Sun Savings Shareholders Hear Plan to Bolster Thrift

Losses at beleaguered Sun Savings & Loan Assn. could be reduced or eliminated if a $12-million loan swap with a Seattle-based savings and loan is completed, Sun’s president told shareholders Monday.

A new management “game plan” fashioned by President and Chief Executive John M. McEwan will rebuild Sun’s sagging net worth--already below the minimum required by regulators--and will emphasize “loan quality, not loan volume,” McEwan told about 100 investors.

The meeting had figured to be heated following a year of controversy, internal strife, charges of wrongdoing, $5.8 million in losses in 1984 and the filing of a derivative lawsuit application against Sun by a disgruntled investor Saturday.

But shareholders, who have seen their stock drop from $17 per share a year ago to about $5, appeared weary and seemingly eager to hear McEwan’s reorganization plan.

He did not disappoint them. In a smooth and at times witty presentation, McEwan admitted the mistakes of previous management but insisted on focusing attention on the future.

He empathized, he said, with investors’ criticisms of the resignation settlement payments made to former Sun Chairman and President Daniel W. Dierdorff. Last year, Dierdorff was paid nearly $500,000 in salary and settlements. “Dan Dierdorff is history,” McEwan maintained when shareholders asked about Dierdorff’s relationship with Sun and his personal relationship with certain directors.

McEwan said that Sun is now “actively negotiating” for an infusion of capital, but he declined to identify the potential supplier.

Sources familiar with the negotiations said that the negotiations are with local developer Victor Fargo, who would reportedly invest about $4 million into the University City-based S & L in return for about 25% of Sun’s nearly 1.2 million shares.

The cash infusion would be tied to Sun’s moving its headquarters into a La Jolla building Fargo owns.

Dierdorff has previously said that he knows Fargo but has no business ties with him. In addition, Fargo is the brother-in-law of Sun director Ted P. Van Leeuwen, a La Jolla management consultant.

McEwan said he hopes to add about $20 million into Sun’s “earnings stream” by the end of the year. Key to that would be a $12 million loan-swap with an unidentified Seattle savings and loan association. About $9 million of that money is currently listed as part of Sun’s $36.1 million in non-performing loans.

The loans to be swapped are part of participation loans with the Seattle company. In exchange, Sun would receive loans--described by Sun management as current--made by the Seattle firm to various San Diego companies and projects.

If the deal does not go through, Sun officials said Monday that they might initiate legal proceedings against the Seattle S & L for getting Sun involved in the loans originally.

After the meeting, shareholder Robert Blake, whose lawsuit action Saturday was expected to spark verbal wars at the meeting, said he was relatively restrained in his joustings with McEwan because “the shareholders are weary enough.” His allegations that some past and present Sun officials defrauded shareholders will be settled in court, not at the annual meeting, he said.