Coast Savings’ Quarterly Loss Is $24 Million

Coast Savings Financial Inc. on Thursday became the latest California thrift to report problems this month, posting a $24.4-million third-quarter loss and eliminating its dividend.

Separately, the Los Angeles-based firm, at the urging of regulators, said it will file a plan showing how it will meet tougher federal standards for capital that are being phased in through 1994--as required by last year’s thrift bailout law. The action is unusual because Coast is in compliance with the standards, albeit barely. Normally, plans governing capital--the financial cushion that institutions maintain to protect against losses--need to be filed only by thrifts failing to meet the standards.

Coast, parent of Coast Federal Bank, said the plan is being filed to assure regulators that it will meet the standards--which get tougher Jan. 1. The thrift’s capital is thin, and it has posted losses recently. Through the first nine months of the year, it lost $47.2 million.

Coast’s quarterly loss was caused mostly by $61 million that it set aside for losses that may occur on loans that turn bad in the future. The action was suggested by regulators at the Office of Thrift Supervision and Federal Deposit Insurance Corp. Regulators are increasingly concerned about how the softening economy and deteriorating real estate market will hurt institutions.

The money that Coast is allocating is called a “general loan-loss reserve.” That’s something banks have done for years, but it’s relatively new to the thrift industry, which is being forced to adopt more bank-like standards.

Historically, thrifts set aside money to cover specific problem loans. The FDIC, which is examining thrifts--as required by last year’s savings and loan bailout law--is putting them through tougher examinations. Thrift regulators also have tightened their standards. As a result, industry executives expect that other thrifts will be forced to take similar actions.

Coast, the state’s 10th-largest thrift, is the third major California S&L; this month to cut its dividend. CalFed and Glenfed cut their dividends sharply. Coast was paying shareholders a quarterly dividend of 10 cents a share.

Coast Chief Executive Ray Martin said a proposed sale of 27 branches with $1.2 billion in deposits is moving quickly and there is more than one interested buyer. The sale would give a much-needed boost to Coast’s capital.

In the year-earlier third quarter, Coast posted a $92.2-million loss caused by a major restructuring.