Says Only that Thrift Unit Never Intentionally Discriminated in Loans

ATLANTA - DFSoutheastern, Inc. declined to comment Wednesday on reports that its thrifts subsidiary was the target of a Justice Department probe into discriminatory lending practices.

Robert C. McMahan, DFSoutheastern's chairman and chief executive, would only say that Decatur Federal Savings and Loan Association "has not internationally discriminated against any mortgage loan applicant.

"If there are any outstanding questions concerning our policies and practices, you have my word we will work to address those issues," Mr. McMahan added in a prepared statement.

A Four-Year Probe

DFSoutheastern was responding to reports in Wednesday's edition of the Atlanta Journal-Constitution that the Justice Department was preparing to take legal action against the $2.7 billion-asset thrift following a four-year probe into alleged bank discriminatory lending practices in Atlanta.

Atlanta-based DFSoutheastern agreed on Monday to be acquired by First Union Corp., Charlotte, N.C., for about $143 million in stock.

A source close to the deal said Decatur Federal had kept First Union officials fully informed of the Justice Department probe and that First Union felt that situation was "totally manageable."

First Union expects Decatur Federal to reach a settlement soon and does not plan to announce any major new community lending initiatives of its own, the source said.

In addition, the source said First Union does not expect the controversy to delay its acquisition of Decatur-Federal, which is scheduled to close at yearend.

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