Future Looking Up for Banks and S & Ls Despite a Weak ’93 : Economy: Most of the region’s financial institutions posted losses or lower profits in 4th quarter. But their restructuring may make for a better year ahead.
Still burdened by sour real estate loans, most major banks and savings and loans headquartered in the San Fernando Valley and Ventura County posted losses or lower profits in the fourth quarter, closing the third straight year of lackluster performance. But there was one saving grace.
The local banking industry restructured last year. Under the watchful eye of regulators, financial institutions dumped assets by the millions, overhauled management and cut employment. Some secured new capital and made acquisitions, and all turned back to their core businesses.
As a result, their financial outlook is brighter for 1994. But that picture has been clouded somewhat by the recent Northridge earthquake.
For the October-December period, six of the area’s eight largest institutions, as ranked by assets, reported losses or smaller profits compared with a year earlier. The biggest losses were at Glendale Federal Bank and Great Western Financial Corp. of Chatsworth, two of the nation’s largest savings and loans. Both blamed their troubles on bad real estate loans.
A smaller S & L, Citadel Holding, the Glendale-based parent of Fidelity Federal Bank, has not released its fourth-quarter results. But Citadel--which remains up for sale--previously said it expects to show a loss of $37 million for the fourth quarter because of large write-offs in its loan portfolio. In the fourth quarter of 1992, Citadel had a profit of $6.4 million.
For all of 1993, four of the region’s eight institutions had losses and three others posted smaller earnings than in 1992. The sole exception was CU Bancorp, which staged a stunning turnaround last year.
In 1992, the Encino-based parent of California United Bank lost $8.1 million, and federal regulators were breathing down its neck. But after revamping management and selling off non-core assets such as its mortgage-banking business, the bank made a profit of $2.1 million in 1993. That included a profit of $591,000 in the latest quarter, contrasted to a $5-million loss a year earlier.
CU Bancorp’s assets were down 21% from the end of 1992, to $279.7 million as of Dec. 31. But Stephen G. Carpenter, president and chief executive officer, said the bank can now focus on its main customers--medium-size businesses.
“This was a pivotal year for California United Bank,” Carpenter said, noting that the bank has been freed from a formal operating agreement with regulators.
But while one local bank was released, another was shackled. Ventura County National Bancorp, the Oxnard-based parent of Ventura County National Bank and Frontier Bank, last March signed consent agreements with the Office of the Comptroller of the Currency, regulator of national banks. The agreement was amended last month and now includes a Sept. 30 deadline for Ventura County National Bank to shore up its capital levels.
In the latest quarter, Ventura County National Bancorp reported a loss of $3.5 million, compared with a profit of $422,000 a year earlier. The company’s total loss in 1993 was $12.1 million, versus a profit of $685,000 for 1992.
Richard S. Cupp has been moving quickly to reorganize the bank since he became chief executive officer of Ventura County National Bancorp last July. In a recent interview, Cupp said he expects to meet the regulatory requirements by fall and return to profitability this year.
The same goal has been set by Stephen J. Trafton, chief executive of Glendale Federal Bank, the nation’s fifth-largest S&L.; Last September, Trafton engineered a $451-million recapitalization of the thrift, saving it from government seizure. Glendale Federal, which operates on a fiscal year that ends June 30, cut its losses by half to $39.8 million for the quarter ended Dec. 31.
Trafton said the latest quarterly loss was due partly to a sharp decline in net interest income. Partly that is due to a high volume of refinancing of loans at lower rates, which narrows the lender’s net interest margin, or the difference between what banks pay on deposits and what they charge on loans.
While Glendale Federal has dumped a lot of bad loans, Trafton said delinquencies in apartment and commercial real estate loans increased in the fourth quarter. Trafton said he was concerned the recent quake could result in more delinquencies, especially if homeowners walk away from their mortgages. Glendale Federal has an estimated $1.5 billion in real estate loans in quake-affected areas.
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The Northridge earthquake has already hit American Pacific State Bank, whose latest quarterly profit sank 54% to $198,000, from $431,000 a year earlier.
