CENFED Financial Corp. announces fourth quarter and total year earnings.

PASADENA, Calif.--(BUSINESS WIRE)--Jan. 26, 1996--CENFED Financial Corp. (NASDAQ:CENF) Friday announced fourth quarter earnings of $2.3 million, representing $.49 per primary share, compared with $1.9 million and $.40 per primary share in the fourth quarter of 1994.

For the full year, the company reported net earnings of $7.2 million in 1995, or $1.57 per primary share, compared with $9.0 million, or $2.00 per primary share, in 1994. Included in net earnings for the fourth quarter and for the full year of 1995 is a $.04 per share charge in connection with the company's decision to discontinue its single family wholesale lending operations.

D. Tad Lowrey, president and chief executive officer, stated: "I am pleased that our earnings have improved markedly for the second quarter in a row and that fourth quarter earnings were the highest of the past five quarters. Our improved earnings include the beneficial effects of a widening net interest margin and improved operating efficiencies. It is particularly gratifying that our spread compression is no longer obscuring the financial benefits from strategic and structural changes we have accomplished this year."

Core earnings increased by 40% in the fourth quarter of 1995 to $.53 per primary share, compared with $.38 per primary share in the corresponding period in 1994, due largely to increased net interest income and fee income. For the year, core earnings of $1.67 per primary share in 1995 were lower than core earnings of $1.97 per share in 1994, mostly due to spread compression in 1995 and inefficiencies within the wholesale lending function that began to arise as new loan volumes declined significantly during the year.

The company's "core earnings" exclude gains and losses on sales of investments and mortgage-backed securities, results of real estate operations and nonrecurring adjustments.

Loan originations for the fourth quarter of 1995 totaled $63.8 million, representing a 38% decrease from the fourth quarter of 1994. For the full year, loan originations in 1995 totaled $252.4 million, compared with $567.9 million in 1994.

The greatest volume decreases were experienced in single family, adjustable rate loan originations, which decreased from $83.6 million and $483.7 million in the fourth quarter and full year 1994, respectively, to $19.0 million and $144.1 million in the corresponding periods in 1995, respectively.

These origination declines were partially offset by a $93 million increase in loan purchases and $30 million of new loans originated by the company's SBA lending division in 1995, compared with 1994.

The company will discontinue its wholesale single family lending operations, effective Jan. 31, 1996, resulting in a decrease in staff of approximately 40 persons. The company will continue to offer single family loans through retail loan officers located within the retail delivery system.

The decision to discontinue wholesale lending operations was based upon several factors, including: (i) loan acquisition costs that, at current market pricing, would preclude the company from achieving its return on equity benchmarks, (ii) a declining adjustable rate loan market, due to an overall reduction in refinance activity in Southern California and a Treasury yield curve that favors fixed rate lending; and (iii) the unacceptably high investment in human capital, even after significant further downsizing, to maintain a presence in the single family wholesale lending market.

Originations of single family loans through the bank's wholesale lending operations totaled $250.9 million in 1993, increased to $483.7 million in 1994, then fell to $144.1 million in 1995.

Lowrey commented: "The bank's single family wholesale loan volume has been steadily declining since it reached its peak in the second quarter of 1994. Under current market conditions, we do not believe wholesale-generated loans provide the return that our shareholders require. We believe we can attract new assets from other sources, and because we have leveraged our capital over the past three years, our needs for new assets will not be as great in the future as in the past. Looking forward, we expect that our mix of new loan volume will include more SBA loans and bulk purchases of single family loans."

Loans delinquent 31 days or more at Dec. 31, 1995 totaled $21.3 million and represented 1.35% of loans held for investment, compared with $12.6 million and 1.02% one year earlier. However, delinquent loans at Dec. 31, 1995 decreased by $1.0 million from Sept. 30, 1995 principally due to a decline in delinquent single family loans in the 31-60 day delinquency category.

Nonperforming assets at the end of 1995 totaled $21.1 million, or .98% of total assets, compared with $20.4 million and 1.10% at the end of 1994. During the fourth quarter, nonperforming assets increased by $479,000 due to a $1.3 million increase in nonaccruing single family loans that was only partially offset by improvements in other product lines.

The company's net interest margin was 2.27% in the fourth quarter of 1995, compared with 2.31% in the fourth quarter of 1994. Comparing the fourth quarter of 1995 to the third quarter of 1995, the average net interest margin increased by 17 basis points due to an 18 basis point increase in the yield on interest earning assets and a 3 point basis point increase in the cost of interest bearing liabilities.

