Joint Profits for O.C. Banks Plunge 89%, to $4.6 Million in 1991

Orange County’s 32 banks, reeling from the recession and costly regulatory demands, posted a combined profit of $4.6 million in 1991, down 89% from the prior year.

And the county’s 22 savings and loans, still crippled by a few government-run, mega-money losers, were again mired in their annual outpouring of red ink, posting a combined loss of $20.6 million.

Reserves for possible bad loans in a shaky economy hurt the bottom lines of many financial institutions last year, bankers and S&L; executives said.

But the bank figures, compiled by Findley Reports in Anaheim, and the S&L; numbers, released by the Office of Thrift Supervision in Washington, also show the restrictive impact that zealous regulators, federal laws and new accounting standards are having on financial institutions, despite President Bush’s promise to ease the regulatory burden.

Last year, banks and thrifts refused to make loans that would once have been routine, fearing that regulators could make them devalue the loans, said Gerry Findley, a banking consultant and founder of Findley Reports. The resulting credit crunch has been cited as a major contributor to the continuing recession.

“Regulators have terrible clout now,” Findley said. “They’re driving us frantic.”

Federal law, he said, requires regulators to be “micro-managers” in examining the financial condition of financial institutions. But those kinds of business judgments are not what regulators are equipped to do, he said.

Parallel with the local banking industry’s 89% profit drop in 1991--down from $43.8 million earned in 1990--just six banks made more money last year than the year before. Orange National Bank in Orange posted the biggest jump, with net income rising to $2.3 million, from $314,000 the previous year.

A dozen banks posted losses, including Mission Viejo National Bank, which lost $7.2 million last year, and was seized by regulators Feb. 28 and closed.

The county’s large banks had their share of woes too. Security Pacific State Bank showed the biggest profit, with $3.7 million, but that was down sharply from a $10-million profit in 1990. The county’s biggest bank, National Bank of Southern California, earned just $516,000, down from $3.2 million the previous year.

“California is coming out of the recession, but a lot slower than the rest of the country,” said J.B. Crowell, president and chief executive of Eldorado Bancorp and its Eldorado Bank subsidiary.

At Eldorado, the cost of federal deposit insurance alone nearly doubled in a year, he said, to $661,000. This year, the cost is expected to rise to $954,000, making it the bank’s third-biggest expense, after salaries and building and equipment costs. Two years ago, the deposit insurance premium was its seventh-biggest expense.

The county’s S&Ls--excluding; several failed thrifts that regulators continued to operate--combined for a profit of $251.6 million. But that was wiped out by the $239.7-million loss at failed FarWest Savings & Loan in Newport Beach, which was sold two weeks ago, and the $28.2-million loss at Guardian Savings & Loan in Huntington Beach. Failed Delta Savings & Loan in Westminster posted a $3.6-million deficit, accounting for most of the rest of the debits.

In 1990, the local thrift industry would have posted a profit except for losses at failed Lincoln Savings & Loan in Irvine. Lincoln’s $525.8-million loss that year left combined local thrifts with red ink of $477.6 million.

In 1991, the thrifts still in independent hands had mixed results, as 12 posted profits and seven had losses. Giant American Savings Bank, which has its main office in Stockton but is operated out of Irvine, led the way, with $181.5 million in net income.

As a group, the thrifts also improved their capital, which is their final reserve against losses. Even with the failed thrifts included, the local industry had enough capital to exceed federal requirements.

“I think thrift institutions have extremely good net worth (capital), and I think you’ll see some growth as we come out of the recession,” said Stephen W. Prough, president and chief executive of Western Financial Savings Bank in Irvine.

He said the federal rules spawned by the 1989 federal law that restructured the thrift industry crippled many S&Ls; because they could not respond fast enough to the changes.

Now, he said, thrift executives have gained confidence in managing their capital and are poised to compete more effectively.

