Calfed Chairman Forced Out : Finance: Jerry St. Dennis’ ouster follows a second-quarter loss of $45.5 million. The thrift says the two are unrelated.
In a stunning development, California Federal Bank, one of the nation’s largest savings and loan companies, announced a large quarterly loss on Monday and said its chairman had been forced to resign.
Calfed said Chairman Jerry St. Dennis, a veteran company employee, had been forced out at the same time the financial institution reported a loss of $45.5 million for the second quarter.
In a statement, the financial institution insisted there was no correlation between the loss and St. Dennis’ departure, although financial analysts said the losses were much larger than expected. With $15.9 billion in assets, Calfed is the nation’s sixth-largest thrift.
The board selected director Michael Arthur, a Los Angeles-based management consultant, as interim chairman and named a search committee to find a permanent replacement. St. Dennis, who had been chairman for the last three years, was asked to stay on until a successor was found. He refused, resigning effective Saturday.
Calfed Chief Executive William L. Callender was also asked to quit but agreed to stay on until a successor can be found, the company said. In an interview, Callender expressed surprise at the board’s action and said he will stay no longer than the end of the year. The resignations were requested by the board at a meeting last week.
The news shocked investment analysts and apparently the executives themselves. St. Dennis, 51, and Callender, 60, had received generally high marks for bringing Calfed back from the brink of insolvency with a $256-million recapitalization completed earlier this year.
Calfed blamed the quarterly loss on the “continuing decline in Southern California real estate values.” Calfed said it had to add $80.8 million to loan-loss reserves, most of which resulted from lower than expected sale prices of foreclosed commercial real estate.
Calfed’s shares fell $1.50 Monday to $11 on the New York Stock Exchange.
Calfed is struggling with a high level of non-performing assets, which totaled $1.18 billion--or 7.45% of assets--at the end of June. But the problem assets declined slightly during the quarter, Paine Webber analyst Gary Gordon said Monday.
Callender said that he and St. Dennis were offered no explanation except that the board wanted the 166-branch thrift to move in an unspecified “new direction.” Analysts speculated that those changes might include a more aggressive search for a buyer for Calfed and its attractive branch network.
“I was certainly surprised that Jerry St. Dennis resigned,” said First Boston Corp. financial services analyst David Hilder. “I thought Jerry had done a very good job of managing Calfed through a long and difficult period and I thought he was focused on the right issues: expense control, asset quality and making new loans.”
The hiring of a new management “creates an additional source of uncertainty” for Calfed, Hilder said.
Except for St. Dennis and Callender, the Calfed board has been completely revamped since the recapitalization, the bulk of which was accomplished through a swap of about $160 million in bonds for stock, giving former bondholders control of 78% of the S&L;’s shares.
The quarterly loss, up from a $23.2-million loss for the same quarter last year, “was a big surprise to me,” Paine Webber’s Gordon said. “I predicted a break-even quarter for them and they lost $45 million so I can’t say that I just missed.”
Calfed’s loss follows the $291-million loss reported last week by H.F. Ahmanson, parent of Home Savings of America, and the $29.9-million loss by the parent company of Glendale Federal. Both institutions said the continuing deterioration of real estate values were at fault.
The Losses Keep Coming
Calfed, once one of the nation’s leading savings and loan companies, has fallen on hard times lately. It has reported heavy losses every year since the decade began, a trend that is continuing in 1993.
2nd quarter, 1993: $45.5 million loss
Source: Dow Jones