Although the net interest margin was 3 basis points lower in the fourth quarter of 1995 than in the fourth quarter of 1994, net interest income increased by $1.7 million in the 1995 quarter due to a 19% growth in average interest earning assets. The net interest margin for the total year 1995 was 2.11% compared with 2.60% in the previous year. Even with a 22% increase in average interest earning assets in 1995, compared with 1994, net interest income was $511,000 lower than in 1995 due to the 49 basis point margin difference.

Lowrey commented: "After a number of quarters of declining spread, we are pleased that our spread increased for the second consecutive quarter. In combination with our asset growth in 1995, the return of our spread to virtually the same level as one year ago resulted in a material increase in net interest income in the fourth quarter of 1995, compared to the corresponding period in 1994."

The company recorded $1 million of loan loss provisions in the fourth quarter of 1995, compared with $350,000 in the year-earlier period. For the year, loan loss provisions totaled $2.9 million in 1995, compared with $2.3 million in 1994.

Charge-offs, net of recoveries, totaled $1.6 million and $3.1 million in the 1995 fourth quarter and full year, respectively, compared with $971,000 and $4.7 million in the respective corresponding periods in 1994.

During fourth quarter 1995, $1.2 million of net charge-offs were associated with income property loans for which specific reserves totaling 95% of these charge-offs had been established at the beginning of the quarter.

At Dec. 31, 1995, the allowance for loan losses was .85% of loans held for investment, compared with 1.00% one year earlier. The allowance for loan losses covered 87% of nonaccruing loans at the end of 1995, compared with 119% one year earlier.

Non-interest income increased by 35% in the fourth quarter of 1995, compared with the corresponding period in 1994, but was slightly lower for the full 1995 year than in the previous year. After removing the non-core elements of non-interest income -- consisting of gains and losses on sales of securities and losses from real estate operations -- the fourth quarter and full year results for 1995 posted improvements when compared with 1994.

Operating expenses in the fourth quarter of 1995 totaled $9.0 million, compared with $8.3 million in the corresponding quarter in 1994. The majority of the increase in operating expenses in the comparative periods is a result of two items; employee termination expenses associated with eliminating the single family, wholesale lending division and stock incentive compensation linked to the performance of the company's stock.

Operating expenses in the fourth quarter of 1995 represented 1.68% of average assets, compared with 1.85% in the corresponding quarter in 1994.

For the full years, operating expenses totaled $33.2 million and $32.1 million in 1995 and 1994, respectively, and were 1.65% and 1.95% of average assets in the same comparative periods, respectively. Excluding the employee termination expenses and stock compensation charges in the 1995 fourth quarter, the operating expense ratio in the fourth quarter of 1995 was 1.52%.

The company's effective tax rates were 30.4% and 18.6% in the fourth quarters of 1995 and 1994, respectively. For the calendar years ended 1995 and 1994, the effective tax rates were 25.7% and 25.0%, respectively.

Although the company's marginal tax rate is 42.5%, its effective rate is reduced due to the tax advantages associated with its portfolio of municipal bonds. In 1994, the effective tax rate was affected by a $210,000 tax benefit in connection with the sale of a branch office.

During the fourth quarter of 1995, the company reclassified its investments in debt securities from "held to maturity" to "available for sale" in accordance with transition rules set forth in the Financial Accounting Standards Board's implementation guidelines with respect to Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities."

As a result, all investments in debt and equity securities were classified as available for sale at Dec. 31, 1995, and stockholders' equity at that date included a $2.2 million component to record the unrealized gain on the securities portfolio, net of taxes.

CENFED Financial Corp. is the holding company for CenFed Bank, a Federal Savings Bank which currently operates 18 branch offices in Los Angeles, Orange, Riverside and San Bernardino counties in Southern California. -0-

                       CENFED Financial Corp.
                Consolidated Financial Highlights
                      (Dollars in thousands)

                                         At Dec. 31,  At Dec. 31,
                                             1995         1994

FINANCIAL CONDITION DATA:
Total assets                              $2,151,421   $1,849,683
Interest-earning assets                   $2,074,631   $1,761,580
Loans held for investment, net            $1,492,094   $1,234,588
Loans held for sale, at lower
  of cost or market                       $  100,183   $   95,214
Mortgage-backed securities                $  341,288   $  315,753
Real estate held for development
   and sale                               $    5,410   $    4,891
Total deposits                            $1,551,329   $1,310,505
Total borrowings                          $  473,352   $  436,112
Total stockholders' equity/a              $  104,552   $   91,221

