U.S. Regulators to Sell Ailing HomeFed Bank
Federal regulators said Friday they will sell HomeFed Bank, the once-proud San Diego thrift that has fallen on hard times, because the savings and loan was unable to solve its financial problems or find a buyer.
The bidding process is likely to take about six months. In the meantime, depositors’ accounts will not be affected and HomeFed’s top management will remain. But HomeFed’s stockholders and bondholders will probably lose their investments when a sale is complete, regulators said.
“We gave HomeFed a time period to raise capital on their own,” said Office of Thrift Supervision official Mark Hurley, but they got no offers without government assistance.
Though regulators did not seize the S & L, they did place the institution into a program for thrifts that need new capital but are not insolvent. The program seeks to find outside investors to inject capital into these weak institutions.
The Office of Thrift Supervision said it is placing HomeFed--once the nation’s seventh-largest S & L--into the agency’s new Accelerated Recovery Program. Among the nine groups interested in bidding on HomeFed’s assets are Home Savings of America and Great Western Bank, the state’s two biggest savings and loans, the agency said in a news release.
In the meantime, it is expected to be business as usual at the 201 branches around the state. “HomeFed remains open, and not under government seizure,” said Thomas J. Wageman, HomeFed’s chief executive officer.
In the past, regulators have placed weak thrifts into conservatorship or receivership while they conduct a search for bidders to buy the assets. However, experience showed that the assets of these thrifts often deteriorated alarmingly while they were under direct government control.
HomeFed Bank, formerly known as Home Federal Savings & Loan, was one of California’s most respected financial institutions. However, it invested heavily in commercial real estate development projects in the mid-1980s that became the thrift’s undoing in the early 1990s.
HomeFed’s bad news has been virtually unrelenting in the past two years. This week, the financial institution reported that it lost more than $807 million in 1991, including $35.6 million in the fourth quarter. HomeFed lost $248 million in 1990.
With $13.9 billion in assets, HomeFed is by far the largest thrift that will be sold under the new federal program. There have been 40 thrifts nationwide to be placed into this program, including four in California, and another 700 seized since August, 1989, when the federal bailout began.
The others in California include Valley Federal Savings in Los Angeles and Heartland Savings in suburban San Diego.
Wageman, who was installed with regulatory blessing last July, got high marks from regulators for his nine-month stewardship, during which he has pared the thrift’s assets by more than 25%. He is staying on as chief executive.
Kraul reported from San Diego and Furlong from Los Angeles.
