Controversial Founder of S&L; ‘Understands’ Takeover of Firm

Donald Endresen, who controlled Butterfield Savings & Loan Assn. until federal regulators seized the Santa Ana-based S&L; on Wednesday evening, said he “understands” the reasons for the takeover and is not bitter about it.

In an uncharacteristically mellow interview Thursday, the burly and bearded Endresen said that despite past disagreements with Federal Home Loan Bank Board Chairman Edwin Gray over the degree of freedom S&Ls; should enjoy, he agrees there is a need for tight regulation as long as the government provides deposit insurance.

The often-controversial and outspoken Endresen, who used financial deregulation as a means to establish Butterfield S&L; as owner of two restaurant chains and millions of dollars worth of apartments and undeveloped real estate, said he now sees that he was “not suited to manage in a regulated business.” His management style and the course he charted for the S&L;, Endresen said, “sent up a lot of flags.” Butterfield’s problems intensified at the end of 1984, when federal regulators required the S&L;’s management to sign a no-growth order, Endresen said. “At the time,” he said, “we demonstrated that we needed to grow to close to $1 billion in assets just to break even” because of the costs of moving into a new headquarters and more than doubling the company’s staff. “Requiring us to stay at $830 million when we had geared up for a business plan that had us at $1.2 billion in June, 1985, and $1.5 billion a year later meant we weren’t even going to break even.”

But Endresen refused to blame regulators for Butterfield’s collapse.

The S&L;’s problems, he said, were caused largely by the failure of its real estate lending policies--policies based on the belief that Southern California property values don’t decline.

Butterfield S&L;, which has lost more than $40 million in the past two years and had a negative net worth of about $10 million when it was seized Wednesday, concentrated its lending on coastal area homes in the $500,000-plus price range during most of 1981 and 1982, Endresen said. The collapse of the market for those properties in 1983 and 1984 drove prices down an average of 25% and resulted in a huge number of foreclosures and, ultimately, Butterfield’s demise, he said.

Still, Endresen said he believes that much of what he did at Butterfield will have a lasting and positive impact on the industry.