Total common shares outstanding            4,556,937    4,463,974
Book value per common share/a             $    22.94   $    20.43

CenFed Bank's regulatory capital
  ratios:
Tangible                                        5.27%       5.62%
Core                                            5.38%       5.74%
Risk-based                                     10.90%      12.16%
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                                                       At:
                                             Dec. 31,     Sept. 30,
                                               1995         1995

NONPERFORMING ASSETS:
Nonaccrual loans                             $14,841      $15,047
Real estate owned                              6,236        5,551
Total nonperforming assets                    21,077       20,598
Nonperforming assets, as a
 percent of total assets                        0.98%        0.97%
Allowances for loan losses                   $12,789      $13,404

DELINQUENT LOANS (31 days or more):
Single family                                $15,404      $16,328
Income property                                3,222        3,747
SBA                                            2,580        2,133
Other                                             58           70
Total delinquent loans                       $21,264      $22,278

Delinquent loans, as a percent of
 loans held for investment                      1.35%        1.50%

                                                  At:
                                   June 30,    March 31,   Dec. 31,
                                    1995         1995        1994

NONPERFORMING ASSETS:
Nonaccrual loans                  $12,256      $12,840      $10,499
Real estate owned                   6,753       10,206        9,842
Total nonperforming assets         19,009       23,046       20,341
Nonperforming assets, as a
 percent of total assets             0.92%        1.20%        1.10%
Allowances for loan losses        $13,102      $12,373      $12,529

DELINQUENT LOANS (31 days or more):
Single family                     $12,155      $10,795      $ 8,891
Income property                     4,045        4,782        3,701
SBA                                   932          ---          ---
Other                                  20           63           30
Total delinquent loans            $17,152      $15,640      $12,622

Delinquent loans, as a percent of
 loans held for investment           1.24%        1.22%        1.02%

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                           For the three months      For the years
                              ended Dec. 31,         ended Dec. 31,
                            1995        1994        1995        1994
   (Dollars in thousands)

CONDENSED STATEMENT OF INCOME:
Net interest income
  before loss
  provisions             $10,963     $ 9,292     $38,485     $38,996
Provisions for
  estimated losses        (1,000)       (350)     (2,900)     (2,300)
Net interest income
  after loss
  provisions               9,963       8,942      35,585      36,696
Total non-interest
  income                   2,304       1,704       7,254       7,363
Total operating
  expense                 (8,966)     (8,339)    (33,151)    (32,069)
Pretax earnings          $ 3,301     $ 2,307     $ 9,688     $11,990
Net earnings             $ 2,299     $ 1,879     $ 7,197     $ 8,998
Primary earnings
  per share             49 cents    40 cents     $  1.57     $  2.00

OTHER DATA:
Net Interest Margin:
Yield on interest
 earning assets/b           7.54%       6.46%       7.19%       6.40%
Cost of interest
 bearing liabilities        5.38%       4.21%       5.18%       3.87%
Net interest spread         2.16%       2.25%       2.01%       2.53%
Net interest margin         2.27%       2.31%       2.11%       2.60%

Loan Originations:
Single family-fixed      $ 8,085     $   959    $ 21,075     $ 40,035
Single family-adjustable  19,047      83,644     144,088      483,738
Income property
 real estate              23,342      14,230      52,257       35,950
SBA                       11,526         910      31,213          910
Other                      1,757       2,630       3,783        7,236
Total loans originated   $63,757    $102,373    $252,416     $567,869
Loans purchased          $92,952    $      0    $184,636     $ 91,647

Note a: Stockholders' equity at Dec. 31, 1995 and 1994 includes an
unrealized gain of $2.2 million and an unrealized loss of $4.6
million, respectively, to record investment and mortgage-backed
securities available for sale at market value.
Note b: Yields on tax-exempt securities have been presented on a fully
taxable equivalent basis.
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                          CENFED Financial Corp.
              Consolidated Statements of Financial Condition
                              In thousands

                                              Dec. 31,      Dec. 31,
                                                1995          1994
ASSETS:
Cash                                     $    21,928   $    22,560
Federal funds sold                             7,288         1,394
Cash and cash equivalents                     29,216        23,954

