Viking Savings shareholders to vote on buyout bid; Hollywood bidder wants to switch to S & L business.

Viking Savings shareholders to vote on buyout bid 

Hollywood bidder wants to switch to S&L business

Shareholders of Viking Savings and Loan Association vote this week on the proposed acquisition of the Santa Monica S&L by Basin Energy Corp.

A special meeting has been scheduled for Jan. 26 for shareholders of the $26.2 million (assets) thrift to vote on the Hollywood-based energy company's offer.

If the sale is given a nod by Viking's 225 shareholders, Basin Energy, a publicly held company that owns mineral leases in Utah, will change its name to Hemingway BankCorp. It also will assign all of its leases to a private investor, according to president George Hemingway. If further exploration occurs on the properties while the leases are in force, Basin Energy will receive a 2 percent overriding royalty, he said. The move from mineral exploration, a business Hemingway said he no longer wants to be involved in, to the S&L industry is based on the president's belief that the next 10 years will be the decade of the S&L.

"The problems the industry is having will be over very soon," he said. "There's great opportunity in traditional lending in the S&L field."

Named for the Santa Monica High School Vikings, Viking has been a traditional lender specializing in single-family home mortgages since it was founded four years ago.

Neither Hemingway nor S&L officials would reveal what Basin Energy bid for Viking. According to analysts, S&Ls generally sell for 1.5 times book value. The book value of Viking's stock, which is not publicly traded, was $1.50 a share last week. If the bid follows the industry norm, Basin Energy would be offering $2.25 a share for Viking's 521,880 outstanding shares, or $1.17 million.

In pricing an S&L, a proposed buyer looks at the quality of assets and management, said Ted Inouye, a partner in the Irvine office of accounting firm Grant Thornton.

Viking had repossessed assets of $519,000 at Sept. 30, or about 2 percent of its total assets, according to data compiled by Sheshunoff Information Services Inc., an Austin, Texas-based financial institutions consulting firm. Repossessed assets averaged 1.1 percent of total assets for all California S&Ls at Sept. 30, according to Sheshunoff.

Viking's regulatory capital, made up of retained earnings, stock and reserves, was 2.73 percent of total assets at Sept. 30, just below the 3 percent minimum required by federal regulators. The S&L lost $515,000 in the first nine months of 1988, according to Sheshunoff.

Even though the S&L's capital is below the required minimum, it is not "distressed," according to Pete Rogers, Viking's president.

"In an industry where one-sixth of the S&Ls are insolvent, we look pretty good," he said.

In fact, the S&L has had a number of inquiries from potential acquirors in the recent past, Rogers said.

Viking is attractive to suitors because it is a small, community-oriented institution with healthy core deposits, he said. Core deposits include money deposited by longtime, loyal customers. Unlike "hot" money that chases the best interest rates at S&Ls across the country, core deposits are stable, remaining at an institution for a number of years.

Basin Energy has not asked for assistance from the Federal Savings and Loan Insurance Corp. to acquire the S&L. While other investors are buying up troubled S&Ls at bargain-basement prices with federal assistance, Hemingway said that strategy is not for his company.

"There are two schools of thought: One says buy a cancer patient and get a government guarantee that the patient will be cured. But if the patient isn't cured, the government will pay the hospital bills," he said. "The other school says take a healthy patient."

Besides shareholder approval, the proposed acquisition also must be approved by regulators and is subject to due diligence research and a definitive purchase agreement.