The History Behind a Corporation’s Rise and Fall

November 1976: Donald Endresen, his father, David Endresen, and partner Daniel Kiernan form KEICO Investments Inc. of Fullerton with $1,500 in capital. KEICO’s basic business is purchasing run-down apartments and other properties and packaging them as investments. Firm later changes name to KECOR Financial Group Inc.

April 1981: Organizers of Butterfield S&L; of Temecula are granted a state charter and begin selling stock to raise the $2 million in capital needed to open for business. KECOR acquires a substantial minority interest in the new S&L.;

June 1981: Butterfield S&L; opens for business on June 29. Donald Endresen is president and William Endresen, Donald’s younger brother, is chief executive officer.

April 1982: KECOR changes its name to Butterfield Equities Corp.

June 1982: Butterfield S&L; ends its first year of operations with about $35 million in assets.

July 1982: Butterfield S&L; acquires Kern Savings & Loan Assn. of Bakersfield. Kern’s four branches and nearly $40 million in assets more than double Butterfield’s size.

Congress passes the Garn-St. Germain Depository Institutions Act, which largely deregulates interest rates that S&Ls; may offer customers and opens new areas of investment.

November 1982: Butterfield Equities Corp. completes its initial public offering of 400,000 shares at $5 each.

December 1982: Butterfield Equities acquires part ownership of a franchise territory from Wendy’s International Inc.

June 1983: Butterfield S&L; is merged into Butterfield Equities Corp., which acquires all outstanding shares of the S&L.; Seven Butterfield Equities’ divisions are made subsidiaries of Butterfield S&L.; The S&L; also is made 51% owner of Butterfield Hospitality Corp.

Butterfield Equities reports consolidated earnings of $388,000 on revenue of $19.5 million. Corporate assets are reported as $155.5 million, including about $100 million for Butterfield S&L.;

September 1983: Butterfield S&L; acquires Love’s Enterprises Inc., operator of the Love’s barbecue restaurant chain, for $2.9 million cash.

August-October 1983: Butterfield S&L; acquires United Realty Investors Inc., a Beverly Hills real estate investment trust, for approximately $59 million. This marked the first significant, direct real estate investment by the S&L.;

November 1983: Governor Edmund G. Brown Jr. signs legislation allowing California state-chartered S&Ls; unlimited investment powers.

January 1984: Butterfield Equities moves the bulk of its growing operation to a new, eight-story headquarters building in the Hutton Centre in Santa Ana.

Butterfield S&L;, because of new federal rules aimed at reducing use of commercial money brokers to generate deposits for banks and S&Ls;, starts its own internal money desk, offering high interest rates to attract institutional jumbo deposits of $100,000 or more.

April 1984: Butterfield S&L; begins its 800-Banking program, a toll-free telephone banking system, supported by a national advertising campaign, aimed at securing retail deposits from throughout the nation.

June 1984: Butterfield Equities reports a net loss of $6.5 million on income of $70.5 million. Assets total $677.3 million.

June-September 1984: Butterfield Equities issues approximately $25 million in preferred stock in exchange for various real estate properties. All equity is contributed to Butterfield S&L; in order to boost its sagging net worth.

October 1984: Federal Home Loan Bank Board, alarmed at growing Butterfield losses, imposes a stop-growth order on the S&L;, ending a plan that called for assets to climb to more than $1.5 billion in the next 18 months.

November 1984: Donald Endresen, president and chief executive of Butterfield Equities and chairman of Butterfield S&L;, uses annual shareholder meeting to announce major corporate restructuring and personnel changes. David. B. Ross is named president and chief executive of Butterfield S&L; Bruce Bierkland is named executive vice president of loan operations and Raymond Johnston is named chairman of Butterfield Hospitality Group.

January 1985: Butterfield Equities announces the layoff of 30% of its staff after losing $15.8 million in the six months ending Dec. 31, 1984.

Founding partner Daniel Kiernan leaves Butterfield, taking its financial planning unit with him.

Butterfield Equities establishes an internal audit group to evaluate the S&L;’s loan and real estate portfolios. Writedowns are taken when loans and investment property values are discovered to be less than initial appraisals.

March 1985: Bruce Bierkland is fired as executive vice president of the S&L;’s loan division.

April 1985: Raymond Johnston, chairman of Butterfield’s restaurant division, is fired.

Butterfield begins closing some of the Love’s restaurants it operates directly.

May 1985: Butterfield Equities announces loss of $5.5 million for its fiscal third-quarter, which ended March 31. Losses now total $27.8 million, all in a 21-month period.

June 1985: Raymond Johnston and Bruce Bierkland file wrongful termination suits against Butterfield Equities, seeking total damages of approximately $25 million.

Butterfield S&L; announces that it will sell two of its four branches.

Federal officials impose a supervisory agreement on Butterfield S&L; management, requiring federal approval of most business decisions.

July 1985: Donald Endresen begins negotiating the sale of the company’s Wendy’s operation.

The Bank Board informally decides that Butterfield is heading for insolvency and begins looking for an outside manager to run the S&L.;

August 1985: Alerted to Butterfield Equities’ as-yet-unpublicized estimates of a huge fourth-quarter loss, the Securities and Exchange Commission halts trading in the company’s stock and orders Butterfield to make a public announcement.

In response, Butterfield issues a statement on Monday, Aug. 5, saying that it expects losses for its fiscal 1985 fourth-quarter to exceed $15 million. The net worth of its S&L;, which should be about $24 million to satisfy regulatory requirements, would fall to a negative $10 million. Butterfield also says it is seeking a merger as one way to stave off insolvency.

On Wednesday, Aug. 7, agents of the Federal Home Loan Bank Board enter Butterfield Equities’ corporate offices just as the S&L; closes for business at 4 p.m. and deliver a formal notice of insolvency. The federal agency places Butterfield S&L; into receivership, removes its board of directors, appoints a new board and contracts with Downey Savings & Loan Assn. of Costa Mesa to provide a temporary management team for a newly chartered federal mutual S&L; to be called Butterfield Savings & Loan Assn., FSL (a federal savings and loan). Butterfield S&L;’s assets at the time of the takeover totaled $802.6 million. The Endresens are left with control of Butterfield Equities, a shell corporation with few apparent assets.