Thrift Agency Gives Glendale Federal a Break

Glendale Federal Bank, struggling under the shadow of a possible seizure or government-pressured merger, said Thursday that federal regulators have agreed to give it a year to bolster its capital levels to meet tougher government standards for ailing thrifts.

The unit of Glenfed Inc., which is the nation’s fourth-largest thrift, said the agreement with the Office of Thrift Supervision was positive because it reduces “regulatory uncertainties” and gives it time to rebuild.

But while giving it until June, 1993, regulators also told the S&L; that it will have to increase its capital levels well beyond what is required of healthier thrifts. And analysts questioned whether Glendale Federal could do that.

“They’re going to need every bit of that year,” said E. Gareth Plank, an analyst with Dean Witter Reynolds in San Francisco. On Thursday, Glenfed’s stock fell 62.5 cents to $3.875 a share on the New York Stock Exchange.

The agreement with regulators came after Glenfed, which has assets of about $19 billion, lost $106.7 million in its fiscal third quarter ended March 31, mainly because of mounting real estate losses. Glendale Federal is Glenfed’s primary subsidiary. With that loss, Glenfed fell below capital levels that federal regulators require to cushion a thrift against future losses.

As a result, regulators told Glenfed that Glendale Federal’s capital will have to increase to 5% for “core” assets and to 10% for real estate and other “risk-based” assets. As of March 31, Glendale Federal’s core capital ratio was 3.1% and its risk-based capital ratio was 6.9%.

Capital requirements for thrifts are usually 3% for core assets and 7.2% for risked-based assets.

Glenfed officials said Thursday that they will consider a number of steps to raise capital levels, including selling more stock to existing shareholders, new stock to the public or a private placement of securities.

However, Stephen J. Trafton, Glenfed’s chairman and chief executive, acknowledged that the new requirements presented a “formidable challenge.” He said the California economy and real estate markets will have to improve before Glenfed could meet the requirements.