The Office of Thrift Supervision (OTS) has terminated a cease and desist order to Union Federal Savings Bank, a wholly owned subsidiary of The First Marblehead Corp.

The OTS issued the order against Union Federal, a community bank in North Providence, R.I., on July 2, 2009. The company was ordered to lower risk by reducing its concentration of private student loans, a move it said could cause a "significant" loss.

First Marblehead said market disruptions left it unable to securitize new private student loans since September 2007. As a result, it said Union Federal had more of the loans on its books than had been expected when the OTS approved First Marblehead’s purchase of the bank in late 2006.

The agreements set minimum capital and deposit requirements for the bank, and require Union Federal within 60 days to submit a new business plan covering the 2010 to 2012 fiscal years.

First Marblehead, a Boston-based large packager of student loans, is examining strategic alternatives for Union Federal, including a potential sale.