Valley Federal Posts Profit of $6.27 Million

Valley Federal Savings & Loan said it exceeded financial targets that the capital-poor thrift agreed on with the federal government by earning $6.27 million in the second quarter that ended June 30, compared to a loss of $2.55 million for the same period in 1989.

Valley Federal is required to meet targets in a capital plan approved in May by the federal Office of Thrift Supervision, since the S&L; falls far short of requirements for capital reserves, which are meant to provide a cushion against potential losses.

Scott A. Braly, Valley Federal’s chief executive, said last week that the S&L;’s $16 million in earnings for the first six months of the year exceeded the profit target by about $1 million. In the first half of 1989, Valley Federal lost $2.38 million.

On June 30, the Van Nuys-based thrift reported a deficit of $27.5 million in tangible capital. Tangible capital is essentially equal to the net worth of the company minus the value of some non-cash assets.

That means that Valley Federal falls about $70 million short of the federal requirement of about $43 million for an institution of its size.

But things have improved since Dec. 31, when Valley Federal had a tangible capital deficit of $43.5 million.

Meanwhile, Valley Federal has also lowered the amount of capital it must have under the federal requirements by shrinking in size. The S&L;’s total assets fell 6% to $2.85 billion as of June 30, from $3.04 billion on Dec. 31.

Nevertheless, by the end of June, 1991, Valley Federal will have to meet even tougher capital standards than those in effect today.

The thrift has said that to meet those goals so soon, it would have to be sold.