20 S&Ls; Record $75.3 Million in Earnings
Orange County’s 20 savings and loans, controlling their problem loans and profiting from low interest rates, recorded combined earnings of $75.3 million for the third quarter last year.
The hefty earnings were similar to the previous two quarters and gave the once-battered local industry net income of $235.3 million for the first nine months last year, according to statistics released by the Office of Thrift Supervision.
Similar earnings for the final quarter, to be released in two months, would push the county’s thrifts beyond $302.1 million earned in 1992 and give them back-to-back years of profits for the first time in more than a decade.
In addition, all of the county’s S&Ls;, except for three failed ones run by thrift regulators, exceed federal levels for capital adequacy, which is the amount of cash an institution has as its last resort against losses.
“The quality of everybody’s loan portfolio generally has improved,” said Stephen W. Prough, president of Western Financial Savings Bank in Irvine.
Prough and other S&L; leaders said they believe that thrifts have straightened out most loan problems and don’t have new ones cropping up. That has allowed the thrifts to halt the excessive amount of money they had been taking from the bottom line and stashing in reserves to cover potential losses.
“I’m not saying the Southern California economy is getting any better; it’s just not getting worse,” Prough said.
The renewed wave of mortgage refinancing last summer and fall was not much of a help to thrifts, said Thomas E. Prince, chief financial officer at Downey Savings & Loan in Newport Beach.
Except for mortgage banking operators like Plaza Home Mortgage Bank, a Santa Ana thrift that sells all the loans it makes, refinancing essentially does little more than move loans around and cause additional expenses, Prince said.
“When you have a refinancing market where borrowers are paying off current loans, you’re just churning your loan portfolio,” he said. “The only way to get loan growth (through refinancing) is in a market where borrowers are taking out more money than what they need to pay off mortgages.”
The key, he and others said, would be an improved statewide economy that would provide long-term growth and ignite the long-dormant market for home purchase loans.
The local industry’s profits were led by its bigger S&Ls.; Household Bank in Newport Beach recorded $31.4 million in profits; American Savings Bank in Irvine earned $24.9 million.
Only one large thrift, Union Federal Savings Bank, generated red ink. The Los Angeles thrift, run by its troubled Brea parent company, lost $4.1 million for the third quarter. But in public offerings, parent UnionFed Financial Corp. picked up $39 million in capital for the thrift in September.
