Northern Trust to Buy Unit of CalFed Inc.

Northern Trust Corp. of Chicago agreed on Monday to buy the trust subsidiary of CalFed Inc. in a deal valued at $65 million.

The CalFed unit, Trust Services of America, has eight California offices and administers $6 billion of assets.

Added to an existing $1.6 billion of California trust assets, the deal gives Northern $7.6 billion of discretionary assets in that state. It said some overlapping offices will be merged.

Scheduled to close late this year, the transaction will bolster capital at Los Angeles-based CalFed, which suspended its dividend on June 30 after losing $262.9 million in the previous 18 months.

CalFed's principal subsidiary, California Federal Bank, is the nation's fifth largest thrift. It received a $77 million capital infusion from its parent last December and at midyear was in compliance with regulatory capital standards.

Trust Services is the largest independent trust company in California and is expected to earn roughly $3 million this year.

James Hurley, a senior vice president at CalFed, said the holding company also plans to sell California Thrift & Loan, a $500 million-asset commercial lending subsidiary based in Santa Barbara. He said asset sales are part of a restructuring.

David Fox, Northern's chairman, president, and chief executive officer, said the Chicago-based company has obtained a bank charter in California and eventually will market private banking services in each of its locations in that state Mr. Fox emphasized, however, that Northern's primary thrust in California would be in trust services.

Mr. Fox said the California expansion reflects Northern's strategy to penetrate fast-growing U.S. markets including Arizona, California, Florida, and Texas. Northern earned $63.1 million during the first half of 1991 and at midyear managed $307 billion of trust assets.

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