Without blinking an eye, Marvin N. Schoenhals, the mild-mannered chairman and chief executive of Delaware's Wilmington Savings Fund Society, declares that he and his directors have saved taxpayers as much as $150 million.

He figures that's how much the government would have been stuck for if it had seized the thrift back in 1990, when it was gushing red ink.

For the last 21/2 years, the skinny 46-year-old, who goes by the nickname "Skip," has spearheaded the drive to pull the state's largest and oldest thrift from failure.

He has made tremendous progress.

A Major Turnaround

Last year, WSFS Financial Corp., Wilmington Savings' parent company, made $4.8 million - a major turnaround from the record $85.5 million loss in 1990.

It has also boosted its core capital ratio - once as low as 0.17% - to 3.29% in the first quarter. And it claims to be leading the state in 1993 single-family mortgage originations.

"Without him [Mr. Schoenhals] it [the turnaround] never would have happened," said C.G. Cheleden, WSFS's vice chairman. "He hung in tough with the regulators and kept their confidence. He didn't try to hide any problems."

"He basically saved the institution," added R. Ted Weschler, director of WSFS and a partner in Quad-C Inc., a leverage buyout firm that owns 24.9% of Wilmington Savings.

"He stepped into an institution that was clearly on the brink of seizure. It was literally a goal line stand."

Still a Long Way to Go

Of course the thrift still has a long way to go before all of its problems are solved. It's operating under an Office of Thrift Supervision capital plan that requires it to boost core capital to 4% and risk-based capital to 8% by December 1994. Its riskbased capital currently stands at 5%.

Wilmington Savings also is wrestling with $87.3 million in nonperforming assets, which cost the thrift about $5 million a year to carry on its books. The nonperformers represent about 8% of its $1 billion in assets.

"We are out of the woods," Mr. Schoenhals said. "We are always susceptible to surprise, but it's hard to imagine that a single bad loan could hurt us at this point."

A Residential Focus

Mr. Schoenhals' goal is to continue a shift in focus away from commercial real estate and concentrate on single-family mortgages and consumer and small-business lending.

"We will be, in essence, a community bank focused on residential lending," he said.

It wasn't long ago that Wilmington Savings' management was occupied more with staying out of government hands than with long-range plans. The failure would have meant the end of a venerable 161-year-old institution that has carved out a niche among the middle class.

Before Mr. Schoenhals arrived in November 1990 bad real estate loans were piling up, and Mr. Cheleden and another stockholder were threatening to wage a proxy fight if they weren't admitted to the board. In the summer of 1989, the thrift's chairman and its president were ousted.

Forced to Stop Building

In perhaps the single most embarrassing move, regulators forced management to stop construction on a new corporate headquarters - leaving a hole in downtown Wilmington the size of a city block. The thrift has had to write off $11 million in construction costs.

Selected from among 120 candidates, Mr. Schoenhals was offered the job at a $225,000-a-year salary. He joined WSFS after selling Peoples Savings Bank in Monroe, Mich., of which he was president and chief executive.

Shortly after he arrived, the examiners were preparing for a full-blown examination. Mr. Schoenhals asked them to postpone it for two months so he could conduct his own review. One of his first tasks was to assess the magnitude of the problems in the loan portfolio.

|Knots in My Stomach'

"When we got done, it was obviously much worse than I had thought - $20 million to $30 million worse in terms of losses for 1990," he said. "There were some days when I had some real knots in my stomach."

One of those days was Jan. 15, 1991, when the company announced its $85 million loss for 1990. Mr. Schoenhals wondered if he would have a job. That same day his wife was watching movers deliver their belongings from their home in Michigan to their new house.

"It was just like having half of your body in the freezer and half your body in the fire," he said.

Started Shedding Assets

Meantime, Mr. Schoenhals set about shrinking the thrift from its $1.5 billion size. He sold its money-losing commercial fleet leasing subsidiary.

Late in the year he would also shed a real estate brokerage subsidiary and millions of dollars worth of mortgage backed securities and mortgage servicing rights. Also sold at that time were $129 million in deposits at eight branches. With the sale, 50 employees were fired.

"I would say it was the toughest thing I have ever done," he said, reflecting on the day he stood before the employees and told them they no longer had jobs. "I knew it went with the territory. I hope I never have to do it again."

Closing Was Contemplated

Despite the sale of the leasing company, the examiners were getting itchy early in 1991. In one tense meeting in the second quarter they told Mr. Schoenhals that they were thinking about closing the thrift.

"I spent a great deal of time working with the regulators, pointing out that ... I was saving them money every day that they left me there," he said. "I was reducing the size of the company significantly ... but I was doing it as a going concern versus the government coming in and doing it at fire sale prices."

Mr, Schoenhals said the turn-around would have never happened under current rules that require regulators to shut down banks and thrifts whose capital falls below 2%.

|Great Regulatory Courage'

"The easiest thing would have been to have shut us down in the first quarter of 1991 and nobody would have asked any questions," he continued. "It took great regulatory courage."

While he was paring down the business, he was also banging on doors trying to do the impossible - convince investors to buy WSFS stock.

In June 1991 the thrift commenced a private placement, and a month later it offered shares to stockholders in a rights offering. When the offering closed 15 months later, the thrift had raised $13.4 million.

Mr. Weschler said Quad-C, which invests in everything from Burger Kings to companies that make reflectors for roads, took a $5 million stake in Wilmington Savings because it has a valuable name and does business with three out of 10 households in New Castle County.

"It's something you really can't replicate," he said.

Praise for the Chief

He also like Mr. Schoenhals.

"He's disarmingly forthright individual. He stepped into what by rights should have been a finished situation. There is not a person I have spoken to in regulatory circles who had not mentally written the institution off."

Mr. Schoenhals' contract expires this month, but he and the board have reached an agreement that would keep him running the show for three more years. The regulators, however, must sign off on it.

"I absolutely want to stay here." he said. "There is an immense unfinished job here. My vision is to turn this company into a high-performing financial institution.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.