Banks Learn Ropes of Deregulation, String Together Good Quarters

For almost a year now, Orange County’s local banks--recovering from the collapse of the area’s ballooning real estate values in the early 1980s--have been posting healthy and increasingly larger quarterly earnings.

Continuing that trend, three county financial institutions--a bank and two of the area’s largest bank holding companies--have posted record net incomes for the second quarter and the first six months.

Turning in their best efforts yet and predicting record annual incomes are Tustin-based Eldorado Bancorp and its 15-year-old Eldorado Bank; Landmark Bancorp and its Landmark Bank, founded in 1980 in La Habra, and 3-year-old American Commerce National Bank in Anaheim.

“Most of the better banks, with the exception of maybe two or three, will be reporting better results,” said Gerry Findley, a Brea-based financial institutions consultant. “They’re learning to be better bankers in the era of deregulation.”

Managing costs and cleaning out loan portfolios hurt by the real estate downturn in the early 1980s “contributes to the bottom line,” he said.

Growing Interest Spreads

Findley also noted that banks have been getting bigger spreads between the interest rates they earn on loans and investments and the rates they pay on deposits and borrowings. In other words, he said, banks in general have been increasing their charges to customers when their own expenses have not grown at the same pace.

J.B. Crowell, president and chief executive of Eldorado Bancorp and its bank, said he believes that profits are booming largely because banks are making better-quality loans and seeing fewer of them go bad.

Eldorado Bancorp posted a $584,000 net income for the second quarter, a 32.1% increase over the $442,000 it earned in last year’s second quarter. Its net income for the first six months rose 42.6% to $1.15 million from $806,000 in the same period last year.

Its assets at the end of June were $191 million, a 5.9% increase over the $180.4 million in assets a year earlier. The bank’s total loans at the end of the period grew 7.3% to $114.4 million from $106.6 million a year earlier, and deposits rose 5.7% to $173 million from $163.6 million.

Boost in Fee Income

Craig Collette, president and chief executive of Landmark Bancorp and its bank, said a healthy increase in fee income that more than offset a slight increase in expenses helped the company post a quarterly net income of $288,000, slightly above last year’s $285,000.

Net six-month earnings of $550,000 were 17% higher than $470,000 earned in the year-earlier period.

The company’s assets at the end of June were $144 million, a 2.9% increase from $140 million in assets a year earlier. The bank’s total loans grew 10.7% to $93 million from $84 million a year earlier, and deposits rose 7.4% to $131 million from $122 million.

At American Commerce, Gerald J. Garner, the chairman and chief executive, said net income for the quarter was $272,000, a 54.5% increase from the $176,000 earned in last year’s second quarter. The six-month net income rose 15.8% to $513,000.