SAN FRANCISCO - California Federal Bank has put its nasty realty lending problems definitively behind it, reporting first-quarter net income of $14.7 million.

It lost $596 million in first-quarter 1994.

The results, released Friday, reflected a 22% decline in operating expenses, excluding deposit insurance, to $53.1 million; 7% growth in retail deposits, to $8.9 billion; and 7% growth in new real estate and consumer loans, to $572 million.

Like many California thrifts, $14.2 billion-asset CalFed was stung by the real estate crisis of the early 1990s as well as by new regulations that raised capital requirements. It lost money from 1990 through last year's first quarter.

The fact that CalFed has been profitable since then prompted chairman Edward G. Harshfield to proclaim that his recovery plan has worked. Under that plan, CalFed shed every part of its business except its core retail thrift operation in California and Nevada.

"We have shown in previous quarters that our business strategy has been highly successful in terms of sharply improved asset quality and capitalization," Mr. Harshfield said. "We are now demonstrating that, as promised, our balance sheet restructuring has led directly to increased profitability."

Mr. Harshfield said CalFed would focus on the basics, namely, cost- cutting, increasing deposits and loans, and boosting net interest margins.

But at some point in the not-too-distant future, CalFed will also have to think about being acquired, Mr. Harshfield said. "We've either got to grow or be acquired," he said. "We're too big for a boutique and too small to be a player."

An acquisition is unlikely this year, Mr. Harshfield said, and analysts agree, because buyers are looking for bargains, while CalFed seeks to maximize shareholder return.

But James Marks, a senior stock analyst at Hancock Institutional Equity Services, said CalFed stands a good chance of being bought in 1996, at a discount relative to prices now being paid for large thrifts.

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