BANKING : 1980s Proved Deadly to Many Misbegotten Lending Institutions

Many of the banks created in California during the first half of the 1980s should never have opened, according to banking consultant Gerry Findley of Brea.

He may have a point: Twenty-four percent have failed or merged into other banks, and most of those mergers involved troubled banks forced to sell out. In addition, financial records of banks in the state indicate that 32% more face “serious survival challenges,” Findley said.

Among the short-lived county banks born in 1980-84 were Western National Bank in Santa Ana (1980-82), Newport Harbour National Bank in Newport Beach (1980-83), Saddleback National Bank in Laguna Hills (1983-86), New City Bank in Orange (1983-87) and Far Western Bank in Tustin (1980-90). All were seized by regulators and closed.

Owners of troubled Pacific Regency Bank in El Toro (1984-88) escaped regulators by turning the bank over--just about for free--to National Bank of Southern California in Santa Ana.

During the early 1980s, “the banking regulators were relatively lax and responsive to almost anyone who was a warm body, had some money or had confidence in getting some investors to provide the desired capitalization for the bank,” Findley said.

Of 237 banks formed in those five years, 21 failed, 36 merged out of existence and 75 are facing problems now, Findley said.

Many of the troubled banks, though, are in better shape than they were just a few years ago, he said.