UnionFed Loses $9.3 Million but Not Its Optimism : Thrift: Brea-based firm says it has greatly improved operations, cut down bad loans and remains on target for a turnaround.
BREA — UnionFed Financial Corp., trying to pull itself out of a quagmire of bad loans, posted a $9.3-million loss for its second fiscal quarter.
But the Brea parent company of Union Federal Savings Bank said it has made great strides in improving its operations and is on target with its revival plan in spite of the $1.25-per-share loss for the three months ended Dec. 31.
“The number of non-performing loans is down, and every loan we have has been completely re-evaluated by an asset management team we’ve put together,†said Michael Hooper, a company spokesman.
The quarterly red ink is less than the loss of $11.6 million, equal to $1.55 per share, in the second quarter of 1990. But for the first six months of the current fiscal year, the company lost $15.9 million, or $2.14 per share, a third more than the loss of $10.6 million, or $1.43 per share, in the same period a year earlier.
UnionFed said its thrift unit, operating under regulatory orders, has met interim requirements for three capital levels and has improved two of those ratios. It far exceeds one ratio, is just shy of meeting a second and is well short of complying with a capital ratio based on the risk of its assets. The last category, especially, should improve as the thrift sells its direct investments in real estate, as required by a 1989 federal law.
Under the orders and a capital plan approved by regulators in September, the thrift must meet certain interim targets to increase its capital and reduce risky investments. The aim of the orders and the plan is to lessen the possibility of another thrift failure.
The quarterly loss resulted mainly from the need to set aside $7.8 million for estimated losses on real estate holdings and $2.3 million for estimated loan losses.
The provision for loan losses mostly covers the thrift’s commercial real estate loan portfolio.
The provision for real estate losses was mainly attributed to the cost of withdrawing from two single-family real estate developments in California. That allowed Union Federal’s real estate subsidiary, Uni-Cal Financial Corp., to stop funding the projects.
For two years, the thrift has had difficulties with specific borrowers in New England and Florida, and Hooper said those problems still exist. The recession in California and the state’s troubled real estate market, however, has further exacerbated the thrift’s problems.
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