S&L; Bank Earnings in Area Show Wide Disparity

Times Staff Writer

The first three months of 1986 separated the high fliers from the also-rans among the biggest banks and savings and loan associations based in the San Fernando Valley area.

A few of the leading financial institutions with headquarters in the region, extending from Burbank to Camarillo chalked up solid profits. Lincoln Bancorp and First State Bank of the Oaks, in particular, posted strong earnings increases from the same period in 1985.

But most of the area’s eight banks and S&Ls; with assets exceeding $100 million that have reported first-quarter results--the other three in that size range have yet to report--didn’t come close to matching that sort of performance. For example, Santa Clarita National Bank and American Pacific State Bank recorded lower profits than a year ago.

Earnings Vastly Improved


Two major S&Ls;, Valley Federal and Encino Savings, disclosed earnings that were vastly improved from their skimpy profits last year but still didn’t amount to much for institutions of their size.

Moreover, some institutions that have recently lost money have yet to report.

They include Valley State Bank, an institution with assets of $128.7 million that lost $383,000 last year, and Camino Real Savings Bank, a $242.9-million thrift that posted a deficit of $6.3 million in 1985.

Unified Savings Bank, an S&L; with close to $100 million in assets that lost $1 million last year, also has not released its first-quarter report.


The emergence of a wide gap between the cluster of most successful financial institutions in the area and their less successful counterparts may dovetail with nationwide trends.

“You find the good, the bad and the ugly,” said Salvatore Serrantino, president of the California Research Corp. consulting firm in Santa Monica.

Serrantino, predicting a boom year overall for banks and S&Ls;, said that strong, well-managed institutions are benefiting handsomely from the apparently strong national economy and low interest rates. He explained that low interest rates fatten profits at many financial institutions, particularly S&Ls;, by cutting the amount of money they pay out on deposits. Their income from loans often doesn’t drop off as quickly or dramatically. Some institutions, however, have slimmer profit margins when interest rates decline.

In any case, many financial institutions, Serrantino said, lack the capital to capture new business and take advantage of the good economic conditions. Still others, he said, are struggling to recover from bad loans that were made shortly before the last recession ended in late 1982.


Serrantino said some of the banks and S&Ls; suffering the most made loans at that time on the expectation that rapid inflation would continue.

Valley Federal Rebounds

Van Nuys-based Valley Federal Savings & Loan, which was hampered by bad real estate loans last year, said it rebounded during this year’s first quarter because of low interest rates and improved business at a subsidiary that issues loans for manufactured homes. The S&L;, by far the area’s largest financial institution, with $2.5 billion in assets, reported that its profits rose 295.6%, to $3.6 million.

Encino Savings & Loan, which has assets of $171.4 million, said its earnings climbed because it sold bonds at a profit and expanded its real estate lending. The S&L;'s net income was up 356.3%, to $219,000. Even so, its return on assets, at 0.52%, was the lowest among the leading institutions in the area that have reported results.


Return on assets, which is derived by dividing an institution’s yearlong earnings by its assets, is a key gauge of profitability.

The area’s second-largest S&L;, Woodland Hills-based Investment Savings & Loan Assn., has yet to finish compiling its results for its fiscal year ended March 31.

Among the area’s banks, First State Bank of the Oaks reported the highest return on assets by far, 1.92%. Its earnings, $516,445, were up 41.1%. The Thousand Oaks-based bank cited a surge in home loan refinancing.

Lincoln National Bancorp, the Encino-based parent of Lincoln National Bank, posted a 93.2% increase in earnings, to $247,072, largely stemming from increased lending and profits from securities sales. That gain came despite its infusion of $380,000 into loan loss reserves, a provision that is subtracted from earnings.


Alton Cogert, vice president and controller for Lincoln Bank, said the provision was made to take advantage of unexpected earnings rather than because of concerns about the bank’s loan portfolio.

The area’s biggest bank, Encino-based Independence Bank, grew the fastest over the first quarter, increasing its assets over the three months by 6.2% to $246.5 million. Its profit was $416,000, up 58.2% from its soft first quarter in 1985.

Morton R. Michaels, Independence’s president, said the bank has been more aggressive in making loans and pursuing deposits since it was acquired in October by Saudi financier Ghaith Pharaon. Independence acquired Center National Bank of Woodland Hills earlier this month, but the deal had no effect on its first-quarter results, Michaels said.

Santa Clarita Fast-Growing


Fast-growing Santa Clarita National Bank, its assets of $177.8 million up 5.4% over the last three months and up 18.9% over the last 12 months, suffered an earnings decline partly because of acquisition expenses. The Valencia-based bank, whose profit fell 18.6% to $408,000, bought a branch in Canoga Park from Bank of America late last year.

Frank C. Ficke, a Santa Clarita senior vice president, said he believes that loan losses also contributed to the decline.

North Hollywood-based APSB Bancorp, parent of American Pacific State Bank, reported a 2.1% drop in profit, to $247,868. But Frank J. Ures Jr., the company’s president, said it enjoyed a 17% rise in operating income. He said the net income was down mainly because of an after-tax profit of $35,000 last year from the sale of Treasury bills.

Earnings rose a modest 10.4% to $213,000 at Sherman Oaks-based TransWorld Bancorp, parent of TransWorld Bank. The company said earnings were reduced because it raised its provision for loan losses in anticipation of increased lending problems throughout the banking industry.



Net income Assets (loss) Independence Bank $246.5 million $416,000 Santa Clarita National $177.8 million $408,000 TransWorld Bancorp $151.8 million $213,000 (parent of TransWorld Bank) Lincoln Bancorp $148.9 million $247,072 (parent of Lincoln National Bank) APSB Bancorp $136.7 million $247,868 (parent of American Pacific State Bank) First State Bank of the Oaks $107.7 million $516,445

Return Change on assets in earnings Independence Bank .67% +58.2% Santa Clarita National .95% -18.6% TransWorld Bancorp .56% +10.4% (parent of TransWorld Bank) Lincoln Bancorp .69% +93.2% (parent of Lincoln National Bank) APSB Bancorp .75% -2.1% (parent of American Pacific State Bank) First State Bank of the Oaks 1.92% +41.1%



Return Change Assets Net Income on assets in earnings Valley Federal $2,545.7 million $3.6 million .57% +295.6% Encino Savings $171.4 million $219,000 .52% +356.3%