Flagship Federal Savings & Loan opened officially Monday morning, replacing the once-promising but seemingly ever-troubled Sun Savings & Loan, which was shut by regulators Friday.
Nevertheless, Sun's problems linger.
Flagship Federal officials are huddling with federal regulators to determine how to allocate Sun's resources and what to do with about $55 million in non-performing assets, mostly delinquent loans.
Robert McNitt, executive vice president of Great Western Savings of Beverly Hills, which is under contract to operate Flagship, said Monday that it could take weeks to construct a new business plan.
Meanwhile, Sun's top executives have been given their leave. President and Chief Executive John McEwan, Executive Vice President John Grosvenor and senior lending officer E. Sloan Duvall were asked not to report to work Monday morning.
John Schumaker, head of Sun's real estate development arm, reportedly is also out, but he may stay with Flagship as a consultant, sources said Monday.
McEwan will be heard from again, however. Regulators who seized Sun late Friday reportedly are balking at paying McEwan $238,500 in severance. The money was placed in a trust fund when McEwan was hired early last year, something of a "golden parachute" in case he was fired.
The funds represent one year's base salary plus benefits.
Sun executives were given virtually no notice of Friday's federal takeover--the typical policy of the Federal Home Loan Bank Board.
But management knew something was up: Officials were called at 5:30 a.m. by the American Stock Exchange and were told that Sun's stock wouldn't open for trading that day, pending an announcement by regulators.
Sun management spent the day wondering when the federal action would take place. When the company was seized, top management was escorted into a conference room, where they waited for the rest of Sun's work force to leave and for regulators to officially inform them of the shutdown--a rather undignified and unceremonious end to their tenure.
Federal regulators prepared for the takeover by gathering in the parking lot at Sun's headquarters in the afternoon.
By the time the 60 regulators--nearly all in dark suits--actually moved in, the parking lot was full.
Among those entering Sun's offices was intrepid Times reporter Greg Johnson, who nonchalantly walked in.
But the regulators apparently had other things on their minds--"Where's the kitchen?" one asked, followed by "Where's accounting?" And, once they discovered Johnson was not one of them, allowed him to remain inside.
Bad loans unraveled Sun. With $374 million in assets, delinquent loans at the end of the first quarter reached nearly $55 million.
But loan problems have plagued Sun from the beginning.
Area bankers are humorously recalling that, when Sun opened in
1980, officials had overlooked getting loan papers for customers. Management asked Point Loma Savings for help, which obliged by messengering over its loan papers. Sun simply excised Point Loma's name and inserted its own.
So what happens to Sun shareholders, whose stock at one point topped $17 per share?
"They get nothing," one analyst said. "Sun has disappeared."
Stockholders could receive proceeds from class-action lawsuits, but none has been filed.
Flagship is a mutual association, meaning that it is owned by depositors.