First 9 Months of ’89 Were Lucrative for County Banks

Orange County’s 39 banks posted a combined $41.9 million in net income for the first nine months last year, earning more than they did for all of 1988, according to recently released statistics.

The unaudited profits--38% higher than the $30.3 million earned during the same nine-month period in 1988--put the local banks on track to record their third consecutive profitable year. Audited results for all of last year won’t be available until late March.

For the entire year of 1988, the local banks reported $41.4 million in net income.

“All indications we have are that 1989 was an excellent year through the fourth quarter,” said Gerry Findley, a Brea banking consultant. “It was probably the best year we’ve had in independent banking in a long time. Anybody who couldn’t make it in ’89 was sure as hell doing something wrong.”

He cautions, however, that this year’s bank earnings won’t be “nearly as strong” as last year’s.

Meantime, the county’s small thrift and loan industry continues to fare well as 13 local thrifts operating under banking regulations earned $9.4 million in combined profits for the first nine months. Results for five other thrifts not yet regulated by banking authorities were unavailable.

Thrifts, state-chartered institutions that are sort of a hybrid between banks and finance companies, are required by state law to obtain federal insurance for their deposits by July 1. Thrift and loans, known by that name only in California, sometimes are confused with the nation’s savings and loans, which often are called thrifts, also.

For the period that ended Sept. 30, only two county banks--Laguna Bank in Laguna Beach and American Interstate Bank in Newport Beach--lost money. And their losses--$242,000 and $54,000, respectively--were small compared to the millions of dollars lost by nearly two dozen local banks in the early- and mid-1980s.

Of the profitable banks, 16 reported earnings of more than $1 million, and only three recorded profits of less than $150,000.

But Alex Sheshunoff, head of Sheshunoff Information Services Inc., the Austin, Tex., firm that compiled the quarterly results from regulatory statistics, warned that earnings often do not reflect underlying problems like slow-paying or non-paying loans.

One indication of such problems, he maintains, is the percentage of a bank’s non-performing loans to its total loans. A bank should not have more than 3% of its loans classified as non-performing, he said. Most bankers try to keep that figure below 1%.

Seven county banks had ratios higher than 3% at the end of the third quarter, with Commercial Center Bank in Santa Ana at 12.48% and Mission Valley Bank in San Clemente at 7.46% heading the list. A year earlier, only six county banks were above the 3% level.

Thrift and loans insured by the Federal Deposit Insurance Corp. have continued to prosper. Only one county thrift--Orange Coast T&L; in Los Alamitos--has failed in the last decade.

Four thrifts must obtain FDIC insurance in the next six months or face regulatory action against them. A fifth one, Chase Manhattan of California Thrift Corp., is no longer acting as a full-service thrift.

For the first nine months, only one thrift, Franklin T&L; in Orange, lost money. But like other thrifts, Franklin has sufficient capital to meet regulatory requirements.

ORANGE COUNTY BANK SCOREBOARD

Asset and net income figures for Orange County banks as of Sept. 30, 1989, show that banks earned more in the first nine months than in the entire previous year. Sixteen banks earned more than $1 million.

Ranked by assets

Total Net Assets Income Bank (millions) (thousands) Sunwest 271.1 2,338 National Bank of So. Calif. 269.6 1,689 Eldorado (a) 267.3 2,847 Commercial Center 261.4 3,042 Bank of Newport 248.2 1,096 CommerceBank 247.7 2,723 Security Pacific State 238.3 4,260 Far Western 212.3 3,893 Landmark 171.7 1,422 Orange National 158.5 1,087 Pioneer 151.3 2,098 El Camino (a) 135.9 1,753 Liberty National 125.1 1,177 Mission Viejo National 122.0 2,081 Citizens Bank of Costa Mesa 119.2 1,551 Pacific National 95.9 511 American Commerce National 90.4 1,240 Pacific Inland 86.6 175 Huntington National 82.9 609 Marine National 83.8 328 Corporate 88.0 864 Frontier, N.A. 68.6 20 Mariners, N.A. 65.3 627 California City, N.A. 61.2 322 American Interstate 60.7 -54 Bank of Westminster 59.0 386 Bank of Anaheim, N.A. 58.7 428 Monarch Bank 57.1 41 Dana Niguel, N.A. 51.8 590 Founders National 47.2 228 Bank of San Clemente 46.7 392 Colonial 43.9 810 Mission Valley, N.A. 40.6 497 United American 36.7 64 Bank of Orange County 35.2 210 Bank of Yorba Linda 32.0 316 First American Capital, N.A. 30.9 297 Grand National 29.4 207 Laguna, N.A. 21.1 -242 Totals $4,373.3 $41,923

(a) Citizens and El Camino are sister banks. Both are owned by Citizens Holdings in Newport Beach.

Source: Sheshunoff Information Services Inc., Austin, Tex. ORANGE COUNTY THRIFT SCOREBOARD

Here are asset and net income figures for Orange County thrift and loans as of Sept. 30, 1989, for the first nine months of the year. The county’s T&Ls; continued to fare well after moving under the regulation of the Federal Deposit Insurance Corp. Five thrifts were privately insured at the end of the third quarter.

Ranked by assets

Total Net Assets Income Thrift and Loan (a) (millions) (thousands) First Fidelity 294.5 5,308 Investors 164.2 807 Citizens 73.2 520 South Coast 67.8 415 Heritage 54.2 105 Assured 44.1 380 Huntington Pacific 43.8 89 First Security 32.6 718 First American 30.7 1,005 Liberty (b) 21.7 121 North American 20.6 67 Freedom Financial 17.8 286 Franklin 15.5 -343 Orange County Totals 880.7 9,357

(a) List does not include Centennial, Savers, Assured or Tustin T&Ls; because they were not subject to Federal Deposit Insurance Corp. regulations in the third quarter. It also excludes Chase Manhattan of California Thrift Corp., which no longer operates as full-service T&L.;

(b) Liberty is a subsidiary of Investors T&L;

Source: Sheshunoff Information Services Inc., Austin, Tex.; and Southport/Carpenter Group, Santa Ana