Gibraltar Seeks New Investors to Boost Capital : Ailing S&L; Discusses Assistance Options With Regulators; Chairman Resigns
Gibraltar Financial in Beverly Hills, hobbled by heavy losses that have eroded its capital, disclosed that it has held preliminary talks with federal savings and loan regulators about ways to find outside investors to bolster its shrinking net worth.
Such a move might be coupled with direct financial assistance from the Federal Savings & Loan Insurance Corp., the arm of the Federal Home Loan Bank Board, which steps in when a thrift gets into financial trouble. Gibraltar Financial is the holding company for Gibraltar Savings, among California’s 10 biggest thrifts with nearly $15 billion in assets.
Gibraltar “has had preliminary discussions with FSLIC concerning some form of FSLIC assistance, possibly coupled with an investment in the company by a third party,” the company disclosed in its latest quarterly report to the Securities and Exchange Commission.
Meanwhile, Gibraltar announced Thursday that Jay Janis, the nation’s top savings and loan regulator during part of the Carter Administration, has resigned as Gibraltar’s chairman, a post he has held for less than a year. In an interview, Janis, 55, said he is resigning for personal reasons that have nothing to do with Gibraltar.
James N. Thayer, president and chief executive, will succeed Janis as chairman, but the company said a nationwide search has begun to find a new president and chief executive to replace Thayer, who is 62.
The latest developments mark another significant turn of events at Gibraltar, which has sustained losses of nearly $200 million since mid-1987 and has gone through sweeping changes in top management. The losses, including $24 million in the latest three-month period, have cut deeply into the thrift’s capital, which is used as a safety cushion against losses.
Gibraltar has had heavy losses on large commercial real estate development loans that have gotten into trouble. Rising interest rates have further squeezed profit margins on fixed-rate assets, such as mortgage-backed securities.
If FSLIC were to provide financial assistance to Gibraltar, it would qualify under a controversial new federal regulation, known as open-bank assistance, that allows FSLIC to bail out thrifts that are still stockholder-owned. FSLIC traditionally has bailed out a thrift when it has run out of capital and shareholders’ equity has been eliminated through a government receivership.
Gibraltar still has $446 million in regulatory capital, but that is only $63 million above its federal regulatory minimum. And Gibraltar indicated that its capital will probably continue to erode.
In its filing with the SEC, known as a 10-Q report, Gibraltar said it will remain in the red as long as interest rates keep rising. “Losses are expected to continue unless short-term interest rates, which have risen substantially during 1988, decline significantly,” the firm said.
Top Name Sought
Thayer and Janis assumed their present posts at Gibraltar last March following the resignation of chief executive Herbert J. Young, 56, who left following a long career at the company.
Janis said the search for a new chief executive remains wide open and is being conducted by the search firm of Korn/Ferry International. “We’re looking for a top name in the business,” Janis said.
Thayer readily admitted the firm needs help at the top. “We really need some more top people,” he said. “Given that I am over 62, logic dictates that you put somebody younger in (the chief executive) job.”
Before assuming the chairman’s post at Gibraltar, Janis had been a consultant at the company as well as a director since 1982. His other jobs have included stints as chairman of the Federal Home Loan Bank Board, undersecretary to the U.S. Department of Housing and Urban Development and president of California Federal Savings & Loan in Los Angeles.
Janis said he has no specific plans now but wants to work on ways to solve the problems of FSLIC, the industry’s bankrupt deposit-insurance fund. FSLIC’s financial condition is expected to be a major problem facing the next Congress when it convenes in January.
“I want to devote some time to broader industry issues,” Janis said. “This is where my interests lie. It’s going to be a crucial year for the savings and loan business and I want to participate in that.”