OneWest On Track but Faces Long Haul

PASADENA, Calif. (TheStreet) -- The private equity team that's building the OneWest banking enterprise across the recession-ridden state of California has made great progress over the past nine months, though it will probably take years to reap the full rewards of that work through a sale or public offering.

The former IndyMac Bank was sold to a group of private equity gurus, led by Dune Capital Management's Steven Mnuchin early last year. The transaction was completed on March 19, months after the Federal Deposit Insurance Corp. seized the failed thrift.

The investors -- including J. Christopher Flowers, John Paulson, Michael Dell and George Soros -- are employing a roll-up strategy for their investment. It goes like this: Buy one bank to start a holding company, this one called IMB HoldCo. Then buy other failed or troubled banks throughout the region to form a medium- to large-scale banking enterprise. Use hard bargaining or generous loss-sharing agreements with the FDIC to acquire them on the cheap. Expand business lines through such acquisitions. Once integrations are complete, sell the whole, healthy entity to another bank, or in the public market, generating heady profits.

The process, of course, is easier said than done, but IMB has made great strides in a short amount of time. The consortium recently set its sights on a struggling lender called First Federal based in Santa Monica, Calif., roughly 25 miles away from OneWest's Pasadena headquarters. When First Fed failed on Dec. 18, OneWest acquired its $6.1 billion in assets for about $1.5 billion, and entered a loss-sharing agreement with the FDIC on nearly the entire loan portfolio.