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SOUTH DAKOTA THRIFT SOLD THROUGH ARP; LACK OF FUNDING HALTS RESOLUTIONS

 SOUTH DAKOTA THRIFT SOLD THROUGH ARP;
 LACK OF FUNDING HALTS RESOLUTIONS
 WASHINGTON, D.C., April 24 /PRNewswire/ -- First Federal Savings Bank of South Dakota, Rapid City, S.D., was sold today to Metropolitan Federal Bank, FSB, Fargo, N.D., through the Accelerated Resolution Program (ARP), a joint effort of the Office of Thrift Supervision (OTS) and the Resolution Trust Corporation (RTC) that greatly reduces the taxpayer cost of resolving troubled thrifts.
 The sale marks the last ARP transaction the agencies are able to complete due to Congress' failure to extend the RTC's funding, OTS said.
 "The RTC has $17 billion in resolution funds that it cannot access because the House of Representatives defeated a bill to remove the funds' April 1 expiration date," said OTS Director Timothy Ryan. "Congressional inaction on this matter threatens the entire resolution process, especially the highly successful ARP.
 "Unless Congress releases existing funding for the RTC and approves proposed legislation for additional funds, bidders interested in ARP institutions may seek other investments," Ryan said. "Available private capital can wait only so long. Moreover, failed thrifts already in receivership that otherwise could be merged or sold through the standard resolution process will languish under government control, at increased cost to the taxpayer."
 Metropolitan Federal, a subsidiary of Metropolitan Financial Corp., Minneapolis, Minn., purchased First Federal Savings for a franchise premium of $2.85 million. Metropolitan will assume all insured deposits of approximately $183 million, and is buying $57.2 million of First Savings' assets with no option to return the assets to the government.
 The RTC will advance an estimated $122.9 million to Metropolitan and will retain approximately $165.6 million of First Federal's assets. Estimated cost to the government is $47.9 million.
 The action was taken by OTS and the RTC to protect insured depositors and the interests of the thrift insurance fund. Deposits remain insured to the $100,000 legal limit. First Federal depositors can continue to conduct business with the acquirer, but should visit the institution to discuss continuation of specific services.
 Ryan emphasized that the lack of RTC funding does not affect depositors' access to their insured accounts at any institution; nor does it necessarily affect the process of initially placing failed thrifts in receivership.
 "It does, however, impose a needless, costly delay on the final resolution of those institutions," Ryan said.
 The ARP is a process by which troubled or insolvent thrifts are marketed and sold through competitive bidding, thereby eliminating the need to place them under more costly government conservatorship. Though insolvent, these institutions can be attractive to investors because of their strong franchise value.
 The RTC has sold 39 institutions with $26.4 billion in assets through ARP; 21 institutions with assets of $23 billion remain eligible for the program. The number of pending ARP transactions accounts for nearly half of the 47 remaining Group IV institutions -- that is, insolvent or troubled thrifts slated for takeover. Those Group IV thrifts posted net losses of $955 million in 1991.
 Ryan said the delay in funding not only will cause those losses to mount, but will further erode ARP institutions' franchise value, "which is the very element that generates investor interest."
 "This delay has occurred just when the investment community has become comfortable with the ARP process," Ryan said. "Each day without funding pushes government and private investor due diligence activity that much farther behind schedule; and the RTC estimates that each day without funding adds millions to the taxpayer cost of resolution. In short, Congress' failure to approve funds amounts to a skein of missed opportunities."
 First Federal Savings Bank of South Dakota was insolvent in that it had negative tangible, care and risk-based capital. As of Dec. 31, 1991, the thrift reported assets of $211.2 million, liabilities of $240.17 million and tangible capital of negative $29.1 million, for a tangible capital-to-assets ratio of negative 13.9 percent.
 -0- 4/24/92
 /CONTACT: Marc Adams of OTS, 202-906-6677/ CO: First Federal Savings Bank of South Dakota; Metropolitan Federal
 Bank, FSB ST: South Dakota, North Dakota IN: FIN SU: TNM


PS -- NY107 -- 2798 04/24/92 20:17 EDT
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Publication:PR Newswire
Date:Apr 24, 1992
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