Glendale Federal to Buy 13 of 14 Union Federal S&L; Branches : Purchase: The Brea-based thrift, badly hurt by the recession and under pressure from regulators to raise capital, will receive $6.6 million cash for loan offices and deposits.
BREA — Long-suffering UnionFed Financial Corp., beset by enormous losses for six years, said Monday that it has agreed to sell 13 of its 14 savings and loan branches and $820 million in deposits to Glendale Federal Bank for $6.6 million in cash.
The Brea parent company of Union Federal Bank--chronically short of capital, its final reserve against losses--also could receive additional payments based on the performance of a portfolio of about $200 million in loans over the next three years.
The purchase dramatically expands Glendale Federal’s presence in California, said Jeff Misakian, a Glendale Federal spokesman.
“We’ve said we want to build our retail network of branches in California and we’re following up on that,†Misakian said. “Union Federal is in a number of locations we aren’t in currently.â€
Union Federal was once a strong regional thrift with more than $2.5 billion in loans and other assets and was heavily involved in funding real estate construction and its own real estate deals.
But the long recession, along with changes in federal law that severely curtailed thrift investments, devastated both its real estate holdings and its large developer customers. It lost $178.8 million over the past six years and had shrunk to $912 million in assets by the end of December.
“This is pretty much the end of Union Federal,†said Campbell K. Chaney, an industry analyst with investment banker Rodman & Renshaw in San Francisco. “I don’t see how their shareholders will ever recoup. Glendale is the clear winner in this transaction.â€
The deal is part of UnionFed’s plan to sell substantially all of its assets and liabilities to boost its capital in the face of a June 30 deadline set by federal regulators. Union Federal Bank is “significantly undercapitalized,†according to federal guidelines, with its capital amounting to only 2% of its assets. Regulators could seize it if the sale doesn’t go through by the end of June.
Under the deal, Union Federal will retain only its Downtown Los Angeles office and deposits there, along with about $35 million in assets.
Glendale Federal, which closed a deal earlier this month for another Orange County thrift, Independence One Bank of California in Mission Viejo, will continue to operate 10 of the 13 Union Federal branches, closing offices in Anaheim, Sherman Oaks and Encino and transferring those operations to nearby Glendale Federal branches.
The Glendale thrift, one of the nation’s largest with $15.7 billion in assets and 135 branches, will keep open branches in Anaheim Hills, Seal Beach, Fountain Valley, Mission Viejo, Huntington Beach, Van Nuys, Long Beach, Gardena, Silver Lake and Newbury Park.
Glendale’s stock jumped 87.5 cents a share to close at $14 a share, while UnionFed was unchanged to close at 12.5 cents a share in New York Stock Exchange trading.
“With Glendale’s purchase of the Union Federal branches, they are improving their retail mix and moving into new communities,†said Claire Flemming, a bank analyst in Arlington, Va. The thrift “is extraordinarily attractive, and investors certainly reacted favorably.â€
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UnionFed Sells Assets
UnionFed Financial, holding company for Union Federal Bank, is selling a majority of its assets to Glendale Federal Bank. Here’s a look at the two companies and the deal:
UNIONFED FINANCIAL CORP. * Headquarters: Brea * Chairman / CEO: David S. Engleman * Employees: 160 * Branches: 14 (selling 13) * Assets: $876 million* * Net earnings: -$15.2 million* * Selling: Offices in Anaheim, Anaheim Hills, Encino, Fountain Valley, Gardena, Huntington Beach, Long Beach, Mission Viejo, Newbury Park, Seal Beach, Sherman Oaks, Silver Lake, Van Nuys; $820 million in deposits * Price: $6.6 million * Retaining: Downtown Los Angeles office with $25 million in deposits; $35 million in assets
GLENDALE FEDERAL BANK * Headquarters: Glendale * Chief executive: S. J. Trafton * Employees: 2,280 * Branches: 135 * Assets: $15.7 billion (9th largest in California)* * Net earnings: $63 million*
* Nine-month figure for period ended March 31, 1995
Sources: Times reports; Glendale Federal Bank
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