Union Federal Bank, Los Angeles, five years ago a $2 billion-asset California thrift, was closed by the Office of Thrift Supervision on Friday. It was the first thrift failure since May 1995.

For the past several years, the thrift, under new management and with the cooperation of lenders, sold off most of its assets and deposits to shore up its finances. Gains from sales largely offset losses from nonperforming loans, but the institution could not generate enough income to build up its capital.

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