IndyMac Mortgage Holdings has emerged, with a new strategy, from the tough times that hit the real estate investment trust sector last year.

The second half of last year was difficult for REITs as Wall Street dealers pulled financing lines on the entire sector.

But IndyMac of Pasadena, Calif., survived and has advanced its plans to convert to a taxable, depository institution by agreeing to acquire SGV Bancorp of West Covina, Calif.

IndyMac said Tuesday that it will buy the holding company of First Federal Savings and Loan Association of San Gabriel Valley in a cash transaction for $25 per share, or $62.5 million.

SGV has $324 million of deposits, eight branches, and $465 million of assets, primarily single-family residential mortgages and related investments.

IndyMac said its assets and liabilities will be merged into those of the savings and loan holding company, which will put them in its thrift unit. That unit will ultimately be renamed IndyMac Bank. After the transaction, IndyMac will cease to operate as an REIT and will become a taxable depository institution.

Analysts characterized the deal as an aggressive response to the problems facing REITs such as IndyMac, which were primarily financed through warehouse lines of credit and repurchasing agreements.

Margin calls forced Criimi Mae Inc. into bankruptcy last year, and Southern Pacific Funding Corp. filed when its lenders pulled uncommitted lines of credit. The liquidity crisis continued into the new year, with FirstPlus Financial Group, United Companies Financial Corp., and Wilshire Financial Services Group all falling into bankruptcy.

IndyMac's instability was not on its asset side, analysts said, but rather on the liability side of its balance sheet; the best way to stabilize would be to replace short-term Wall Street financing with customer deposits from a thrift.

IndyMac is expected to continue originating loans at its previous pace through brokers and the Internet and to build new volume through branch offices.

Analysts also said that IndyMac was forced to keep its overall balance sheet leverage low to maintain its investment-grade rating. Gary Gordon, a managing director at PaineWebber Inc., said SGV is a good choice for IndyMac.

"First of all," he said, "it's local. Secondly, they wanted some size because they are not in the branch banking business." SGV "was not too big," he added, noting that regulators might have had a problem with IndyMac's buying a one-branch business cheaply and dramatically increasing its size.

Mr. Gordon said deposits are a much more stable source of financing, as shown by last year's credit crunch. He added that the REIT structure is not appropriate for active lenders because it forces them to pay out all earnings as dividends. But Mr. Gordon warned that IndyMac is not completely in the clear.

"In the near term, they will take a hit in earnings, mainly because of tax payments," Mr. Gordon said. "But they will be able to grow more rapidly in the long run, which will offset tax losses, and this is a much better deal for its shareholders."

On news of the deal, SGV closed at $22 per share Tuesday, up 3.53% for the day. On June 1, before reports that a deal was in the works, the stock was at $11.6875.

IndyMac shares fell 3.77%, to $15.9375. On June 1, its shares were at $15.1875.

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