Banks Grow, Keep Tight Rein on Bad Loans

Orange County’s banks, as a whole, grew modestly last year as total assets increased 6%. At the same time, the group kept a tight rein on bad loans and posted combined net income of $48 million.

Nevertheless, the growth of several banks exploded, and the bad loans at a few others jumped dramatically, according to statistics compiled by Findley Reports Inc., an industry consulting firm in Brea.

Frontier Bank in La Palma doubled its size to $147.9 million in assets, mainly by buying three branches of the failed Westco Savings Bank in Wilmington from federal thrift regulators.

Among larger banks, Pioneer Bank in Fullerton took on more business loans and a large amount of home construction loans, a market many thrifts abandoned, to boost its assets 31% to $200.5 million.

National Bank of Southern California grew 27.5% to become the county’s biggest bank with $349.6 million in assets.

Among small banks, Colonial Bank in Santa Ana added $15 million in assets to grow to a $65.4-million institution, a 63% increase. Bank of San Clemente grew 33% to $69.4 million in assets.

Future loan problems often can be forecasted by a key barometer--the ratio of slow-paying and non-paying loans to total loans. Bankers try to keep that figure below 1%, and regulators take note when it rises above 3%.

Overall, the local industry’s bad-loan ratio dropped slightly to 1.81% last year from 1.84% the previous year. Still, seven of the county’s 10 largest banks had higher ratios. Industry consultant Gerry Findley attributed such increases mainly to heavier real estate construction lending, which hurt the bigger banks when that market foundered.

Last year, the county lost one bank, Far Western Bank in Tustin, which regulators seized and closed in December. It was the first federal takeover of a county bank in three years. Two healthy institutions, El Camino Bank in Anaheim and Citizens Bank of Costa Mesa, were sold on Jan. 1 to Wells Fargo Bank. ORANGE COUNTY BANK SCOREBOARD FOR 1990

Ranked by assets ASSETS (millions) Bank 1990 1989 National Bank of So. Calif. 349.6 274.1 Security Pacific State 345.8 300.4 Eldorado 297.3 280.0 CommerceBank 294.4 257.7 Sunwest 289.5 286.4 Bank of Newport 275.4 269.6 Commercial Center 241.9 309.3 Pioneer 200.5 153.4 Landmark 178.5 175.4 Orange National 170.2 169.9 Mission Viejo National 149.6 133.1 Liberty National 148.3 138.2 Frontier N.A. 147.9 74.1 American Commerce National 127.9 123.9 Citizens Bank of Costa Mesa2 122.4 130.7 Huntington National 115.4 130.3 El Camino2 111.3 138.7 Pacific National 110.5 116.7 Corporate 104.2 94.9 Pacific Inland 101.5 93.0 Marine National 87.3 85.2 Dana Niguel N.A. 77.2 70.6 Mariners 74.1 72.4 Bank of San Clemente 69.4 52.2 Bank of Westminster 67.6 62.9 Bank of Anaheim N.A. 67.0 60.7 Colonial N.A. 65.4 40.1 American Interstate 59.5 67.0 Monarch Bank 55.6 58.5 Founders National 53.0 50.9 Mission Valley N.A. 46.5 44.7 United American 41.2 40.7 Bank of Yorba Linda 35.9 32.6 First American Capital N.A. 35.4 31.5 Bank of Orange County 33.1 34.9 Grand National3 n/a 29.1 Laguna N.A. 16.8 22.5 Totals 4,767.1 4,506.3

Ranked by assets % NON-PERFORMING TO TOTAL LOANS 1 Bank 1990 1989 Security Pacific State 0.20 0.17 Eldorado 2.77 0.65 CommerceBank 0.85 0.56 Sunwest 2.90 1.45 Bank of Newport 1.27 1.95 Commercial Center 5.62 14.85 Pioneer 2.48 2.60 Landmark 0.87 0.06 Orange National 1.16 1.12 Mission Viejo National 7.14 4.02 Liberty National 3.14 0.56 Frontier N.A. 0.65 1.33 American Commerce National 1.45 1.74 Citizens Bank of Costa Mesa2 0.39 1.81 Huntington National 0.50 0.49 El Camino2 1.12 0.07 Pacific National 1.19 2.19 Corporate 0.01 0.12 Pacific Inland 0.49 1.26 Marine National 0.02 0.10 Dana Niguel N.A. 3.90 0.17 Mariners 0.00 0.75 Bank of San Clemente 0.01 0.00 Bank of Westminster 1.75 1.09 Bank of Anaheim N.A. 0.01 0.00 Colonial N.A. 0.00 0.00 American Interstate 2.08 0.34 Monarch Bank 2.46 0.56 Founders National 0.90 1.21 Mission Valley N.A. 11.88 8.65 United American 2.07 2.07 Bank of Yorba Linda 0.18 1.86 First American Capital N.A. 3.10 5.62 Bank of Orange County 1.14 0.00 Grand National3 n/a 0.35 Laguna N.A. 1.07 0.16 Totals 1.81 1.84

Ranked by assets NET INCOME (thousands) Bank 1990 1989 National Bank of So. Calif. 3,243 2,526 Security Pacific State 9,960 5,633 Eldorado 3,598 3,905 CommerceBank 3,758 3,709 Sunwest 1,644 3,285 Bank of Newport 2,619 2,069 Commercial Center 3,773 5,213 Pioneer 1,851 2,812 Landmark 2,127 1,858 Orange National 314 1,477 Mission Viejo National 1,089 2,377 Liberty National 1,463 1,602 Frontier N.A. 434 162 American Commerce National 1,494 1,435 Citizens Bank of Costa Mesa2 1,068 2,104 Huntington National 1,194 1,179 El Camino2 1,553 2,589 Pacific National 729 847 Corporate 1,207 1,282 Pacific Inland 571 115 Marine National 514 705 Dana Niguel N.A. 311 605 Mariners 1,004 901 Bank of San Clemente 552 463 Bank of Westminster 500 555 Bank of Anaheim N.A. 705 630 Colonial N.A. 857 1,055 American Interstate 229 -722 Monarch Bank 379 248 Founders National 243 414 Mission Valley N.A. -1,212 643 United American 12 102 Bank of Yorba Linda 115 293 First American Capital N.A. 127 470 Bank of Orange County 407 526 Grand National3 n/a 301 Laguna N.A. -452 -549 Totals 47,980 52,819

1 Bankers try to keep bad loans below 1% of total loans. Regulators take note when ratio exceeds 3%.

2 El Camino and Citizens were sold Jan. 1 to Wells Fargo Bank.

3 Grand National refused to disclose fourth-quarter figures.

Source: Findley Reports Inc., Brea