Glenfed Sells $350 Million in Loans to Meet New Rules

Glendale Federal Bank’s parent company said Wednesday that it has sold $350 million in loans for an $85-million after-tax gain to help the Glendale-based thrift meet tougher capital requirements that take effect Dec. 7.

Glenfed Inc. said it would also set aside $30 million, to be subtracted from its fiscal second-quarter earnings, to cover potential bad loans.

The federal Office of Thrift Supervision earlier this month announced the new requirements, which call on thrifts to maintain a higher amount of capital to protect against losses.

“It’s not smart or stupid,” Michael Abrahams, a thrift industry analyst for the Los Angeles investment firm of Bateman Eichler, Hill Richards Inc., said of Glenfed’s actions. “There’s no choice.”

The new rules require thrifts to maintain capital equal to 3% of assets as of Dec. 7. Half of that must be tangible assets, such as cash and securities, but the remainder may be in the form of “goodwill,” the value of an institution over and above its tangible assets. However, starting in 1992, savings and loans must begin replacing goodwill with cash, and in 1995, only cash will count.

A separate formula under the new rules determines the amount of capital needed based on the riskiness of a thrift’s investments.

Federal officials said as many as 800 S&Ls; nationwide may fail to meet the toughened standards. Those institutions would be forbidden to expand and would have to submit detailed business plans to regulators.

After allowing for the increase in loan-loss reserves, Glenfed will apply the remaining $55 million in gains from the loans’ sale to retained earnings, Chief Financial Officer David Hansen said.

Glenfed’s stock fell 75 cents Wednesday to close at $16.38 a share, a 52-week low, on the New York Stock Exchange.

The thrift earned about $19.6 million in the first quarter ended Sept. 30, down about 38% from $31.4 million a year earlier. Glenfed had about $24.7 billion in assets as of Sept. 30.