Local banks and savings and loans, long in need of capital, are under more pressure than ever before to raise their levels of capital--the basic fund that protects them from unforeseen losses.
New regulations coming out of Washington are requiring banks and S&Ls; to bolster their capital base, and those regulations are forcing the traditionally lower-capitalized S&Ls; to come up with hard-to-get dollars.
The easiest place to get that cash for some institutions is to cut out dividends, and two major S&Ls; in Orange County have done just that.
The latest, the parent of FarWest Savings & Loan in Newport Beach, said recently that it was terminating its quarterly 10-cent-per-share dividend “for the foreseeable future.”
Previously, Mercury Savings & Loan in Huntington Beach had stopped making its quarterly dividend of 10 cents a share.
But some of the stronger S&Ls;, as well as most banks, which typically have twice as much capital as thrifts, are continuing to pay cash dividends.
One parent of a local bank, Eldorado Bancorp in Laguna Hills, said it was increasing its quarterly cash dividend by a penny, to 7 cents a share. In August, Eldorado raised the dividend to 6 cents from a nickel a share. The company, which operates eight Eldorado Bank branches in Orange, Riverside and San Bernardino counties, said the increases reflect the company’s strong earnings and its effort to return about 20% of those earnings to shareholders.