McEwan a Likely Winner for Troubled Sun Savings
John McEwan won’t admit it, but he may be in the proverbial win-win situation.
The scenario unfolds thusly: McEwan, the new president and chief executive officer of beleaguered Sun Savings & Loan Assn., last Friday reported that the thrift recorded a first-ever loss in 1984 of $5.8 million after writing off $8.9 million in bad loans.
While the large write-offs halve Sun’s net worth to about $6.3 million, they also wipe clean as many old-management mistakes as auditors will allow.
Now begins the McEwan era at Sun. It will not be an era erased of the past, but writing off the loans will allow McEwan to quickly shed the prior loan losses rather than extend them over time. (Delinquent loans now total about $23.2 million.)
In addition, if any of the loans are made good, then the earnings will be credited to McEwan’s tenure as Sun’s chief executive.
On the other hand, if Sun should not be able to recover from its financial morass, McEwan can always claim that the problems were too widespread to overcome.
On a personal level, McEwan would be left with a move from Cleveland--he was vice chairman and executive vice president of Central National Bank there--to San Diego.
When presented with that seemingly win-win scenario, McEwan, 50, only smiles, refusing to directly acknowledge its plausibility.
But his actions give away his strategy.
He is now in the process of reorganizing the association, especially Sun’s credit review and administrative operations. “We’ll not cut back so much as reallocate” staff, he said in an interview last week. Although Sun’s 100-member work force may be “a little fat,” he said he has no plans to drastically trim it.
Credit Analysis
(McEwan has his own cost-cutting formula: He shares a secretary with another Sun senior executive, and he answers his own phone.)
While steering clear of heavily criticizing his predecessor, McEwan maintained that Sun’s “credit analysis wasn’t done with the intensity it should have been.”
Indeed, in the third quarter, Sun wrote off as a bad loan its $4-million portion of a $17.75-million commercial participation loan with Investment Mortgage International Inc. of San Francisco.
And Sun wrote off another $4.8 million in the fourth quarter for bad loans issued during the previous administration of Daniel W. Dierdorff, who resigned as chairman, president and chief executive last fall after a controversy-filled summer among board members.
“We’ve completed a total loan portfolio review,” said McEwan. An action plan for the next five years, he added, will be presented to Sun’s new compromise board--restructured in the wake of protests by dissident shareholders--within the next three weeks.
Some of the loans made to large commercial and multifamily housing projects may require additional funding, said McEwan. Sun may have to “spend more money to save what it has in there already,” he said.
Sun will file lawsuits seeking to recover other bad loans, McEwan maintained.
The association also will try to breathe life into other non-performing assets, including the famous Gagosian mansion in La Jolla, on which Sun has a $4-million loan, and a 283-unit apartment complex in Colorado in which Sun has a $12 million investment.
Concurrently, Sun will reorganize, write off the bad loans and “take our lumps,” McEwan said.
‘Willing to Talk’
Then the S&L; will seek the much-needed capital infusion that has eluded it for the past seven months.
“I’m willing to talk to anybody” about investing in Sun, McEwan said.
New York financier and Sun director Van D. Greenfield is “still interested” in being an investor, according to McEwan. Greenfield and his firm, Greenfield Partners, was to have invested $10 million into Sun late last year.
But after Greenfield examined Sun’s books and loan portfolio in December, he called the deal off. (Insiders expect Greenfield to resign from the board either in the next few weeks or at Sun’s annual shareholders meeting in May.)
Other potential capital infusion offers are still in the works, said McEwan.
Despite Sun’s obvious financial problems, McEwan insists he can turn the thrift around. “If I thought this was a basket case after going over Sun’s loan (portfolio), I wouldn’t have come out here,” he said. “The problems are retrievable; I came here for the long haul.”
If Sun was ready for McEwan, so too was McEwan ready for Sun.
The $3-billion-in-assets Central National Bank, where he was the second-highest-ranked executive, was acquired last year by $5.5-billion-in-assets Society Corp. Under the merger agreement, Society claimed three top executive spots and Central received only one.
“I wanted to be a chief executive,” McEwan said candidly. Hence, his move West.
‘Never Lie’
The first thing McEwan told Sun’s staff was that they should “never lie to me and they should be squeaky-clean in their dealings with this institution.”
McEwan shied away from discussing either Dierdorff or the investigation of Sun by the Federal Home Loan Bank Board.
He said he forwarded a board-ordered investigation of Sun’s loans by San Diego attorney Lewis Silverberg, but admitted that he had not read it. “And I don’t want to read it. Any activity between the regulators and Dierdorff doesn’t concern me. Dierdorff is history, and he has nothing to do with Sun, either formally or informally.”
Dierdorff, who still owns directly and indirectly about 10% of Sun’s stock, did not cut a deal with Sun’s board as part of his resignation, said McEwan. “There was no agreement (for Sun) not to file suit against him; but we won’t.”
McEwan conceded he was surprised that Sun’s steady stream of negative publicity last year has not hurt deposits. “Maybe San Diego is used to bombshells going off,” he quipped. “But we’ve had little negative impact on our deposits.”
As of Dec. 31, 1984, savings account deposits totaled nearly $402 million, up 30.4% from the previous year.
