Troubled Thrift Union Federal May Be Sold : Finance: Brea-based institution’s parent company weighs options to maximize value.
The parent company of Union Federal Bank is thinking about selling the troubled thrift, according to a letter sent by the board chairman to an investor.
David S. Engleman, chairman and chief executive of UnionFed Financial Corp., wrote in a letter dated Friday that directors of the Brea-based institution are considering a sale as one option “as we pursue a resolution that will maximize shareholder value.”
UnionFed disclosed Aug. 4 in its annual earnings report that it no longer meets regulatory capital requirements and is under increased scrutiny by the Office of Thrift Supervision.
Hurt by bad real estate loans, the company posted a loss of $26.5 million for its fiscal year ended June 30. That compared to a loss of $32.1 million for the previous 12 months.
UnionFed’s stock price dropped to a 52-week low of 25 cents a share the day after the earnings report was issued. It has since recovered somewhat, closing Tuesday at 63 cents a share, unchanged, in New York Stock Exchange trading. Earlier this year, however, the stock was trading at more than $2 a share.
Engleman’s letter was in response to an inquiry about the company’s future by Hamid Boroumand, a bond analyst with the investment firm M.L. Stern & Co. in Beverly Hills. Boroumand said he wrote Engleman as a private investor and that his inquiry was unrelated to his work at Stern.
Boroumand said he estimates that a sale of UnionFed would fetch about $54 million. “When a lot of financial institutions are consolidating,” he said Tuesday, “it would be hard for a small one to survive without consolidating.”
Engleman did not return calls Tuesday seeking comment.
A top executive with the investment advisory company that is UnionFed’s second-largest shareholder said the company, given its financial difficulty, would be wise to consider a sale.
“I don’t think they have any other choice than to investigate these options,” said Robert Rodriguez, senior vice president of First Pacific Advisors Inc. in Los Angeles, which holds 5% of the stock.
The economy is improving for thrifts, but UnionFed may not have sufficient capital to hold on, Rodriguez said. “There’s a value in the company and value in the franchise,” he said, that would make it attractive to a buyer.
The thrift has $918.9 million in assets, $841.9 million in deposits and 14 branches in Orange County.
UnionFed Under Scrutiny
UnionFed Financial Corp.'s board is considering selling the company. Though the company has assets of more than $900 million, its stock price has been declining steadily since the beginning of the year. UnionFed’s stock dropped sharply when it announced earlier this month that it no longer meets federal capital requirements. Monthly closing prices:
Tuesday’s close: $0.63
AT A GLANCE * Headquarters: Brea * Business: Holding company for Union Federal Bank * Chairman: David S. Engleman * Branches: 14 * Deposits: $841.9 million * 1994 loss: $$26.5 million * Assets: $918.9 million
Sources: Bloomberg Business News; Dow Jones; Researched by JANICE L. JONES / Los Angeles Times