North Providence-based Union Federal Savings Bank must stop making student loans as the result of an order by the U.S. Office of Thrift Supervision requiring the bank’s parent company to lessen its reliance on the private lending packages.

Union Federal and its parent, Boston-based First Marblehead Corp. (FMD:NYSE), agreed to special oversight by the OTS and accepted a cease-and-desist order from the federal regulator. Under the agreements, the bank must either boost the capital it has on hand or sell off some of its student-loan portfolio.

The agreements set minimum capital and deposit requirements for the bank and require Union Federal to submit a new business plan within 60 days that covers the 2010, 2011 and 2012 fiscal years. First Marblehead must maintain a $30-million deposit at the bank until it is sold or the bank’s concentration of private student loans is cut to 50 percent of Union Federal’s capital, plus allowances for loan losses.

The bank must also get OTS approval before awarding any “golden parachute” payments to bank employees.

“We have been working diligently on addressing these issues in collaboration with the OTS. We have already taken several steps to reduce the private student loan concentration at the bank and First Marblehead has acted as a source of strength for the bank, providing capital and operational support. We are committed to continuing this progress and resolving all of these issues completely,” said Daniel M. Meyers, First Marblehead’s chief executive officer.

First Marblehead has struggled since its guarantor of private student loans — The Education Resources Institute –– filed for bankruptcy protection in April 2008, which led to the loss of a key customer — Bank of America.

In May 2008, First Marblehead cut about 500 jobs in an effort to trim $200 million in operating expenses after losing Bank of America, which accounted for about 15 percent of annual revenue

First Marblehead bough Union federal in December 2006

Deposits at Union Federal are insured by the Federal Deposit Insurance Corporation.

pgrimald@projo.com