GlenFed Inc. Loses $140 Million in Quarter
GlenFed Inc., citing a slowdown in the California economy, said it will lose $140 million in its fourth quarter ended June 30 and projected a $235-million loss for the fiscal year.
The announcement follows reviews this spring by two regulatory agencies, the Federal Deposit Insurance Corp. and the Office of Thrift Supervision.
The loss for the Glendale-based thrift stems from the setting aside of $135 million for possible loan losses largely related to a unit that provided money to medium-sized businesses in the state. Another $90 million was set aside for losses on the sale of foreclosed real estate and assets in GlenFed’s real estate development subsidiary. An additional $30 million in other assets will be charged off during the quarter, which means GlenFed no longer believes that the debt will be repaid.
In an interview, Chief Executive Norman M. Coulson said that although GlenFed worked closely with regulators, they did not force the thrift to take the actions.
“Even if they weren’t here we would have done the exact same thing,” Coulson said.
Coulson said that despite the big loss, GlenFed, the nation’s fourth-largest thrift, still expects to meet federal requirements for capital, the financial cushion that absorbs losses at financial institutions. He acknowledged that GlenFed has less capital than it would like.
But he added that GlenFed hopes to generate additional funds through profits that Coulson said would be boosted by recent cost slashing. GlenFed is laying off about 25% of its workers and closing 10% of its branches.
“Either they are going to turn around, or they will end up like hundreds of other savings and loans have,” said James Marks, an analyst with SNL Securities in Charlottesville, Va.
GlenFed, parent of Glendale Federal Bank, is one of several large thrifts in California that meet most or all of their capital requirements, but not by much. The fate of those thrifts is uncertain given the tougher regulatory climate. Some analysts believe that institutions such as GlenFed may have to seek merger partners.
The $235-million loss for the fiscal year compares to a profit of $117.3 million the previous year.
Part of GlenFed’s real estate problems stem from changes in federal thrift laws in 1989 that discourage S&Ls; from developing real estate. Coulson said the firm, which is leaving the development business, is selling assets of its real estate development operation into a very soft market.
Glenfed stock rose 37.5 cents a share to $5.125 on the New York Stock Exchange Wednesday.
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