Charter Completes Acquisition of Troubled Merit Savings

Charter Savings Bank in Huntington Beach said Wednesday that it has completed its $3.5-million acquisition of financially troubled Merit Savings Bank, the only savings and loan catering to the Japanese-American community in Southern California.

The acquisition catapulted the one-office Charter into a five-branch operation with $440 million in assets, more than twice its previous size, said Jon Maddox, Charter’s president.

Mola Development, which owns 90% of Charter, paid $1 million in cash to Merit shareholders and put $2.5 million in cash into Charter’s capital base to merge the Los Angeles thrift into Charter.

Maddox said all Merit employees are being retained, including its president, Keith Kishiama, who will act as a liaison between Merit’s retail operations and Charter.

With Merit, Charter also picked up a sizable retail base composed mainly of first- and second-generation Japanese-Americans who hold accounts in Merit’s branches in downtown Los Angeles, Fullerton, Torrance and Monterey Park.

Charter--strong on building out projects and managing and developing properties--has lacked a consumer-oriented retail base. It has acted mainly as a wholesale operation by buying packages of loans at discounts from other lenders.

More than 14% of Merit’s $220 million in assets at the end of last year were foreclosed real estate and poor or non-performing loans. Bankrupt construction companies, cost overruns and bad projections eventually sapped Merit of its net worth.

Since reaching a merger agreement in January, Mola and Charter have reduced the $30 million in foreclosed real estate that Merit was holding to about $13 million.