Home Savings Outbids Rivals for 61 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 (nine) and Kern County (six). None of the branches being sold is in Orange County.

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.

The choice of Home Savings didn’t sit well with at least one of the other bidders.

“Wells advertised one thing and did something else,” said Robert P. Keller of Newport Beach, who headed a group that raised $647 million in an effort to acquire the branches and recapitalize the operation.

Wells Fargo had asked for bids that would keep the branches open, retain the employees and focus operations on commercial banking. That’s exactly what Keller’s SDN Bancorp in Encinitas proposed with its $180-million offer.

“The disappointing thing is that it went to an institution that doesn’t make commercial loans,” Keller said. As a thrift, Home Savings must maintain 70% of its loans and other assets in home financing, but the differences between thrifts and banks otherwise are nearly nonexistent.

“We would have had a large commercial bank that would have been competitive,” he said about SDN’s bid. “That would have been good for consumers, for employees and for the California economy.”

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, Union Bank, U.S. Bancorp, Zions Bancorporation and a consortium of at least four California community banks, sources said.