Real Estate Doldrums Crimp Bank Earnings : Financial institutions: The sagging Valley and Ventura County property markets continue to take their toll as loan-loss reserves are bolstered.
After taking a pounding in 1992, the region’s banking industry continued its sluggish pace in the first quarter as six of the eight largest banks and savings and loans based in the San Fernando Valley and Ventura County saw losses or lower earnings.
Among the financial institutions hurt the most were the two big banks in Ventura County, where pressure from real estate losses is mounting.
At Ventura County National Bancorp, longtime chief executive William E. McAleer announced his resignation a day after the company revised its first-quarter earnings, saying it had a loss of $1.6 million.
The company previously reported a profit of $518,000, about the same as it did in the first quarter of 1992. But after a review it added $3.3 million to the reserves it sets aside in case of future loan losses.
McAleer, 54, said his resignation was unrelated to the earnings restatement.
But the management at the Oxnard-based company, which operates Ventura County National Bank and Frontier Bank, has been under strain since federal regulators in March implemented stiff new requirements to improve performance at both banks.
Meanwhile, Levy Bancorp, the Ventura parent of the county’s largest locally owned bank, Bank of A. Levy, posted a loss of $790,000 in contrast to a profit of $1.65 million in the first quarter a year earlier. Levy blamed the loss on loan-loss reserves, which the company boosted to $13 million as of March 31 from $10.8 million a year earlier.
“This reflects the bank’s highest priority: problem loan recognition and management,” said Marshall Milligan, Levy’s president and chief executive officer.
In the San Fernando Valley, things weren’t much better, although the one bright spot was American Pacific State Bank.
The Sherman Oaks-based bank said its first-quarter profit rose 3%, to $563,000. American Pacific specializes in small-business loans, and it was also the only regional institution with a return on average assets at or above 1%--which is considered a healthy sign of how profitably a bank uses its assets.
Glenfed Inc., the struggling parent company of Glendale Federal Bank, was the only other major bank or thrift in the region to improve--at least on paper--from a year earlier.
But Glenfed’s net earnings of $45.2 million for its fiscal second quarter that ended March 31--although up from a loss of $146.6 million a year earlier--came on a one-time gain of $56.8 million for a debt-for-equity swap.
Without that one-time gain, Glenfed actually showed a pretax loss of $50.4 million.
Moreover, in a troubling sign for the company, the nation’s fifth-largest savings and loan, Glenfed’s non-performing assets edged up to 4.93% of its total assets from 4.46% a year earlier. The company’s capital, or its cash cushion against future loan losses, also remain about $400 million below government-mandated minimums.
Those figures are important for Glenfed because it is fighting to avoid government seizure.
Glenfed, with assets of $17.8 billion as of March 31, faces a June 30 deadline to meet federal capital requirements.
Glenfed said it continues “to be classified as a significantly undercapitalized institution,” but it is hoping that regulators will extend the deadline and give it more time to boost capital.
Like Glenfed, Great Western Financial Corp. is struggling with the sluggish Southern California real estate market. In fact, the Chatsworth-based parent of Great Western Bank sold $121 million of foreclosed properties in the first quarter, three times more than a year earlier.
Yet the company’s profit still dropped 45% to $45.2 million, from $81.6 million, as Great Western’s profit was reduced by provisions of $88 million for loan and real estate losses.
Said James F. Montgomery, Great Western’s chairman: “The continued high level of provision for losses is the result of rising single-family residential delinquencies related to the weakness in the California economy.”
Much the same can be said for Southern California’s apartment market, which was a major reason for Glendale-based Citadel Holding Corp.’s plunge in earnings, to $135,000 from $6.1 million a year earlier.
With more than two-thirds of its loans tied to multifamily residential properties, Citadel’s Fidelity Federal Bank has a major stake in the apartment market.
But Citadel President Richard M. Greenwood said the recession has eroded apartment occupancy rates and rents. He concluded with an ominous warning: “We do not anticipate any improvement in the near future.”
Stephen G. Carpenter, president and chief executive officer of CU Bancorp, was more hopeful.
The Encino-based parent of California United Bank posted a profit of $384,000 in the first quarter, down 35% from a year earlier but up from a huge loss of $5 million in the fourth quarter of last year.
“Our first quarter profitability marks the next step in the bank’s rebuilding process,” Carpenter stated.
Still, in reducing CU Bancorp’s non-performing assets and improving its balance sheet, the company pared down 37% of its assets, to $337.4 million as of March 31 from $539.3 million a year earlier.
TransWorld Bancorp in Sherman Oaks saw its profit dip 6% in the first quarter, to $450,000 from $479,000 a year earlier, because of an increase in credit-loss reserves.
However, unlike most other regional institutions, TransWorld’s assets rose 8%, to $267 million as of March 31 from $246 million a year earlier.
And the company is trying to strengthen its standing by expansion into the Conejo Valley.
Last month, TransWorld acquired about $50 million of insured deposits and safe deposit operations of Premier Bank, a Northridge-based bank that joined the growing list of state institutions seized by federal regulators because of problem loans.
First-Quarter Report From the Region’s Largest Financial Institutions
For the quarter that ended March 31:
Assets Dec. 31 Change from Banks (millions) year ago Levy Bancorp $751.2 -14% (parent of Bank of A. Levy) CU Bancorp $337.4 -37% (parent of California United Bank) Ventura Co. National Bancorp $408.2 +2% (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $266.9 +8% (parent of TransWorld Bank) American Pacific State Bank $218.3 -5% Savings & Loans Great Western Financial Corp. $37,915.3 -4% (parent of Great Western Bank) Glenfed Inc.* $17,790.0 -6% (parent of Glendale Federal Bank) Citadel Holding Corp. $4,759.5 -5% (parent of Fidelity Federal Bank)
Profit Banks (Loss) Levy Bancorp ($790,000) (parent of Bank of A. Levy) CU Bancorp $384,000 (parent of California United Bank) Ventura Co. National Bancorp ($1.6 million) (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $450,000 (parent of TransWorld Bank) American Pacific State Bank $563,000 Savings & Loans Great Western Financial Corp. $45.2 million (parent of Great Western Bank) Glenfed Inc.* $45.2 million (parent of Glendale Federal Bank) Citadel Holding Corp. $135,000 (parent of Fidelity Federal Bank)
*
Return on Change from average Banks year ago assets Levy Bancorp NA NA (parent of Bank of A. Levy) CU Bancorp -35% 0.50% (parent of California United Bank) Ventura Co. National Bancorp NA NA (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp -6% .71% (parent of TransWorld Bank) American Pacific State Bank +3% 1.03% Savings & Loans Great Western Financial Corp. -45% 0.47% (parent of Great Western Bank) Glenfed Inc.* NA NA (parent of Glendale Federal Bank) Citadel Holding Corp. -98% .01% (parent of Fidelity Federal Bank)
* Fiscal third quarter ended March 31
NA: Not applicable for comparison due to current or year-earlier losses.