For the fourth quarter, county banks lost a combined $4.7 million, and county thrifts posted a total loss of $101.4 million, caused by the problems at FarWest and two other failed S&Ls.;

1991 Orange County S&L; Scoreboard

Ranked by assets ASSETS (millions) 1991 1990 American $16,922.2 $16,569.1 Household Bank 8,551.0 7,887.0 Downey 3,776.4 4,155.6 Western Financial 2,671.0 2,977.2 Union Federal 1,813.2 2,387.1 FarWest** 1,674.6 3,715.0 ITT Federal 1,390.1 1,240.3 Beverly Hills 1,208.1 1,408.2 Long Beach 797.7 794.9 United California 591.8 653.3 Guardian** 451.7 681.9 Standard Pacific 341.1 263.4 Fullerton 333.8 338.5 Plaza 330.6 118.6 Universal 242.9 265.0 San Clemente 229.5 254.2 Irvine City 104.6 97.1 Delta** 59.2 73.1 Cornerstone 58.3 56.4 Sterling 53.5 92.1 Pioneer 51.6 33.4 University 39.9 72.9 Orange County Totals 41,692.8 44,134.3

1991 Orange County S&L; Scoreboard

Ranked by assets CAPITAL ADEQUACY* % % % Tangible Core Risk-based American 4.2% 4.3% 12.8% Household Bank 3.5 4.2 11.5 Downey 6.3 6.3 12.1 Western Financial 5.2 5.2 11.9 Union Federal 2.6 2.9 4.9 FarWest** -24.1 -24.1 -22.0 ITT Federal 5.7 5.7 8.5 Beverly Hills 9.4 9.4 41.0 Long Beach 4.0 4.0 5.7 United California 3.5 3.5 7.4 Guardian** -3.2 3.2 -3.7 Standard Pacific 6.1 6.1 10.9 Fullerton 6.5 6.5 10.2 Plaza 5.1 5.1 10.1 Universal 5.3 5.3 10.9 San Clemente 0.8 1.3 2.5 Irvine City 4.1 4.1 9.4 Delta** -0.8 -0.8 -1.1 Cornerstone 3.8 3.8 5.4 Sterling 18.4 18.4 23.4 Pioneer 6.9 6.9 14.2 University 5.0 5.0 10.0 Orange County Totals 3.3 3.5 8.4

1991 Orange County S&L; Scoreboard

Ranked by assets NET INCOME (thousands) 1991 1990 American $181,492 $247,408 Household Bank 67,598 41,807 Downey 24,859 40,375 Western Financial 18,957 10,192 Union Federal -69,767 -37,171 FarWest** -239,735 -263,882 ITT Federal 17,456 8,865 Beverly Hills 9,258 16,156 Long Beach 7,480 7,151 United California -4,338 -5,924 Guardian** -28,227 -2,821 Standard Pacific 3,499 1,319 Fullerton -1,367 2,139 Plaza 9,254 2,132 Universal -3,336 307 San Clemente -7,098 -93 Irvine City 377 -34 Delta** -3,604 520 Cornerstone 60 -78 Sterling -3,547 -5,682 Pioneer 445 67 University -331 93 Orange County Totals -20,615 62,846***

* Federal law requires thrifts to have 1.5% tangible, 3% core and 7.2% risk-based capital.

** Seized in 1991 and operated by regulators. FarWest was sold and closed last month.

*** Total does not include annual loss from then existing Lincoln Savings & Loan, which pushed the county total down to -$477.6 million.

