Charter Savings Bank Seized by Regulators : S&Ls;: The federal agency that declared it insolvent calls for a criminal investigation of the Newport Beach firm.

Charter Savings Bank, which had targeted struggling thrifts in its aggressive acquisition plan, was itself declared insolvent Friday and seized by federal regulators who also called for a criminal investigation into possible wrongdoing at the Newport Beach thrift.

The 12-year-old savings and loan suffered losses that depleted “substantially” all of its capital--its last reserve against losses--and had no prospect of getting more funds, said the Office of Thrift Supervision, the federal agency that seized it.

Charter, a state-chartered S&L;, was put in receivership and its $308.6 million in assets (as of April 30) were turned over to a newly chartered federal institution called Charter Savings Bank FSB, which will open on Monday for business as usual.

The thrift’s deposits, nearly $295 million at the end of last year, continue to be federally insured up to $100,000 per account holder. OTS appointed the Resolution Trust Corp., the federal agency that manages failed thrifts, as conservator of the new S&L.;

Regulators would not expand on the request for a criminal investigation except to say they had made “a number of referrals” to the Justice Department. They said the institution also was operating in an unsafe and unsound manner.

Charter is the fourth Orange County S&L; to be seized this year and the 19th taken over in the last five years.

The government’s action wipes out the ownership interest of Mola Development Corp., a Newport Beach company that owned 90% of Charter.

It is unclear what effect the action will have on Mola, which is proposing a controversial 329-unit residential project on the Hellman Ranch property in Seal Beach and a 164-unit, 15-story residential condominium and commercial complex in Irvine.

Regulators blamed the thrift’s condition on its loan record-keeping, investment losses, lack of internal controls, bad management and continuing problems stemming from its 1988 acquisition of the failing Merit Savings Bank in Los Angeles.

In acquiring Merit, Charter picked up more bad loans and other nonperforming assets than it expected and wound up increasing its level of goodwill, an intangible asset that must be written off over time. At the end of last year, Charter had nearly $18 million in goodwill, which can no longer be used in its calculations of capital for regulatory purposes.

With net losses of $1.5 million last year and $718,000 in the first quarter of 1990, Charter was insolvent under all three tests of financial health used by regulators.

Under generally accepted accounting principles, however, Charter would appear to be solvent with $6.7 million in equity over its $301.9 million in liabilities, as of the end of April.

“There’s a suggestion of living high in their financial statements,” said Bert Ely, an Alexandria, Va., industry consultant. “It looks like they had some fat salaries in there.”

Operating expenses last year were about 30% of the institution’s gross income, said Gerry Findley, a Brea industry consultant. He said he considers a 20% ratio to be too high.

Charter has had a colorful past.

It was founded as Orange Coast Savings & Loan by flamboyant Douglas Patty and other directors at the once mighty Heritage Bank in Anaheim. But after Heritage failed in 1984, the thrift found itself mired in the ensuing federal litigation against Patty and others. They later sold their interest to Mola.

In 1988, Mola decided to use its expertise in real estate to buy thrifts that were failing from their bad real estate operations. After buying Merit Savings, Mola quickly tried to snap up three more thrifts, but the deals fell through.

Last year, Charter’s financial condition grew shaky as Merit’s bad assets soured further. Then the new federal law enacted to bail out the thrift industry’s deposit insurance system eliminated goodwill and set up such strict standards for capital that Charter was doomed.