Problems at Seattle Thrift May Hurt Sun : Plans to Swap Loans Endangered by Losses at Westside Federal

Part of Sun Savings & Loan’s ongoing effort to boost its revenue-producing base may be stalled by a Seattle thrift’s acknowledgement Thursday that “grounds exist” for the Federal Savings and Loan Insurance Corp. to appoint a conservator or receiver for the institution.

In July, Sun announced that it had swapped $4 million in non-performing loans for $4 million in performing loans with Westside Federal Savings & Loan of Seattle. The swap was the first part of a three-part, $12-million package that was to have been completed during the third and fourth quarters of 1985, Sun Executive Vice President John Grosvenor said Friday.

On Wednesday, however, Westside’s parent company, Westside Bancorp, announced a loss of $32.7 million for the fourth quarter ended June 30, giving the institution a “net-worth deficit” of $29.5 million, a spokesman for the S&L; said. In short, Westside has $29.5 million more in liabilities than assets.

The next day, Westside’s board of directors passed a consent resolution acknowledging that “due to the financial condition of (Westside), grounds exist for the FSLIC to appoint a conservator or receiver for (the S&L;).”

‘Certain Restrictions’

The resolution imposed “certain restrictions” on Westside, including a provision that the Federal Home Loan Bank Board in Seattle approve “transactions outside the normal course of business,” the Westside spokesman said.

“We have not yet resolved with Westside what this latest development means,” Grosvenor said Friday. “But I am prepared for a delay of at least a short duration . . . while things are sorted out.”

Although Grosvenor acknowledged that the remaining $8 million in planned loan swaps could be delayed, he added that “the first step of the transaction was coordinated closely with the Federal Home Loan Bank Board in Seattle. (The deal) did not close without their full understanding and approval.”

The $4 million in swapped loans and the remaining $8 million in loans were all originated by Westside, Grosvenor said, with Sun getting involved as a “participating lender.”

“We still think there are benefits to be achieved by making the second and third exchanges,” Grosvenor said. “I think Westside still believes that also.”