Community Banks in O.C. Record Loss : Economy: The 28 institutions post a second-quarter net loss of $12.5 million, nearly equaling red ink for entire year in 1983.
Orange County’s 28 community banks, battered by the enduring recession and sagging property values, recorded a combined net loss of $12.5 million for the second quarter.
The red ink nearly equaled the $12.7 million that the local banking industry lost for the entire year in 1983, when the county was struggling out of the last recession to hit Southern California.
“I don’t ever remember such a quarterly loss,” said veteran banker Harvey Ferguson, president of the Bank of Orange County in Fountain Valley.
Said Gerry Findley, an Anaheim banking consultant: “These are tough times.” Interest rates have fallen so low for both loans and deposits, he said, that even the banks that are carefully watching overhead and other expenses are seeing their profit margins squeezed.
For the first six months this year, losses amounted to $21.1 million, according to figures compiled by Sheshunoff Information Services Inc. in Austin, Tex. Last year, the local banks earned $11.1 million for the second quarter and $16.3 million for the first six months.
The biggest losses this year came at five of the county’s most troubled banks:
* CommerceBank in Newport Beach, once a model of business banking, lost $5.8 million for the first half and saw its primary capital--its final cushion against losses--drop to 4.2% of total assets. The bank lost $3.6 million more for the third quarter, and its capital ratio fell to 3.1%.
* Mid City Bank in Brea was seized by regulators last week after suffering a $3.8-million first-half loss and running out of capital.
* Security Pacific State Bank in Costa Mesa, part of the package Bank of America acquired in the purchase of Security Pacific National Bank, lost $3.2 million as the new owner stripped it of its specialty roles and set it up to be merged into B of A’s own state bank in Walnut Creek.
* Pioneer Bank in Fullerton, caught with bad commercial real estate loans, lost $2.4 million for the first six months.
* Sunwest Bank in Tustin, long battling bad loans, dropped $2.4 million for the first six months. Like CommerceBank, Pioneer and a host of other financial institutions, it has been operating under restrictions imposed by regulators.
The losses cannot be blamed just on real estate loans gone bad because of the recession. Speculating in real estate and simply bad management also plague many institutions, Findley said.
He predicted that six county banks could fail soon and that the local industry could be cut in half by the end of 1995 through failures and mergers. At one point in the mid-1980s, Orange County was home to 45 community banks.
