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GlenFed, CalFed OK $2.5-Billion Merger Deal

Thrifts: Action would create the nation's third-largest S & L, based in San Francisco. Layoffs, consolidations are expected in regions of branch overlap, including Orange County.


Glendale Federal Bank and California Federal Bank, two of the best-known names in the California banking business, announced Thursday that they plan to merge as part of a $2.5-billion deal that would create the nation's third-largest savings and loan.

The proposed deal reflects another in a wave of consolidations that is sweeping though the nation's banking industry. The combined thrift would be called California Federal Bank, own about $51 billion in assets and have more than 400 branches in eight states, including about 280 in California.

"We're better together than apart," said Gerald J. Ford, CalFed chairman and chief executive officer who will head the combined operation. "And no egos got in the way of the best thing for shareholders."

There are expected to be about 60 branch closures, many of them in Southern California, where the two financial institutions have the most overlap in their operations, analysts said. Layoffs are expected among the 8,400 employees, with some estimates of about 1,000, but company officials said most job cutbacks would be accomplished through attrition.

In Orange County, there are 22 California Federal branches and 17 Glendale Federal branches. It isn't known which, if any, will be targeted for closure. But the banks now have competing branches within about a block of each other in Huntington Beach and Newport Beach.

The merged company will be based in San Francisco, and Glendale Federal, based in Glendale, will scale back its headquarters there. GlenFed's colorful chief executive, Stephen J. Trafton, will become an executive vice president of the new company and focus on pending litigation that both firms have filed against the federal government.

The merger deal is the latest in a series of bank and thrift mergers and acquisitions that have dramatically altered California's financial landscape and often left disgruntled customers in their wake.

Ironically, GlenFed is well-known for its ads skewering big bank competitors because of their size and eagerness to merge. One ad urged viewers to call GlenFed if they were "fed up" with their present big bank and another showing a manager at a big bank avoiding customers by ducking under his desk and disappearing through a trap door.

Trafton, who inspired the ads, said he saw no problem, saying that the new CalFed will be just as focused on service. But now that GlenFed will be part of the nation's third-largest thrift, some of its customers were clearly concerned Thursday.

"Oh no, not again," said Laurel Canyon resident John Ladner, a GlenFed customer at the Silver Lake branch. "If this place loses that small bank feel, I'm out of here."

In Los Angeles County, GlenFed has 53 branches and CalFed has 65 branches.

Rebecca Gilchrist of Los Feliz switched to CalFed six years ago. She said she tired of the long lines and impersonal treatment she found at Bank of America. "I'm afraid [CalFed] will become like Bank of America and I'll end up leaving them," she said.

Bank mergers are happening so fast these days that many customers say they can't keep up.

In October, the parent of Home Savings of America said it would acquire Los Angeles-based Coast Savings Financial. Other banks and thrifts headquartered in Los Angeles have left in such high-profile deals as Wells Fargo & Co.'s acquisition of First Interstate Corp. and Great Western's purchase by Seattle-based Washington Mutual.

Indeed, efforts to merge CalFed and GlenFed are not new. Nearly a decade ago, plans to merge the two were scuttled when the chief executives could not agree on details of the deal, especially the number of layoffs.

But a combination between them now makes sense after both survived the S & Ls scandals of the 1980s and the California real estate collapse in the early 1990s, analysts say.

A combination of the two thrifts of similar size and focus is expected to cut annual operating costs by $131 million by the end of 1999 and enable the new bank to better compete against larger adversaries. Washington Mutual is currently the nation's largest thrift and Home Savings of America is second largest.

The combination of CalFed and GlenFed will also create California's fifth-largest financial institution, with $28 billion of total deposits in the eight states and a 6.4% share of all deposits statewide. That compares to H.F. Ahmanson & Co.'s and Coast Savings, which will have a 9.1% share in California. Industry leaders Wells Fargo & Co. has a 13.75% market share in California and BankAmerica has a 20.6% market share, according to SNL Securities, a data company.

This increased market share would make the new CalFed a very attractive acquisition for another bank interested in entering the California market, such as NationsBank Corp. in Charlotte, N.C., analysts said.

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