Caretaker of Failed Thrifts Hired as CalFed’s New CEO
California Federal Bank named Edward G. Harshfield, an experienced caretaker of failed banks and thrifts, as its new chief executive Wednesday and said it will soon hire an investment banking firm to explore future moves, including a possible sale of the thrift.
The appointment of Harshfield, 56, heightened speculation that CalFed is readying itself for sale to another financial institution. The investment banking firm will help the thrift make a “strategic assessment . . . and . . . maximize shareholder value,” company spokesman James Hurley said.
The company might also consider selling its problem loans in bulk, Hurley said, a common strategy for large financial institutions struggling to clean up their balance sheets.
Harshfield was not available for comment, but analysts said a sale of the thrift could be a difficult task. Los Angeles-based CalFed has adequate capital but is strapped with a huge portfolio of delinquent loans in a sluggish economy. The market is also glutted with thrifts for sale.
“My best guess is that his job is to pretty up the company over the next two to three years and then sell it,” said Paine Webber thrift analyst Gary Gordon. “The argument to sell CalFed today is not the best strategy. You’ll get a better price later.”
CalFed shares dropped 50 cents to close at $13.375 in trading Wednesday on the New York Stock Exchange. The value of its shares had been rising in recent weeks on speculation that the financial institution was looking for a buyer. With $15.9 billion in assets, CalFed is the nation’s sixth-largest thrift.
Wedbush Morgan Securities thrift analyst Charlotte Chamberlain said she is concerned about Harshfield’s “lack of track record in turning around problem thrifts.”
Harshfield headed insolvent First City Texas National Bank at the behest of federal regulators for six months late last year and early in 1993. The Texas bank was the eighth-largest insolvency in U.S. history.
Before that, Harshfield was hired by regulators to take over as chief executive of Columbia Savings in Beverly Hills after regulators removed the failed thrift’s management.
Harshfield also spent 13 years as a commercial banker with Citibank and before that was with Household Financial Services, Ford Motor Co. and Pepsico Inc. Since 1987, he has been chairman of Chicago-based U.S. Thrift Opportunity Partners, a Merrill Lynch-sponsored limited partnership investing in banks.
The thrift also announced the election of board member David Gilbert as chairman, replacing Michael Arthur, who will return to his role of director. Gilbert will have no operating responsibilities.
The CalFed board’s naming of Harshfield caps a two-month search for a successor to former Chairman Jerry St. Dennis, who was forced out in July after the thrift reported a $45.5-million second-quarter loss.
