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HOMESTEAD SAVINGS TO OPERATE UNDER FEDERAL GOVERNMENT CONTROL

 HOMESTEAD SAVINGS TO OPERATE UNDER FEDERAL GOVERNMENT CONTROL
 WASHINGTON, Oct. 30 /PRNewswire/ -- The Office of Thrift Supervision (OTS) today placed Homestead Savings, a FS&LA, San Francisco, Calif., in receivership and chartered a new federal mutual institution to take its place.
 The new institution, Homestead Federal Savings Association, will assume certain assets and liabilities of the old thrift, and will operate in conservatorship under the management of the Resolution Trust Corporation.
 The receivership did not result in any interruption of Homestead's day-to-day operations. The institution and its 20 branches, located throughout northern California, will remain open for business as usual. Holders of insured accounts are not affected by the action, which was taken by OTS to protect insured depositors and the interests of the thrift insurance fund. Deposits remain insured to the $100,000 legal limit.
 OTS initiated the action because Homestead was operating in an unsafe and unsound condition in that it had insufficient capital, with no reasonable prospect of replenishment without federal assistance.
 Homestead's condition is due primarily to an over-reliance on high- risk real estate investments made by former senior management, funded largely by expensive brokered deposits. A substantial amount of those assets, composed of apartment buildings, raw and improved land and a commercial real estate development, are non-performing.
 The institution's original strategy was to develop the assets for eventual sale. Some of the assets have been sold at a profit during the past two years. Sales of the remaining assets faltered, however, due to their poor quality and location, and to the inability of the thrift to continue financing the sales. As of June 30, 1992, 65 percent of Homestead's commercial real estate portfolio was made up of loans to finance asset sales, and most of those loans were classified as substandard, doubtful or loss. Overall, classified assets were $270.4 million, or 16.5 percent of total consolidated assets. More recently, sales have been hindered by the severe slump in the California real estate market.
 Homestead reported a net loss of $39.2 million in 1990. Earnings of $19 million in 1991 were generated largely from an exchange of subordinated debt for preferred stock. Earnings of $3.4 million for the first six months of 1992 resulted from one-time gains on the sale of mortgage-backed securities and repossessed real estate.
 Former and current management have cut costs and improved the institution's balance sheet, but earnings cannot be sustained. The remaining assets continue to decline in value, and prospects for disposal are poor. Homestead had been operating under regulatory growth restrictions since 1991.
 Homestead Savings, a FS&LA, was a federally chartered stock institution wholly owned by Homestead Financial Corp., a San Francisco holding company. Shareholders will retain no interest in the new institution.
 As of June 30, 1992, Homestead Savings, a FS&LA, reported assets of $1.64 billion, liabilities of $1.59 billion and tangible capital of $7.9 million, for a tangible capital-to-tangible asset ratio of 0.49 percent.
 -0- 10/30/92
 /CONTACT: Laurie Lavaroni, 415-616-1556, or Marc Adams, 202-906-6677, both for the Office of Thrift Supervision/ CO: Office of Thrift Supervision ST: District of Columbia IN: FIN SU:


TM-LD -- NY102 -- 7391 10/30/92 18:57 EST
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Publication:PR Newswire
Date:Oct 30, 1992
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