The retrenching of Utah's financial community continued this week as First Federal Savings Bank announced it has signed a letter of intent to buy the $75 million in retail deposits of CrossLand Savings.
The acquisition agreement follows on the heels of last month's announcement that Key Bank of Utah would acquire Citibank Utah's banking operations in the state. Citibank, based in New York, and CrossLand Savings, whose parent company is also based in New York, both came into Utah in the 1980s when changes in state law allowed out-of-state holding companies to buy troubled Utah banks and thrifts - Citibank had acquired Utah First Bank and CrossLand had bought Western Savings & Loan Co.Gerald R. Christensen, chairman of First Federal, told the Deseret News that this latest merger of financial institutions won't be the end of the retrenching.
"You will see a lot of consolidation in this business over the next two to three years," said Christensen. "Utah is overbanked."
CrossLand Chairman Maurice L. Reissman indicated the company was getting out of the savings bank business in Utah for the same reasons Citibank cited last month: to get back to the markets it knows best and in which it has a major presence.
"The sale of these deposits will enable CrossLand to focus its resources more efficiently in those retail banking markets where CrossLand maintains a larger market share," he said. CrossLand's retail banking operation includes some 115 offices in eight states.
Reissman stressed that although CrossLand Savings will leave Utah, CrossLand Mortgage Corp. will retain its national headquarters in Salt Lake City.
Along with CrossLand's 13,000 deposit accounts, First Federal - founded in 1920 - will acquire the company's five branch offices, all located in Salt Lake County. He said it hasn't yet been decided which CrossLand or First Federal offices might be closed as a result of the acquisition but said there will be "some consolidation" of offices.
He said First Federal officers met with CrossLand's approximately 35 employees on Wednesday to tell them of the pending merger. "We will hire a lot of them," said Christensen.
Christensen said he couldn't disclose how much First Federal will pay CrossLand until the end of the month when documents will be signed. He said it would be a cash transaction with no new First Federal stock issued. First Federal has about 1,200 shareholders, and its stock is traded on NASDAQ.
The merger is subject to the usual regulatory reviews and approvals from both companies' directors and isn't expected to be completed until July or August. Richard A. Fisher, First Federal's senior vice president, said CrossLand's depositors would have advance notice as to when the final acquisition will take place.
"It (the acquisition) makes a great statement about our commitment to Utah," said Fisher. "It's a great deal for us."
Christensen agreed. "Everyone that has acquired branches in Utah has been out-of-state banks coming in. We're the first one that has gone the other way. This is a positive statement for us because it says we have the capital to do it."
First Federal is not buying any of CrossLand's loans or investment assets but will acquire its leases, equipment and furnishings. He said that while the takeover will add overhead, it should still have a positive impact on earnings and shareholder value.
"The acquisition will provide First Federal with a larger share of the Salt Lake County market," he said. "First Federal will use a portion of the deposits to repay some of its wholesale borrowings. These retail deposits are more stable over time and are less susceptible to interest rate fluctuations."
He said First Federal's capital will continue to exceed regulatory requirements following the merger. "First Federal will remain one of Utah's strongest financial institutions."
Once completed, Christensen said, former CrossLand customers will be able to conduct their banking transactions at any First Federal office, including the former CrossLand offices. First Federal currently has four branches in Salt Lake City and one in Price.