In part that drop was the result of heavy reserves to cover losses from quake-damaged borrowers.
Frank J. Ures, president and chief executive officer, said he does not expect big losses from the earthquake, but he said the increased reserves were a precautionary measure.
Also, the Sherman Oaks-based bank is one of the nation’s largest Small Business Administration lenders. So it could also see additional volume from business owners wanting SBA loans to rebuild..
Great Western, the nation’s second-largest S & L, said it does not expect a “material loss” from the earthquake, although some of the buildings at its Chatsworth headquarters sustained severe damage. Great Western lost $18.2 million in the fourth quarter, compared with a loss of $97.3 million a year earlier.
The latest loss resulted from loan-loss provisions of $149 million and a restructuring charge of $30 million for expenses to cut employment by 1,000, half of which are expected through layoffs. For all of 1993, Great Western made a profit of $62 million, but that was down 27% from 1992.
TransWorld Bancorp, the Sherman Oaks-based parent of TransWorld Bank, posted a 5% increase in profit for the fourth quarter to $490,000, from $467,000 a year earlier. But for all of 1993, its profit declined 27% to $1.4 million, from $1.9 million in 1992.
In Ventura, Levy Bancorp, parent of Bank of A. Levy, continued to struggle with its problem loans, posting a loss of $981,000 for the fourth quarter, triple the losses of a year earlier.
The latest results brought Levy’s 1993 losses to $5.7 million, compared with a loss of $921,000 in 1992.
Still, President Marshall C. Milligan said the bank had a very productive year in reducing problem loans.
Annual Report From the 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 ($5.7 million) NA NA (parent of Bank of A. Levy) CU Bancorp $2.1 million NA 0.68% (parent of California United Bank) Ventura Co. National Bancorp ($12.1 million) NA NA (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $1.4 million -27% 0.45% (parent of TransWorld Bank) American Pacific State Bank $1.6 million -28% 0.69%
Savings & Loans
Change Return on Profit from average Banks (Loss) year ago assets Great Western Financial Corp. $62.0 million -27% 0.16% (parent of Great Western Bank) Glendale Federal Bank * ($59.7 million) NA NA Citadel Holding Corp. ** ($29.8 million) NA NA (parent of Fidelity Federal Bank)
* Six months ended Dec. 31
** Nine months ended Sept. 30
NA: Not applicable for comparison due to current or year-earlier losses.
Fourth-Quarter Report From the Region’s Largest Financial Institutions
For the quarter that ended Dec. 31:
Change Change Assets from from Dec. 31 year Profit year Banks (millions) ago (Loss) ago Levy Bancorp $665.1 -16% ($981,000) NA (parent of Bank of A. Levy) CU Bancorp $279.7 -21% $591,000 NA (parent of California United Bank) Ventura Co. $340.5 -15% ($3.5 million) NA National Bancorp (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp $313.4 +25% $490,000 +5% (parent of TransWorld Bank) American Pacific State Bank $230.1 +1% $198,000 -54%
Return on average Banks assets Levy Bancorp NA (parent of Bank of A. Levy) CU Bancorp 0.80% (parent of California United Bank) Ventura Co. NA National Bancorp (parent of Ventura County National Bank and Frontier Bank) TransWorld Bancorp 0.58% (parent of TransWorld Bank) American Pacific State Bank 0.34%
Savings & Loans
Change Change Assets from from Dec. 31 year Profit year Banks (millions) ago (Loss) ago Great Western $38,348 +0% ($18.2 million) NA Financial Corp. (parent of Great Western Bank) Glendale Federal Bank* $17,951 +1% ($39.8 million) NA Citadel Holding Corp. Did Not (parent of Fidelity Report Federal Bank) Report
Return on average Banks assets Great Western NA Financial Corp. (parent of Great Western Bank) Glendale Federal Bank* NA Citadel Holding Corp. (parent of Fidelity Federal Bank)
* Fiscal second quarter ended Dec. 31
NA: Not applicable for comparison due to current or year-earlier losses.
