Crossland Put on Sale After Posting Big Loss
The Office of Thrift Supervision said Tuesday that it has put capital-poor Crossland Savings, the nation's 14th-largest thrift, on the auction block.
OTS officials said they have lined up three potential bidders and disclosed the name of one-Republic New York Corp.
2d-Quarter Loss Announced
The move was announced concurrently with Crossland's report of a $123.1 million loss for the second quarter, its eighth consecutive quarterly loss and the fourth to exceed $100 million.
The thrift, based in Brooklyn and with branches in seven states, has been hurt by declining real estate markets in the New York area. Its assets fell 22%, to $9.9 billion, in the 12 months through June 30, while deposits were off 8%, to $7.4 billion.
Citing Crossland's inability to comply with a capital-raising program, OTS officials said they wanted to see the institution sold to a healthy bank or thrift before it became subject to seizure by regulators.
The OTS recently took a similar step at $3.7 billion-asset Perpetual Savings Bank, the leading thrift in the Washington market. Perpetual is the largest thrift in the OTS' accelerated-resolution program. Mellon Bank Corp. is among those interested in bidding.
Equity Capital Thins
Crossland, as a Federal Deposit Insurance Corp. member, is ineligible for the accelerated resolution program, but OTS handling of the sale will be essentially the same.
Crossland's second-quarter loss, equal to $8.84 a share, reduced its equity capital to a scant 0.63% of total assets. Its tangible equity capital is negative.
The company's stock did not trade Tuesday after the earnings and sale announcements, and the New York Stock Exchange said the stock would be delisted. It closed Monday at 75 cents a share.
An institution interested in expanding quickly in the New York market would likely find Crossland attractive. The bank has a relatively high proportion of low-cost passbook savings accounts among its $6 billion in core deposits, according to an investment banker familiar with Crossland.
A Well-Placed Bidder
Republic New York, the lone bidder identified so far, is the parent of Republic National Bank of New York, one of the most profitable and well-capitalized banks. Republic in the past two years has acquired two New York thrifts, Manhattan Savings Bank and Williamsburgh Savings Bank.
OTS officials, in a background briefing for reporters, said any transaction would be government-assisted and would likely be completed by yearend. They declined to speculate on the deal's cost.
Crossland will continue to operate under current management until a buyer is identified, but management's activities will be closely supervised by the OTS. "Any lending activities of any sort must first be approved by the regional office of the OTS," said a senior agency official.
The retail network, deposits, and certain assets of Crossland will go to the acquirer, an OTS official said. Crossland's debts and obligations will remain in receivership with few high-quality assets to offset them, so it appears likely that shareholders and bondholders will find their investments worthless. Uninsured depositors may also suffer losses.
Preserving Institutions' Value
The OTS is eager to dispose of troubled institutions quickly and minimize the cost of such disposals, and agency officials said they believe accelerated resolutions accomplish both objectives. Open institutions have been sold at premiums as high as 6.7% over the face value of deposits, while closed institutions often sell for less than a 1% premium.
"I don't think you'll get a higher premium" for Crossland, said Christopher Quackenbush, a partner in Sandler O'Neill & Partners. He said that 1% would be "a reasonable expectation" and that most major New York commercial banks would be interested in bidding.
