Valley Federal Given to Dec. 31 to Boost Capital

Valley Federal Savings & Loan said Wednesday that it was granted until the end of this year to meet federal capital regulations. The action by the Office of Thrift Supervision put off the possibility of a seizure of the Van Nuys-based thrift, which could have come as soon as July.

Valley Federal, which is insolvent but profitable, now plans to close or sell about half of its 32 branches and will strive to remain profitable to meet terms of a new capital-boosting plan approved by the OTS. S&Ls; must have a certain amount of capital as a cushion against losses.

Under a previous plan approved in 1990, Valley Federal had until June 30 to meet the requirements.

Valley Federal, which had about $2.69 billion in assets as of Dec. 31, had a profit of $25.7 million in 1990, contrasted with a loss of $137.7 million in 1989. But with liabilities far exceeding its assets, the thrift would have needed an additional $167 million in capital to meet the most stringent federal standards at the end of last year.

As a result, Valley Federal said it can only meet capital requirements at the end of the year through an acquisition by another S&L.; But Scott A. Braly, chief executive of the S&L;, said such a sale this year is “unlikely.”

That means Valley Federal will probably have to ask the OTS for another extension past the end of the year. If the government turns down the request, the S&L; would again face the possibility of seizure.

Valley Federal’s problems stem from its mobile-home lending unit, which suffered worse-than-expected loan losses, forcing the thrift to make steep writedowns. The writedowns led to the S&L;’s huge 1989 loss and wiped out its capital. Since then, the S&L; has taken steps to rid itself of the mobile-home loan problems.