Regulators Ask Seapointe S&L; to Sell or Merge
Federal regulators have asked fledgling Seapointe Savings & Loan Assn., now financially insolvent after reporting at least $20 million in losses from various securities transactions earlier this month, to let government officials negotiate either a sale or merger of the company’s assets.
Seapointe’s board of directors have not yet decided whether to accept the Federal Savings and Loan Insurance Corp.'s request that Seapointe enter into a consent agreement that would drastically alter the operations and management of the S&L;, according to David B. Ross, Seapointe’s acting president.
For the past week, Carlsbad-based Seapointe, founded last April, has been under orders from the state to “stand still,” according to William Crawford, California Savings and Loan Commissioner.
Seapointe, with $45 million in assets and $3 million in stockholders’ equity as of Jan. 31, lost at least $20 million between Feb. 3 and Feb. 18 from what company officials described as the “liquidation and transfer of certain securities brokerage accounts.”
According to Seapointe sources, the losses, which could eventually exceed $20 million, may have stemmed from “hedging” the market, the practice of offsetting possible losses by buying corresponding and often contrary securities positions. Such strategies almost always include a degree of risk.
Ross would not disclose the exact nature of the losses, nor would he identify the outside brokerage firm that handled Seapointe’s investments.
Seapointe’s board has launched an investigation into the transactions, said Ross.
“It’s complicated and esoteric,” he said. “But because of the confidential nature of this, we haven’t pinpointed” the exact transactions that sparked the losses.
For Ross, Seapointe’s insolvency--its $3 million net worth will quickly erode from the $20 million in losses--is the second time in the past six months that a financial institution he has headed has been in hot water with regulators.
Ross is former president of Butterfield Savings & Loan Assn. of Santa Ana, which was seized by federal regulators last summer.
Seapointe does not expect further losses from the transactions, Ross said.
“We can recoup the losses,” he added. “If someone is found responsible for . . . the losses, we can recover from the party responsible.”
The proposed agreement with federal regulators calls for restricting operations and reviewing “all major decisions,” Ross said.
Regulators could allow Seapointe to operate or they could “come in tomorrow and appoint a receiver or close it down,” Ross acknowledged.
State savings and loan officials restricted Seapointe’s operations last week because “we don’t want people making more mistakes,” Commissioner Crawford said. He would not disclose who may be responsible for the losses.
Meanwhile, the board will “meet regularly and focus on . . . the consent agreement and on looking for a capital infusion,” Ross said.
Seapointe’s eight-member board includes only one San Diegan--Ernest Dronenburg Jr., vice chairman of the State Board of Equalization.