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BankAmerica Buys Arizona's 2nd-Largest S&L : Thrifts: It outbids Wells Fargo and Security Pacific in a federal auction. Other banks have suffered huge losses in the state in recent years.

June 02, 1990|TOM FURLONG | TIMES STAFF WRITER

BankAmerica has bought the branches and most of the healthy assets of Phoenix-based Western Savings & Loan, Arizona's second-largest thrift, for $81 million, it was disclosed Friday.

The sale was arranged by the Resolution Trust Corp., the federal agency created last year to dispose of assets of ailing thrifts. It is expected to eventually cost the government about $1.7 billion because it is retaining Western Savings' problem assets.

BankAmerica's winning bid bested offers from two of its prime California competitors, Wells Fargo & Co. and Security Pacific Corp. "The bidding was pretty heated," said Robert W. Stallings, a Phoenix-based real estate consultant.

In entering the Arizona market in a major way, the San Francisco-based parent of Bank of America is treading where other out-of-state banks have sustained huge losses in recent months--a result of the region's real estate collapse.

Yet, many banking and real estate experts say, the worst is over in Arizona. They point out that BankAmerica has insulated itself from major problems by agreeing to take over only $1 billion in consumer loans and residential mortgages and $2.5 billion in cash and other liquid investments.

BankAmerica also assumed $3.5 billion in deposits in 61 branches, which opened Friday under the name Bank of America Arizona. It also bought a Western Savings branch in Salt Lake City.

"They have insulated themselves against any major fluctuations in asset values," said Stallings, a banking trouble-shooter who ran Western Savings last year at the behest of regulators.

The RTC has retained nearly $3 billion in Western Savings assets, many of which are troubled. As was most large financial institutions in Arizona, Western Savings was ravaged by write-offs in the wake of the real collapse of 1988 and 1989. It invested heavily in raw land and commercial real estate.

In its better days, the financial institution was run by the Driggs family, a wealthy Phoenix clan well known for its involvement in politics, culture and philanthropy. Stockholders' equity in the thrift was wiped out when regulators took over last June.

Some Phoenix residents viewed the BankAmerica investment as a positive sign for a region whose real estate and banking woes have often been compared to those of Texas.

"A lot of institutions think the economy (in Arizona) has very good long-term potential," said Jay M. Pulis, a senior manager in the Phoenix office of Kenneth Leventhal & Co., an accounting and real estate consulting firm. "It's an opportunity to get into the market (at a price) that you could never do otherwise."

"It's a good market, and it's going to be better," said Thomas Peterson, vice chairman of BankAmerica and head of its retail consumer banking operations. "It's not the same as Texas."

Not everyone, though, is enthusiastic about yet another out-of-state bank buying an Arizona-based financial institution. All but one of Arizona's major commercial banks are now owned by companies headquartered in California or New York.

"The bad news is that this is just another major (local) financial institution that has been colonized," said real estate developer Elliott Pollack, a former economist at Phoenix-based Valley National Bank.

Likewise, it is not clear if Arizona has seen the worst of its real estate problems. Though the number of foreclosures in the Phoenix area is not increasing as fast as it was, the dollar value of the real estate going into foreclosure is rising dramatically, according to Ralph Shattuck, publisher of the newsletter Foreclosure Update.

"The first-quarter statistics were awful," Shattuck said, noting that residential and commercial loan foreclosures in the first three months of 1990 totaled nearly $1.3 billion.

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