CalFed’s Chief Quits at Request of the Directors
John R. Torell III quit Friday as chairman, president and chief executive of CalFed Inc., the parent of California Federal Bank, two days after the Los Angeles thrift’s board of directors asked for his resignation.
Torell headed CalFed just short of one year, joining the company last Aug. 1 after 27 years as an executive with Manufacturers Hanover Corp. in New York. Torell effectively will be replaced by Jerry St. Dennis, most recently the company’s chief financial officer and chief economist. St. Dennis’ title will be president and chief operating officer.
In addition, director Arthur W. Schmutz was named chairman and a three-member “Office of the Chairman” was formed that includes Schmutz and directors Howard P. Allen and Richard C. Lawton. With $28.3 billion in total assets, CalFed is the nation’s fourth-largest thrift.
In a telephone interview Friday, Torell, who said the board asked for his resignation Wednesday, said his differences with CalFed directors did not stem from disagreements over his policies, which included an overhaul of much of CalFed’s operations. Rather, he said, the differences were that CalFed’s directors believed “that West Coast thrift culture is different than the culture that I brought.”
Torell declined to specify those differences. But thrift executives and industry analysts said CalFed had trouble adapting to Torell, an intense, often impatient man.
“There’s a tough-guy way about him,” said Peter Treadway, an analyst who follows the company for the investment firm of Smith Barney, Harris Upham.
As a former New York banker, Torell came from a much more formal corporate environment than is found at CalFed. Torell, for example, asked executives to wear their suit jackets when walking around the company building and office. He also made it known that he wanted to end CalFed’s annual meeting with shareholders quickly this year. The meeting took less than 20 minutes, compared to more than an hour in past years.
Like Each Other
CalFed directors and St. Dennis did not return a reporter’s calls Friday. Despite being fired by CalFed’s directors, Torell praised them as a “neat board” that he respects.
“We like each other just fine,” Torell said.
Torell joined CalFed soon after quitting as president of Manufacturers Hanover, where he had been viewed as the eventual successor to John McGillicuddy as chief executive. Torell said then that he left because of a growing frustration that he would not lead a big bank soon.
Indeed, that drive to run things was a factor earlier this year when CalFed was in merger talks with GlenFed, the parent of Glendale Federal Bank--a combination that would have created the nation’s largest thrift.
But the talks broke off, in part because of disagreements between Torell and GlenFed Chairman Norman M. Coulson over who would be head of the merged institution. Some analysts speculated Friday that Torell’s leaving may result in the renewal of those talks, although executives familiar with the discussions said they believe that they are off for now.
Torell came to CalFed looking for a turnaround situation and got one in a company whose earnings had lagged and that had diversified into far-flung areas. Among his actions were to dispose of some insurance businesses and part of its trust operation and to sell a $500-million loan portfolio. He also set CalFed on a course of expanding its branch system and buying other savings and loans.
Squeeze on Capital
Despite the changes that Torell made, CalFed has problems. It has some $566 million in intangible assets called goodwill that it will not be able to consider as capital under new, tougher standards about to be approved as part of the nation’s savings and loan bailout package.
Although no one expects CalFed to have difficulty meeting the minimum requirements that will be set, some industry analysts and thrift executives believe that it may not have adequate capital to grow and buy choice thrifts that come up for sale.
The news of Torell’s resignation came one day after CalFed reported a 50% drop in earnings to $19 million in the second quarter. The decline was due largely to lower profit in its financial services segment, caused by higher short-term borrowing costs.