Cenfed Financial Corp., Pasadena, Calif., closed on its acquisition of United California Savings Bank on Monday, but at a price $500,000 less than originally negotiated.

For $6.5 million, well below book value, Cenfed picked up eight branches in affluent Orange County and expanded its retail customer deposit base by $405 million, or 45%. And, though United California had a good-size nonperforming asset ratio, Cenfed is taking on relatively little credit risk.

The deal illustrates the stark difference between the losers and winners among community thrifls in Southern California. Cenfed and its Cenfed Federal Savings Bank have been riding high in the last two years while most Southern California thrifts have gotten nailed by declining real estate prices.

A More Typical Thrift

Anaheim-based United California, on the other hand, is more typical ofmidsize thrifts in the region. It hasn't made money in three years, has had a steadily increasing nonperforming loan portfolio - to 8.13% of assets at the end of 1993 - and its core capital has been chronically low.

Interest rates have hurt United, to boot. The deal with Cenfed originally called for $6 million in stock and $1 million in cash, but Cenfed reduced the cash portion to $500,000 because the rise in rates has devalued United's loan portfolio.

"Yes, we got a good deal," said Steven Neiffer, spokesman for Cenfed. "The bottom line is that there looks to be some negative goodwill on their books."

Part of the merger agreement called for United California to sell its real estate loan portfolio at a prescribed minimum price. Cenfed will sell virtually the entire single-family real estate loan portfolio, all $216 million of it, and keep just $70 million worth of commercial and multi-family residential loans.

"Maintaining our asset-quality profile is very important to us, so we will apply conservative valuation allowances when we record these loans on our books," said D. Tad Lowrey, chief executive of Cenfed.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.