Security Federal Savings Agrees to Acquisition by Fin West Group
Security Federal Savings & Loan, a one-branch thrift in Garden Grove, said it has agreed to be acquired by Fin West Group, a Diamond Bar financial services company, in a stock swap that will pump up Security’s sagging net worth.
The deal, which still must be approved by regulators, involves conversion of Security Federal from a mutually owned S&L; to a stock company. It calls for Security to swap its new stock for the stock of First Mortgage Corp., a subsidiary of Fin West.
The upshot is that the S&L; would become a wholly owned subsidiary of Fin West. The thrift operations would include First Mortgage, a 12-office mortgage banking firm.
Security Federal President Richard S. Miller said the deal would enable the S&L; to use the mortgage company’s assets to boost its own net worth to levels that are acceptable to federal S&L; regulators.
The S&L;, with assets of $86 million at the end of the third quarter, has been losing money for several years. Its net worth--assets minus liabilities--has sunk below the minimum level required by regulators. Security Federal reported a 1.27% ratio of capital to assets at the end of the third quarter, while regulators require S&Ls; to maintain a minimum ratio of 3%.
Miller said the S&L; is not yet operating under regulatory orders to improve its financial position and is pursuing the deal with Fin West so that the Federal Home Loan Bank Board doesn’t step in.
First Mortgage, the Fin West subsidiary that would be folded into the S&L;, currently services a $500-million portfolio of mortgage loans and values its own capital stock at $4 million, according to Bruce Norman, Fin West’s executive vice president.
In the complex deal, Security first must receive permission from federal regulators to convert from a mutual association--in which depositors’ accounts represent investments in the company--to a stock corporation. It would then issue shares of stock, and Fin West Group would apply to the Bank Board for permission to acquire them through a stock swap.
Miller said the process is expected to take more than a month.
Norman said that if the deal is concluded, Fin West intends to keep Security Federal in Garden Grove “and might, if conditions are right, open other branches.” He said the S&L;’s management would stay the same.
Fin West wants to acquire the S&L;, he said, to round out its family of real estate-oriented financial services companies and to regain a mortgage-lending presence in the Orange County market that was lost when it closed its First Mortgage branch office in Santa Ana 2 years ago.
The privately owned Fin West Group, said Norman, was founded in 1972 and currently has 240 employees in five subsidiaries: First Mortgage; United Title Co., which has four offices, including one in Santa Ana; Realty Evaluations Inc., an appraisal firm; Hacienda Escrow Co., and HSC Inc., a foreclosure trustee services and hazard insurance firm.
Norman said the group of companies has a net worth of about $20 million. Its stock is owned by the 100 employees and officers of First Mortgage Corp., he said.
