Bank Pays $101,000 for Western Empire’s Deposits : Bailout: Southern California Bank acquires nearly $135 million in failed S&L;’s insured accounts. The thrift’s two branches opened Tuesday as offices of the bank.

IRVINE — Southern California Bank paid $101,000 Tuesday for nearly $135 million in insured deposits at the failed Western Empire Savings & Loan, which was seized by regulators in February.

The thrift’s two branches opened Tuesday as offices of the Downey-based SCB after the transaction was approved late Friday by federal regulators running the S&L.;

SCB will keep Western Empire’s Yorba Linda branch--the thrift’s original headquarters and the heart of its operation--but will close the Irvine branch within a month, said Norman Morales, the bank’s executive vice president.

The ultimate cost to taxpayers for the S&L;’s collapse was estimated at $24 million by the Resolution Trust Corp., the federal agency that operates and liquidates failed thrifts.

All deposits continue to be insured to the federally guaranteed limit, but the bank can lower interest rates on deposits after two weeks. The bank has the option to return portions of about $135 million in assets and to purchase other assets within 60 days.

Western Empire got into trouble in the mid-1980s with large commercial loans and other real estate properties. It was insolvent but not seized in late 1988 when regulators approved its sale to Castle Harlan Inc., a New York merchant banking and investment firm.

Castle Harlan put $15.8 million in cash into the purchase and received approval from regulators to revive the thrift through the purchase of junk bonds, high-yield, high-risk debt securities. But the federal law that restructured the thrift industry in August, 1989, banned such investments by S&Ls;, and the junk bond market began to fall.

Western Empire had $191.8 million, or 33.8% of its $567.8 million in assets, in junk bonds, and the writedowns it had to take wiped out its capital.

SCB, which has $415 million in assets and 16 branches, was one of only two bidders for Western Empire. Regulators would not release the name of the other bidder. The RTC accepted the SCB’s bid because it deemed it to be the least costly proposal.

Morales said more than $100 million in Western Empire’s deposits are in high-cost certificates of deposit--so-called brokered deposits--that the thrift had brought in from money brokers to finance its business strategy.

Those high rates will be reduced after two weeks, Morales said, and customers will have right to take their money out without penalty for early withdrawal. He said the bank expects all the brokered deposits to be withdrawn, leaving the bank with about $33 million in deposits from customers who live in the Yorba Linda area.

“We’re very excited about the transaction,” Morales said. “The Yorba Linda community is a natural fit with our offices in Placentia and Anaheim Hills and the type of business we seek.

“Western Empire has a very tight community-oriented branch,” he said. “It has a very good name here.”

The bank will keep the seven employees at the Yorba Linda branch, he said, and nearly 30 employees at the Irvine headquarters branch will work for the RTC only as long as it takes to wind down operations that aren’t being sold to the bank.