UnionFed to Revise Blueprint for Raising Capital
Troubled UnionFed Financial Corp., which has been gushing red ink for more than two years, said Thursday that it must revise its plan to raise capital in light of continuing losses at the thrift holding company.
The parent company of Union Federal Savings Bank in Los Angeles, which has been operating under federal regulatory restrictions, reported late Thursday that it lost $22.1 million, equal to $2.97 a share, for its fiscal year ended June 30.
The loss was about a third of the $64.7 million, or $8.68 a share, lost in its previous fiscal year. The company’s annual revenue fell nearly 16% to $126.2 million from $149.8 million last year.
UnionFed’s fourth-quarter loss was $4.8 million, or 54 cents a share, compared to a loss of $41.1 million, or $5.51 a share, in last year’s fiscal fourth quarter. Quarterly revenue rose threefold to $28.5 million from last year’s $9.1 million.
The savings and loan fails to meet two of the three standards for capital required by federal regulators. Its plan to increase its capital levels, approved by regulators, now must be revised, the company said.
The Office of Thrift Supervision now wants a plan that will give the S&L; enough new money to raise its core ratio of capital to assets to 5% by the end of next June and to raise its ratio of capital to risky assets to 10% by the same date. Previously, the thrift had been required to raise its capital levels to 4% and 8%, respectively, by the end of 1994.
The thrift’s core capital level at the end of June was 2.9% and its risk-based capital was 5.2%. Those levels are short of the currently mandated levels of 3% and 7.2%, respectively.
In prepared remarks, thrift officials said the S&L;’s basic operations continue to perform well, but its ability to return to profitability “depends greatly on real estate and general economic conditions and regulatory and legislative developments impacting the banking industry.”
Union Federal’s troubles stem from a portfolio of bad commercial loans and a series of real estate and joint venture projects that have gone sour. Under federal law, it must reduce its real estate holdings to 2% of assets by the end of 1994.
The company, meantime, continues to shed assets as part of a strategic plan to improve its capital ratios. At the end of June, its assets had fallen 26% to $1.6 billion from $2.15 billion a year earlier.
