Higher loan volume and lower deposit costs were two of the principal reasons why four large savings and loans in California and Arizona reported sharply higher third-quarter profits Wednesday.
The profits are continuing evidence that the savings and loan industry is on its way to the best year in its history in total earnings. Financial analysts estimate that the nation's S&Ls;, which number more than 3,000, could earn between $5 billion and $7 billion this year.
Leading the pack Wednesday was Great Western Financial, the nation's second-largest S&L; holding company. Great Western said it earned $57.4 million from July through September, nearly quadruple what it earned in the third quarter of 1984.
First Nationwide Financial, San Francisco-based parent company of the nation's eighth-largest savings and loan, said it earned $32.9 million in the quarter, more than eight times what it earned a year ago. However, First Nationwide noted that the results included a one-time gain of $9.7 million from the sale of its New York administrative office building in midtown Manhattan.
First Federal Savings Bank of Arizona, based in Phoenix, said its profits reached $4.6 million, up 84% from a year ago, while Great American First Savings Bank of San Diego earned $12.5 million, its best quarterly performance since it went public more than two years ago. Great American earned $4.69 million in the third quarter of 1984.
Another San Diego-based S&L; isn't doing as well. Central Savings & Loan, whose board of directors was replaced by regulators last May, lost nearly $12.6 million for the second quarter, according to the latest figures available from the Federal Home Loan Bank Board. The loss reduced Central's net worth to $15.1 million as of June 30, but that figure includes $122 million in capital notes issued by regulators in June.
The healthy S&Ls; attributed the third-quarter black ink largely to increased lending and a drop in what they had to pay depositors for their savings.
For example, Great Western had a record real estate loan volume of $2 billion, 25% higher than a year ago, Chairman James Montgomery said. First Nationwide's real estate loan volume jumped to $808 million in the third quarter, almost double the $452-million level a year ago.
Great American pointed out that it improved its so-called primary spread--which is the difference between an S&L;'s cost of funds, including the interest that it pays its depositors, and its yield on loans and investments. Great American said its primary spread rose from 2.21% on June 30 to 2.42% on Sept. 30, the best margin that it has had in this decade.
Several of the financial institutions also emphasized that more and more of their assets are now in adjustable-rate mortgage loans, making their loan portfolios less vulnerable to sharp upward swings in interest rates. A combination of low-earning fixed-rate assets and high interest rates was the principal reason why the S&L; industry lost nearly $9 billion in 1981 and 1982.
Great Western said almost two-thirds of its earning assets are now in adjustable-rate mortgage and short-term investments, up from 54% a year ago. Great American said its adjustable mortgages now account for 47% of the loan portfolio, up from 44% on June 30.