Pulling back sharply from plans to build a Washington area consumer banking network, Meritor Financial Group, a giant Philadelphia-based financial services firm, has put its local operations on the selling block.
Meritor Financial officials said yesterday that they have decided to sell the 20 local branches of the Arlington-based Meritor Savings Bank, barely two years after the company made a grand entrance into the Washington market by buying two ailing savings and loan institutions.
The company did not say how much it hoped to get for the operations.
The move comes less than two months after the parent company said it had no plans to sell the local bank, which has 35,000 customers in all three local jurisdictions. The local operation has more than $500 million in deposits and $800 million in assets.
Company officials said yesterday they had decided to reverse course to help raise $50 million in capital needed for a major corporate restructuring to boost earnings. The restructuring was announced in October after Meritor Financial, a nationwide company with $19.6 billion in assets, reported a $379 million loss in its third quarter, including a $330 million writedown.
When the restructuring was announced, the parent company "did not think that the Washington branches would be affected, because it is a good market," said Joseph Barrett, a Meritor Financial spokesman. "But at that point we did not have the investment bankers going in to evaluate our operations."
Since then, the firm's investment adviser, First Boston Corp., has identified the Washington area operation as a good sale opportunity, Barrett said.
Meritor also is planning to sell one of its mortgage banking subsidiaries and the auto financing arm of a consumer credit subsidiary, he said.
Barrett also said the $50 million that Meritor Financial hopes to raise from all of these transactions will pay for a reshuffling of the company's loan portfolio aimed at emphasizing variable-rate mortgages instead of fixed-rate mortgages, which dropped sharply in value when interest rates rose last spring.
Although no sales price was given, Carl A. Modecki, president of Meritor Savings Bank, said bank branches typically sell for 4 percent to 5 percent of deposits -- putting the prospective cost of purchasing the branches at about $25 million. However, he said, these branches could fetch more because of their prime locations.
Modecki said he was disappointed by the decision to sell because, after two years on the job, the local management team was on target to meet its three-year goal of breaking even on an operating basis.
But he said Meritor Financial's plans changed after a number of large transactions in the past several years in addition to its entrance into the Washington market. "They had a lot of acquisitions, and as they started to work the acquisitions they felt there were more ... than they could comfortably manage."