Huntington S&L; Due $2 Million From Acquisition by Intergroup
Huntington Savings & Loan Assn. will get at least $2 million in new capital under an acquisition agreement with Intergroup Corp., but it may be three years before the S&L;'s 508 shareholders know how much they’ll get for their stock, Huntington’s chairman said Friday.
The acquisition, nevertheless, will be a “very positive thing for the association,” said Chairman Robert C. Terry.
Directors of the S&L; and Intergroup, a Los Angeles-based owner and operator of housing properties, have approved the sale, which still needs approval from state and federal regulators and the S&L;'s shareholders.
The complicated rate structure that will be used to pay off existing shareholders takes up 10 pages of the agreement, Terry said. Essentially, he said, shareholders will turn in their stock for an equal number of shares of non-voting preferred stock, which they must redeem in three years for cash earned in the interim by the sale of the S&L;'s bad loans, foreclosed real estate and other assets.
To gain control of the S&L;, Intergroup will purchase 200,000 shares of newly issued stock at $10 a share.
Together with expected additions to capital from profits in the next three months, the new money should raise the S&L;'s net worth to $3.2 million by September, Terry said. That will give the institution, with $110 million in assets now, a net worth ratio of about 3%, the minimum required by regulators.
However, because the Federal Home Loan Bank Board wants to gradually increase the minimum net worth ratio until it hits 6% of an S&L;'s liabilities, and because Huntington S&L; has had regulatory problems, some financial institution consultants believe that regulators will require Intergroup to ante up even more money to win approval of the sale. Consultant Gerry Findley of Brea believes that regulators want Huntington to have up to $5 million in new capital.
Terry said the S&L;'s financial troubles were caused by a former employee’s unauthorized dealings in government securities two years ago. The S&L; lost nearly $3 million in the transactions, which it has been writing off ever since. The last write-off, for $80,000, came last month, he said.
Huntington Savings has operated profitably in six of the last eight months and will turn in a profit in June, Terry said.