Source: Office of Thrift Supervision

1991 Orange County Bank Scoreboard

Ranked by assets ASSETS (millions) Bank 1991 1990 National Bank of So. Calif. $375.4 $349.6 Security Pacific State 366.8 345.8 Eldorado* 359.6 297.3 Bank of Newport 303.7 275.4 CommerceBank 298.6 294.4 Sunwest 284.2 289.5 Commercial Center 272.8 241.9 Landmark* 244.0 178.5 Pioneer 218.9 200.5 Pacific National 192.9 110.5 Orange National 179.2 170.2 Liberty National 161.9 148.3 Pacific Inland 145.0 101.5 American Commerce National 139.2 127.9 Frontier, N.A. 132.4 147.9 Mission Viejo National** 123.4 149.6 Huntington National 110.1 115.4 Colonial, N.A. 102.4 65.4 Corporate 94.4 104.2 Marine National 94.1 87.3 Mariners 78.7 74.1 Bank of Anaheim, N.A. 70.5 67.0 Bank of Westminster 63.8 67.6 Grand National 61.5 31.6 Monarch 61.0 55.6 Dana Niguel, N.A. 55.9 77.2 American Interstate 51.5 59.1 Bank of Yorba Linda 49.5 35.9 Bank of Orange County 44.9 33.1 United American 38.0 40.7 First American Capital, N.A. 31.3 35.3 Laguna, N.A. 11.7 16.8 Orange County Totals 4,817.3 4,395.1

1991 Orange County Bank Scoreboard

Ranked by assets % NON-PERFORMING TO TOTAL LOANS Bank 1991 1990 National Bank of So. Calif. 2.46% 2.15% Security Pacific State 1.71 0.20 Eldorado* 3.55 2.77 Bank of Newport 2.76 0.83 CommerceBank 3.13 0.85 Sunwest 2.89 2.90 Commercial Center 0.03 5.62 Landmark* 1.63 0.86 Pioneer 3.05 2.48 Pacific National 3.13 1.19 Orange National 0.57 1.16 Liberty National 2.36 3.14 Pacific Inland 6.19 0.50 American Commerce National 4.51 1.45 Frontier, N.A. 2.31 0.65 Mission Viejo National** 20.84 7.14 Huntington National 1.50 0.50 Colonial, N.A. 1.56 0.00 Corporate 2.87 0.01 Marine National 0.74 0.02 Mariners 0.02 0.00 Bank of Anaheim, N.A. 0.85 0.01 Bank of Westminster 3.76 1.75 Grand National 0.82 0.03 Monarch 1.38 2.46 Dana Niguel, N.A. 3.61 3.90 American Interstate 3.91 2.08 Bank of Yorba Linda 2.82 0.18 Bank of Orange County 0.03 1.14 United American n/a 2.07 First American Capital, N.A. 5.25 3.10 Laguna, N.A. 0.00 1.07 Orange County Totals 3.00 1.77

1991 Orange County Bank Scoreboard

Ranked by assets NET INCOME (thousands) Bank 1991 1990 National Bank of So. Calif. $516 $3,243 Security Pacific State 3,720 9,960 Eldorado* 2,751 3,598 Bank of Newport 625 1,619 CommerceBank -2,845 3,758 Sunwest -2,202 1,644 Commercial Center -906 3,773 Landmark* 88 2,127 Pioneer 1,602 1,851 Pacific National 974 729 Orange National 2,256 314 Liberty National 1,650 1,463 Pacific Inland 1,056 571 American Commerce National 1,105 1,494 Frontier, N.A. -652 434 Mission Viejo National** -7,159 1,089 Huntington National 795 1,194 Colonial, N.A. 749 857 Corporate 1,043 1,207 Marine National 245 514 Mariners 798 1,004 Bank of Anaheim, N.A. 710 705 Bank of Westminster 232 500 Grand National -538 -75 Monarch -39 116 Dana Niguel, N.A. -441 311 American Interstate -570 -298 Bank of Yorba Linda 191 115 Bank of Orange County 385 407 United American -353 12 First American Capital, N.A. -597 2 Laguna, N.A. -632 -452 Orange County Totals 4,557 43,786

Note: Bad loans should not exceed 3% of total loans, according to bankers and regulators.

* In late 1991, Eldorado acquired Bank of San Clemente and Landmark acquired Founders National Bank, Brea. Also, regulators seized and closed Mission Valley Bank, N.A., in San Clemente.

** Regulators seized Mission Viejo National Bank this year.

Source: Findley Reports, Anaheim