CAL FED TO WAIT FOR PAYOFF : SETTLEMENT OF LAWSUIT COULD TAKE TWO YEARS.

Byline: Bloomberg Business News

Cal Fed Bancorp shareholders will have to wait at least two years until they see any cash from a big lawsuit over a costly change in accounting rules, the thrift's top executive said.

The Los Angeles thrift, the nation's seventh largest, stands to gain an estimated $1 billion in damages if it prevails in its suit against the federal government over the 1989 rule change, which forced it to write off paper assets at a loss.

With the government determined to string the case along with appeals, a final decision will take at least two years, and maybe five years, to resolve, said Chief Executive Edward Harshfield.

But analyst Leslie Nelkin said it will be worth the wait, since Cal Fed stands to gain $1 billion in damages from its case.

Cal Fed, with 125 offices and $14 billion in assets in California and Nevada, recently agreed to be acquired by First Nationwide Bank.

The thrift is one of 100 U.S. savings banks seeking damages from the government over a 1989 congressional act passed at the height of the savings and loan bailouts. The act eliminated an accounting gimmick called ``supervisory goodwill,'' which had allowed some thrifts to take bad loans and liabilities off their books when acquiring ailing banks. The change forced some institutions to take on the bad loans that led to later losses.

Now, as a result of a Supreme Court ruling, thrifts can sue the government to recover their losses. Most analysts expect Cal Fed and others to win their court battles, with an estimated payoff of $10 billion to $20 billion in damages.