Central Savings Board Replaced by Regulators
Apparently unable to find a willing buyer for financially troubled Central Savings & Loan Assn., federal regulators on Friday forced the resignation of Central’s board of directors and turned over operations to executives of an Arizona savings and loan.
With nearly $70 million in losses last year, Central has been under “supervisory review” by the Federal Home Loan Bank Board for 18 months, during which time it has been unable to make any new loans or dispose of any holdings without federal approval. As of Dec. 31, Central had $2.5 billion in assets and a negative net worth of $56.2 million, meaning that its liabilities exceed its assets.
Meeting of Employees
In that period, Central officials have discussed selling the association with at least 15 financial institutions, outgoing Chairman Fred C. Stalder told about 100 Central managers and employees late Friday at a meeting to announce the FHLBB action.
Stalder, 64, resigned as chairman, chief executive and a director. Other directors who resigned were Harvey H. Chapman, Peter L. Fritz, Rodney J. Hansen, Herbert J. Penfield and O. Morris Sievert, who also pledged their full support for the new board and its management team. Stalder, Central’s chief executive since 1948, said he learned of the FHLBB’s action on Thursday. “I don’t feel sorry about it; I’ve been pressing the FHLBB to take some action,” he said in an interview. “It may not be a permanent solution, but it . . . will help us get back in business.”
Regulators signed a 90-day contract with First Federal Savings & Loan Assn. of Phoenix to manage Central. Those officials will submit an operating proposal for approval by the regulators.
First Federal President George Leonard will become Central’s new president and chief executive, according to FHLBB spokesman Don Alexander.
The action will not affect depositors, regulators said, because all of Central’s accounts are insured by the Federal Savings and Loan Insurance Corp. to a maximum of $100,000 each.
The new board of directors, selected by regulators, are Howard Edgerton, former chairman and chief executive of California Federal Savings & Loan Assn., who was elected chairman of Central; Carl Mather, former partner of Peat, Marwick, Mitchell & Co. and a former California commissioner of savings and loans; Oscar Grossman, former chairman and chief executive officer of Surety National Bank in Encino; Raymond Watt, chairman and chief executive officer of Watt Industries, a Santa Monica-based building firm, and Sherman Miller, chairman and chief executive officer of Nevada Savings & Loan Assn. in Las Vegas.
‘Lingering Problems’
Regulators said the removal of the old board was taken to “find a solution” to Central’s “lingering problems.” They said that the search for a new capital infusion into Central would continue.
Central’s supervisory review agreement with the FHLBB allowed Central officials to manage the ailing thrift while pursuing a government-coordinated merger or purchase. Three bidders, according to Central sources, were considered as potential buyers: Old Stone Bank of Rhode Island, Far West Savings & Loan and American Capital Corp. of Miami.
American Capital, which owns TransOhio Savings Bank, last year made a formal bid for Central, but the deal soured when the Miami-based firm was also asked to buy a failing thrift in the East, according to Central sources.
Central has 48 branches in Southern and Central California, including 19 in San Diego County, 12 in Los Angeles County and 3 in Orange County.
The Central workers who gathered Friday in a San Diego Community Concourse meeting room to hear Stalder’s announcement were a somber group who gave the ousted chairman a standing ovation after his brief speech.
He told them he felt as if he were “saying goodby to the troops (but) that’s just not the case.”
Beating the Media
Stalder did his best to keep the meeting upbeat. He told workers that “this is the first time we’ve got a message to you before it was leaked to the media.”
And he joked with a worker at Central’s La Jolla branch that “I’ll actually be seeing more of you because I’ll be doing business” at the branch.
Employees not attending the meeting will be notified of the management shake-up by a letter from Stalder, which was mailed out Friday afternoon.
There will be “no major policy changes, but we do hope to turn this company into something,” pledged Gene E. Rice, president and chief executive of First Federal Savings & Loan of Arizona.
“Ultimately, we would like to buy Central Savings,” he acknowledged, adding that First Federal would have to compete with other institutions.
Rice cautioned the employees that his firm’s 90-day operating agreement won’t bring immediate solutions. “We’re the new kids on the block, and we don’t even know where the bathrooms are.”
Central has had problems and controversies for four years. The 50-year-old thrift branched out into real estate development and mortgage banking during the California real estate boom, and got caught in the high-interest-rate pinch when the market stalled.
Stock Offer Canceled
Central suffered its first-ever loss during that time. The association was forced to cancel a $51-million stock offering in November, 1983, because of the red ink and because its investment banker pulled out of the proposal.
In January, 1984, Central’s board fired President Daniel T. McSweeney, who had captained the expansion and who was Stalder’s hand-picked successor.
If McSweeney “had worked out, I would have retired,” said Stalder, who assumed the presidency after McSweeney’s firing. “It was never my intention to stay here.”
He said that people should not “feel sorry for me. I want to get Central moving again; if this is what it takes, that’s fine with me. I am cooperating with the FHLBB because it’s in the best interests of Central.”
At Central’s headquarters branch in downtown San Diego late Friday, most customers were unaware of the management shake-up.
“What does this mean? What’s happening?” asked attorney Al Van Slyke, who had deposited a client’s trust fund with Central Savings.
But another customer, who had heard the news, said he was “taking out a significant amount” of money as he stood beside a sign at the cashier’s window that boasted, “Cash Reserve Means Overdraft Protection” and signed check after check.
Asked why he was removing his money, the man, who declined to identify himself, said, “I’ve just been listening and reading over the months.”
Times staff writer Lanie Jones contributed to this article.
