SAN FRANCISCO -- Resurrection is a miracle when it occurs once. Glendale Federal Bank's Stephen J. Trafton has been through it twice in one year.

Eight months ago, in one of the most sensational rescue operations in savings industry history, Glendale's chairman and chief executive successfully completed the long-shot recapitalization of the nation's fourth-largest thrift.

Mr. Trafton's feat staved off a federal takeover of Glendale, based in the California city of the same name, confounding a legion of skeptics who had predicted its demise.

But fresh equity did not restore Glendale to health. The thrift still faced a weak California economy, falling revenue, and stubborn credit problems. At times its plagues seemed almost biblical: earthquakes, floods, and fires pounded the thrift's real estate portfolio.

Back from the Brink

Yet, just when it looked as if the roof was about to fall on Mr. Trafton again - with losses mounting, capital dwindling share prices plummeting and stockholders demanding his head- the 47-year-old executive once more pulled Glendale back from the brink.

This go-round, it wasn't the capital markets but the timely sale of Glendale's Florida operations that bailed him out.

He agreed to sell 60 Sunshine State branches and $3.6 billion in deposits to Barnett Banks Inc. for $243.5 million - a spectacular 6.7% deposit premium.

The deal promises to shore up Glendale's balance sheet at closing later this year. But beyond that, it has won back the affections of a high-powered group of institutional investors who had become irate over Mr. Trafton's performance.

Positive Signs

To be sure, the Florida sale is not the only thing that turned Glendale shareholders around.

Results for the March quarter showed the $17.3 billion-asset thrift's revenues rising and its losses narrowing. California's business climate is looking brighter. And Glendale's current bulk asset sale will slash loan problems without requiring further writedowns or charges to capital, Mr. Trafton assures.

"We have experienced slow but consistent improvement," Glendale's chief said in an interview.

That sense of progress is reflected in Glendale's stock price. Offered at $9 in September, shares fell below $6 after a $40 million loss was reported for the December quarter. Now, despite the bear market for stock, Glendale's shares have regained all their lost ground.

"It looks like the storm clouds are clearing" said Salomon Brothers analyst Bruce Harting.

Divisive Issue

All the same, for months sale of the Florida branches was the main issue dividing Mr. Trafton and his investors.

After putting the branches on the block, Mr. Trafton took them off in October. But the shareholders demanded he proceed with the sale to provide a capital cushion. Throughout the fall and winter, Mr. Trafton refused.

The December quarter produced a worse-than-expected loss of $40 million, pushing Glendale to just $28 million above minimum regulatory capital levels. Some investors came to view Mr. Trafton as an obstacle not just to the success, but perhaps even the survival of the institution, according to several shareholders.

One major investor, who asked not to be identified, said: "Another quarter like December and the feds would have come in."

'He Did the Right Thing'

For months, relations between Mr. Trafton and shareholders remained strained. But when he announced the deal with Barnett, the air quickly cleared.

Udayan Ghose, a partner at Omega Advisors, which invested $20 million in Glendale's September stock offering, was among those who pressed for a Florida sale. Now he says of Mr. Trafton's performance: "He did the right thing by waiting to sell Florida until the valuation was right."

Some analysts are convinced the investors forced Mr. Trafton's hand. They link the Florida sale with the formation last March of a special board committee to review strategy. The board, they note, had been the target of concerted shareholder pressure.

Mr. Trafton "told me in February he would not sell Florida," recalled Dakin Securities analyst Campbell K. Chaney. "But the shareholders put pressure on him and on the board. Those hedge-fund guys really throw their weight around."

Tough-Guy Image

But Glendale's CEO, who spends his vacations as a worldclass mountain climber, is known for his iron will. Most who know him can't imagine him buckling. And several shareholders agree that he set his own pace.

That certainly is what Mr. Trafton says. Speaking to a reporter in San Francisco recently, he said selling the Florida branches last fall would have meant a fire-sale price - a premium of perhaps a third of what he eventually got.

"We were viewed as a distressed seller," he noted. "I thought it was an extremely defensive strategy that would have resulted in a heavily discounted price.

"Instead we invested our time and energy in building that franchise. We were patient and sold when we thought our work was done."

Glendale's CEO insisted that, in any case, "developing shareholder value," not the need for capital, was the motive for selling the Florida branches.

Fallback Plan

Despite the anxiety of Glendale's shareholders, Mr. Trafton said there was no danger that the thrift could have dipped below regulatory capital requirements.

"People have been talking about our constant struggle to keep capital at adequate levels, but I'm not concerned," Mr. Trafton said. "We have a backup plan at all times."

If it were necessary, he maintained, Glendale could sell securities to shrink its assets base.

"But I don't want to sell earning assets," he added. "I prefer to run the bank close to the capital requirements."

While other troubled thrifts have rushed to sell off problem assets and unessential subsidiaries, Mr. Trafton adopted a gradual, piecemeal approach to fixing Glendale.

Mr. Trafton is scornful of the bulk sales many thrifts used to clean their balance sheets. He insists that assets were discounted far below their real value.

He said he is carrying out such a sale now because a recovering Southern California market allows him to sell real estate at prices closer to full value.

"Most of the buyers are basing bids on generating a 30% to 40% internal rate of return," Mr. Trafton argued. "Simply handing that over to somebody else doesn't make sense. We can make much more money working off nonperforming assets ourselves."

Mr. Trafton's course contrasts sharply with that adopted by Edward G. Harshfield, chief executive of neighboring California Federal Bank.

Costly Cleansing

Mr. Harshfield elected to rid his thrift of most credit problems in one fell swoop through the sale or securitization of $1.2 billion of problem assets. While the move will thoroughly cleanse the institution, Mr. Harshfield took a $280 million charge against earnings to pay for it.

Mr. Trafton would not comment directly on California Federal. But pressed about the benefits of a rapid credit fix, he responded: "I am not in the business of creating a clean bank at the earliest possible moment without regard to shareholder value."

Analysts speculate that Mr. Trafton's next move will be to sell Glendale's $1.1 billion-asset University Savings Bank unit in Washington State. And many believe that when Glendale has recovered in a year or two, he will find a buyer for the remaining California franchise.

Mr. Trafton would not comment on the Washington unit. But of the core California operation he said, "I've got so much to do in the next 18 months I wouldn't even begin to speculate."

"California is where the emerging values are," he added. "I'm not in a rush."

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