Quit Dividends, Limit Loans, Bank Ordered

Federal thrift regulators have ordered Los Angeles-based Union Federal Savings Bank to stop paying stock dividends and have limited its loan-making ability until the institution comes up with an acceptable plan to raise more capital, officials said Thursday.

The Office of Thrift Supervision imposed the restrictions on Union Federal, owned by Brea-based UnionFed Financial Corp., just two weeks after the parent company was forced to restate its yearly earnings to show an $18.1-million loss.

The thrift, which has $2.5 billion in assets and 27 branches, needs more than $5.2 million to comply with one of the three strict capital standards required under the 1989 thrift restructuring law. It still exceeds the amount required under the other two tests.

The ban on dividend payments means the S&L; would keep more than $825,000 each quarter, or $3.3 million a year, based on its last quarterly dividend of 11 cents a share.

UnionFed’s thrift fell out of capital compliance after the company restated its fiscal year earnings two weeks ago to show a loss for the year that ended June 30. Previously, it had reported annual net income of $11.1 million.

The restatement followed a federal examination of the thrift. Regulators then forced the thrift to write down the values of certain loans, mainly several major commercial loans in Maine, Florida and California.

Earlier the company said that as part of its capital plan, Union Federal would stop making commercial loans and would return to providing mortgages in Southern California. Under the OTS order, the thrift can still make home loans.

Roger L. Kringen, UnionFed’s chairman, said two weeks ago that the S&L; also would stop making construction loans because that market was soft and would halt all lending in other states. Under the federal restructuring law, it also must recoup its $100-million investment in its real estate development subsidiary within four more years.