Two major California thrifts, Glendale Federal Bank and Cal Fed Bancorp, considered merging earlier this year before Cal Fed scotched the deal because it believes it could soon get a better offer from elsewhere.

Sources with direct knowledge of the situation said Glenfed initiated the talks because it believed the surviving institution - which would have had $29 billion of assets - would be more profitable, and more attractive to an out-of-state acquirer, than either company would be on its own.

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