BANKING / FINANCE : Banks Searching for Cheaper Funds in Failed Thrifts
Like scavengers in an alley, bankers are sifting through the refuse of failed thrifts hoping to find some gems, and three more California thrifts, including Huntington Savings & Loan, were added to the heap Tuesday.
Federal regulators requested bids for the purchase of the Huntington Beach thrift and two others, Wilshire Savings & Loan in Los Angeles and Constitution Savings & Loan, which moved from Tustin to Monterey Park this year before regulators seized it.
The likely buyers are bankers, who might like a failed thrift’s branch system or its location. But their motivation is the search for cheaper funds, said Gerry Findley, a banking consultant based in Brea.
“Every bank is having trouble raising good core deposits,” Findley said. “The biggest thing we’re seeing right now is banks interested in scurrying around in the S&L; garbage to look for funding sources that are cheaper than what they have now.”
Core deposits are those that come typically from businesses and residents near an institution. Bankers don’t pay as much interest for those as they do for large certificates of deposits brought in from out-of-towners looking for high rates.
But a bank with $100 million in jumbo CDs could save $1 million or more in interest payments by replacing those accounts with deposits from area residents, Findley said.
Frontier Bank in La Palma, for instance, recently bought $120 million in deposits from the failed Westco Savings Bank in Wilmington. About $78 million of the total is considered core deposits, said Findley, who worked on the deal. Frontier paid $750,000 for the deposits and should make its money back within a year by the savings on interest costs.
Huntington Savings had $120.2 million in deposits in two branches at the end of December, and nearly half that amount was smaller core deposits.
With all the banking results analyzed for last year, two Orange County banks wound up among the top 100 community banks in the nation in a key measure of financial performance, according to a recent survey by an industry periodical.
Mission Viejo National Bank and Pioneer Bank in Fullerton ranked 38th and 69th, respectively, in the American Banker’s survey of the nation’s 12,588 banks for the key standard--shareholder return on average assets.
Mission Viejo National, which posted $2.4 million in net income, ended up with a 2.2% return on assets. Pioneer’s $2.8 million in net income last year gave it a 2.01% return.
The trade weekly, which defined community banks as independently owned institutions with less than $200 million in assets, said community banks outperformed the rest of the industry for the fourth consecutive year.
Despite tougher competition and a higher percentage of their income being spent on complying with regulations, community banks prospered by offering personalized service, making better loans and staying within their markets, particularly the growing agricultural economy.
