BANKING : Independence One Hoping to Obtain Commercial Status Before End of Year
Independence One Bank acts like a commercial bank and is run by commercial bankers--and can’t wait until it turns into a commercial bank.
The Laguna Hills institution is actually a savings and loan that must devote 70% of its loans to home financing, not an activity to which bankers are accustomed.
But executives are negotiating with federal thrift regulators and the Internal Revenue Service to clear the way for Independence One to convert to a bank, which would allow it to make many more business and consumer loans and many fewer home loans.
Independence One is the successor to the old Beverly Hills Savings & Loan, one of the first major California thrifts to fail in the mid-1980s. Regulators sold the thrift to Michigan National Corp., a major banking company, at the end of 1988 with a promise to pay $800 million over 10 years to make up for the deep hole in the failed thrift’s finances.
Michigan National has long wanted to turn the thrift into a bank, but it would lose the tax-free interest on the government note, as well as other major tax benefits, if it agrees to accept an early payoff.
Talks with government officials stalled last year as the Clinton Administration took office, but they’re back on track now. The government could save about $16 million in interest payments if it could repay the note now. It still owes $348 million.
“I don’t know how soon things will happen,” said Edward H. Sondker, president of Independence One, “but I’m optimistic that something will happen this year.”
Once the matter is resolved, Sondker said, Independence One will seek its bank charter immediately. When it does, it will become Orange County’s biggest independent bank with more than $600 million in loans and other assets.
Meantime, the thrift evaluates its loans as if it were a bank. Instead of providing mortgages directly to consumers, it makes “business” loans to mortgage bankers, who loan the money to homeowners. Such loans, together with the government note, are how the thrift now meets its 70% home-financing test.
