THE TIMES 100 : The Best Performing Companies in California : THE BOTTOM LINE : Top-Performing Golden West Financial Sticks to the Basics : Banks and thrifts: In a forgettable year for the industry, the firm’s World Savings & Loan turns in a strong peformance.
In a year in which California banking was turned upside down, it is perhaps fitting that the state’s top-performing financial institution is a savings and loan run by a husband-wife team with an unexciting home loan business and no automated teller machines at its branches.
Indeed, Golden West Financial, parent of World Savings & Loan, is one of the most conservatively run institutions in the nation and has resisted most trendy investments and technological changes. Yet it was the only major publicly traded bank or thrift in California to post a return on average assets exceeding 1%. A 1% return, considered a benchmark of excellence in the industry, means the company earned $1 for every $100 in loans and other assets.
World’s performance looks especially strong compared to that of its competitors. For the most part, 1991 turned out to be a forgettable year for California banks and thrifts. As a group, California’s commercial banks earned only $651 million last year--and were in the red the last two quarters of the year--with a return on assets of just 0.19%, according to the Federal Reserve Bank of San Francisco.
Nearly one-third of the top 25 publicly traded major banks and thrifts finished the year in the red. Some institutions that have been among the top performers in past Times 100 rankings, notably City National Corp. in Beverly Hills and Pacific Western Bancshares in San Jose, were in the red this year for the first time. City National lost $21.2 million, while Pacific Western lost $4.6 million.
Security Pacific Corp., the Los Angeles bank that was just acquired by BankAmerica Corp., lost the most, $774.5 million, as a result of the soft economy in California and economic troubles in Australia and Great Britain, where it does some business. First Interstate Bancorp, also of Los Angeles, lost $288.1 million because of the sagging economy in California.
Finishing second in return on assets was BankAmerica, the San Francisco giant that just five years ago was struggling with huge problem loans. The bank finished slightly behind Golden West, earning 99 cents for every $100 in assets.
Golden West Chairman Herbert M. Sandler, who runs the Oakland-based firm with his wife, Marion, said there is no secret to the thrift’s accomplishment. He attributes it to long-held policies of not taking needless chances, sticking to high-quality borrowers, watching expenses and building a large cushion of capital to protect against losses. The Sandlers do not make commercial real estate loans, which can be risky, and they do not fly around in a corporate jet.
“Nothing has changed,” Sandler said. “It’s a long-term philosophy.”
Peter Treadway, thrift analyst with Smith, Barney Harris Upham, described the Sandlers as “very risk-adverse” executives who adhere to a simple, focused business plan. He added that the simplicity of World’s branches, marked by the lack of such things as ATMs, helps keeps costs low. World has 113 branches, mostly in California. It also has branches in Arizona, Colorado, Florida, Kansas, New Jersey, Ohio, Texas and Washington.
In addition to Golden West, some other savings and loans showed strong results, given the difficult banking environment, partly because the spread between what they charge customers on loans and what they pay out to depositors widened.
* FirstFed Financial, based in Santa Monica, finished third among major institutions by earning 90 cents for every $100 in assets, despite an increase in problem loans caused by the soft economy.
* Great Western Financial, based in Beverly Hills, earned 75 cents for every $100 in assets, placing it sixth. Downey Savings, based in Newport Beach, ranked ninth by earning 69 cents for every $100 in assets.
FirstFed Chief Executive William Mortensen said 1991 was different in that tough years in the past typically stemmed from problems related to interest rates. Last year, however, the problem was clearly high unemployment. Said Mortensen: “We never even had a foreclosure on an apartment house until last year, and we had quite a few.”
Top 25 Banks and S&Ls;
Ranked by income as a percent of average assets.
% return on average 1991 income Rank Company assets ($ millions) 1 Golden West Financial Corp. 1.02 238.6 2 BankAmerica Corp. .99 1,124.0 3 FirstFed Financial Corp. .90 28.4 4 Westamerica Bancorporation .88 11.6 5 Sumitomo .85 42.9 6 Great Western Financial .75 298.1 7 Westcorp .75 21.1 8 California Financial Holding .69 7.3 9 Downey Savings & Loan Assn. .63 24.9 10 Union Bank .55 93.5 11 H. F. Ahmanson & Co. .50 245.8 12 Coast Savings Financial Inc. .44 41.7 13 SFFed .44 14.7 14 Bay View Capital Corp. .35 9.6 15 Imperial Bancorp .07 2.5 16 Citadel Holding Corp. .05 2.7 17 Wells Fargo & Co. .04 21.0 18 Homestead Financial Corp. (.06) (1.3) 19 Pacific Western Bancshares (.40) (4.6) 20 Glenfed Inc. * (.44) (98.5) 21 City National Corp. (.45) (21.2) 22 First Interstate Bancorp (.57) (288.1) 23 CalFed Inc. (.61) (131.9) 24 Security Pacific Corp. (.96) (774.5) 25 UnionFed Financial Corp. (3.38) (71.8)
1991 assets Rank ($ billions) 1 24.298 2 115.509 3 3.287 4 1.308 5 5.281 6 39.600 7 2.689 8 1.041 9 3.778 10 17.474 11 47.226 12 8.596 13 3.317 14 2.710 15 3.827 16 5.127 17 53.547 18 1.784 19 1.120 20 20.593 21 4.565 22 48.922 23 18.395 24 76.411 25 1.825
* See exceptions, Page 54. Source: MZ Group
