Regulators Force Shake-Up, Loan Limits at Guardian
As the result of a federal regulatory order, Russell M. Jedinak resigned Friday as chairman of Guardian Savings & Loan and was replaced by William J. Crawford, former commissioner of the state Department of Savings and Loan.
The cease-and-desist order by thrift regulators also restricts the lending activity of the once fast-growing thrift, resulting in the layoffs of 185 people in Guardian’s loan operations. That amounts to about 26% of the thrift’s 700-person work force.
The actions follow a recent audit by the Office of Thrift Supervision that uncovered problems with Guardian’s internal controls, mortgage-loan credit underwriting standards, monitoring of mortgage-loan brokers, and the management of the institution.
Jedinak and his wife and co-owner, Rebecca M. Jedinak, agreed to leave the institution in negotiation with the OTS. Rebecca Jedinak was the senior executive vice president and oversaw the thrift’s foreclosure actions and sales of foreclosed properties.
In a statement, the thrift said that Jedinak, who also was president, is “stepping down to pursue other interests,” and noted that he agreed to provide services necessary to make the transition in leadership smooth.
Crawford, who retired as state S&L; commissioner last year, could not be reached for comment. In recent months, he has worked for the Resolution Trust Corp., the federal agency that manages and liquidates failed thrifts, as managing agent of Mercury Savings & Loan in Huntington Beach and, until Friday, as a managing agent of FarWest Savings in Newport Beach.
The OTS had halted most of Guardian’s lending last month while the Jedinaks and regulators negotiated. With Crawford taking over, OTS is allowing Guardian to resume limited mortgage-loan funding--$50 million this month and $75 million in each of the next two months. Higher amounts will be allowed in May after the thrift improves internal procedures.
Steve Kudenholt, a spokesman for the S&L;, said the order necessitated the layoffs because the thrift will be making fewer loans in the next three months. About 150 of the layoffs are being made at Guardian’s 19 loan offices statewide. The remaining layoffs are at the S&L;’s five savings branches and its headquarters.
Though only a mid-size thrift, Guardian has thrived by funding more than $100 million in mortgage loans a month and selling them to Wall Street investors. Last year, it made and sold $1.6 billion in mortgage loans.
In examining Guardian, regulators found that it reportedly made poor credit checks for loans, monitored loan brokers poorly and had a defective management structure and inadequate internal procedures.
The OTS order requires the thrift to correct those problems and to make other changes. The thrift already has complied with most of the order, Guardian officials said. They also said that the issues are mainly small ones or ones that were corrected long ago.
Much of its lending has been concentrated in poorer areas and on borrowers who made large down payments. Jude Lopez, the thrift’s vice president in charge of lending, said Guardian has taken only 60 properties back in foreclosure among 34,400 loans it has made since it opened its doors in October, 1983. But he acknowledged that the thrift is quick to foreclose once loans go into default.
The OTS also approved a plan to bring Guardian into compliance with federal capital requirements. The thrift has agreed to retain all earnings, and last year stopped paying dividends to the Jedinaks.
With $606.3 million in assets at the end of September, Guardian had earned $2.4 million for the first nine months of 1990. It lost $1.7 million the previous year. Year-end figures for 1990 have not yet been reported.
Guardian’s assets have slipped slightly from its earlier fast growth. The management structure became outdated as Guardian’s assets grew from $230.6 million at the end of 1986 to nearly $650 million in mid-1989. Jedinak had a dozen executives reporting directly to him, instead of setting up a pyramid line of authority.
“I think (the ability to control things) got beyond them,” said Gerry Findley, a financial institutions consultant based in Brea.
GUARDIAN’S PERFORMANCE
Guardian Savings & Loan of Huntington Beach has grown rapidly over the past five years, and has reported profits in every year but 1989. But federal regulators forced a change in management Friday as the result of a recent audit that uncovered operating problems. Dollar figures are in millions
Net income Year (Loss) Assets 1985 $1.2 $230.6 1986 3.6 291.0 1987 6.1 365.7 1988 14.8 522.2 1989 (1.7) 607.3 1990* 2.4 606.3
* For nine months ended Sept. 30.
Source: Guardian Savings & Loan
