IndyMac Mortgage Holdings Inc., a major provider of home loans, said Tuesday that it has agreed to purchase a San Gabriel Valley bank for $62.5 million as part of a plan to shed its status as a real estate investment trust.
The Pasadena-based mortgage lender said that all of its $4.4 billion in assets will be folded into West Covina-based SGV Bancorp Inc., which would be renamed IndyMac. First Federal Savings & Loan Assn. of San Gabriel Valley--a subsidiary of SGV Bancorp--would eventually be renamed IndyMac Bank.
IndyMac officials said the company's transformation into a bank from a REIT will result in lower costs and a more stable source of funds--the bank's deposits. Last year, IndyMac and other mortgage REITs were hit hard when their Wall Street financial sources cut off funds amid worldwide financial crises. In addition, the depressed REIT shares also have limited the companies' ability to raise funds by selling stock.
In the wake of last year's financial turbulence, IndyMac reported a fourth-quarter loss and fired 19% of its staff.
The acquisition will "enable us to move forward with our plan to strengthen and diversify the funding sources for IndyMac and to become a premier financial services entity," Michael W. Perry, chief executive of IndyMac, said in a statement. "We believe the conversion from REIT to a full-service consumer banker provides an enhanced opportunity for our shareholders."
With the deal, IndyMac would pay $25 a share in cash for SGVB--an 18% premium over that company's closing price Monday.
On Tuesday, IndyMac shares closed at $15.94, down 62.5 cents, on the New York Stock Exchange. SGV Bancorp shares rose 75 cents to close at $22 in over-the-counter trading.
SGVB has eight branches, $324 million in deposits and $465 million in assets. These assets are primarily in mortgages for single-family homes, IndyMac said.
The offer is subject to approval by both companies' shareholders.
"IndyMac will have a better operation. It's a win-win situation," said Paul Mackey, an analyst at Buckingham Research Group.