The Federal Deposit Insurance Corp. has ordered a struggling Los Angeles thrift to boost its capital and amend its "hazardous" lending practices.
In a cease-and-desist order dated Aug. 15 but released last week, the FDIC said Royal Thrift and Loan had operated with inadequate management and capital and in "such a manner as to produce losses."
The $29.6 million-asset institution was given 30 days to begin taking steps toward upgrading management and 180 days to raise capital equal to 7.5% of its total assets.
Royal hired a new president, Steve P. Duffield, in late summer. Mr. Duffield is credited with guiding the turnaround of once-troubled Brentwood Savings Bank in Los Angeles.
Royal Thrift officials refused to comment on the cease-and-desist order, one of only nine issued by the FDIC this year. And agency officials would not comment specifically on the case. "Our main concern is that they at least address the issues and that they are not dragging their feet," said FDIC spokesman David Barr.
Profitable as recently as 1993, Royal's troubles can be attributed to California's real estate crash, said Barry M. Rubens, a Santa Monica, Calif., bank and thrift consultant. He noted that Royal's proportion of nonperforming assets-13.9%-is the second-highest among California's 31 thrift and loan companies.
(Unique to California, thrift and loans take in deposits and make loans but typically do not offer frills such as checking accounts or safe deposit boxes.)
Royal never "really recovered from the real estate recession," said Mr. Rubens, who is president of California Research Corp. and publisher of a monthly newsletter on the thrift and loan industry.