HomeFed Chief Resigns Under OTS Pressure : Thrifts: Robert Adelizzi’s action is seen by some analysts as presaging a government takeover of the San Diego savings and loan.
Under pressure from federal regulators, Robert Adelizzi resigned Tuesday as chief executive of HomeFed Bank, further fueling fear among many analysts that the nation’s fifth-largest thrift is heading for a government takeover.
HomeFed, which has $18 billion in assets and 210 branches, said in a statement that Adelizzi tendered his resignation after the board received a “suggestion” from the Office of Thrift Supervision that he quit.
Adelizzi, 56, will stay on the job, however, until a successor is found and plans to preside at HomeFed’s annual shareholders meeting May 15.
In an interview, Adelizzi said he “didn’t argue the case” that he resign. “In a company that doesn’t do well, the guy at the top expects anything’s possible and certainly I thought that (a resignation) was something that could happen,” Adelizzi said. “It was their decision, they made the recommendation, and that’s fine.”
Regulators typically force chief executives out for one of three reasons: lack of confidence, lack of trust or they suspect fraud. Several analysts said Tuesday that in Adelizzi’s case regulators simply lost confidence in his ability to lead HomeFed following several quarters of big losses. The company last week reported a loss of $173.9 million in the first quarter ended March 31 and revealed it failed to meet one test for capital levels.
“When the team gets routed, you fire the coach,” said Peter Treadway, a savings and loan analyst for Smith Barney, Harris Upham & Co. in New York.
The losses and a weakened capital base have prompted analysts to handicap HomeFed’s chances of survival at no better than even. But some observers say that Adelizzi’s forced departure, so soon after regulators completed a thorough audit of HomeFed’s books, means regulators are stepping up their involvement in HomeFed’s affairs.
“I think this is obvious evidence of more active involvement by the OTS. How far they are going to take it, I don’t know,” said Lawrence R. Vitale, vice president of Keefe, Bruyette & Woods, an investment research firm.
Observers said the increased pressure on HomeFed could be an example of how the regulatory microscope has shifted to a group of large “second-tier” thrifts that are solvent--but not by much--now that California’s worst high-flying S&Ls; such as Lincoln Savings, Columbia Savings & Loan and Imperial Savings have already failed.
HomeFed is at the top of the emerging list of troubled institutions. Coast Savings Financial in Los Angeles is also having trouble meeting capital requirements and is said to be under growing regulatory pressure. Other thrifts that meet the capital requirements, but have suffered from losses on real estate lending, are GlenFed in Glendale and CalFed in Los Angeles.
In an interview, HomeFed Chairman Kim Fletcher said OTS’s Western regional Director Michael Patriarca “strongly suggested” that Adelizzi resign while attending HomeFed’s April 29 board meeting.
“It was apparent at that time that (Patriarca) wanted him gone,” Fletcher said. Patriarca “had nothing but kind things to say about Bob, no dishonesty or anything like that--absolutely clean. But he did feel the institution should be given new leadership,” said Fletcher, who relinquished the CEO’s job to Adelizzi in January, 1990.
But the timing of Adelizzi’s resignation led some observers to say it could have been a result of friction between regulators and Adelizzi. Although executives at troubled S&Ls; have been forced out in the past, regulators have frequently waited until the institutions were in far more desperate straits than where HomeFed finds itself.
Although the S&L; is deficient in one, soon to be two, capital measures, HomeFed still exceeds the minimum tangible capital measures, the most stringent standard.
Last week’s first-quarter loss comes on top of a loss of $247 million for all of 1990. The losses have left HomeFed severely weakened and deficient in risk-weighted capital, one of three minimum capital standards applied by regulators. Moreover, the thrift said it expects to soon be out of compliance on its core capital measure. Capital is the financial buffer that protects a bank or S&L; from losses.
The capital deficiency means HomeFed will soon have to submit a plan to regulators explaining how it will get back into compliance. Such a plan usually leads to the imposition of operating restrictions on thrifts. HomeFed has said it plans to shrink assets by as much as $2.5 billion. Fletcher said HomeFed was also considering selling branches in “outlying areas,” but not in San Diego.
Also ominous is HomeFed’s high ratio of nonperforming loans to total assets, which by March 31 had ballooned to 8.4%. HomeFed’s nonperforming assets--defined as loans in foreclosure or those at least 90 days delinquent--grew sharply over the past year as commercial real estate and apartment loans in California, Florida and other Eastern states turned sour.
Adelizzi, an ex-Marine and former football player at Dartmouth, enjoys considerable standing in the S&L; industry by virtue of his personality and the once-seemingly impregnable strength of HomeFed. Still, observers were not surprised that he had been pressured to step down.
“HomeFed is a company whose fortunes have taken a turn for the worst,” said Jonathan Gray, senior analyst at Sanford C. Bernstein & Co. in New York. “No one questions his integrity. He’s a very nice man and a lot of people on a personal level find this a sad day. But then again the company’s business record has been most unfortunate.”
HomeFed shares closed down $.25 cents to $3.125, its all-time low in New York Stock Exchange trading Tuesday. The shares traded as high as $34 last June.
Times staff writer James Bates contributed to this story.
