Canada Firm Buys Insolvent Costa Mesa S&L

In one of the first major deals since Congress approved the thrift bailout plan, Royal Trustco Ltd. of Toronto on Friday acquired insolvent Pacific Savings Bank in Costa Mesa with the help of $550 million from the federal government.

Pacific Savings and three other large S&Ls were sold Friday as part of the federal government’s effort to clean up the ravaged industry. The Resolution Trust Corp., the federal agency charged with disposing of failed institutions, provided a total of $7.1 billion in assistance to the four buyers.

Royal Trust will inject $47 million in new capital into the Costa Mesa thrift and will operate the 11-branch S&L as Pacific First Bank, a federally chartered savings bank, the company said in a press release Friday. Pacific Savings is among Orange County’s 10 largest S&Ls, with $1.2 billion in assets, and has been run by regulators for more than two years.

For Pacific Savings customers, it will be business as usual when the S&L’s Courtyards branch across from its headquarters opens this morning. The branch is the only one open on Saturdays, and remaining branches will resume business as usual on Monday, S&L officials said.

The acquisition of Pacific Savings is the second step in Royal Trust’s strategy to build a super-regional thrift institution along the West Coast. The Toronto firm is awaiting regulatory and shareholder approval for its acquisition of Pacific First Financial Corp., a Seattle financial services firm with S&Ls in Washington and Oregon.

Royal Trust plans to fold the Costa Mesa thrift’s operations into Pacific First once the approvals are obtained. In the meantime, it has hired the Seattle firm to operate the Costa Mesa thrift.

“The establishment of Pacific First Bank of Costa Mesa, and the acquisition of Pacific First Financial of Seattle, is part of a larger plan to geographically diversify our banking franchise,” said Michael A. Cornelissen, Royal Trust’s president and chief executive.

“We will see much consolidation in the near future of many financial institutions because of re-regulation in the United States,” he said.

Royal Trust assumed Pacific Savings’ $989 million in deposits and about $473 million worth of performing assets. Together with the federal assistance, Pacific First has more than $1 billion in assets.

Royal Trust is a financial services conglomerate with $29.1 billion (Canadian) in assets. The firm has 128 branches in Canada plus 24 offices in Britain, Europe and Asia.

Pacific Savings, which traces its roots back to 1890, was once a thriving S&L with a 60-branch network. But new operators moved the S&L to Costa Mesa from Hollywood seven years ago and nearly killed off the branch network in favor of commercial and industrial lending.

It also began posting losses. The S&L lost a total of more than $262 million in the last six years and $10 million more in the first six months of this year.

In the other deals, University Federal Savings Assn. in Houston was bought by NCNB Texas National Bank with $3.8 billion in federal assistance; Hill Financial Assn. in Red Hill, Pa., was purchased by Meridian Bancorp. of Redding, Pa., with $1.9 billion in assistance, and Freedom Savings & Loan Assn. in Tampa, Fla., was acquired by NCNB National Bank of Florida with $875 million in assistance.