Plan to Boost Valley Federal Capital OKd : S&L;: The move may stave off a federal takeover. But stiff restrictions remain.
Valley Federal Savings & Loan, apparently dodging a federal takeover, said Thursday that thrift regulators approved its plan to bolster its slim capital reserves.
While the approval appears to save the Van Nuys-based S&L; from the immediate threat of receivership, it does not free Valley Federal from tight operating restrictions imposed in January by the federal Office of Thrift Supervision--restrictions so severe that the S&L; cannot even write new home loans.
Moreover, the plan to bolster its capital--the financial cushion against losses--essentially acknowledges that Valley Federal cannot survive as an independent institution. The OTS-approved plan calls for Valley Federal to shrink its assets, bolster its capital through profits--and then find a buyer before July, 1991.
A key to the plan will be continued profitability for Valley Federal’s core operations, such as its existing home loans. Valley Federal’s core earnings were about $5.7 million for the first quarter of 1990, contrasted with a loss of $1.7 million a year earlier.
But Valley Federal will also have to rid itself of its troublesome mobile home loan portfolio, which was mainly responsible for last year’s $138-million net loss.
And even if Valley Federal remains profitable, the thrift estimates that any buyer would need to provide a $135-million infusion to meet capital requirements by next July, as called for by the OTS-approved plan.