Big Winner Buys a Tiny Loser : Thrift: Newport Beach mortgage banker with history of profit-making takes on beleaguered Pioneer, the state's smallest S&L.; He's confident a few policy changes can make it work.


Why would a 57-year-old man who has built two companies, sold one at a hefty profit and secured a comfortable life for himself and his family want to risk his money in the beleaguered savings and loan industry by buying a money-losing thrift?

"I come from a mortgage banking background, so I have no trouble running and managing a mortgage operation," said Frank O'Bryan, who operated a mortgage banking firm for 16 years.

Besides, he said, Pioneer Savings and Loan in Newport Beach fits well into the expanding financial empire he has dubbed Spring Mountain Group.

Spring Mountain, also based in Newport Beach, recently paid about $350,000 to acquire Pioneer, the state's tiniest thrift. It also agreed to put in $3 million of new capital, which will allow the S&L; to stabilize its operations and increase assets from its Dec. 31 level of about $11 million. The thrift lost $407,000 last year.

Thrift regulators, who killed at least one of two previous buyout deals for Pioneer, like O'Bryan's approach to the business for one major reason--he plans to make only single-family home loans.

"Pioneer has 42 loans on the books--about $10 million worth--and half of them are commercial loans and a few of them are for $1 million or so," O'Bryan said. "Now, they're good loans, but a small savings and loan has no business making loans like that. You don't put all your eggs in one basket."

He plans to make home loans of no more than $350,000 so he can avoid the problems that other thrifts have encountered by investing in a wide range of risky deals. He doesn't fear a collapse in California real estate and expects that his business plan would weather even a strong economic downturn. He also plans to increase Pioneer's assets slowly--to about $40 million at year-end from a current level of about $22 million.

Not only has his business plan won regulatory approval, but so have his personnel decisions.

He hired Anne Bacon as Pioneer's president. She had earned kudos from regulators for taking over the reins of the failed Butterfield Savings & Loan in Santa Ana for regulators in 1985 and maintaining it until it was sold 19 months ago.

Such moves show why the likable O'Bryan is regarded as an astute businessman.

"He keeps very careful track of the key factors of every part of his businesses," said Leslie N. Duryea, his friend and former lawyer.

With a quick smile and affable manner, O'Bryan has the appearance of an easygoing guy. And with the proceeds from the 1979 sale of his Newport Beach mortgage banking firm, he has enjoyed the laid-back lifestyle, at least for a while.

After graduating from the University of Arizona with a degree in business administration in 1955, O'Bryan joined his grandfather's mortgage banking firm, Southern California Mortgage & Loan Corp. in San Bernardino. He became president in 1967.

In 1971, a year before his grandfather died, O'Bryan took the company public, retaining with his mother a majority interest. He moved the firm to Newport Beach in 1973 and changed its name to Western Pacific Financial Corp.

He was looking to acquire other companies in 1979 when the Shearson Hayden Stone brokerage headed by Sanford I. Weill decided it wanted to get into the mortgage business and offered to buy Western Pacific.

At first, O'Bryan resisted. But with his mother getting older and a stock package and employment opportunities offered to him, he finally agreed. The brokerage bought his firm for $16 million. His stock package made him millions more when Shearson eventually merged into American Express.

As chairman of the renamed Shearson/American Express Mortgage Co., O'Bryan hired a president to run the operation, and he began flying to New York regularly to work on acquiring real estate and mortgage companies and figuring out a way to put the new acquisitions together.

"I thought Wall Street and mortgage banking would do more together," O'Bryan said. "But I'm not sure it ever happened."

Meantime, things were not going well at the mortgage firm. Some investments went sour and its reach into a series of related areas left the firm sluggish and in disarray. O'Bryan also wanted to start operating his own company again.

At the end of 1985, he got his opportunity. The mortgage company's new president decided to strip the firm of its subsidiaries and concentrate on mortgage banking. Shearson/American Express Escrow Co. was sold to O'Bryan for an undisclosed price, and he left the Shearson firm.

Renaming the escrow company after a street in Napa County where he had a home--and soon afterward parted with it in a divorce--O'Bryan welcomed back a host of former employees. He soon fueled the growth of Spring Mountain Escrow Corp. with the purchase of Security Pacific National Bank's small escrow operation. The company now has 42 offices in Southern California and plans to open shops in the Sacramento area.

Spring Mountain Group was formed as a holding company to handle O'Bryan's growing plans. Subsidiaries now include an auto loan unit, an insurance agency and an "accommodator" company, which handles tax-free exchanges of property.

But the group's mortgage banking firm has become inactive, and O'Bryan doesn't plan to go head-to-head with his old firm, now called Shearson Lehman Hutton Mortgage Co. and one of the nation's largest mortgage companies.

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