New Union Federal Deadline Is Sought on Raising Capital

The holding company for ailing Union Federal Bank said Tuesday that it has asked federal regulators for a 75-day extension of its deadline to raise millions of dollars of new capital or sell the savings and loan.

The Office of Thrift Supervision had given parent UnionFed Financial Corp. in Brea until Friday to complete a sale, merger or recapitalization of the thrift, which has lost more than $170 million since 1990.

UnionFed officials said they have asked for an extension until June 15. Company officials also said they are pursuing two alternatives: sale of the holding company’s interest in Union Federal Bank to another financial institution; or a cash infusion by outside investors augmented by the sale of part of the thrift’s assets and its network of 14 branch offices. Union Bank has more than $850 million in consumer deposits.

Failure by the thrift to comply with the federal order to improve its capital position could result in the appointment of a conservator or receiver, and that could wipe out the investment of the company’s shareholders.

UnionFed officials said the thrift is expected to move one step closer to the legal requirement for a receivership at the end of the first quarter, when new reserves set aside for losses from lending and real estate operations will reduce one of its measures of capital to a level below the federally required minimum.