LOS ANGELES -- Federal regulators announced Friday they have agreed to sell the assets of failed 136-branch HomeFed Bank, including $4.7 billion in deposits, to four financial institutions for $163.8 million.
Most of the assets will be acquired by Great Western Bank, which will buy 119 branches and $4.1 billion of deposits for $151 million.
The Resolution Trust Corp., which took over HomeFed a year and a half ago, said most of the HomeFed offices will reopen on Monday and operate according to their normal schedules.
The agency said the combined premium of $163.8 million is the largest premium offered to the RTC for a single institution.
First Interstate Bank will buy four offices in west Los Angeles, with deposits of $246.5 million; three west Los Angeles offices with deposits of $143.2 million were acquired by First Federal Bank of California; and eight offices in the Barstow/Apple Valley and San Bernardino/Riverside areas, with deposits of $191.4 million, were acquired by Home Savings of America.
HomeFed was one of the largest savings and loans ever seized by regulators. The RTC said it received 62 bids for the HomeFed assets, which were viewed as being capable of drawing interest because of the attractive branch network.
The RTC previously sold 56 HomeFed branches with $1.6 billion in deposits in northern and central California to a variety of buyers.
The Office of Thrift Supervision handed over control of HomeFed, the nation's eighth largest savings and loan, to the RTC in July 1992 after it could not find a buyer for the San Diego-based institution, which had 206 branches and $13.5 billion assets at that point.
Regulators have not yet estimated how much the HomeFed bailout will cost taxpayers. HomeFed has assets of $4.3 billion and liabilities of $5 billion, including $4.7 billion in 441,000 accounts and $300 million in liabilities that will not be sold to the four buyers.
The RTC said two HomeFed branches in Julian and Ridgecrest, holding $36 million in deposits, will not be reopened, since no bids were submitted for the offices. The RTC will directly pay off the insured deposits.
Great Western, the nation's second largest thrift after Home Savings, said the deal will more than triple its deposit market share in San Diego County.
James F. Montgomery, chairman and chief executive of parent Great Western Financial Corp., said the deal will help Great Western meet several of its strategic objectives including growth in transaction or checking account balances; improved fee and commission income; and the development of a comprehensive California branch network that delivers economies of scale.
Great Western did not indicate if there will be layoffs to the 2,300 employees currently working for HomeFed.
Great Western, which has assets of $37.6 billion, has been hit with problems stemming from the three-year California recession and is in the middle of a cost-cutting campaign. It lost $17.5 million in the third quarter and may face a fourth-quarter loss if it has a significant number of layoffs to the 16,000-employee work force.
Great Western's problem loans remain at a level far above the 2.8 percent average for major savings and loans despite efforts to keep knocking bad loans off its balance sheet. It has also been hit by lagging earnings and criticized for high operating costs.
California has been a graveyard for the formerly high-flying thrift industry. Among its more spectacular failures were Lincoln Savings, which led to Charles Keating Jr. serving time in federal prison for a junk-bond scam, and Columbia Savings, a favorite investment vehicle for convicted junk-bond swindler Michael Milken.
But HomeFed was done in mostly by the collapse of the state's real estate market, following in the footsteps of Valley Federal, Imperial Savings, Great American Bank, Mercury Savings and Santa Barbara Savings.
At the time of the HomeFed seizure, chief U.S. thrift regulator Timothy Ryan, who later resigned, blamed Congress for failing to provide more funding for the industry bailout and said the lack of money had undermined regulators' efforts to find a buyer for HomeFed.
But HomeFed had been a problem institution for several years. Its increased reserving for loan losses sucked away its cash, leaving it hundreds of millions of dollars short of meeting minimum capital requirements.
HomeFed was clobbered by mounting bad real estate loans and lost $807.7 million in 1991 and $248 million in 1990. It was placed in April 1992 in a special government program to make it institution more attractive to a potential buyer.
