Butterfield Has Deficit Net Worth : S&L; Operating Under Supervisory Pact With FHLBB
Butterfield Equities Corp. said Monday that fourth-quarter losses exceeding $15 million will leave its Butterfield Savings & Loan Assn. subsidiary with a deficit net worth of $10 million or more.
In response to the firm’s losses, at least two S&Ls; in Southern California have been quietly asked by the Federal Home Loan Bank Board whether they would operate Santa Ana-based Butterfield S&L; under a management contract, sources said.
For the record:
12:00 a.m. Aug. 8, 1985 FOR THE RECORD
Los Angeles Times Thursday August 8, 1985 Home Edition Business Part 4 Page 2 Column 4 Financial Desk 2 inches; 56 words Type of Material: Correction
Butterfield Equities Corp.’s estimated fourth-quarter losses of more than $15 million came in part from costs associated with real estate investments made by the company’s Butterfield Savings & Loan Assn. subsidiary. In Tuesday’s edition, The Times incorrectly reported that the losses were due to costs associated with properties purchased by Butterfield’s real estate syndication division.
Butterfield would not comment on possible regulatory action but said in a statement that it would consider merging with another S&L; to resolve its financial problems.
Butterfield had about $800 million in assets as of its June 30 financial report to the bank board and would need to raise about $34 million in new capital to meet the board’s minimum capital requirements. In the past 21 months, Butterfield Equities has reported losses of $26.7 million, and the fourth-quarter losses would bring the total for two years to more than $42 million.
Officials at the FHLBB in San Francisco declined to comment on the agency’s relationship with Butterfield S&L;, and Butterfield officials limited their comments to a pair of lengthy prepared statements issued late in the afternoon.
Neither statement dealt with Butterfield S&L;’s regulatory woes beyond acknowledging that the savings and loan has been operating since late June under a supervisory agreement with the bank board, which limits the thrift’s investment and lending powers and gives the federal agency the right to screen and disapprove of management decisions.
Such an agreement, industry consultants and officials say, generally is used when the bank board is willing to give a faltering S&L; limited time to raise new capital on its own.
But several sources close to the Butterfield situation said Monday that federal regulators met with the S&L;’s top officers late last month and tried to persuade them to agree to a consent decree that would have enabled the bank board to sell, merge or liquidate Butterfield.
The agreement was not signed, the sources said, because Donald Endresen, president of Butterfield Equities, refused to agree to the bank board’s terms, maintaining that to do so would deprive the corporation’s shareholders of any chance of recovering their investment and could leave corporate officials open to liability suits by other shareholders.
Endresen and other top Butterfield officials, including his father and brother, own 32% of the corporation’s common stock, according to a proxy statement issued for Butterfield Equities’ Nov. 15, 1984, shareholders meeting.
Butterfield management has been openly at odds with federal regulators for most of its five-year existence, largely because of the thrift’s unorthodox investments, which include two restaurant chains.
FHLBB Chairman Edwin J. Gray has often publicly cited Butterfield’s operation as an example of the excesses of deregulation.
Butterfield’s statement said the fourth-quarter losses stem primarily from “reserves for holding costs and potential losses on the sale of real estate in the company’s savings and loan portfolio.”
The statement said the net worth of Butterfield Equities, a diversified holding company, could fall to a deficit of $15 million or more because of the losses.
Other losses attributed by the company to “reserves for holdings costs,” come largely from the cost of maintaining several hotels and golf courses and thousands of apartment units that Butterfield has acquired in recent years for its real estate syndication unit, according to one knowledgeable source.
The company also has been losing money on its restaurant operations: the Love’s barbecue restaurant chain and a large Wendy’s International Corp. franchise territory that currently includes a dozen Wendy’s hamburger restaurants.
Wendy’s Franchise Involved
In a prepared statement issued shortly after it announced its anticipated losses Monday, Butterfield said that it is “currently evaluating its land and property inventory . . . with the intention of disposing of most non-mortgage assets in order to increase capital for Butterfield Savings.”
Among the properties involved are Butterfield’s franchise with Wendy’s, its eight-story building in Santa Ana and its two S&L; branch offices, located in Temecula and Lake Elsinore. Butterfield had announced the pending sale of the S&L; branches and its headquarters building earlier this year.
During the past several months, federal regulators have taken action against five California S&Ls; with substandard capital.
The bank board placed Bell Savings & Loan Assn. in receivership last month, declared Southern California S&L; of Beverly Hills to be insolvent in June and, in April, installed new management at Beverly Hills Savings & Loan Assn.
In June, the bank board also forced the resignation of the boards of directors of Eureka Savings & Loan Assn. and Central Savings & Loan Assn. of San Diego.
