EDITOR'S NOTE: This story has been corrected from the print version to clarify that OneWest executives have not said they plan to sell the institution.

The biggest thrift in Los Angeles is about to become the county’s second-biggest bank, a move that could signal that the owners of Pasadena’s OneWest Bank are gearing up for a planned public offering.

Though “bank” is part of its name, OneWest is a thrift or a savings and loan association – a designation it inherited from its predecessor, failed mortgage lender IndyMac. Thrifts face limitations on commercial lending and have fallen out of favor with investors, which is likely one reason OneWest has applied to federal regulators to change from a thrift to a bank charter.

OneWest executives have said for more than a year that they plan to take the institution public, though executives reportedly had informal talks with potential buyers last spring and at least one bank investor has mentioned an outright sale as a possibility, according to Reuters. But OneWest’s application for a bank charter bolsters the case that a public offering, not a sale, is the next step.

It’s unlikely OneWest would attempt a public offering while still a thrift, said John Ahn, head of corporate finance at Westwood investment bank B. Riley & Co. Investors prefer banks because they tend to have a more diverse book of business compared with thrifts.

And the industry never recovered from the S&L crisis of more than 20 years ago. In 1988, there were 65 thrifts in Los Angeles County. Today, including OneWest, there are six.

“I don’t think you could go public as a thrift,” Ahn said. “I don’t think anyone in the investment community would invest in an IPO of a lending institution that was a thrift.”

If OneWest’s application is approved, it would be the second biggest among local banks, behind only downtown L.A.’s City National Bank. OneWest’s $25 billion in assets place it $2 billion behind City National, but $2 billion ahead of longtime runner-up East West Bank of Pasadena.

Regulators said they could not comment on the application process.

OneWest executives declined to comment for this report.

Commercial clients

OneWest in July quietly applied to the Office of the Comptroller of the Currency in Washington to be regulated as a so-called national bank and to change its name from OneWest Bank FSB to OneWest Bank, National Association.

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