Ailing United Bank Forced Into Merger but Still Open

Hibernia Bancshares acquired United Bank on Friday in a forced merger that was arranged by federal banking regulators because of United Bank’s well-publicized financial problems, including the run on its main branch in San Francisco’s Chinatown last year.

Banking regulators said United Bank’s 26 branches throughout the state--including six in Southern California--will be open today for business as usual. The branches, however, will be operating under the new name of United Savings Bank.

The merger was arranged by the Federal Savings and Loan Insurance Corp., the government regulatory agency that moves in when S&Ls; get in trouble. (Despite its name, United Bank is a savings and loan association.)

The merger, which represents a union of two of California’s best-known Asian-American financial institutions, is being assisted by $44 million from the FSLIC and another $15 million from Hibernia.

Although forced mergers are not uncommon, this deal is unusual because it merges a savings and loan association into the holding company of a commercial bank. A spokesman for the FSLIC said this arrangement was selected because it represented “the most cost-effective solution.”