Glenfed Inc., the parent of the country's fourth-largest savings and loan, reported Wednesday a loss of $140.8-million in its second quarter, which ended Dec. 31, as signs of commercial real estate problems continued to spread through the financial industry.
The loss was mostly because of a large $153-million addition to Glenfed's reserves, meant to cushion the thrift against problem loans. In addition to that reserve bolstering, Glenfed also eliminated its quarterly dividend for at least a year as part of a restructuring plan.
Glenfed, parent of Glendale Federal Bank, joins a number of large California thrifts suffering from problems with loans made on commercial real estate. CalFed Inc. said Jan. 3 that it expected to report a fourth-quarter loss of about $140 million, due to similar commercial real estate loan troubles.
Glenfed said its nonperforming assets--a category including restructured loans, loans with payments overdue and repossesed real estate--rose 12% to $609.6 million as of Dec. 31 from $542.4 million a year ago. About 40% of Glenfed's problem assets are in Florida, said Judy Cunningham, a spokeswoman for the company.
As part of a "strategic plan" to bolster reserves and return to profitability, Glenfed also wrote down some loan and real estate assets by $55.1 million, established additional reserves of $16.2 million, instituted measures to cut annual costs by $160 million and wrote off about $176 million in goodwill, an intangible asset. The cost-cutting measures include an 18-month freeze on management salaries.
"We think this puts us in a very strong position," Keith P. Russell Jr., Glenfed's president and chief operating officer, said in an interview.
The loss--the company's first since 1981--"was more than what people were expecting," said E. Gareth Plank, an industry analyst for Dean Witter Reynolds in San Francisco. Glenfed's stock closed Wednesday at $4.625 a share, down 87.5 cents.
Analysts responded cautiously to the moves. "I think at this point they are adequately reserved," said Campbell K. Chaney, a thrift analyst with Sutro & Co. in San Francisco.
Standard & Poor's lowered its ratings on about $310 million in Glenfed's debt because the loan-loss reserve increases cut into the thrift's capital, but said "this strategy bodes well for further improving the bank's core earnings power."
Glenfed's announcement comes in the middle of a Federal Deposit Insurance Corp. examination of the thrift, which is expected to be completed in March. But federal regulators "have not blessed, nor have they been asked to bless" Glenfed's restructuring plan, said Russell.
Glenfed also announced that it no longer expects to sell its real estate development and commercial lending divisions as whole entities, but rather to sell loans and property held by the divisions piecemeal. The divisions had been on the block since last year.
In addition, Glenfed said it sold its Guaranteed Financial real estate brokerage unit to a management-led group and has agreed to sell its North American Title unit to a management-led group. Terms were not disclosed.
EARNINGS ROUNDUP: D13