Lack of capital reduces bidders for thrift's assets; Security Pacific wins bid for Gibraltar Savings' assets.

Lack of capital reduces bidders for thrift's assets

Security Pacific wins bid for Gibraltar Savings' assets

In its successful bid for some of Gibraltar Savings' prime assets and liabilities, Security Pacific National Bank competed against a reduced field of candidates after a slew of potential bidders were eliminated by the Federal Deposit Insurance Corp. because they had inadequate capital.

Alan Bortel, vice president at Sutro & Co., said the FDIC apparently wanted to see total capital of 4.5 percent of assets, he explained.

Wells Fargo & Co., which had no problem meeting capital requirements, withdrew from the bidding, an industry source said. Wells Fargo, whose main interest in Gibraltar would have been the thrift's branch network, determined Gibraltar's "brick and mortar did not fit into our strategy," the source remarked. Wells Fargo's strategy is to expand its presence in the San Diego and Inland Empire areas. But the bank has already made acquisitions there, and Beverly Hills-based Gibraltar's branches covered too much of the same territory.

The Resolution Trust Corp. has not yet released a list of the companies which bid against Security Pacific for Gibraltar's assets.

For Security Pacific, the acquisition of Gibraltar's assets seem to mark a reversal of its policy of two years when it was streamlining its branch network.

The deal that was off limits or unattractive to others may have made sense to Security Pacific because it could squeeze out more cost savings than the other financial institutions, said Claire Percarpio, financial analyst at Duff & Phelps, the Chicago-based credit rating agency.

Those savings will come from closing redundant branches in areas where the two institutions' branch networks overlap, Percarpio said. The surviving branch in a given area would obtain the deposits of the closed branch.

The price Security Pacific will pay has yet to be disclosed. Estimates range from $150 million to $200 million, based on the amount Bank of America paid for Western Savings of Arizona. In that deal Bank of America paid roughly 4 percent of Western's core deposits.

Whatever was paid, Gibraltar's value declined considerably during the year it was under government conservatorship, said Sal Serrantino, president of Santa Monica-based California Research Corp.

The thrift, which currently has 83 branches in California, lost some of its premier locations during that period, generally because of lapsed leases, Serrantino said. As an example, he cited the Gibraltar Santa Monica branch on Wilshire Boulevard, replaced by a storefront branch.

Gibraltar's core deposit base has also become less valuable as the cost of these funds has risen for the troubled company, Serrantino said.

Whatever its loss in value, Gibraltar's branch franchise was still attractive to some, according to Ian Campbell, a spokesman for Great Western Financial Corp., which unsuccessfully bid against Security Pacific for the branches.

Last month, Great Western picked up 18 Gibraltar branches in Florida with $700 million in deposits for $3.5 million, Campbell said. Last week, Great Western also announced it bought 71 Florida branches of CenTrust Savings Bank of Miami for $86 million. "Even without Gibraltar's California branches we got a lot to digest, and we feel we came out of this round of bidding at the RTC successfully," Campbell remarked.

Security Pacific National Bank, in addition to Gibraltar branches, will pick up $3.9 billion in core deposits and $2.7 billion of loans covering one- to four-family residences.

Gibraltar Financial Corp., the parent of the thrift, filed a petition of bankruptcy under Chapter 11 in February. The S&L's troubles resulted from its loan and investment activities in commercial real estate and mortgage-backed securities.