GlenFed posts quarterly loss, warns of more trouble; CalFed reports improved showing in restructuring.

GlenFed Inc., parent of the troubled Glendale Federal Bank, last week announced a second quarter loss of $79.4 million and said it will not be able to meet a debt payment to bondholders in March.

In addition to the loss of $2.34 a share for its fiscal second quarter ended Dec. 31, GlenFed announced that it had fallen even further below federal capital requirements.

"It's hard to say this isn't disappointing news," said David Hochstim, financial services analyst with Bear Stearns & Co. in New York. "Their survival really depends on what the regulators choose to do."

The Office of Thrift Supervision has issued a "prompt corrective action directive" to the institution, based on Glendale Federal's status as a "significantly undercapitalized institution," GlenFed announced in its earnings statement.

Campbell Chaney, a banking analyst with Hancock Institution Equity Services in San Francisco, assessed GlenFed's chances of survival as "very remote."

The corporation has previously stated in Securities and Exchange Commission filings that there was a possibility GlenFed would be forced into bankruptcy if it could not make its March debt payment of $4.6 million.

GlenFed does not have sufficient cash or liquid assets to pay the annual installment of interest due March 15 on its bonds, the company announced. It is negotiating with the bondholders, but the negotiations were in "a preliminary stage," according to the statement.

Chaney noted the institution would not be seized by regulators in March if it could not meet its debt payment. But one possible scenario is that the holding company, GlenFed Inc., may file for bankruptcy protection, Chaney said.

Chaney said if the payment is not made, the bondholders, who could become owners of the company, "can declare involuntary bankruptcy to protect their position" from OTS seizure of the bank. But government seizure does not hinge on the bond payment.

GlenFed is under OTS orders to raise its risk-based capital level to 10 percent and its core capital level to 5 percent by June, a move which would require a capital injection of about $450 million.

GlenFed's core capital was at 2.56 percent and risk-based capital was a 6.35 percent at Dec. 31. Both are below federal standards of 3 percent and 8 percent, respectively.

In its earnings statement, GlenFed announced it had come to a definitive agreement with another set of bondholders to swap $105 million in debt for stock, but that move would raise only $128 million -- more than $300 million short of what is required by the OTS.

Chaney and other analysts said GlenFed's only real chance of survival is if the U.S. government agrees to settle a lawsuit the thrift won last year. A federal court judge ruled last July that the government breached a contract with GlenFed when it ceased allowing the thrift to count an intangible asset, known as goodwill, toward its capital levels.

GlenFed's fiscal second quarter loss compares to net earnings of $27.6 million or 81 cents a share a year earlier. For the first six months of fiscal 1993, GlenFed lost $96.2 million or $2.81 a share, compared with earnings of $51.6 million or $1.51 a share the year before.

"The company's operations continue to be adversely impacted by borrower difficulties and depressed real estate values that have resulted from persistent economic problems in California," said Stephen J. Trafton, GlenFed chairman and chief executive.

In the first few hours after the earnings release, GlenFed's stock price plummeted $1.62 to $2.37 a share.

In the last few weeks GlenFed's stock had roughly doubled to more than $4 a share on speculation that the troubled thrift had found a merger partner or was going to get hundreds of millions in a settlement with the U.S. government, according to Jon Hogen, broker with Baraban Securities Inc. in Long Beach.

Meanwhile, California Federal Bank, the other giant Southern California savings and loan under orders from the OTS, reported a somewhat less gloomy quarter.

Los Angeles-based California Federal reported a fourth quarter net loss of $45 million, but a net operating profit of $6.4 million.

"This is the first operating profit of some substance in a year," said James Hurley, spokesman for California Federal.

The loss of $1.08 a share compares to a net loss of $91.2 million or $3.56 per share for the same 1991 period.

For the full year, California Federal reported a loss of $97.3 million or $3.28 a share compared to a 1991 loss of $169.6 million or $$6.62 a share.

The thrift's fourth quarter financials were hit by a one-time charge of $51.4 million for accounting adjustments and costs relating to a company restructuring in December. In that restructuring, parent CalFed Inc. was folded into the bank, California Federal Bank, and bondholders swapped $150 million in bonds for a 79 percent stake in the company.

California Federal was able to raise $150 million in equity capital in that restructuring, which helped boost the thrift's capital levels in the fourth quarter.

Capital levels in the quarter were at 3.71 percent for tangible, 4.71 for core and 9.71 for risk-based capital. This compares to a tangible capital level of 2.81 percent, a core capital level of 3.85 percent and a risk-based capital level of 7.51 for the third quarter.

California Federal is under OTS orders to raise risk-based capital to 9 percent and core capital to 5 percent by June 30.

"That looks very good," said Sally McIver, a savings and loan analyst with SNL Securities, of the thrift's capital levels. "Let's hope they don't have to take any writedowns (on bad real estate loans) in the future. A lot of what happens with them depends on what happens with the economy."

McIver said because of the weak real estate market in California, there may be a lot of changes in store for Los Angeles County-based thrifts in the next year.