Unified Savings Bank Folds; U.S. Board Will Run It
Unified Savings Bank, a Northridge financial institution beset by bad loans and costly deposits, was declared insolvent and seized by federal regulators Friday.
The Federal Home Loan Bank Board said the depositors holding Unified’s 2,037 accounts will not be affected. The bank will reopen Tuesday--Monday is a bank holiday--under the federal bank board’s supervision as Unified Savings, a federally chartered, depositor-owned institution.
Chartered as a California thrift in March, 1983, privately held Unified had assets of $105.6 million on June 30, but its liabilities exceeded that by $1.0 million. For the first six months of this year, Unified lost $2.7 million.
Fast-growing Unified was “insolvent, had suffered a substantial dissipation of assets and earnings, and was in an unsafe and unsound condition to transact business,” the federal bank board said in a news release.
Unified’s growth in part was because it paid high interest rates to big depositors. When it failed, $87 million of its deposits were for more than $100,000 each. About $14 million of these were volatile deposits obtained through money brokers attracted by above-market interest rates.
The federal board added that, in May, 1984, Unified “began making high-risk, non-residential construction loans,” many of which went bad.
Victim of Fraud
Unified also was the victim of a fraud perpetrated by 43-year-old Victor Bagha of Orange, who arranged a total of $3 million in loans from Unified and Mitsui Manufacturers Bank, ostensibly to build stretch limousines for the 1984 Olympics.
Bagha, also known as Michael Victor Louciano, was convicted of conspiracy and bank fraud in June, and was later sentenced to 18 years in prison. Unified won a judgment of more than $1 million against him in Superior Court but never recovered the funds.
Martha L. Badila, a spokesman for the federal bank board, said the bank also broke various federal rules, including those governing internal controls and limits on loans to a single borrower. The identity of the borrower and the amount lent were not disclosed.
Unified employs 22 staffers at a pair of offices in a shopping center on Tampa Avenue south of Nordhoff Street. Badila said the S&L;’s offices will remain there.
She added that her agency named a new five-member board of directors to replace Unified’s board, which was fired. Until 3 p.m. Friday, when federal regulators took over, Unified’s chairman was Terry L. Donnelly, Badila said. Neither Donnelly, who previously resigned as president of the thrift, nor any other former Unified directors could be reached for comment.
New Officers
The new president is William J. Verant, formerly senior vice president of Mercury Savings & Loan in Huntington Beach. The new chairman is Robert W. Hubbard, former president and chief executive of Imperial Corp. of America, the holding company for San Diego-based Imperial Savings.
Badila said the new institution has enough working capital to stay in business without a cash infusion from the federal government, and that no Federal Savings & Loan Insurance Corp. funds are needed to cover deposits.
She said Unified is not being liquidated, but is being placed in the government’s management consignment program to save failing thrifts. Badila said 19 thrift institutions have actually failed this year.
