The sale of IndyMac Federal Bank was concluded Thursday, and the new owners wasted no time in ditching its tainted name. Starting today, IndyMac is OneWest Bank.
The Pasadena bank's new owners, organized under OneWest Bank Group, bought the bank's $20.7 billion in loans and other assets for $16 billion. That includes $9 billion in financing from the Federal Deposit Insurance Corp. and the Federal Home Loan Bank.
For IndyMac customers it will be business as usual. Checking, ATM cards, automatic bill payments, home loans and the website are expected to work the same way, even as the name is changed.
"It's really going back to old-fashioned banking, where customers and clients and depositors know the staff and the staff knows them," said OneWest Chief Executive Terry Laughlin.
The new owners said they intended to repay the government financing. Laughlin, the former chairman and CEO of Merrill Lynch Bank & Trust Co., will run the bank.
The ownership group is led by Steven Mnuchin of Dune Capital Management in New York. The bank's investors include J. Christopher Flowers, who has specialized in distressed bank purchases, and hedge fund operators George Soros and John Paulson.
IndyMac collapsed in July after borrowers stopped paying on variable-rate mortgages. Depositors, worried the bank was failing, lined up for blocks to pull their money out. The failure is expected to cost the FDIC $10.7 billion.
The new owners are hoping to allay depositors' fears by touting the bank's "tangible common equity," or capital cushion as a percentage of total assets, a key measure of a bank's net worth. That equity is the first line of defense against loan losses; a small tangible common equity cushion increases the possibility that a bank could become insolvent if loan losses surge.
Analysts like to see a number in the 4% to 6% range or higher. That's why eyebrows were raised when Bank of America Corp. recently reported a ratio of 2.6%. OneWest executives say that with assets of $16 billion and a new investment of $1.55 billion, their bank will have an equity ratio of more than 9%.
The FDIC also has agreed to share in future loan losses. Similar to other deals the agency has brokered with failed banks, OneWest will assume the first 20% of losses from borrowers who default. The agency will cover most of the remaining losses.
Mnuchin said the company hoped to double in size over the next five years by acquiring other banks and opening new branches. It plans to specialize in so-called jumbo loans, those tailored to the expensive Southern Calfornia market and exceeding the federal loan guarantee limits. Unlike the old IndyMac Bank, OneWest intends to hold most of its loans rather than selling them to other banks or investors.
Though the banking and loan business will focus primarily on the West, the company intends to build IndyMac's national loan servicing business, which, at $153 billion in loans, is one of the largest in the country. The management team has been working with the FDIC on a loan modification program to attempt to keep people in their homes.
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At a glance
IndyMac Bank customers should not notice much of a change with the transfer of ownership today to OneWest Bank Group. Here is a checklist:
* The name: Over the next several months, all IndyMac materials will be changed to OneWest Bank FSB. The headquarters will remain in Pasadena.
* Branches: All 33 will remain open.
* Website: The site will remain www.indymac.com for now. If you're using the IndyMac website now, you can keep using it. OneWest will launch a site soon in English, Spanish and Mandarin.
* Automatic bill payment: There will be no delay in bill payments drawn on IndyMac accounts.
* Checking: Even though your checks might say IndyMac, you can continue writing, depositing and cashing them at OneWest.
Source: OneWest Bank Group