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4 Suitors Scan Books as Sale of Mercury Nears

August 28, 1990|JOHN O'DELL and DEAN TAKAHASHI | TIMES STAFF WRITER

HUNTINGTON BEACH — Federal regulators are preparing to sell Mercury Savings & Loan Assn. and sources on Monday said that at least four potential bidders are currently reviewing the books of the $2-billion institution.

Industry sources said the suitors include Security Pacific National Bank of Los Angeles, Great Western Financial Corp. of Beverly Hills, American Savings Bank of Irvine and Santa Monica-based First Federal Savings Bank of California.

Anthony Scalzi, western regional director of the Resolution Trust Corp., the federal agency charged with overseeing the sale of government-run S&Ls, would not identify the potential bidders but said several major California banks and S&Ls are actively pursuing acquisition of Mercury.

"We hope to have a deal done before the end of September," he said.

Spokespersons for potential bidders declined comment, but at least three of the four companies identified by sources have been active in the acquisition arena in recent months.

Because of the growing number of S&L seizures under the tough new financial standards imposed by Congress in 1989, regulators are attempting to speed up the sales process.

Mercury, which was declared insolvent in February, is just one of 18 California S&Ls put up for sale since June. If it is sold as early as next month, it would be one of the quickest sales under RTC management.

With its 24 branches and loyal customer base, Mercury would make a good addition to many major institutions' network of offices, financial institutions consultant Edward Carpenter, head of the Southport/Carpenter Group in Santa Ana, suggested.

Carpenter said several of his firm's large banking and S&L clients are among the institutions negotiating to acquire Mercury's branches, deposits and some of its assets.

In an S&L sale, the government typically retains the assets that got the S&L in trouble--typically loans in default, repossessed real estate and hard-to-sell high-yield corporate bonds.

Mercury, which was founded in 1964 and had grown to nearly $5 billion in assets in the mid-1980s, was declared insolvent and seized by federal regulators in February after posting a loss of nearly $40 million for 1989. At the time, Mercury had about $2.2 billion in assets and $1.8 billion in deposits.

The thrift's problems didn't come from the insider abuses and speculative investing policies that led many S&Ls to ruin. Instead, the losses that ate up its capital came mainly from two large commercial loans that went into default last year and from accounting changes under the new federal financial rules.

So while Mercury's capital was below the minimum required by law when it was taken over, it was in much better financial shape than many other S&Ls that have been seized. That, Carpenter said, makes it an attractive acquisition target.

Of the four institutions known to be interested, Great Western has been the most aggressive in seeking to grow through acquisitions. The company, already the 21st-largest financial institution in California, recently acquired a number of branches on the west coast of Florida, spokeswoman Lynn Taylor said.

In May, Great Western acquired 13 Florida branches of Carteret Savings Bank of Morristown, N.J., for a premium of $26.5 million. The branches had $700 million in deposits.

A month later, Great Western bought 71 branches of CenTrust Savings Bank in Miami for a premium of $61 million and 18 branches of the Gibraltar Savings Bank of Florida, with deposits of $700 million, for a premium of $3.75 million.

At the end of June, Great Western had $39 billion in assets. For the six months ended June 30, the company had net income of $152 million, compared to $109 million a year earlier.

Taylor said Great Western's acquisition strategy is to target markets with growth potential in which the company is not represented and markets, such as Orange County, where it can gain economies of scale from advertising.

Security Pacific Corp., the Los Angeles-based parent of Security Pacific National Bank and the state's fourth-largest financial institution, also has been looking for acquisitions among troubled thrifts, spokesman Chuck Lemoine said.

The company acquired 83 branches of Gibraltar Savings & Loan in June, paying a premium of $141 million and acquiring assets of $5 billion.

Security Pacific has assets of $94.5 billion and reported net income of $383 million for the six months ended June 30.

American Savings Bank in Irvine has just entered the buyout business. The company, acquired by the Robert M. Bass Group in December, 1988, for $500 million in capital and $1.7 billion in government assistance, in June acquired two branches of Huntington Federal Savings & Loan Assn. in Huntington Beach.

American Savings paid a premium of $1.5 million for Huntington Federal, which had deposits of $112.7 million. The privately owned American Savings has assets of $16 billion and reported net income of $214.2 million for 1989, spokeswoman Dianne Nelson said.

First Fed Financial Corp., the parent of First Federal Bank of California, could not be reached for comment. The company is the eighth-largest financial institution in the state.

The Santa Monica-based firm reported net income of $7.1 million for the second quarter ended June 30, up 73% over the same period last year. At the end of 1989, the company had $2.6 billion in assets and 15 branches.

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