Quarter Earnings Reports Up for Banks, Mixed for S & Ls

The biggest savings and loan associations based in the San Fernando Valley area displayed mixed performances during the third quarter, while the top banks reported results that surpassed last year’s but still were unspectacular.

Valley Federal Savings & Loan, by far the largest financial institution headquartered in the area, with nearly $2.7 billion in assets, continued to rebound from its past real estate lending problems.

But another S & L, Investment Savings & Loan, disclosed it was responsible for $8 million in loans to real estate partnerships arranged by Craig Hall, a financially troubled investment syndicator. Investment Savings’ quarterly profit was off 42.4% from a year earlier largely because of those loans.

The area’s top six banks all reported either higher profits or recoveries from money-losing third quarters in 1985. Even so, most of the leading banks based in the area extending from Burbank to Camarillo were not as profitable in the three months that ended Sept. 30 as they were earlier this year.

Two concerns that have struggled in recent years--Valley State Bank and Unified Savings--were the only financial institutions with more than $100 million in assets that refused to divulge their third-quarter results.

All told, just one of the nine top institutions that disclosed earnings posted a return on assets of more than 1%, a measure of superior performance. That institution was Valencia-based Santa Clarita National Bank, which netted a profit of $488,000 and a return on assets, or ROA, of 1.1%. ROA is derived by dividing a business’ profit by its assets.

Among the leading banks, profits generally were hamstrung by declining interest rates. Those declines narrow the banks’ spread between what they receive from loans and pay out on customers’ deposits.

Encino-based Independence Bank, the area’s biggest bank with assets of $296.9 million, had a profit of $469,000. Although that marked a rebound from a loss of $156,000 in last year’s third quarter, it was down from second-quarter earnings of $801,434.

Since being acquired by Saudi financier Ghaith Pharaon last year, Independence has grown briskly. Its assets were up 34.7% from a year earlier.

Another fast-growing institution, Lincoln Bancorp, the parent of Lincoln National Bank, reported a profit of $295,894, up 20.3% from a year earlier and nearly unchanged from the second quarter. At 0.71%, its ROA was down slightly from 0.77% in the third quarter of 1985. Encino-based Lincoln’s assets climbed 16.9% over the 12 months to $168.6 million.

TransWorld Bancorp, the Sherman Oaks-based parent of TransWorld Bank, posted earnings of $287,000, up 4.5% from a year earlier, largely because it sold securities at a profit.

After Santa Clarita National, the most profitable institutions as gauged by ROAs were APSB Bancorp, the North Hollywood based parent of American Pacific State Bank, and Thousand Oaks-based First State Bank of the Oaks.

APSB recovered from a loss of $53,697 a year ago to post a profit of $310,074 in the most recent quarter, giving it an ROA of 0.93%. Frank J. Ures Jr., president and chief executive, attributed the improvement to lower expenses--APSB trimmed its work force and shrank its high-interest deposit accounts.

First State Bank of the Oaks, with an ROA of 0.95%, saw its profit rise 14.6% from a year earlier to $266,105. Les Mosley, senior vice president and chief operating officer, said the bank benefited from home mortgage lending that was inspired by low interest rates.

Encino-based Valley State Bank, which had assets of $107.8 million as of June 30, is under orders from regulators to increase its capital by $3 million by next October. Chairman John C. Bedrosian declined to discuss the bank’s third-quarter results other than to say they were improved. In 1985, the bank lost $1.7 million.

Unlike banks, S&Ls; generally thrive when interest rates are low because low rates boost the profitability of their bread-and-butter business, home mortgage lending. That was the case for Van Nuys-based Valley Federal, whose earnings jumped to $4.4 million from $3 million a year earlier. It issued a record $401 million in new mortgages, up from $186 million in the third quarter of 1985.

On the other hand, both Woodland Hills-based Investment Savings and Encino Savings & Loan Assn. slumped.

Investment Savings said its profit fell to $239,237 in its second quarter ended Sept. 30 because of its loans to Hall partnerships and due to the softening of its mortgage banking business.

Encino Savings’ sluggish performance continued. It posted a loss of $17,000 versus a profit of $228,000 a year earlier. Eugene Cazier, senior vice president, said the S & L had an operating profit of $25,000 but lost $42,000 on securities sales.

Unified Savings of Northridge said it was advised by the Federal Home Loan Bank Board not to disclose its third-quarter results. The S & L is the successor to Unified Savings Bank, which was declared insolvent and taken over by federal regulators on Oct. 10. It lost $2.7 million in the first six months of the year and had assets totaling $105.6 million as of June 30.

Although all of the leading financial institutions in the Valley are publicly held, only two have actively traded stocks. The two, Valley Federal and TransWorld, are listed on the NASDAQ system in the over-the-counter market. THIRD-QUARTER REPORT FROM THE VALLEY’S LARGEST FINANCIAL INSTITUTIONS

Banks Assets Net income (loss) Independence Bank $296.9 million $469,000 Santa Clarita National $183.2 million $488,000 Lincoln Bancorp $168.6 million $295,894 (parent of Lincoln National Bank) TransWorld Bancorp $151.8 million $287,000 (parent of TransWorld Bank) APSB Bancorp $137.8 million $310,074 (parent of American Pacific State Bank) First State Bank of the Oaks $118.1 million $266,105

Banks Return Change on assets in earnings Independence Bank .64% NA Santa Clarita National 1.1% +11.4% Lincoln Bancorp .71% +20.3% (parent of Lincoln National Bank) TransWorld Bancorp .76% +4.5% (parent of TransWorld Bank) APSB Bancorp .93% NA (parent of American Pacific State Bank) First State Bank of the Oaks .95% +14.6%

Savings and loans Assets Net income Return Change on assets in earnings Valley Federal $2,697.4 million $4,442,000 .67% +47.8% Investment Savings* $324.8 million $239,237 .29% -42.4% Encino Savings $179.9 million ($17,000) 0% NA

Valley State Bank and Unified Savings declined to disclose their third-quarter results.

* Figures for second quarter ended Sept. 30.