BankAmerica said late Friday that it has acquired Oregon's largest thrift, paying the largest amount ever for a savings and loan controlled by the new federal thrift-bailout agency.
The San Francisco-based banking firm, parent of Bank of America, paid $162.3 million for Benj. Franklin Federal Savings & Loan Assn., outbidding Los Angeles-based rival Security Pacific Corp.
The acquisition gives BankAmerica a major presence in Oregon, where it has operated just one branch previously. The deal is in line with the strategy of new BankAmerica Chief Executive Richard M. Rosenberg to build a large consumer banking network in the West.
The deal will cost taxpayers $105 million, said the Resolution Trust Corp., the federal thrift-bailout agency that arranged the sale. Portland-based Benj. Franklin was seized by the federal government in February.
BankAmerica's price exceeds amounts paid for other RTC-controlled thrifts since that agency was created a year ago to clean up the S&L; debacle. The price, for example, is higher than the $141 million (plus $3 million for an option to acquire certain assets) paid by Security Pacific earlier this year for Gibraltar Savings of Simi Valley.
The price also represents a staggering 6.85% of Benj. Franklin's $2.4 billion in so-called "core" deposits, or the more stable savings from customers most likely to stay with the bank after the acquisition.
That percentage, or premium, is the highest ever paid for a thrift acquired from the RTC, and double the percentages thrift buyers have paid in recent months. The sale boosts the fortunes of the RTC, which has had mixed success in attracting substantial bids for failed thrifts.
A BankAmerica spokesman said the bank paid the high premium in part because it believes that Benj. Franklin--with a very low percentage of bad loans--was one of the "cleanest" failed thrifts the government has made available.
Franklin had been marginally profitable. It was seized because it had a negative net worth, primarily because a large amount of its capital was in the form of "goodwill," an intangible asset that it once could count in computing its financial safety net.
A BankAmerica spokesman said the bank believes that Benj. Franklin is Oregon's third-largest financial institution, with its 10% market share trailing that of United States National Bank and First Interstate Bank of Oregon.
BankAmerica will operate the institution initially as a thrift called Bank of America FSB, and ultimately convert it to a commercial bank called Bank of America Oregon.
Benj. Franklin had 66 branches in Oregon, along with 12 in Washington, nine in Idaho and one in Utah. Those branches will continue normal operations Monday under the Bank of America name.
Benj. Franklin had $3.47 billion in assets. As part of the deal, BankAmerica will take on $3 billion in assets, including $2.2 billion in home loans. BankAmerica will have up to three months to review the assets and return those with improper documentation or other problems.
Rosenberg said in a statement that BankAmerica expects to retain more than $1 billion of Benj. Franklin's high-quality loans. He added that BankAmerica also is getting an option to buy Benj. Franklin's mortgage service business and an insurance subsidiary.
"Our winning bid reflects our view of the value of Benj. Franklin's businesses to BankAmerica shareholders," Rosenberg said.