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O.C. Thrifts on Win Streak in 2nd Profitable Quarter

TIMES STAFF WRITER

For the first time in nearly a decade, Orange County’s savings and loans collectively have posted two profitable quarters in a row.

The county’s 25 thrifts had combined net income of $17.6 million for the second quarter, which was down from $64.8 million for the first quarter. Despite the lower profits, some S&L; leaders saw reason for optimism in the latest quarterly results.

“It shows that a lot of institutions were still making money, even though they put aside large amounts into reserve because of the slow real estate market,” said Stephen W. Prough, president of Western Financial Savings Bank in Irvine.

“If they don’t need that reserve later when the real estate market rebounds, it’ll turn into earnings,” he said.

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Because of the sluggish market, Prough’s own thrift set aside $2 million for possible loan losses in addition to the normal amount it keeps in reserve. That reduced its quarterly net income to $5.2 million.

Local thrift leaders hope that county-based S&Ls; will report an aggregate profit for the year--something the local industry also has not done in nearly a decade.

The 25 thrifts earned $82.4 million for the first six months, a big turnaround from the $206.8-million loss that county thrifts posted for the same period last year.

The biggest reason, of course, is that most of the big, money-losing S&Ls; that failed and were seized by government regulators are now gone. Among those defunct thrifts are American Savings & Loan, Beverly Hills Savings & Loan, American Diversified Savings Bank, Pacific Savings Bank and the nation’s biggest thrift failure to date: Lincoln Savings & Loan.

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Orange County has had more thrift failures--23--than any other county in the state.

Regulators are now operating FarWest Savings in Newport Beach and Guardian Savings & Loan in Huntington Beach, both of which they seized this year.

The local industry ended the quarter with $51.5 billion in total assets, down 1.4% from $52.2 billion a year earlier.

Ronald McGee, president of Household Bank’s California operations, said thrifts are being cautious and are still concerned about building enough capital, their final reserve against losses.

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“Interest rates on deposits are continuing to fall, and mortgage rates are still high,” McGee said, “so thrifts should do well this year.”

American Savings Bank, which dwarfs other county thrifts in size and earnings, reported net income of $47.9 million. Household and Downey Savings & Loan posted earnings of $16.8 million and $11 million, respectively.

Union Federal Savings Bank, which won approval from regulators this week for a recapitalization plan, posted the biggest loss: $41 million. FarWest followed with a $33.4-million quarterly loss. Guardian’s $3.3-million loss wiped out its first-quarter profit.

Orange County S&L; Scoreboard

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Second-quarter 1991 results

Ranked by assets ASSETS (millions) S&L; 1991 American $16,979.8 Household Bank 8,865.1 New West Federal 2 7,152.7 Downey 4,064.4 FarWest 3 2,874.5 Western Financial 2,777.2 Union Federal 2,154.2 ITT Federal 1,264.8 Beverly Hills 1,262.6 Long Beach 788.0 Guardian 3 680.0 United California 611.3 Fullerton 336.1 Standard Pacific 298.1 Universal 262.8 San Clemente 249.9 Plaza 227.9 Malibu 4 119.6 Irvine City 104.2 Sterling 81.1 University 69.5 Delta 64.0 Beach 4 62.9 Cornerstone 60.5 Pioneer 51.5 O.C. Totals $51,462.7

Second-quarter 1991 results

CAPITAL ADEQUACY 1 % % % S&L; Tangible Core Risk-based American 4.20% 4.20% 13.50% Household Bank 3.10 3.80 9.10 New West Federal 2 na na na Downey 5.80 5.80 12.20 FarWest 3 -7.50 -7.50 -6.70 Western Financial 4.10 4.10 9.90 Union Federal 2.70 3.00 5.40 ITT Federal 5.70 5.70 8.30 Beverly Hills 8.70 8.70 43.30 Long Beach 3.20 3.20 4.60 Guardian 3 2.30 2.50 3.80 United California 3.80 3.90 7.40 Fullerton 8.00 8.00 11.80 Standard Pacific 6.30 6.30 12.00 Universal 3.20 3.90 8.70 San Clemente 3.50 4.00 5.20 Plaza 5.70 5.70 10.30 Malibu 4 -5.50 -5.50 -6.30 Irvine City 3.90 3.90 9.20 Sterling 16.30 16.30 21.60 University 3.40 3.40 7.50 Delta 5.40 5.40 8.40 Beach 4 -2.90 -2.90 -3.60 Cornerstone 4.90 4.90 7.30 Pioneer 6.40 6.4 12.70 O.C. Totals 3.00 3.20 8.30

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Second-quarter 1991 results

NET INCOME (thousands) S&L; 2nd Qtr 1st Qtr American $47,913 $47,505 Household Bank 16,788 14,404 New West Federal 2 0 0 Downey 11,042 12,462 FarWest 3 -33,369 -7,462 Western Financial 5,203 3,467 Union Federal -41,024 -12,888 ITT Federal 4,853 3,542 Beverly Hills 3,507 2,428 Long Beach 3,670 -3,247 Guardian 3 -3,303 3,093 United California -684 573 Fullerton -781 385 Standard Pacific 833 500 Universal -117 -86 San Clemente 2 -532 Plaza 4,165 1,144 Malibu 4 -582 -190 Irvine City 210 -64 Sterling -156 30 University 11 29 Delta 148 173 Beach 4 -875 -581 Cornerstone 19 3 Pioneer 130 66 O.C. Totals $17,603 $64,754

1 Regulators require capital ratios of 1.5% tangible, 3% core, 7.2% risk-based. 2 Self-liquidating S&L; consisting of old American Savings & Loan’s bad assets. 3 Seized and operated by regulators. 4 Seized by regulators and sold in July. Source: Office of Thrift Supervision


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