Household Bank Finds a Bargain in Imperial S&L; : Thrifts: The purchase of 48 branches from the Resolution Trust Corp. gives Household $2.5 billion in prized core deposits.
Household Bank has been on a shopping spree for several years, and the savings and loan has found that the Resolution Trust Corp. offers the best deals around.
The federal agency, which manages and liquidates failed thrifts, has been under intense pressure by Congress and others to sell its vast holdings of failed thrift properties. Locally based Household was only too happy to pay $14 million Friday for 48 branches of failed Imperial Savings & Loan’s statewide network.
The acquisition gave Household $2.9 billion in deposits, of which $2.5 billion are considered core deposits--accounts of residents who live near the branches and aren’t likely to move their funds to other institutions.
Core deposits are so treasured that the purchase price of the thrift is often expressed in terms of the ratio of that price to the amount in such accounts. Household’s purchase of Imperial equals 0.56% of core deposits, a steal compared to other recent purchases.
For example, Lincoln Savings & Loan in Irvine was sold in early March to Great Western Bank for 1.2% of core deposits, said Robert S. Boyd, managing director of the Secura Group in Washington. In late 1989, the RTC sold Pacific Savings Bank for 6.5% of core deposits, he said.
“We think it was a very attractive price,” Antonia Shusta, Household’s president, said about the purchase of Imperial’s Southern California branches. Bank of the West in San Francisco picked up Imperial’s remaining 30 branches in Northern California.
Household, which began its acquisition spree three years ago by buying healthy thrifts and branches of healthy thrifts, has looked almost exclusively to RTC holdings of failed S&Ls; to bolster its size in the major metropolitan areas of six other states where the thrift has branches.
“We find that institutions offered by the RTC have been most attractive to us,” Shusta said.
Shusta and Boyd pointed out, however, that the Imperial deal also was good for the RTC because it removed a large thrift from the RTC’s operations. The agency, which controls about $167 billion in assets from failed thrifts, simply loses more taxpayer money every day it has to keep operating a failed thrift, they said.
The RTC said it expects that Imperial’s collapse will cost taxpayers $1.6 billion.
Household will take some time to digest its biggest purchase ever, Shusta said, and probably won’t buy much else for the rest of the year. Besides, she said, “we are managers, not just buyers, so we are pacing our growth.” But executives will keep their eyes open for a good deal, she said.
The thrift is part of Household International Inc., a Prospect Heights, Ill., firm better known for its Household Finance Co. subsidiary.
The parent company relies heavily on borrowings to fund its consumer lending activities, and it hopes that the thrift will grow large enough to account for half the money loaned out by the corporation, said Robert Hartney, a company spokesman. Currently, the thrift accounts for less than 25% of all lending by corporate subsidiaries, he said.
Household Bank has borrowed heavily to supplement its $5 billion in deposits and to help boost its assets to $7.9 billion. At the end of the year, it had borrowed $1.2 billion from the Federal Home Loan Bank of San Francisco and an additional $976 million from other sources.
The deposits it picked up from Imperial will be used to replace much of that borrowing as well as to fund new loans, Shusta said.
Of $2.6 billion in Imperial assets that it officially purchased, all but $88 million in performing residential mortgages will be sold or given back to the RTC, she said. It also combined seven of the Imperial branches it bought with existing branches nearby.
