Old Stone's CEO Resigns As Big Loss Is Announced
The top executive of Old Stone Corp. resigned Monday as the Rhode Island thrift announced it will report a "significant loss" for the third quarter and full year.
Theodore W. Barnes, who joined as a clerk in 1948, left as president and chief executive -- apparently under pressure from the Office of Thrift Supervision, analysts said.
Rosati Succeeds Barnes
The company said that James V. Rosati, president and chief executive of Old Stone's flagship bank, will assume Mr. Barnes' titles. Mr. Barnes, 60, could not be reached for comment.
Winfield Major, a spokesman for Old Stone, denied that regulators had pushed out Mr. Barnes. "It was totally separate and apart from the examination and everything else," he said.
But observers said the ouster fits a pattern. Regulators have initiated a slew of senior-executive departures in the past two years at ailing banks and thrifts.
Old Stone, with $3.4 billion in assets, is Rhode Island's largest thrift and its second-biggest financial institution. The company did not estimate its quarterly loss, which is expected to be reported within two weeks.
However, it announced a special $68 million addition to its reserve for loan losses and foreclosed real estate in the third quarter. The reserve, which stood at 19% of nonperforming assets just three months earlier, totaled 58% of nonperformers at Sept. 30, the company said.
Old Stone's nonperforming assets at Sept. 30 totaled $304 million, or 16% of loans and foreclosed real estate.
The 172-year-old thrift also suspended its common and preferred stock dividends. In early-afternoon trading Monday, Old Stone's stock had fallen 31%, to $3.625 per share.
Analysts said the announcements raise serious questions about the thrift's survival.
"They're in deep financial trouble," said Gerard Cassidy, a Maine-based analyst at Tucker, Anthony & Co. "The probability of government action at some point in the future is high."
$25 Million Loss Predicted
Mr. Cassidy predicted a loss in the third quarter of at least $25 million. That would reduce Old Stone's shareholders equity to $83 million, or 2.44% of its $3.4 billion in assets. Thrifts are required to have a core equity-to-asset ratio of 3%.
Old Stone, which earned $476,000 in the second quarter after losing $4.7 million in the first quarter, said it did not meet regulatory minimums at the end of the third quarter.
The Providence-based company has been furiously trying to shed assets, write off bad loans, and build reserves in recent months. But it may not have the strength for such dramatic actions, analysts said.
Mr. Cassidy estimated that Old Stone's nonperforming loans equal 239% of its tangible equity, plus reserves. Any ratio in excess of 100% means trouble, analysts said.
"Old Stone looks and smells like a disaster," said James Moynihan, a broker and analyst at Advest Inc.
Old Stone recently sold 50% of its Old Stone Credit Corp. to an investor group led by Thomas H. Lee Co. of Boston. The sale is expected to net a $42 million gain in the fourth quarter.