Pacific Savings Sees Recovery Sign In a Smaller-Than-Expected Loss : BANKING/FINANCE

Executives at troubled Pacific Savings Bank in Costa Mesa are seeing some small signs of recovery, and they are hoping that insurance sales centers going into the savings and loan’s retail branches will generate income and help stabilize sagging fortunes.

Pacific Savings had a net loss of $6.1 million for the first quarter, but that was $2.9 million better than projections in a business plan developed last year by its new management. It is also a large improvement over the $28.2-million loss in last year’s first quarter.

“We’re excited about the reallocation of our resources into our branches and the retail recovery we seem to have under way,” said Harvey A. Lynch, a Glendale Federal Savings executive hired by regulators to run Pacific Savings.

A Pacific Savings subsidiary, Pacifica Insurance Services, has joined with a San Francisco broker to set up shop in the S&L;’s branches. Pacifica has been offering basic automobile, property, casualty and life insurance to 10,000 clients.

Through Integrated Resources Investment Centers, Pacifica can offer insurance brokerage services, such as trading in mutual funds, government securities and high-yielding corporate bond funds.

The insurance sales centers are part of a plan to revitalize the S&L;’s branch network. The 98-year-old S&L; once had 60 full-service branches, but it had just 11 limited-service offices in four Southern California counties when Lynch took over. He said the S&L; may build up its branch system in the near future by buying a few branches from other savings institutions.

Lynch has also moved routine lending authority to the branches so each branch can make its own auto, consumer and home loans, activities that had been centralized in the S&L;’s headquarters in the mid-1980s.

While Lynch believes Pacific Savings can be saved, he has no illusions that the S&L; can do the job on its own. It needs $240 million in new capital from investors or buyers to meet regulatory requirements.

With $1.3 billion in assets at the end of March, Pacific Savings lost $178 million in the last five years; its liabilities exceeded assets by nearly $200 million, though that deficit figure is now closer to $180 million, Lynch said.

Though regulators have installed new management, they have not officially declared Pacific Savings insolvent and have not seized it.