Federal regulators yesterday seized control of Sunrise Savings & Loan Association in Boynton Beach, Fla., after finding that real estate speculation had rendered it insolvent.
It was the fifth such takeover this year by the Federal Home Loan Bank Board.
The bank board immediately converted the state-chartered stock association into a federal mutual association and transferred all the assets and deposits of the old Sunrise to the new entity. The board named T. William Blumenauer Jr., former chairman of Columbia First Federal Savings and Loan of the District, to head a new board of directors and also appointed a management team from AmeriFirst Federal Savings and Loan of Miami.
The Federal Savings and Loan Insurance Corp. plans to inject an unspecified amount of capital in the form of promissory notes to assure the new S&L's solvency. All deposits are federally insured, and operations will be continued as usual at 15 locations.
The bank board noted that Sunrise had grown at an excessive rate, increasing its assets in five years from $4.7 million to $1.5 billion, a 32,000 percent increase. It stated that the insolvency resulted from "poor underwriting practices, high-risk direct investments and acquisition, development and construction loans that went sour."
Earlier this month, Sunrise announced that its nonperforming loans had doubled to $350 million, amounting to more than a quarter of its loan portfolio and more than 10 times its net worth of $30 million. Sunrise experienced losses of $24.6 million during the first three months of this year. During June, it lost $22 million and had negative net worth.
Over-the-counter trading in Sunrise's stock was halted during the day at the request of the government. The last sale was 3 3/8.
According to the American Banker, Sunrise was once the darling of Wall Street, hailed as a "new" type of thrift. Its stock rose from $4 per share in 1982 to $31.25 last year. Return on equity in 1984 was an extraordinarily high 39.6 percent.
Sunrise avoided the traditional home mortgage market in favor of investments in shopping centers, residential developments, hotels and office buildings. Some of these borrowers turned out to be poor credit risks, especially after the Florida real estate market turned soft. The value of foreclosed property held by Sunrise jumped from $290,000 in June 1983 to $4.23 million at the end of 1984, the publication noted.
Sunrise had been operating under a supervisory agreement with the bank board that required it to cut back on growth and direct investment. Regulators also forced the removal of its president, Ron Jacoby, in April.