SAN FRANCISCO -- Jerry St. Dennis, the thrift executive who pulled California Federal Bank from the brink of failure last year, has been forced out as chairman.
The resignation, announced Monday, was effective immediately. The move was requested by California Federal's board, according to officials of the nation's sixth-largest thrift.
The departure came as California Federal, which has $15.9 billion of assets, reported a $45.5 million second-quarter loss. The thrift said this result reflected a continuing decline in Southern California residential real estate values.
Chief Executive Ousted, Too
California Federal's directors also requested the resignation of William L. Callender as president and chief executive. Mr. Callender, 60, will stay to manage operations until new leadership is installed this year, thrift officials said.
Michael W. Arthur, a Los Angeles management con who joined the board this year, will be interim chairman until a permanent chairman is hired.
Directors requested the resignations of the thrift's top two executives at last Wednesday's board meeting and started a search for a new chief executive late last week.
The decision to replace the top two officials was not due to the latest quarterly loss, California Federal officials said. Rather, they explained, directors want a more aggressive leadership style now that a federal takeover is no longer a threat.
"The feeling was that Jerry and I were spending so much time solving problems," Mr. Callender said. "They wanted somebody who would focus on the future."
Scott L. Adair, a former director familiar with the board's thinking, said board members did not "believe [Mr. St. Dennis] had a game plan going forward."
Ironically, Mr. St. Dennis' successful effort to recapitalize the thrift may have ultimately led to his dismissal.
Under a regulatory order to boost capital, the 51-year-old executive in the last year engineered a debt-for-equity swap, a preferred stock offering, and other measures that raised about $250 million - enough to lift capital ratios above the required levels.
But the restructuring put most of the thrift's stock into the hands of former bondholders, leading to the election of a new group of outside directors this year. The activist group includes entrepreneurs, consultants, and corporate turnaround specialists.
California Federal's unexpected second-quarter loss followed two consecutive quarters of operating profits. For the first six months of 1993, the thrift lost $35 million.
As part of a capital plan approved last year, the thrift projected a 1993 profit of $42 million. But it warned that results hinged on a recovery of California's economy.
California Federal said the loss stemmed mainly from declines in the value of foreclosed residential property in the Los Angeles area during the second quarter. It was forced to add $80.8 million to loss reserves to cover larger-than-expected losses on the sale of houses and apartments.
The thrift's problem assets, however, declined modestly during the quarter. Nonperforming assets of S1.185 billion at the end of June were down 0.6% from March 31 but 4.1% higher than a year earlier.
Despite the loss, California Federal's core and risk-based capital ratios remained above the 5%- and 10%-of-assets ratios achieved this year. Reaching those thresholds ended restrictions imposed in the thrift's regulatory capital plan.
Mr. Callender declined to predict whether California Federal would return to profitability this year. But he said he was "hopeful" it would stay above the 5% and 10% capital levels.