Banks, S&Ls; Took a Solid Pounding in 1992 : Financial institutions: Fourth-quarter setbacks contributed to bleak year for six of eight largest Valley and Ventura County firms.
In pondering 1992, the area’s banking and thrift industries can take heart in one fact: It’s over.
In what proved to be a dismal year for most local banks, and savings and loans, six of the eight largest financial institutions in the San Fernando Valley and Ventura County posted losses or lower profits in 1992.
The same institutions took big hits in the fourth quarter, as the continued shakiness of the state’s economy forced them to add to the reserves they set aside in case of future loan losses.
And in what threatens to become the most expensive savings and loan collapse in the nation’s history, Glenfed Inc.’s Glendale Federal Bank said it must come up with as much as $450 million in new capital within five months or risk government seizure at a potential cost to taxpayers of $4 billion.
The nation’s fifth-largest S&L; is “significantly undercapitalized,” federal regulators warned in January, meaning that its financial cushion against losses has deteriorated because of real estate losses.
Glenfed, based in Glendale, posted a $79.4-million loss in its fiscal second quarter ended Dec. 31, in contrast with a year-earlier profit of $27.6 million.
Glenfed could receive a capital infusion if the Justice Department settles a legal claim in which Glenfed says the government unfairly wiped out $734 million in intangible “goodwill” from its assets when Glenfed purchased some distressed S&L; offices. The Bush Administration opposed such a settlement, but the Clinton Administration’s position isn’t yet clear.
(When a company purchases a business, some of the price is attributed to “goodwill,” or the value of purchasing an ongoing concern, such as having a well respected business name, good customer relations, etc.)
Meanwhile, the nation’s second-largest savings and loan holding company, Great Western Financial Corp. in Chatsworth, parent of Great Western Bank, posted a surprisingly large loss in the fourth quarter.
The $97.3-million loss came after Great Western boosted its loan-loss reserves by a staggering $335 million. For the year, Great Western earned $85 million, down 71% from a $298-million profit in 1991.
Nonetheless, analysts generally consider Great Western to be in relatively good health and regard the big increase in its reserves as an aggressive move to rid itself of problem loans and real estate.
Similarly, Citadel Holding Corp., the Glendale-based parent of Fidelity Federal Bank, increased its provisions for future real estate and loan losses, resulting in a 48% decline in fourth-quarter earnings to $6.4 million from $12.3 million a year earlier.
For all of 1992, Citadel’s profit fell 23%, to $2.05 million from $2.7 million in 1991.
Richard A. Greenwood, Citadel’s president and chief executive, warned that the thrift’s problems might not be over. If the economy and local real estate market remain weak and Citadel’s portfolio of troubled loans continues to grow, he said, further increases in its loan-loss reserves might be needed.
Among local banks, CU Bancorp, the Encino-based parent of California United Bank, which recently completed a management shake-up, reported a $5-million fourth-quarter loss. A year earlier, the bank, which makes loans to small and medium-sized businesses, earned $1.3 million.
CU blamed the latest quarterly loss on the weak economy and its decision to add to its loan-loss reserves. The bank’s annual loss totaled $8.2 million, compared to a $3.6 million loss in 1991.
Stephen G. Carpenter, CU’s president and chief executive, said the losses reflected “continuing economic conditions as well as carefully planned actions to strengthen our balance sheet and strategically position our company for growth and profitability in 1993 and beyond.”
Levy Bancorp, which also increased its loan-loss reserves in 1992, reported a $237,000 fourth-quarter loss, in contrast with a $1.3-million profit a year earlier. The parent of Bank of A. Levy had a $921,000 annual loss. In 1991, it earned $5.1 million.
“Our operating performance throughout 1992 has been dominated by problems plaguing the local real estate market,” said Marshall C. Milligan, Levy’s president and chief executive. “As vacancy rates for income properties grew, our borrowers found it increasingly difficult to meet mortgage obligations.”
Levy’s smaller rival, Ventura County National Bancorp in Oxnard, warned that the Comptroller of the Currency plans to pursue a written agreement or administrative action to correct “certain deficiencies” found at its two banks, Ventura County National Bank and Frontier Bank.
It said the actions are likely to relate to areas of its management, internal controls, information systems and credit administration.
Ventura County National also said its pending application to merge its two subsidiary banks--which it says will cut costs--isn’t likely to be approved by the agency “in the near future.”
