HomeFed’s Chief Makes Own Review of Thrift’s Assets

Thomas Wageman, HomeFed Bank’s new chief executive, said he has begun a personal review of all loans over $1 million, a process that will take at least three months and which some observers say could lead to another round of loan loss reserves at the embattled thrift.

In an interview, Wageman said “no inferences should be made” about whether the review will lead to loss reserves, saying he customarily goes over assets whenever he takes on a new thrift or assets so that he can learn what he is dealing with.

“Knowledge is power.” Loan quality information “isn’t something you can take from someone else’s report. Schwarzkopf didn’t run the Persian Gulf War from Tampa. He went to the desert. This is the same metaphor,” Wageman said. “Nobody said it was necessary. I just wanted to do it.”

But Wageman could use the review as an opportunity to “take a big reserve so that he can show profits in the future,” said Jonathan Gray, a financial institutions analyst with Sanford Bernstein & Co. of New York.

Taking on problem thrifts and assets is something the 57-year-old Wageman has had extensive experience doing. In 1983, he was hired as chief executive at First National Bank of Midland (Texas), already a troubled institution. Ten weeks later, the bank was placed in receivership. Wageman stayed on until 1986, when he joined Sunbelt Savings, a Dallas thrift that regulators subsequently used as the repository for pieces of two dozen failed Texas thrifts.

HomeFed’s books have been under review by the thrift and various federal regulators for a year because of deteriorating loan portfolios in California and other states including Florida, Georgia and Maryland. The reviews resulted in HomeFed setting aside bad loan reserves totaling $546 million in 1990 and $200 million in the first quarter of 1991. For those periods, HomeFed lost $247.5 million and $173.9 million, respectively.

The heavy losses prompted regulators to ask for the resignation in May of Robert Adelizzi as HomeFed’s chief executive. Wageman was hired last week to replace him. HomeFed is deficient in one of three capital requirements and is expected to fall short of a second capital measurement when it reports its second-quarter financial results later this month.

Until the loan review is complete, Wageman said he will not be able to say whether HomeFed’s problem loans are stabilizing or not and thus declined to say in the interview what HomeFed’s chances of recovery are. But he said overall, HomeFed is aided by its strong market franchise, its 210-branch network and California’s overall economic strength.

Wageman said he is on a two-year employment contract at HomeFed that pays him $650,000 this year and $725,000 next year. He is also negotiating a stock option agreement with HomeFed’s board of directors that could give him and four other former Sunbelt executives that have come to HomeFed a “significant ownership position” in HomeFed, not exceeding 10% combined.