S&L; Seized by Federal Regulators
Beach Savings Bank, a once-vibrant thrift that relied heavily on real estate loans, was seized Friday by federal regulators because it had insufficient capital and was operating in an “unsafe and unsound condition.”
Also on Friday, Anaheim developer James A. Carter, who owns 99% of Beach Savings, agreed to sell his 100% stake in another financial institution, Corporate Bank in Santa Ana, to a management-led group of investors. The purchase price was not disclosed.
Beach Savings, which Carter bought in 1986, will continue to be operated by an agent of the Resolution Trust Corp., the federal agency that manages failed thrifts.
Deposits will remain federally insured to the limit of $100,000 per account.
Beach Savings appeared to be well-capitalized at the end of June, reporting ratios that exceeded those required by regulators. It even posted net income of $474,000 for the first six months of 1990.
But the Office of Thrift Supervision, which recently concluded a routine audit, said it had ordered the thrift to increase its reserves significantly against loan losses, eroding the S&L;’s capital.
The OTS said Beach Savings had inadequate management, poor underwriting, poor internal controls and a substantial level of bad loans. At the end of December, the agency said, the thrift had $12.8 million--or 15% of its total assets of $84.9 million--invested in assets that were substandard or unprofitable.
Beach Savings had relied heavily on earnings from real estate investments, an activity thrifts must cease by mid-1994 under a new federal law. The thrift had little prospect for future profits because management had not developed an alternate source of income, the OTS said.
The thrift had a positive net worth of about $400,000, but it was insolvent by $1.13 million under one of three capital tests set by the federal government.
Last month, Carter resigned as chairman of Beach Savings and of Corporate Bank. He had become disillusioned with financial institutions and said recently of his long struggle to buy an S&L;: “I should have had a tougher time buying a thrift.”
