West Coast Bancorp Reports a Loss : Earnings: Newport holding company for 3 banks says interest income fell and loans continued to sour.

West Coast Bancorp said Wednesday that it had a second-quarter loss of $1.4 million, or 16 cents per share, as interest income fell and loans continued to sour.

The Newport Beach bank holding company posted a $350,000 loss, or 4 cents per share, in the same period a year earlier. West Coast ended the quarter with total assets of $395 million.

For the first half of 1992, the company’s loss was $1.4 million, or 15 cents per share, contrasted with a profit of $404,000, or 4 cents per share, in the first six months of 1991. West Coast is a holding company for three subsidiaries: Sunwest Bank of Tustin, Heritage Thrift & Loan of Brea and Sacramento First National Bank.

The company’s red ink is “reflective of the economy,” said Frank E. Smith, West Coast’s chief financial officer. The recession “typically increases the number of non-performing loans,” he said.

West Coast wrote down $1.4 million in bad loans during the quarter, compared to $766,000 in loans that were reduced in value a year earlier. The company owned $10.7 million worth of borrowers’ real estate that it foreclosed on by June 30, down from $11.4 million at the end of 1991.

Its rate of bad loans compared to total loans was 4.35%, up from 3.26% at the end of the first quarter. Rates above 3% often fuel regulatory criticism, and 15 Orange County banks were above that level at the end of March.

Another regulatory indicator--the company’s risk-based capital ratio--was at 10.14%, well above the recommended minimum level of 7.25%. Broken down, Sunwest was at 9.14%, Sacramento was at 10.96% and Heritage was at 8.52%.

Meanwhile, West Coast’s loan volume fell during the second quarter. Total loans declined 9% to $338 million, from $371.4 million a year earlier. And interest income fell to $6.3 million from $6.9 million.

“You hear a lot about the credit crunch: Banks are reluctant to lend,” Smith said. “But people also are reluctant to take out loans.”

The company stands to do better in the third quarter, when it will record $2.8 million from the settlement of a long-standing lawsuit against Lloyd’s of London. Sunwest Bank claimed that the insurer failed to reimburse it for its payment of $1.3 million to investors of wrongly seized certificates of deposits in 1986.

The CDs were seized because West Coast believed that they were collateral on defaulted loans made by Ronson Equities Inc., a real estate syndicator. In fact, a bank employee concealed from the bank that the CDs could not be pledged as collateral. Lloyd’s refused to defend the bank when investors sued. The settlement was reached last month, as Lloyd’s was appealing a $5.8-million judgment awarded by a jury in 1990.