Investment securities held to maturity,
  net, at cost (market value of
  $81,812 at Dec. 31, 1994)                      ---        94,901
Investment securities available
  for sale, at market value                  133,778        19,730
Mortgage-backed securities (MBS)
  held to maturity,
  net, at cost (market value
  of $152,687 at Dec. 31, 1994)                  ---       157,936
MBS available for sale, at market value      341,288       157,817
Loans held for investment, net             1,492,094     1,232,055
Loans held for sale, at lower of cost
  or market value                            100,183        95,214
Accrued interest receivable                   14,894        11,669
Real estate acquired in settlement
  of loans                                     6,236         9,826
Real estate held for development and
  sale, net                                    5,410         4,891
Premises and equipment, net, at cost          13,300        17,238
Intangible assets, net of accumulated
  amortization                                   248           701
Deferred income taxes                            ---        11,990
Other assets                                  14,774        11,761
                                          $2,151,421    $1,849,683

LIABILITIES AND STOCKHOLDERS'
  EQUITY:
Customer deposit accounts                 $1,551,329    $1,310,505
Securities sold under agreements
  to repurchase                              150,052       147,412
Notes payable                                 22,800        23,000
FHLB advances                                300,500       265,700
Deferred income taxes                            544           ---
Other liabilities                             21,644        11,845
Total liabilities                          2,046,869     1,758,462

Commitments and contingent
  liabilities
Common stock, 1 cent par value
Authorized shares:  14 million at
 Dec. 31, 1995 and 1994
Outstanding shares:  4,556,937 at
 Dec. 31, 1995, and 4,463,974 at
 Dec. 31, 1994                                    46            45
Additional paid-in capital                    30,126        29,406
Retained earnings -- substantially
  restricted                                  73,721        68,075
Unrealized gain/(loss) on securities
  available for sale, net of tax               2,179       (4,629)
Deferred compensation -- retirement
  plans                                       (1,520)       (1,676)
Total stockholders' equity                   104,552        91,221
                                          $2,151,421    $1,849,683

See notes to consolidated financial statements.
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                          CENFED Financial Corp.
                 Consolidated Statements of Operations
                             (in thousands)

                                 Three Months Ended Twelve Months Ended
                                      Dec. 31,          Dec. 31,
                                   1995     1994      1995     1994

Interest and Dividend Income:
 Loans and leases                $ 30,202 $ 20,269   $105,164 $ 69,266
 Investment securities and
  short-term investments            2,035    1,588      7,758    6,454
 Mortgage-backed securities         6,054    5,501     23,527   23,417
   Total interest and
    dividend income                38,291   27,358    136,449   99,137

Interest Expense:
 Customer deposit accounts         20,151   12,930     71,130   42,743
 Securities sold under
  agreements to repurchase          2,286    1,910     10,371    5,933
 FHLB advances                      4,258    3,039     13,972   11,009
 Other borrowings                     633      187      2,491      456
   Total interest expense          27,328   18,066     97,964   60,141
   Net interest income before
    loss provisions                10,963    9,292     38,485   38,996
 Provision for estimated
   losses                           1,000      350      2,900    2,300
   Net interest income after
    loss provisions                 9,963    8,942     35,585   36,696

Non-Interest Income (Expense):
 Loan and lease servicing fees      1,345      747      3,977    3,421
 Customer deposit account fees        539      478      1,921    2,044
 Gain on sale of investments            0      316          2      824
 Gain on sale of loans and MBS         30       24        181      458
 Loss from real estate operations    (176)    (299)      (682)  (1,417)
 Other                                566      438      1,855    2,033
   Total non-interest income        2,304    1,704      7,254    7,363

Operating Expenses:
 Compensation and employee
  benefits                          4,782    3,711     17,078   15,123
 Net occupancy                      1,474    1,487      5,288    5,294
 Deposit insurance premiums           862      823      3,149    2,740
 Data and check processing            412      536      1,707    2,056
 Advertising and marketing            177      298        820      973
 Intangible amortization               18      138        (46)     922
 Other                              1,241    1,346      5,155    4,961
   Total operating expenses         8,966    8,339     33,151   32,069
   Earnings before taxes            3,301    2,307      9,688   11,990

Income taxes                        1,002      428      2,491    2,992
  Net earnings                    $ 2,299  $ 1,879    $ 7,197  $ 8,998

Earnings per share                $  0.49  $  0.40    $  1.57  $  2.00

Average primary shares
  outstanding                  4,656,710 4,646,659 4,580,671 4,487,729

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See notes to consolidated financial statements.

CONTACT: CENFED Financial Corp.

Steven P. Neiffer, 818/585-2595