O.C.-Based Banks Have Profitable First Quarter : Earnings: The net gain, however, is $2 million less than last year and points to a continuing slide in the economy.
Despite the effects of a recession, Orange County’s independent banks reported a combined net income of $9.6 million for the first quarter.
The profit, though, is lower than the $11.6 million earned in last year’s first quarter and continues the downward spiral for the local industry, according to regulatory figures compiled by Sheshunoff Information Services Inc. in Austin, Tex.
“We don’t see anything in the economy to turn it around right now,” said banking consultant Gerry Findley of Brea.
The county’s 35 banks are suffering, he said, from a small profit margin between interest rates received on loans and rates paid on deposits, a general drought in loan production and an inability to cut back further on general and administrative expenses--the so-called non-interest expenses.
“I predicted a 25% falloff in earnings this year, but I thought I was being too pessimistic,” Findley said. “Now I think that figure’s about right. The second-quarter results are not as good as first quarter’s, and third quarter is going to be even worse. There will be a lot of scrambling around in the last quarter.”
At the same time, the local thrift and loan industry also suffered under the weight of the recession. The 13 thrifts based in Orange County earned $3.2 million, down from $4 million earned in last year’s first quarter.
“The results are largely a product of the real estate environment,” said Edward J. Carpenter, an industry consultant in Irvine. “Most thrift and loans are real estate lenders now. More than 50% of the collateral in the industry is real estate.”
Thrift and loans are hybrids between banks and finance companies and are often confused with savings and loans, which also are known as thrifts.
Thrift and loans used to concentrate on car loans as well as high-interest loans for those who couldn’t borrow elsewhere but had good collateral. But thrift and loans have been diversifying in recent years under new laws that allow investments in such areas as home mortgages.
Findley doesn’t see the banks or the thrift and loans coming out of the doldrums until next summer at the earliest. A recovery in both industries generally lags behind any general economic recovery by about six months, Findley said, and an economic recovery in Orange County probably won’t come until early next year.
Nevertheless, 30 of the county’s banks and nine of its thrift and loans were profitable for the first quarter.
Security Pacific State Bank in Irvine led the way with $2.2 million in net income. It is a sister bank to Security Pacific National Bank and provides services mainly to other banks. No other bank earned more than $1 million, but National Bank of Southern California in Santa Ana came closest with $947,000 in profits.
Of the five banks that oozed red ink, Frontier National Bank in La Palma lost the most--$236,000. It was followed by Mission Valley Bank in San Clemente, which lost $211,000.
Mission Valley also is one of two banks with serious loan problems. Nearly 11% of its loans are sour. Mission Viejo National Bank, though profitable, had 16.6% of its loans in trouble. And 9.2% of the loans at Commercial Center Bank in Santa Ana were bad.
Bankers, who look at the bad-loan rate as a warning of future problems, try to keep that ratio below 3%.
Among thrift and loans, First Fidelity Thrift & Loan in Irvine posted first-quarter profits of $2.4 million, far outdistancing Investors Thrift in Orange as the second-biggest moneymaker with $421,000 in earnings.
Of the four money-losing thrifts, the biggest loss was $313,000 at Centennial Thrift & Loan in Fountain Valley. Heritage Thrift & Loan in Brea was a distant second with a $31,000 loss.
Loan problems also mounted at the thrifts. Despite its huge profit, First Fidelity also had nearly 10% of its loans in trouble. Following it were Freedom Financial Thrift & Loan in El Toro with 8.1% and Centennial with 6.7%.
O.C. Bank Scoreboard
Nonperforming Total Loans as % Bank Assets Gross Loans Income (millions) (thousands) Security Pacific State 377.8 0.83 2,202 National Bank of So. Calif. 354.5 2.40 947 CommerceBank 302.4 0.70 641 Sunwest 290.4 3.07 358 Eldorado 289.9 3.54 807 Bank of Newport 278.5 2.02 286 Commercial Center 238.0 9.18 368 Pioneer 203.4 3.19 563 Landmark 179.0 0.81 495 Orange National 166.4 0.49 893 Frontier, N.A. 155.4 3.16 -236 Mission Viejo National 153.2 16.60 401 Liberty National 146.8 3.28 344 American Commerce National 130.1 2.99 247 Pacific National 125.5 1.89 197 Huntington National 109.7 0.51 204 Pacific Inland 103.4 1.72 129 Corporate 102.8 1.19 439 Marine National 80.1 0.37 102 Dana Niguel N.A. 72.5 3.03 10 Mariners, N.A. 72.4 0.00 169 Bank of Westminster 66.5 2.30 75 Bank of Anaheim, N.A. 66.4 0.00 150 Bank of San Clemente 66.3 0.09 128 Colonial 61.4 0.00 97 American Interstate 60.8 1.85 43 Monarch Bank 56.0 4.21 20 Founders National 55.6 1.60 1 Bank of Yorba Linda 45.6 0.55 -45 United American 42.1 1.47 11 Mission Valley, N.A. 38.0 10.82 -211 Bank of Orange County 37.1 0.03 44 Grand National 36.7 0.02 -143 First American Capital, N.A. 36.2 5.12 33 Laguna, N.A. 13.7 2.65 -166 Totals 3,731 NA 4,374
Source: Alex Sheshunoff Information Services Inc.
