selling $1.1 billion in investments.
The reality isn’t too bad — it only seems bad after a press release that pretended this was some fluffy good news story.
The announcement of a “performance improvement initiative” and a “balance sheet repositioning,” was filled with weasel words attributed to ASB’s comparatively new CEO Tim Schools. In real life I have heard him speak clearly and amiably, so I suspect a public relations professional wrote the release – even the best of this tribe sometimes find themselves estranged from plain English. If he wrote the quotes himself, he’ll doubtless have the good grace to be properly chastened.
There is no point in glossing over troubles in the press releases of publicly traded companies because they have to write the same content in a completely different tone for the Securities & Exchange Commission.
The SEC insists upon companies giving proper notice of bad news, and not only actual bad news but potential bad news, indeed even potential bad news that is only a remote possibility. Your lawyers always want you to load SEC filings with every conceivable thing that could go wrong, because if that one-chance-in-a-thousand thing happens and you didn’t mention it, the SEC will want to know why. So SEC filings must contain the truth somewhere. And SEC filings are available for online scrutiny by the same people who see the original release.
So you look in the SEC filing for any key phrase that doesn’t appear in the press release that tells you what ASB didn’t want you to notice. And there it is. The press release referred to the sale of “certain securities.” The SEC release refers to the sale of “mortgage-related securities.”
It specifies that $12 million of the charge against earnings stems from “losses on the sales of mortgage-related securities.”
I began by saying it isn’t that big a deal, but seems like it because of the namby-pamby release. To view this in a more realistic context, and feel better about it, don’t compare the $12 million in mortgage-investment losses to the news release. Compare it to the writedowns by mainland investment houses, which have routinely run into billions of dollars.
That, though it wasn’t mentioned in the release at all, is the actual good side to the story.
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