The bank holding company reported a $422,000 fourth-quarter profit, in contrast with a loss of $677,000 in 1991’s fourth quarter. The latest quarter’s results were helped by an increase in its net interest margin--the difference between the interest it pays to depositors and the interest charged to borrowers.
For the year, Ventura County National’s earnings fell 15%, to $685,000 from a $806,000 profit in 1991.
Sherman Oaks-based Trans-World Bancorp’s fourth-quarter earnings fell 11%, to $467,000 from $522,000 a year before. The latest quarter’s results included a gain of $307,000 from the sale of its credit card loan portfolio, a $327,000 boost in its loan-loss reserves and write-downs totaling $122,500.
But for the year, Trans-World--which has relatively few real estate loans--managed a 6% increase in its profit, to $1.9 million from $1.8 million a year before.
Also reporting a lower profit in the fourth quarter was American Pacific State Bank in Sherman Oaks, the nation’s sixth-largest generator of Small Business Administration loans.
American Pacific’s earnings fell 20% to $430,556 in the fourth quarter from a $535,021 profit a year earlier because of a $235,000 loss on the sale of foreclosed real estate.
For the year, American Pacific’s profit edged up to $2.2 million from $2.15 million in 1991. Frank J. Ures Jr., president and chief executive, said the bank has remained profitable by controlling costs, and because of a healthy loan portfolio and strong SBA loan demand.
American Pacific was the only local institution that came close last year to having a healthy return on average assets, a measure of how profitably a bank uses its assets. A reading above 1% is considered a strong showing; American Pacific’s ROA was 0.95% for all of 1992 and 0.75% in the fourth quarter.
Fourth Quarter Report From the Region’s Largest Financial Institutions For the quarter that ended Dec. 31:
Assets Dec. 31 Change from Banks (millions) year ago Levy Bancorp $799.5 -13% (parent of Bank of A. Levy) CU Bancorp $353.9 -29% (parent of California United Bank) Ventura Co. National Bancorp $400.2 +10% (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $251.2 -1% (parent of TransWorld Bank) American Pacific State Bank $227.2 +4% Savings & Loans Great Western Financial Corp. $38,439.2 -3% (parent of Great Western Bank) Glenfed Inc.* $17,855.8 -13% (parent of Glendale Federal Bank) Citadel Holding Corp. $4,698.3 -8% (parent of Fidelity Federal Bank)
Profit Change from Banks (Loss) year ago Levy Bancorp ($237,000) NA (parent of Bank of A. Levy) CU Bancorp ($5.0 million) NA (parent of California United Bank) Ventura Co. National Bancorp $422,000 NA (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $467,000 -11% (parent of TransWorld Bank) American Pacific State Bank $430,556 -20% Savings & Loans Great Western Financial Corp. ($97.3 million) NA (parent of Great Western Bank) Glenfed Inc.* ($79.4 million) NA (parent of Glendale Federal Bank) Citadel Holding Corp. $6.4 million -48% (parent of Fidelity Federal Bank)
Return on average Banks assets Levy Bancorp NA (parent of Bank of A. Levy) CU Bancorp NA (parent of California United Bank) Ventura Co. National Bancorp 0.42% (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp 0.74% (parent of TransWorld Bank) American Pacific State Bank 0.75% Savings & Loans Great Western Financial Corp. NA (parent of Great Western Bank) Glenfed Inc.* NA (parent of Glendale Federal Bank) Citadel Holding Corp. 0.54% (parent of Fidelity Federal Bank)
* Fiscal second quarter ended Dec. 31 NA: Not applicable for comparison due to current or year-earlier losses.
Annual Report From Region’s Largest Financial Institutions For the year that ended Dec. 31:
Change Return on Profit from average Banks (Loss) year ago assets Levy Bancorp ($921,000) NA NA (parent of Bank of A. Levy) CU Bancorp ($8.2 million) NA NA (parent of California United Bank) Ventura Co. National Bancorp $685,000 -15% 0.18% (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $1.9 million +6% 0.76% (parent of TransWorld Bank) American Pacific State Bank $2.2 million +1% 0.95% Savings & Loans Great Western Financial Corp. $85.0 million -71% 0.22% (parent of Great Western Bank) Glenfed Inc.* ($96.2 million) NA NA (parent of Glendale Federal Bank) Citadel Holding Corp. $2.0 million -23% 0.04% (parent of Fidelity Federal Bank)
* Fiscal second quarter ended Dec. 31 NA: Not applicable for comparison due to current or year-earlier losses.
