Glenfed Posts Quarterly Loss of $16.8 Million
The problems of Glendale Federal Bank are continuing to mount as its parent company reported Tuesday a loss of $16.8 million in the most recent quarter because of deterioration of its real estate portfolio.
Glenfed Inc. said the loss for the first quarter ended Sept. 30 compares to a loss of $26 million in the previous quarter and $24.1 million in the same three-month period a year ago.
The company recorded a one-time $35.4-million gain from the sale of some mortgage-backed securities, which prevented the first-quarter loss from being even larger.
Glenfed, which has lost more than $350 million in the last two years, has been struggling for survival as bad real estate loans and the state’s slumping economy have dragged down its performance. The firm said the first-quarter losses were attributable to bad commercial and multifamily real estate loans.
The company increased its loan-loss provision by $63.8 million as its level of non-performing assets continued to grow. At quarter’s end, Glenfed had $899.1 million in non-performing assets, or 5% of its total assets. That is up from $798.6 million a year ago.
The company again disclosed that it does not meet one of three capital standards set by federal regulators. Glenfed has proposed a plan to raise new capital by June 30, but if not approved by regulators it could mean that the thrift could be seized by the government.
Glenfed said its plan would bring the thrift in compliance with federal capital levels by “restructuring of subordinated debt and a sale of control or merger of the company.” In addition, the thrift will consider further sales of assets.
The restructuring, however, “will require substantial dilution of the equity ownership of the common shareholders.”
Analysts said such a potential dilution would be opposed by stock and bond holders. They said the most recent quarterly loss increases the chance that Glenfed will default on some of its debt next March and raises the possibility that bondholders could force the company into involuntary bankruptcy.
“There’s just nothing good on Glendfed’s entire financial statement,” said Peter Treadway, a thrift analyst at Smith Barney, Harris Upham & Co. in New York.
