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County’s S&Ls; Trim Losses to $12.2 Million in the Third Quarter

Times Staff Writer

Orange County’s savings and loans posted a combined loss of $12.2 million for the third quarter, a significant improvement over the $318.3-million loss recorded during the first 6 months of the year.

The improving picture is largely the result of recent sales and liquidations of four insolvent institutions, which ranked among the nation’s sickest thrifts.

In addition, regulators have injected $250 million into American Savings, a thrift formerly controlled by Irvine-based Financial Corp. of America, while they await completion of a pending sale to a group headed by Robert M. Bass of Texas.

Those actions leave five insolvent thrifts in Orange County.

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In all, 16 money-losing Orange County S&Ls; chalked up an aggregate loss of $47.6 million, while 18 profitable institutions recorded combined earnings of $35.4 million.

Unless staggering losses hit the county’s 34 S&Ls; in the fourth quarter, the local industry should end the year much better off than last year, when it reported a record annual loss of $920 million.

While the combined loss has been reduced, the industry is finding that it is getting tougher to make a buck.

“We’re in a year where just recurring profits are harder to come by,” said Peter Capobianco, a partner at the accounting firm of Kenneth Leventhal & Co. in Newport Beach. “Earnings are down for everyone, and I think the fourth quarter is going to be a tougher quarter.”

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The markets for investment securities and for mortgage loans have been flat or down, said Edward Carpenter, a Costa Mesa industry consultant. The extra assessments paid to the federal deposit insurance fund to clean up insolvent institutions are taking their toll on earnings, he said.

“Also, regulatory examiners are being tough on evaluations of problem loans, and many S&Ls; in the county have larger than anticipated additions to loan loss reserves,” Carpenter said.

Profit margins have also become slimmer, especially for smaller institutions, making it even more difficult to turn a profit, Capobianco said.

Of the 15 smallest S&Ls; in the county, only three posted profits, while the remaining 12 recorded losses. In addition, four large institutions also lost money, including a $20.3-million loss by generally healthy Lincoln Savings & Loan in Irvine.

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“If you’re small, it’s very difficult to generate operating income if you don’t have a big asset base,” said Robert Thomas, chief financial officer at the small Cornerstone Savings & Loan in Mission Viejo. “Yields on residential loans are much lower than yields on commercial and industrial loans.”

Beverly Hills Savings & Loan in Mission Viejo, seized by regulators nearly 4 years ago, is the largest remaining insolvent institution in the county. It lost $11.6 million in the third quarter and has the largest negative net worth--$616 million--in the industry. Net worth is assets minus liabilities.

Pacific Savings Bank in Costa Mesa reported a $9.2-million loss. Its net worth is now a negative $200.3 million. Other insolvent S&Ls; are Perpetual Savings, First California Savings and Western Empire Savings, which is expected to be sold to a New York investment firm.

The Orange County institutions sold this year were Butterfield Savings and Ramona Savings. American Diversified Savings Bank and North America Savings were liquidated in June.

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Statewide, California’s savings industry earned $287 million for the quarter. Nationwide, the savings industry, beleaguered with hundreds of insolvent institutions, posted a $1.6-billion loss.

COUNTY-BASED SAVINGS AND LOANS

Total Total Capital Net Assets Capital As % of Income Savings and Loan (Mil.) (Mil.) Assets (Thous.) American $30,344.8 $220.1 0.73 $14,745 Lincoln 5,256.0 247.4 4.70 -20,291 Far West 4,564.2 181.2 4.00 1,574 Household Bank 4,465.0 221.0 4.95 493 Downey 3,601.8 226.1 6.28 5,181 Mercury 2,635.7 88.2 3.35 1,565 Western Financial 2,318.8 198.8 8.57 3,088 Beverly Hills 1,310.4 -616.1 -47.02 -11,575 Pacific 1,134.5 -200.3 -17.66 -9,182 Butterfield 687.6 40.0 5.82 16 United California 679.6 34.7 5.11 -273 Newport Balboa 608.3 34.5 5.67 1,010 Guardian 538.8 22.7 4.21 4,624 Charter 433.4 13.6 3.14 273 Fullerton 350.0 22.5 6.43 1,452 San Clemente 297.0 10.7 3.60 180 Universal 262.6 10.7 4.07 549 Malibu 192.3 8.6 4.47 145 Sterling 179.6 15.9 8.85 317 First California 174.5 -71.4 -40.92 -1,161 Standard Pacific 160.3 13.4 8.36 93 Westport 156.6 6.9 4.41 -346 Western Empire 117.6 -3.8 -3.23 -2,145 Huntington 111.2 .4 0.36 -129 Irvine City 92.9 4.1 4.41 -147 Security 86.3 1.1 1.27 -984 Beach 82.0 5.5 6.71 86 Constitution 76.7 1.5 1.96 -107 Plaza 64.1 3.3 5.15 -108 Delta 60.0 1.3 2.17 -149 Cornerstone 59.7 3.8 6.37 9 Perpetual 39.0 -11.5 -29.49 -725 American Interstate 29.9 1.1 3.68 -211 Pioneer 16.7 .8 4.79 -92 Orange County Totals 61,187.9 736.8 1.20 -12,225


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