An Up Quarter for Three Big California Players

SAN FRANCISCO - Improvements in asset quality and loan growth sharply boosted earnings at two big California thrifts and a large commercial bank.

Glendale Federal Bank, a $16 billion-asset thrift headquartered outside Los Angeles, had a profit of $12.1 million for its fiscal fourth quarter, which ended in June. Glendale lost $4.8 million in the same period last year.

Net income for its 1995 fiscal year totaled $75 million, compared with a loss of $209 million in the previous year.

Second-quarter earnings at Coast Savings Financial Inc., a Los Angeles- based thrift with $8.6 billion in assets, rose 195% to $5.6 billion. Earnings at Sanwa Bank California, a San Francisco-based subsidiary of Japan's Sanwa Bank Ltd., rose 160%, to $13.8 million.

Glendale Federal also announced an agreement to sell $180 million of nonperforming and classified loans and real estate.

The sale, which is expected to be concluded in the third quarter, will reduce Glendale's ratio of nonperforming assets to total assets to below 2% for the first time in seven years, said Stephen J. Trafton, Glendale Federal's chairman and chief executive.

At the end of June, Glendale Federal's nonperforming to total asset ratio stood at 3.94%.

The sale also is expected to be accretive to Glendale, marking a success in the thrift's efforts to at least break even in disposing of bad loans it built up during the California recession.

"We have fulfilled our commitment to reduce the level of NPAs without destroying shareholder value," Mr. Trafton said.

The sale was not reflected in the thrift's quarterly earnings report. Glendale attributed the increase in quarterly and annual earnings to lower provisions for loan losses and reduced losses on other real estate owned.

Net interest income fell, but general and administrative expenses did, too. Glendale attributed both declines to the sale of its thrift operations in Washington State and Florida.

Excluding these sales, Glendale gained $2.4 billion in deposits, $1.4 billion of which came from sales through its branch network. The rest came from deposit and branch acquisitions from other California thrifts.

Smith Barney Inc. analyst Thomas O'Donnell said Glendale Federal's quarter was better than he had expected because loan-loss provisions were lower than he had anticipated.

Ray Martin, Coast Savings' chairman and chief executive, attributed his company's increased earnings to improvement in asset quality, reductions in credit costs, and an expansion in net interest margins.

Nonperforming assets were reduced to 1.52% of total assets, from 1.57% at the end of March and 2.68% last year. Net interest margins were 2.42% in the second quarter, up from 2.2% in the first quarter and 2.36% last year.

Coast Savings' per-share earnings of 30 cents beat the First Call consensus estimate by 9 cents.

Joseph Jolson, a thrift analyst at Montgomery Securities, said the result was part of a trend. Every California thrift except Great Western Financial Corp., Chatsworth, beat analysts' estimates with their second- quarter earnings reports, because loan losses were less than expected, while net interest margins were better.

Tamio Takakura, chief operating officer of Sanwa Bank California, said his institution benefited from solid performance in its core operations.

Net loans and leases increased 12% to $5.5 billion, paced by rises in both commercial and consumer loans, Mr. Takakura said. Core deposits increased by $100 million in the year to $3.9 billion. The ratio of nonperforming assets to total assets declined by 43 basis points to 2.34%.

Net interest income rose 73% to $70 million, while noninterest income rose 20% to $21 million.

Mr. Takakura maintained that the results are not directly attributable to improvements in California's economy, and instead reflect better management and performance by Sanwa's employees.

"Our people don't want to attribute our success to the better performance of the economy," Mr. Takakura said. They prefer to think it's "because they've done better," he said. "I really think that is the case."

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