Charter Savings’ Deposits and Some Assets Sold Off : Thrifts: A Torrance bank buys the Newport Beach facility, whose failure will reportedly cost taxpayers $34.4 million.

In a transaction that will ultimately cost taxpayers $34.4 million, federal thrift regulators on Friday sold the deposits and some of the assets of failed Charter Savings Bank in Newport Beach to a Torrance bank.

Pacific Heritage Bank, a two-branch bank serving mainly the Japanese community, paid a premium of $2.6 million to acquire deposits and some assets of Charter. It will also take over Charter’s branches in Gardena and Little Tokyo in downtown Los Angeles.

The bank also sold Charter’s other two branches and their deposits for an undisclosed sum to Far East National Bank in downtown Los Angeles. Those branches are Charter’s headquarters in Newport Beach and its Monterey Park branch.

Pacific Heritage received $14.8 million in assets but will be given 90 days to pick the best assets and deposits, leaving the rest to the Resolution Trust Corp. to liquidate. The agency, which oversees the sale and liquidation of failed thrifts, estimates that the liquidation of Charter will end up costing taxpayers $34.4 million.

Charter had $251.2 million in 21,400 deposit accounts. Henry Dupree, an RTC spokesman, said there was a small number of accounts that exceeded the federal insurance limit of $100,000 that will not be transferred to the banks.

The RTC sought bids from 624 potential buyers, but only three offers were submitted. Pacific Heritage’s bid was the least costly to the government, regulators said.

The sale of Charter’s deposits leaves only one failed S&L; in Orange County unsold. That is Lincoln Savings & Loan in Irvine, one of the nation’s biggest failures with an estimated taxpayer bailout bill of more than $2 billion. Regulators are seeking buyers for it.

Previously, 17 failed thrifts based in the county have been sold or closed.

Charter, which once hoped to grow by acquiring failed thrifts, was declared insolvent by regulators and seized by them on June 15. Its problems stemmed from its 1988 acquisition of troubled Merit Savings Bank of Los Angeles.

Merit, which catered to the Japanese community, was a failing thrift with about 14% of its $220 million in assets in foreclosed real estate and bad loans when Charter bought it. Owned then by Mola Development Co. in Huntington Beach, Charter figured it had the development expertise to work out Merit’s problem assets.

But the assets declined and Charter now is riddled with bad loans.

In addition, last year’s federal law that restructured the thrift industry doomed Charter by setting up strict standards for capital. The law also required thrifts to sell their high-risk, high-yield corporate securities known as junk bonds. Charter had a small amount of those bonds that lost their value and contributed to its losses.

Meantime, the FBI is investigating bank fraud and embezzlement charges stemming from Charter’s collapse, federal authorities said.

Charter has had a colorful past. It was opened as Orange Coast Savings & Loan by flamboyant Douglas Patty and other directors at the once-mighty Heritage Bank in Anaheim. But soon after Heritage failed in 1984, the thrift found itself mired in the ensuing federal litigation against Patty and others. They later sold their interest to Mola.

In its purchase of Charter’s deposits and assets, 10-year-old Pacific Heritage gains a bigger presence in the Japanese communities of Torrance-Gardena and Little Tokyo, where it already has branches.

Far East National, with four branches in Southern California and one in San Francisco, picks up new offices in areas where it now has none.

Since opening a branch six years ago in Little Tokyo, Pacific Heritage has enjoyed growing success yet remained small. At the end of last year, it had only $108.5 million in assets but earned $2.4 million in net income for the year, according to Findley’s annual report on California banks.

Two-thirds of Pacific Heritage’s assets at the end of last year were in real estate-related loans, and its bad loans amounted to only $22,000. The bank’s specialty is making loans for construction of custom-built homes, custom duplexes and small apartment buildings. Its business banking targets professionals such as doctors, lawyers and dentists.

At a time when bank stocks are stagnant at best, Pacific Heritage raised more than $3 million in an offering in October by selling 200,000 shares at $15.75 a share.