Great American Gets Approval to Buy Arizona Thrift
Great American First Savings Bank, in the first interstate acquisition of one healthy thrift by another, on Thursday received federal approval to purchase Home Federal Savings & Loan of Arizona.
The $102-million purchase of Home Federal was hinged on Great American taking over two savings and loans now under conservatorship by the Federal Savings & Loan Insurance Corp. (FSLIC).
San Diego-based Great American will assume control of Hacienda Federal Savings & Loan in Oxnard, with assets of $33.4 million, and First Federal Savings & Loan of Redding, with $38.5 million in assets, as part of its merger deal with Home Federal, officials said Thursday.
Taking over the troubled thrifts means that Great American will absorb about $24 million in negative net worth--or the excess of liabilities over assets--of the two institutions. The cost to FSLIC will total about $1.2 million, regulators said Thursday, adding that “no other potential resolution” to Hacienda Federal’s and First Federal’s financial woes was possible for “less than an additional $27 million.
After the mergers, Great American will become the nation’s 10th largest thrift, with more than $10.6 billion in assets and 161 offices in California and Arizona.
Concurrent with Thursday’s acquisitions, regulators denied Great American’s proposal to buy nine branches of troubled United Bank, S.S.B., in San Francisco. There was no official explanation for the rejection.
Great American has worked hard to finalize the Home Federal deal, but approval of the merger by regulatory agencies has always been tied to the company also taking over one or several financially ailing thrifts.
Originally, United Bank was the only ailing company regulators had linked to Great American’s merger with Home Federal. That acquisition would have cost Great American $9 million, far less than the $24-million cost to take over Hacienda Federal and First Federal.
Nonetheless, the deal is “not that expensive,” maintained Great American President James Schmidt.
The assumption of the deficit as well as acquisition costs will be amortized as good will over 25 years, he said. In addition, the purchases give Great American a presence in two counties--Ventura and Shasta--where it now has none.
Schmidt said the important thing is that the deal gives Great American entry into the Arizona market, the home base of only 12 savings and loan firms. (There are more than 200 in California.)
Regulators first approached Great American about buying Hacienda Federal and First Federal about six weeks ago, Schmidt said. A formal proposal was presented about 10 days ago, he added.
The Home Federal deal is the first interstate acquisition of a healthy thrift by another healthy S&L;, according to Sal Serrantino, president of California Research Corp., a Santa Monica financial consulting firm.
Home Federal Chairman and Chief Executive Thomas C. Weir will become a Great American board member, Schmidt said. The company in Arizona will be known as the Home Federal Savings division of Great American First Savings Bank of Arizona.
A proposal for Great American to merge with Los Angeles Federal Savings Bank, with $660 million in assets and 16 offices in Los Angeles and Orange counties, will be voted on by Great American shareholders next week.
This is the second FSLIC-assisted merger or acquisition in 1986, and officials said Thursday that the deal “effectively resolves two FSLIC problem cases at once.”
Regulators said that FSLIC Chairman Edwin J. Gray, a former Great American executive, did not participate in the transactions because of his past affiliation.
Great American’s stock closed at $24.75 Thursday, up $.375.
