Earnings Jump at 3 California S
Three large California savings and loans reported sharp boosts in second-quarter earnings Thursday, primarily because declining interest rates have cut their cost of money and allowed them to sell fixed-rate assets at a profit.
CalFed and Home Federal Savings of San Diego both achieved record earnings, while Financial Corp. of Santa Barbara, which has not earned a full-year profit since 1980, said it made money for the third quarter in a row.
Meanwhile, a fourth large California savings and loan holding company, Gibraltar Financial, said its profits fell 9% in the second quarter because it is intentionally reducing its assets. Gibraltar said its assets stood at $8.1 billion on June 30, down 13% from year-end.
CalFed, parent company of Los Angeles-based California Federal Savings, said its quarterly profits rose to $39.3 million, up 171% from the $14.5 million earned in the second quarter of 1984.
“Based on this momentum, CalFed should enjoy an exceptional earnings year,” CalFed Chief Executive George Rutland said.
A key factor, the company said, was an improved interest-rate spread, which increased to 2.99% at the end of the second quarter, up from 1.88% on June 30, 1984. (An interest-rate spread is a measure of a financial institution’s cost of money compared to what it earns on loans and investments.)
CalFed also earned $23.8 million from sales of loans and investments and $3.5 million earned by Beneficial Standard Life Insurance Co., which CalFed bought last year.
Home Federal Savings of San Diego said its earnings rose to $21.1 million, a 44% increase from the $14.6 million that it earned a year ago. According to Home Federal Chairman Kim Fletcher, “operating results should continue to strengthen through the balance of the year.”
Financial Corp. of Santa Barbara said it earned $767,000 in the second quarter, a considerable improvement from its $9.8-million loss in the 1984 second quarter. Its interest-rate spread rose to 1.55% on June 30 from 0.44% a year ago.
Philip Brinkerhoff, the S&L;’s new chief executive, said the thrift gained $8 million on the sale of loans and securities. But that was partially offset by a $3-million addition to its reserve for loan losses, including $1.9 million for a single commercial real estate loan.
Brinkerhoff said the company’s profits should grow as its loan production is gradually increased, and the company should have “a net profit in 1985 as long as interest rates remain near their present levels.”
Profits at Gibraltar Financial, based in Beverly Hills, fell to $10.9 million in the second quarter, down from $11.7 million a year ago.
Gibraltar is trying to reduce interest-rate sensitivity on fixed-rate loans, scale down assets, improve its margin on funds and beef up its net worth in a attempt to “maximize opportunities in the next upward cycle in interest rates,” Chairman Herbert J. Young said.
