Apartment Market Puts a ‘For Sale’ Sign on Fidelity Federal Bank
Citadel Holding Corp., whose Fidelity Federal Bank unit is plagued with problem loans to apartment house owners, said Wednesday that it is putting the 56-year-old financial institution up for sale.
Glendale-based Citadel operates 42 Fidelity Federal branches in Southern California, mainly in Los Angeles and Orange counties. The company has total assets of $4.8 billion, which makes Fidelity a medium-size savings and loan by California standards.
In response to Citadel’s decision, its stock rose $1.75 a share to $17.75 in American Stock Exchange composite trading. That gives Citadel a current market value of about $117 million.
But analysts said selling Fidelity--Citadel’s primary business--will not be easy.
“It’s certainly a buyer’s market, and given the economic landscape of Southern California, that’s a very challenging sale,” said Charlotte Chamberlain, a thrift analyst with Wedbush Morgan Securities in Los Angeles.
After consulting with its financial adviser, First Boston Corp., Citadel decided its moderate size and capital “are not competitive advantages in today’s competitive times,” Citadel President Richard Greenwood said in a statement.
Selling the thrift to a rival “would allow our shareholders to realize (gains) on the potential increased values” gained from joining a larger institution, he said.
Fidelity is ailing largely because a whopping 71% of its loans are tied up in apartment units in Southern California. The recession has ballooned apartment vacancy rates, leaving landlords unable to pay their mortgages, and the region’s real estate slump has made it hard to sell the properties.
In the first quarter of 1993, Citadel’s profit plunged to $135,000 from $6.1 million a year earlier, and its problem loans jumped to 5.7% of its assets, from 3.5%.
