Washington Federal Savings Bank, Herndon, Va., resolved four years of regulatory pain when it raised $15.3 million in a June stock offering to its existing shareholders.
The Office of Thrift Supervision terminated Washington Federal's capital directive on June 27, which mandated that the District of Columbia-area thrift raise the capital by July 1 or succumb to prompt corrective action measures.
"We sought to raise $15.3 million and received subscriptions for more than $19 million," said Washington Federal chairman William Calomiris.
Washington Federal was the second Washington area thrift to raise capital in the last year through a stock offering. Ameribanc Savings Bank in Annandale raised $30 million in equity last December to bring it into capital compliance.
Washington Federal's risk-based capital, which was less than the required 8% before the offering, now stands at 11.89 percent of total assets. The thrift now qualifies as a "well-capitalized institution" for regulatory purpose.
Such was not always the case. Though Washington Federal has a highly profitable mortgage operation and has earned money over the last four years, the thrift's balance sheet was hammered by the capital requirements imposed by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989.
Washington Federal n 1990, under then-president William Sinclair, a well-known local banker, had its recapitalization plan approved by the OTS. But in August 1991, as shrinkage and earnings proved unable to resolve the thrift's capital problems, the OTS revoked the approval.
Convincing the OTS
At least one prior effort to recapitalize the thrift, through a rights offering and a $9 million private placement of stock to a local investor group, fell through late last year.
But Washington Federal's management, under chief executive Carroll Amos, convinced the OTS that the prospects for raising capital were good enough to extend the thrift's deadline. Legg Mason Wood Walker Inc., the Baltimore brokerage advised Washington Federal on the offering.
The thrift shrunk its footings from more than $1 billion in 1990 to $655.8 million in March. Nonperforming assets, however, remained at 4.35 percent in March, the latest period for which figures are available. In its most recent quarterly statement, Washington Federal said reducing nonperformers is its No. 1 priority.
Mr. Among said the bank expects to dispose of a high percentage of its other real estate owned "at nondiscount prices" in the next fiscal year. He cited the slightly improved real estate market.