Great Western Bank acquires Lincoln S&L; branches


IRVINE, Calif. -- Great Western Bank acquired yesterday the deposits and 28 branches of Lincoln Savings & Loan for $12.1 million. Federal regulators also disclosed that the taxpayer tab for cleaning up Irvine-based Lincoln will be $2.6 billion, making it the costliest S&L; collapse ever.

The sale means that the once high-flying Lincoln -- whose demise is linked to speculative real estate and "junk bond" investments -- will be removed from the rolls of the nation's money-losing thrifts.

Lincoln and its former owner, Phoenix businessman Charles H. Keating Jr., have become symbols of all that went wrong in the thrift industry.

Lincoln's legacy lives on in U.S. Senate corridors, federal and state courtrooms and in the memories of thousands of Southern California investors who lost savings there.

In a separate development yesterday, federal prosecutors in Los bTC Angeles filed a criminal complaint against Ray C. Fidel, a former Lincoln president, for securities fraud stemming from the marketing of junk bonds at Lincoln branches.

The charges are the second set stemming from a federal grand jury investigation of Lincoln's failure. The inquiry is targeting Keating, former chairman of American Continental Corp., Lincoln's Phoenix-based parent.

The Resolution Trust Corp., the federal agency overseeing the bailout of insolvent thrifts, put Lincoln up for sale in November. Beverly Hills, Calif.-based Great Western said it acquired more than $2 billion in Lincoln deposits and what it termed "a jewel of a branch system."

The Lincoln branches will be reopened Monday for business as usual as Great Western offices.

Great Western did not acquire any of Lincoln's assets, which includes vast real estate holdings in the Arizona desert and some junk bonds.

Regulators have said that Lincoln's assets were overvalued and they have written them down over the past two years.

The $12.1 million that Great Western paid for the deposits is considered cheap by industry consultants, a fact acknowledged the thrift's chairman and chief executive, James F. Montgomery.

"The acquisition of Lincoln Savings on these favorable terms is an outstanding opportunity to expand and complement Great Western's California branch system," Montgomery said. "It will enable Great Western . . . to enlarge its customer base."

The payment represents just 1.2 percent of Lincoln's $1 billion in so-called "core deposits" -- stable money that is less likely to be shifted by depositors to other institutions. Such deposits are valuable also because they provide a cheap source of funds.

Institutions typically pay lower amounts of interest on those accounts than they do for other sources of money.

By buying the deposits of Lincoln and other failed thrifts, Great Western can replace its higher-cost deposits, such as borrowings from the Federal Home Loan Bank system and large deposits from institutions that demand high rates.

Great Western's purchase will give the institution nearly $30 billion in deposits and 241 retail banking branches in California. Great Western has 164 additional retail branches in Arizona, Florida and Washington state. It has been particularly active in Florida in the last year, picking up branches there from four failed thrifts run by the government.

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