Ex-Ahmanson CEO Rinehart takes post at Downey
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Newport Beach-based Downey Financial Corp., struggling to show Wall Street it can survive despite heavy losses on defaulted mortgages over the last year, on Monday named savings and loan industry veteran Charles R. Rinehart as its new chief executive.
Rinehart, 61, was CEO of H.F. Ahmanson, the parent of Home Savings, from 1993 until the Los Angeles thrift giant was sold to Washington Mutual in 1998.
Since then he has been a professional director, serving on the boards of companies including Union Bank of California, Safeco Insurance Co. and Pacificare Health. He also was on the board of the Federal Home Loan Bank of San Francisco from 1995 to 2001.
Rinehart had to pass muster with Downey’s regulator, the Office of Thrift Supervision, because the agency has been giving Downey marching orders for the last few months -- demanding, for example, that the lender raise capital to bolster its balance sheet.
With regulators bearing down, the firm’s board ousted previous management in late July.
Downey, the parent of Downey Savings, had $13.9 billion in assets as of Aug. 31; its non-performing loans, including restructured loans, totaled a huge 14.7% of assets on that date.
‘Our industry currently confronts an environment as difficult as any we have ever seen,’ Rinehart said in a statement. ‘While the task ahead is not easy, I am committed to helping Downey move forward resolutely focused on continuing to meet our customers’ banking needs while we work closely with our regulators.’
He also nodded to the company’s devastated investors, saying the firm would ‘focus on making the changes necessary to generate value for our shareholders.’
Downey’s shares have plunged 90% this year and have been a favorite target of short sellers -- traders who bet on falling stock prices. Nearly 15 million of the company’s 27.8 million shares were shorted as of Aug. 29.
But the stock is one of more than 800 financial issues that are temporarily protected from additional short selling under an emergency order from the Securities and Exchange Commission last week.
Downey’s shares edged up 12 cents to $3.11 on Monday, before the company announced that Rinehart had taken the CEO post. The stock fell as low as $1.49 early last week before rebounding on Thursday and Friday.
Rinehart will earn $1 million a year in base salary and will get a $2.5-million signing bonus.