Unexpectedly big reductions in real estate losses and operating expenses helped more than double the second-quarter earnings of California Federal Bank.
The Los Angeles-based thrift, the country's eighth-largest, with $14.3 billion of assets, reported net income of $21.7 million.
Meanwhile, First Hawaiian Inc., the second-largest banking company in Hawaii, reported a 1% drop in net income from last year's second quarter, to $18.9 million.
"The quality of our balance sheet and improved operating efficiencies contributed to our renewed earnings power," said Edward G. Harshfield, California Federal's president and chief executive.
"It was a very good quarter," said James Marks, a stock analyst at Hancock Institutional Equity Services.
Analysts said California Federal's gain could be attributed to lower losses on real estate held for sale than had been expected. Operating expenses also came in lower than expected, and interest rate spreads were greater.
California Federal lost $900,000 on real estate held for sale during the quarter, compared to an $8.9 million loss in the same quarter last year. General and administrative expenses, excluding deposit insurance premiums, declined for the sixth consecutive quarter, to $52.8 million, from $53.1 million at the end of the first quarter, and $66.9 million the year before.
The thrift's interest rate spread was 1.93%, up from 1.77% in the first quarter, but below the 2.29% spread in last year's second quarter. Real estate and consumer loan originations fell 27% from last year, to $485.3 million.
California Federal said it has established a reserve of undisclosed size to cover possible losses from a suit by Weyerhaeuser Mortgage Co.
In June, a Santa Ana, Calif., jury returned a $31.5 million verdict against the thrift. California Federal disputes the decision and plans to appeal it.
Walter A. Dods Jr, chairman and chief executive of First Hawaiian, said his company's quarterly results "continue to reflect the sluggish Hawaii economy, which is struggling to recover from its prolonged, three-year recession."
Total assets rose 6% from last year's second quarter, to $7.47 billion. But nonperforming assets increased 29%, to $82.7 million.