U.S. to Merge 14 Oklahoma S&Ls; Into 6; Bailout to Cost $1.9 Billion

WASHINGTON — Making a clean sweep through Oklahoma, the Federal Home Loan Bank Board on Wednesday announced a $1.9-billion rescue package that consolidates the state’s 14 insolvent savings and loan associations into six regional institutions.

The six survivors will be offered for sale today to 30 prospective buyers in Oklahoma and later this month to a list of 1,000 bidders across the nation who want to get into the S&L; business, bank board Chairman M. Danny Wall told reporters at a news conference.

Wednesday’s major consolidation continues the frenetic drive by federal regulators to eliminate a heavy load of crippled financial institutions. Using billions of dollars in notes, and promises to protect buyers against losses, the bank board has avoided dipping into the federal insurance fund that guarantees deposits up to $100,000.

Announcement Awaited

The board has dealt with 94 sick S&Ls; this year through mergers, consolidations, sales and shutdowns. In August alone, nearly $9 billion in notes was authorized to help dispose of 39 insolvent institutions, where liabilities exceed assets.

The fast pace persists: The bank board is expected to make an announcement today about the progress of its negotiations with the Robert M. Bass Group for the sale of Financial Corp. of America’s troubled American Savings subsidiary. FCA is based in Irvine, and American Savings has its headquarters in Stockton.

The mass realignments in the Oklahoma thrift industry disclosed Wednesday will “achieve cost savings” and get the state’s insolvent S&Ls; “completely under our control,” Wall said. The combined thrifts have 94 offices, but 20% of these outlets may be closed as part of the drive to cut operating expenses by $15 million a year.

“We will market these institutions immediately, and, in fact, we already have many expressions of interest from potential acquirers for the surviving thrifts,” Wall said.

The regrouping of 14 diverse institutions into six regional combinations offers greater financial strength and quick market appeal to potential buyers, regulators believe. By contrast, the regulators believe that the massive Sunbelt Savings consolidation in Texas announced last month may require a year of cost cutting and branch closings before a buyer can be found to provide badly needed capital.

Assets of $3.6 Billion

Under the arrangement announced Wednesday, the Federal Savings and Loan Insurance Corp. will provide a rescue package of $1.2 billion in notes for the six remaining institutions. In addition, there will be guarantees against losses on some assets.

The total rescue package could reach a maximum of $1.9 billion over a 10-year period. However, spending by the bank board would be reduced if some of the troubled assets, such as real estate, enjoy a revival over the coming years and can be sold at prices above the current depressed levels.

The combined institutions have assets of $3.6 billion and have been suffering operating losses of $100 million a year.

The bank board generally seeks buyers for ailing S&Ls; among a state’s healthy thrift institutions. If no bidders are found, the regulators then seek other qualified buyers within the state, but from other industries. This gives Oklahoma interests the first opportunity to negotiate for the six thrifts that will go on the market today.

In 10 days, marketing will begin on a nationwide basis, allowing any buyers approved by the bank board for financial strength to negotiate for the Oklahoma S&Ls.; Thrift institutions generally would receive preference in the bidding, but other sources of capital would be accepted if thrift money is not available.

The fast pace of S&L; consolidations will continue, Wall promised, as the bank board heads for its goal of dealing with 259 troubled S&Ls; by the end of next year. “We are beginning to hit our stride,” the bank board chairman said. But he refused to provide details on the number of deals expected in the immediate future or on their potential cost.

Acquisitions Detailed

Wall said S&L; competition in Oklahoma will not be harmed by the bank board’s action, because the state has healthy S&Ls; and because the regulators created regional institutions.

In Oklahoma City, the new Arrowhead Federal acquires Capital Federal Savings and Mutual Federal Savings, both of Oklahoma City. In Tulsa, Community Federal, a new institution, takes over First Oklahoma Savings and MidAmerica Federal. In the northeastern portion of the state, the new Chisholm Federal of Kingfisher acquires Kingfisher Federal and Sunbelt Federal of Watonga.

In central Oklahoma, Heartland Federal of Ponca City, newly chartered, acquires the biggest troubled thrift in the state, Frontier Federal of Ponca City. And in the western part of the state, the newly chartered Red River of Lawton acquires First Federal of Elk City, Home Savings of Lawton, Heritage of Elk City and Peoples Federal of Ardmore.

In the east, Cimarron Federal of Muskogee takes over Home Federal of Bartlesville and Phoenix Federal of Muskogee. Cimarron itself was created in July to take over the insured accounts of Victor Federal, which was liquidated. Thus, Cimarron counts as one of the 14 institutions being merged as well as one of the six survivors.