In one fell swoop, Life Savings Bank of Norfolk, Va., erased several problems from its balance sheet.
The $941 million thrift on Thursday unloaded three hotels from its books for $9.5 million.
The sale of the hotels, all of which are situated in the Williamsburg area, will decrease the bank's nonperforming assets by 71%, from $9 million to $2.6 million, bank officials said.
"This is a win-win for both the purchaser and the bank," said Tollie Rich, executive vice president and chief operating officer. "We're in business to make loans not to operate hotelS, so we're glad to make this transition.
Life Savings, which foreclosed on the hotels in 1991, will provide the financing for the new owners, called Newport Hospitality Group.
The Williamsburg-based group, described as a property managemerit company, will receive an $&5 million loan from Life Savings,
As part of the deal, Newport Hospitality will place $1.5 million in an escrow account at the bank to be used as collateral on the loan and for capital improvement of the hotel properties, bank officials said.
Bank officials estimate the transaction will result in a net gain of $1.2 million for the bank.
The gain, however, will be recognized annually over the next 10 years or less from interest and principal payments on the loan, they said.
Mr. Rich said the bank had been marketing the hotels "vigorously" for the. past year and had negotiated with at least three or four parties in that time.
Newport Hospitality was the most desirable buyer in part because it has been managing the hotels for the bank for the past three years, he said. "We're very pleased to have these individuals (Newport Hospitality) on the property," Mr. Rich said.
The hotels suffered in the late 1980s in part because of the overbuilding in the area and the recession. Michael Pleninger, head of the group who bought the hotels, believes the demand for hotel rooms is catching up with the supply.
As for Life Savings, the sale will benefit the bank's already improving net interest margin. As a result of its recent mutual-tostock conversion and other asset/liability activities, the bank's gap between interestearning assets and interest-bearing liabilities was negative 3.04% by Sept. 30, 1994, compared with negative 18.44% six months before, the bank said.
Life operates 17 branches in southwest Virginia.