Michigan National to Shed Independence One Bank : Banking: Buyer sought for five-branch Mission Viejo thrift so firm can return to its roots.
The Michigan banking company that owns Independence One Bank of California said Monday that it will seek a buyer for the thrift and give up its plan to start a financial services network across Southern California.
Michigan National Corp. said it has potential buyers both in and out of state for its savings and loan subsidiary and expects to reach an agreement with one of them by early next year. The company, which had been expected to sell the thrift, would not identify the potential buyers.
Independence One, with $645.7 million in loans and other assets, has seen its home mortgage transactions drop significantly this year as a boom in home refinancing ended with rising interest rates. The S & L, though, has developed business loans and other lending that helped it record a profit of $1.9 million for the first six months this year.
“We’ve been very happy with the development of the franchise, but it has become an obvious anomaly to our strategy,” said Robert J. Mylod, Michigan National’s chairman.
The banking company, which has $10 billion in loans and other assets, has been shedding its out-of-state businesses to devote itself to its Michigan National Bank subsidiary. Mylod said it wants to streamline operations and provide better service in its home state.
“The question was when, not whether, the California operation would be sold,” Edward H. Sondker, Independence One’s president, said.
The five-branch Mission Viejo thrift is the former Beverly Hills Savings & Loan, which was one of the first major California thrifts to fail. The April, 1985, collapse of Beverly Hills Savings led a wave of thrift failures as S & Ls nationwide were crippled with bad loans, bad management or outright fraud.
Altogether, more than 100 California thrifts failed in a decade. Of those, 27 were based in Orange County--more than in any other county in the state.
On the last day of 1988, Michigan National bought Beverly Hills Savings with federal assistance that included a government promise to pay $811.5 million over 10 years to make up the thrift’s negative net worth--the amount of debts that exceeded its assets. The company put up $52 million of its own money.
Michigan National had hoped to use the cachet of the Beverly Hills name to expand operations here and eventually to become a bank. But the company soon found itself in a Catch-22: If it converted the S & L to a bank, it would lose the government’s tax-free payments.
On Friday, the company agreed to let the government pay off its promissory note early. Regulators paid the remaining $348.9 million on its note plus accrued interest of $3.9 million. The government will save $10 million to $16 million in interest payments by paying off the loan now.
Michigan National will record a $51 million after-tax gain on the settlement. In the past few months, it has also sold its two Texas banks for a $13 million after-tax gain and its Independence One Mortgage Corp., a 10-state mortgage banking operation, for a $27 million after-tax gain.
Michigan National, based in a Detroit suburb, is returning to its roots partly to improve what some analysts see as a lagging performance. It also has been under some pressure by investors to sell itself to the highest bidder. But Mylod told shareholders at its annual meeting in April that directors unanimously agreed to keep the banking company independent.
Independence One Bank at a Glance
* Founded: 1920s. Changed its name to Independence One in December, 1992
* Headquarters: Mission Viejo
* Chief operating officer: Edward H. Sondker
* Employees: 150
* Parent company: Michigan National Corp., Farmington Hills, Mich.
* Branches: Savings locations are in Beverly Hills, Century City, Corona del Mar, Laguna Hills and La Jolla; corporate banking offices are in Mission Viejo, Century City and San Diego.
* Assets: $645.7 million as of June 30
Source: Independence One Bank; Researched by CAROLINE LEMKE / Los Angeles Times
