Home Savings Wins Bidding War for 61 First Interstate Branches

Home Savings of America, the nation’s largest savings and loan, has won a heated bidding war for 61 bank branches being divested in First Interstate Bancorp’s merger with Wells Fargo & Co.

Home Savings, owned by Irwindale-based H.F. Ahmanson & Co., agreed Thursday to pay about $207 million for the branches, which have $2.55 billion in deposits and $1.3 billion in loans. The branches are most concentrated in the San Diego area (14), metropolitan Sacramento (9) and Kern County (6).

The deal accelerates Ahmanson’s long-term plan to become more like a bank.

“It has huge strategic value for us,” Charles R. Rinehart, Ahmanson chairman and chief executive, said Thursday.

The deposits being purchased are mainly low-interest checking accounts rather than the certificates of deposit and other savings accounts that typically form the deposit base of a savings and loan. On the lending side, there is a large number of consumer and small-business loans--both areas that Home Savings has targeted for growth as it moves away from concentrating exclusively on home mortgage lending.

For Wells, the sale fulfills the terms of an antitrust agreement with the Justice Department, clearing the way for the First Interstate acquisition, which is scheduled to close Monday. The Justice Department insisted on the divestiture to ensure competition in areas where the combined Wells-First Interstate would dominate the market.

The 61 branches currently employ 781 people, and Rinehart said Home Savings “would be offering jobs to virtually all of them.” Part of the point of the deal is for Home Savings to gain the consumer banking know-how that the branch employees have.

As part of the transaction, Rinehart said Home Savings may also close up to 27 branches--either First Interstate’s or its own.

Under the deal, Home Savings will only pay for the deposits that are still with the branches at the time of the closing, Rinehart said. Home Savings is paying a premium of 8.11% above the value of the deposits.

Gene Galloway, executive vice president for retail banking at Sanwa Bank, said that from Sanwa’s perspective, Home Savings is the best possible winning bidder for the First Interstate branches because it is currently the weakest competitor in consumer banking.

Other institutions that made bids include Bank of the West, Glendale Federal Bank, Great Western Bank, SDN Bancorp, Union Bank, U.S. Bancorp and Zions Bancorporation, according to American Banker, an industry publication.