Union Federal Will Sign Consent Decree
UnionFed Financial Corp. said Tuesday that its savings and loan subsidiary will soon consent to a cease and desist order with federal regulators that will require changes in internal operations.
Some directors of the thrift, Union Federal Savings Bank in Los Angeles, also agreed to pay penalties to the Office of Thrift Supervision, without acknowledging any wrongdoing. The thrift did not reveal the names of directors who must pay the fines or the amounts.
The thrift also said that Roger L. Kringen is retiring as chairman, president and chief executive of UnionFed, effective April 1. He will be replaced by David S. Engelman, a San Diego-area consultant who manages corporate and real estate divestitures.
Union Federal, a 27-branch savings and loan with $2.4 billion in assets, has been losing money as it socks funds away in reserve for possible loan and real estate investment losses. Under a 1989 federal law, it must close down its real estate development subsidiary.
The company reported a loss of $11.6 million for its fiscal second quarter, which ended Dec. 31. That wiped out a modest first-quarter profit and left the thrift with a $10.6-million loss for the first six months and a $18.1-million loss for its 1990 fiscal year, which ended June 30.
The cease and desist order the thrift is expected to sign with OTS would require Union Federal to strengthen internal controls to limit loans to one borrower, develop and implement policies and procedures that comply with regulations and improve other areas in its lending business.
At the end of December, the thrift’s bad loans amounted to 6.63% of its total loans, well above the 1% to 3% that bankers and regulators are comfortable with. Much of its troubles involve a series of loans to a Boston developer.
The thrift does not meet one of three capital requirements imposed by federal law. The thrift last week submitted a plan to regulators to meet the capital rules. The regulators had rejected an earlier proposal.
The company hopes to comply with the risk-based capital requirement by closing its real estate development subsidiary and liquidating the unit’s $129.5 million in assets by mid-1994, the deadline set by federal law.
