Glenfed Agrees to Sell Problem Assets Worth $180 Million

In a move that will cut its non-performing assets to their lowest level in seven years, Glendale Federal Bank said it agreed to sell problem loans and real estate with a book value of $180 million.

The sale, to unidentified investors, will chop the thrift’s non-performing assets by $37 million, to $319 million, or 1.99% of total assets, Glenfed said in a statement Wednesday.

As of June 30, 1994, Glenfed’s non-performing assets were $661 million, or 3.94% of total assets.

Stephen J. Trafton, Glenfed chairman and chief executive, called the bank’s strategy for improving loan quality “a major success. We have fulfilled our commitment to reduce the level of [non-performing assets] without destroying shareholder value.”

The sale, expected to close by Sept. 30, will not result in a charge against Glenfed’s earnings.

Included in the sale are $75 million of multifamily residential loans, $99 million of loans secured by commercial and industrial real estate and $6 million of real estate acquired in settling problem loans.

Also Wednesday, Glenfed announced profits of $12.1 million for the fourth quarter of fiscal 1995, ended June 30, contrasted with a net loss of $4.8 million for the year-earlier quarter.

For the fiscal year ended June 30, 1995, Glenfed reported profits of $75.1 million contrasted with a net loss of $208.6 million for fiscal 1994.

Fiscal 1995 results include an after-tax gain of $29.7 million from the sale of the bank’s Washington operations, an after-tax gain of $2.3 million from the sale of the bank’s Florida franchise and an extraordinary net gain of $1.8 million resulting from an early extinguishment of debt.

Fiscal 1994 results included a write-off of $136 million of goodwill and other assets associated with the sale of the Florida franchise, an extraordinary net gain of $14.1 million resulting from a debt restructuring completed in connection with the 1993 recapitalization of the bank, and tax benefits of $10.2 million.

Excluding the non-recurring items, Glenfed’s net earnings for fiscal 1995 were $41.3 million compared to a loss of $96.6 million in fiscal 1994.