A Florida thrift and finance company has abandoned plans to buy a bank or thrift in California, finding the prices too steep.
Ocwen Financial Corp., West Palm Beach, had sought to get its hands on cheap deposits to fund its purchases of subperforming commercial and residential loans. The $2.6 billion-asset company, a major buyer of such portfolios across the nation, currently uses expensive wholesale deposits and some borrowings to fund lending and servicing.
Officials went to California in January with the company's investment banker, Friedman, Billings, Ramsey & Co., to seek out potential targets for acquisition. But after looking at the options the company stopped its search, said Christine A. Reich, managing director and chief financial officer.
"The pricing for deposits in California at this point is very high," she said. "It's not currently an attractive investment for us."
Ms. Reich said the company is still looking for acquisitions but isn't pursuing any companies in particular. Some investment bankers said they wish they'd known about Ocwen's search.
"I wish they would call. I could help them," said Jerry Jones, managing director of Duff & Phelps in Los Angeles.
Ocwen did manage to buy a California financial company this year, but it wasn't a depository institution. Last month it bought Admiral Home Loan, Pasadena, which originates subprime mortgages through several offices in California and other western states.
Ocwen itself already services some nonperforming loans in California. Buying a bank or a thrift would have provided some local deposits to fund the lending operations. Most of the company's deposits are now tied up in brokered certificates of deposits from Wall Street and institutional certificates of deposits marketed nationally by the company.
A California acquisition "wouldn't necessarily surprise me," said Jim J. Fowler, a former Ocwen official who is now principal of the financial services group at Montgomery Securities in San Francisco. "They might be able to lower their cost of funds from using retail deposits instead of wholesale deposits. That would make good sense."
But Ms. Reich noted that the higher overhead costs of branch network would outweigh any benefits from having cheaper deposits.
Ocwen, which owns Ocwen Federal Bank in Fort Lee, N.J., cobbled together a branch network by buying failed thrifts but sold off all but one branch in 1994 and 1995.
The company doesn't plan to get back into retail branching, Ms. Reich said, so if it bought a bank or thrift it might sell the branches right away. The company might in fact prefer to buy just deposits, she said.
