Great American Negotiates to Buy S.F. Savings Bank

San Diego County Business Editor

Great American First Savings Bank on Tuesday said it was negotiating to buy United Bank, S.S.B., the San Francisco-based savings bank with losses of more than $8 million in the first half of 1985 and a dwindling net worth that is far below regulatory minimum.

It was the second time in the past three weeks that expansion-minded Great American, based in San Diego, has announced its intention to acquire an unprofitable bank.

The announcement increased industry speculation that regulators have “strongly suggested” that approval of Great American’s proposed merger with a successful Arizona S&L; may hinge on purchasing one or more unprofitable institutions.

“There’s no directive, but it’s been strongly suggested,” said one regulatory source.


Last month, Great American agreed to merge with Los Angeles Federal Savings Bank, which has lost $10.7 million since 1981. The combined 21 offices in Los Angeles will triple Great American’s current presence there.

17 Bay Area Branches

Similarly, United Bank’s 17 Bay Area branches will give Great American visibility in an area where it now has none. Its Northern California branches include offices in Santa Cruz, Monterey, Santa Rosa, Sonoma, Sacramento and Stockton, as well as a loan office in San Jose.

Great American, with about $7.5 billion in assets and 122 branches statewide, is awaiting shareholder and regulatory approval to merge with Home Federal Savings & Loan of Arizona, a profitable company with nearly $2 billion in assets.


If all three acquisitions are approved--expected sometime in the first quarter of 1986--Great American will have $10.6 billion in assets and 205 branches.

The proposed $102-million merger with Home Federal in Arizona runs counter to a Federal Home Loan Bank Board policy that has typically prevented interstate mergers of healthy institutions. Generally, interstate mergers have been approved only when a healthy company will assume control over an unprofitable one.

But with an increasing number of financial institutions falling below minimum net-worth requirements and with banks’ freedom under deregulation to conduct business across state lines, the Bank Board has been considering a policy change.

Regulators believe that “unless they get something out of it to protect the insurance fund, then they won’t allow interstate mergers,” said the regulatory source


Sparked by additions to reserves for bad loans, United Bank’s losses for the six months ended June 30 reached more than $8 million, with $7.5 million reported in the second quarter. Net worth totaled only $7.8 million as of June 30, or 1.2% of its $640 million in assets. Net worth as of Dec. 31 was $15.8 million.

United Bank suspended trading of its stock because of Tuesday’s merger announcement. It closed Monday at $2.25 per share, up 12.5 cents. The stock’s high this year was $7.

United Bank, founded 11 years ago by Chinese-American businessman Ben L. Hom, bills itself as the nation’s largest minority-owned bank. In terms of assets, it was the 43rd largest among the state’s 200 savings institutions in 1984.

During a five-day run on the bank in June, United Bank customers withdrew more than $20 million--$6 million of that from the bank’s main branch in San Francisco’s Chinatown. The withdrawals were sparked by the bank’s projected second-quarter red ink and by the failure that month of a Chinese-owned bank in New York and a bank in Honk Kong. Both failures were tied to allegations of management fraud.