Butterfield Says Cuts Due to New Standards
Butterfield Equities Corp.’s decision this week to rein in its savings and loan subsidiary, once considered one of the nation’s most innovative new savings associations, is a portent of what lies ahead for other “new wave” S&Ls; across the country, industry sources said Thursday.
Donald Endresen, president and chief executive of Butterfield, a diversified Santa Ana financial company, denied Thursday that the restructuring of the company was a reaction to its heavy financial losses of the past 15 months.
Instead, he said, Butterfield is acting in anticipation of tight new federal controls on the entrepreneurial new S&Ls; that have sprung up since deregulation.
Butterfield announced Wednesday that it was discontinuing its financial planning and wholesale residential mortgage banking operations and that it had laid off 30% of its work force, or about 100 employees, because of the cutback.
Cut $200 Million in Assets
On Thursday, Endresen said the company also is setting up its real estate syndication and restaurant divisions as separate companies, removing them from Butterfield Savings & Loan Assn.’s corporate structure.
In addition, it will cut $200 million from the S&L;’s assets by June. The company, which had $866 million in assets as of Sept. 30, 1984, sold $70 million of real estate investment holdings in the past quarter, including its Santa Ana headquarters, which it sold in a deal estimated at $26 million, Endresen said.
The balance of the $200-million asset reduction will come from the sale of loans at Butterfield Savings & Loan.
Butterfield’s game plan has changed, Endresen said, “because the regulators are not interested in seeing high growth. The pendulum, in a regulatory sense, is swinging from an open investment policy on the asset side to a more restrictive policy on the asset, investment side.
“Removing the very non-traditional activities from the savings and loan,” he said, will leave Butterfield with a “far more traditional S&L;” that banking regulators now prefer.
More Conservative View
Butterfield Equities bought its S&L; in 1981, when Richard Pratt, then-chairman of the Federal Home Loan Bank Board, was proposing that S&Ls; be granted broad new powers to invest in areas outside the traditional field of residential mortgage lending.
But Pratt resigned and his replacement, Edwin Gray, has taken a much more conservative view. Voicing concern for the integrity of the federal savings and loan deposit insurance fund, Gray has opposed the fast growth that non-traditional investments has brought to many newer S&Ls.;
Currently, there are several proposed federal S&L; regulations “that have as the stated purpose of limiting growth,” said Kirk Hallahan, senior vice president of the California League of Savings Institutions.
And Lawrence Taggart, who resigned Monday as state Savings and Loan Department commissioner and now is an S&L; consultant in San Diego, said federal rules for the savings industry “definitely are becoming more restrictive.”
Taggart said he believes that the FHLBB’s drive to clamp down on S&Ls;’ growth will have its greatest impact on associations that have started in the past four years “and drafted their business plans predicated on being able to use broad powers of investment.”
Butterfield’s problems began last year when the FHLBB placed severe restrictions on S&Ls;’ ability to use brokered deposits, drying up a major source of Butterfield S&L;’s funding.
The S&L; had grown from $2.4 million in assets at the end of its 1983 fiscal year--its first full year of business--to $675.4 million in assets at the end of its 1984 fiscal year last June 30.
It lost $6.1 million in 1984, accounting for almost all of the $6.5-million loss reported by Butterfield Equities in its consolidated financial report.
