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Great Western Expected to Buy Most of Homefed

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TIMES STAFF WRITERS

Great Western Bank, moving to become a financial powerhouse throughout California, has won a sealed-bid auction for the right to buy 119 branches with more than $4 billion in deposits from the failed HomeFed Bank in San Diego, banking industry sources said Tuesday.

Great Western would add a potent San Diego presence to its already powerful network in the Los Angeles metropolitan region and its outlets in the central valley and the San Francisco Bay area. The deal would boost Great Western’s deposits in California to nearly $24 billion, largest among the state’s savings and loans.

The purchase, which is scheduled for formal announcement Friday, would give Great Western “pretty good representation in major metro areas throughout the state,” an official close to the expected sale said.

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It would mark another major step on the road to consolidation for the nation’s shrinking thrift industry as it rebuilds from the failures and scandals of the 1980s. More than 720 S&Ls; have failed since 1989, including many well-known names in California, costing U.S. taxpayers about $85 billion.

The industry’s survivors have focused on basic home mortgage lending that the thrift industry was founded on before moving into risky commercial ventures that often turned sour in the 1980s.

HomeFed was seized by the federal government in July, 1992. Covering its losses has cost the government $1.2 billion so far, a price tag likely to rise and make it the biggest failure ever handled by the Resolution Trust Corp., the thrift cleanup agency.

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The fate of HomeFed’s 2,300 employees was uncertain Tuesday but sources close to the auction said they should expect “fairly significant consolidation” resulting in layoffs and some branch closings.

Sources said Great Western will pay “in the neighborhood” of $155 million for the branches, an amount representing more than 3.5% of deposits, a relatively high price for thrift acquisitions. Few premium networks like these are available for sale, noted Bert Ely, a thrift consultant in Alexandria, Va.

The acquisition would give Great Western, already the state’s biggest thrift network, a total of 358 branches.

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The 18 HomeFed branches that Great Western is not buying will be divided among two or more other bidders, sources said. Great Western and other bidders--said to include First Interstate Bank, Home Savings of America and Household Bank--all declined to comment. The purchases are expected to be announced by the RTC.

For Great Western, the proposed acquisition represents a sterling opportunity to increase its presence, particularly in affluent San Diego County.

Great Western now has only 19 branches in San Diego and will add 58 branches through the new purchases. It will move from seventh place to third in the San Diego thrift market. The other 61 HomeFed branches to be acquired are scattered in five different Southern California counties.

Most California thrifts and banks for sale in recent years have been acquired by other financial institutions within the state, evidence that out-of-state investors are wary about the California market, said Bill Ferguson, president of Ferguson & Co., a financial analysis firm in Irving, Tex.

“People from outside the state are scared to death of California because they look at loan quality, see it is deteriorating and wonder if the bottom has been experienced,” Ferguson said.

The general consolidation among banks and thrifts is being accelerated by the drive to acquire greater market share and to spread fixed costs--such as data processing, advertising and supervisorial overhead--over as broad a customer base as possible, Ely said.

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Great Western would become the nation’s second-largest thrift in the volume of deposits, with $32 billion, compared to $39 billion at H. F. Ahmanson, parent of Home Savings.

Regulators have been dismembering HomeFed since July, 1991, when chief executive Robert Adelizzi was forced to resign and was replaced with Thomas Wageman, a government-anointed caretaker. Branches have remained open but regulators have been selling off its bad loans in nationwide auctions ever since.

Earlier this year, 56 HomeFed branches in Northern California were sold to several groups of buyers. For once-proud HomeFed, the expected sale will mark the end of a sad saga that started in early 1990 when its commercial loan portfolio began to sour. The financial institution went on to lose more than $1 billion before it was finally seized by the federal government.

Rosenblatt reported from Washington and Kraul from San Diego.

* RTC NOMINEE WITHDRAWS: Stanley Tate bitterly withdrew his nomination to manage the savings and loan cleanup. D1

HomeFed: A Chronology

Once the nation’s fifth-largest thrift with $18 billion in assets, San Diego-based HomeFed Bank fell swiftly from grace in 1990 with the souring of its commercial real estate loans, many of which were in other states. The thrift lost more than $1 billion over the next two years and was seized by regulators in July, 1992. Its demise will be complete Friday, when regulators announce the winner of a government-supervised auction of its California branch network.

* March, 1983: HomeFed goes public, switching from mutual to stock ownership as shares begin trading at $16.75 after a $342-million initial public stock offering.

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* October, 1989: HomeFed stock trades at an all-time high of $47.50 on the New York Stock Exchange.

* February, 1990: Thrift reports record annual profit of $115.7 million for 1989.

* April, 1990: HomeFed reports record first-quarter profit of $34.5 million.

* Spring, 1990: Things begin to unravel as bad loans mount, leading to a second-quarter loss of $108 million.

* January, 1991: HomeFed reports a 1990 loss of $248 million.

* July, 1991: Regulators force HomeFed chief executive Robert Adelizzi to resign. He is replaced by Thomas Wageman, an executive with experience as a caretaker of dying thrifts.

* January, 1992: HomeFed reports an $807.7-million loss for 1991.

* April, 1992: The thrift is placed in the Accelerated Resolution Program by the Office of Thrift Supervision.

* July, 1992: Regulators place HomeFed in receivership and remove the board of directors, including Chairman Kim Fletcher.

* November, 1993: Government-supervised bidding is formally closed on HomeFed’s remaining 137 branches, of which 58 are located in San Diego County.

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* December, 1993: The Resolution Trust Corp. is expected to announce a winning bid.

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