Thrifts Post Another Profitable Year : S&Ls;: The refinancing craze has given the industry a boost, resulting in $309 million in combined earnings.
Buoyed for the second straight year by a runaway refinancing market, Orange County’s savings and loans had combined earnings of $309 million last year to give the once-beleaguered local industry back-to-back profitable years for the first time in more than a decade.
The county’s 19 thrifts continued to roll with the mortgage refinancing wave last year as homeowners took advantage of the lowest interest rates in two decades.
With Southern California’s still-stagnant economy, replacing home loans at lower interest rates was just about the only healthy market for thrifts. Banks and non-regulated mortgage firms saturated the county with deals, including offers to refinance loans that were made less than 12 months earlier.
“Interest rates fell quite a bit in 1993, and that helped everybody’s earnings,” said Lawrence W. Kellner, chief financial officer at American Savings Bank in Irvine.
But Kellner and other thrift executives said that other factors put a damper on profits and left the local industry’s profits relatively flat from the previous year. In 1992, the 22 thrifts based in the county then in existence earned $302 million. Three S&Ls; were sold last year.
Dampening profits last year were a record number of foreclosures the left the thrifts with money-losing properties they had to sell. In addition, falling interest rates on loans came closer to the interest rates that S&Ls; paid for their deposits, resulting in smaller profit margins.
Still, 11 county thrifts reported profits last year, according to figures released by the U.S. Office of Thrift Supervision.
Leading the list was Household Bank in Newport Beach, home base for a seven-state operation and a charge-card business that ranks with the top 10 nationally. The thrift, part of the Household Inc. financial services empire, earned $131.9 million last year.
“It wasn’t really surprising to us. We expected a good year,” said Ronald McGee, Household’s regional president. “And we’re pretty comfortable about this year.”
A better economy in the Midwest and the East, where the thrift also operates, helped to boost the S&L;’s overall profits. McGee said that its GM credit card, which earns bonus points toward the purchase of a General Motors Corp. car, was a hit with consumers.
Household, with $9.2 billion in loans and other assets, outdistanced the much larger American Savings, which has $17.3 billion in assets. American earned $112.1 million last year, less than half the amount it earned the previous year.
Kellner said American’s 1992 income soared with a one-time tax adjustment that put $110 million on the S&L;’s bottom line. Earnings for 1993 were more in line with American’s expected profits, he said.
Other major moneymakers were Downey Savings & Loan in Newport Beach, with $43.7 million in profits, and ITT Federal Bank in Irvine with net income of $25.1 million.
This year, profit margins will continue to be squeezed and the demand for loans will drop as the refinancing market ebbs, said Thomas E. Prince, Downey’s chief financial officer.
“The big issue this year will be asset growth,” he said, pointing out that widespread competition for mortgage loans will likely foster further mergers and acquisitions among thrifts.
Net income for the local industry was reduced, in part, by $15.5 million lost by three failed thrifts--Guardian Savings & Loan in Huntington Beach, Delta Savings Bank in Westminster and Golden State Bank in Irvine--that federal regulators are still operating.
The county’s biggest money-loser among independent thrifts last year was Union Federal Savings Bank. The institution was near death last fall before its Brea parent company, UnionFed Financial Corp., raised $39 million to revive it. For the year, it lost $31.7 million, bringing its accumulated losses over the last 4 1/2 years to $148.4 million.
Other big losses included a $5.5-million loss at United California Savings Bank in Anaheim and $1.7 million at tiny Cornerstone Savings & Loan in Mission Viejo.
Orange County S & L Scoreboard
1993 Results, Ranked by assets:
ASSETS CAPITAL ADEQ (millions) Tangible Core capital capital Savings and Loan 1993 1992 %/assets %/assets American $17,297.4 $17,283.4 5.3% 5.3% Household Bank 9,156.0 9,581.7 5.7 6.3 Downey 3,471.7 3,483.4 9.5 9.5 ITT Federal 3,266.6 1,693.7 4.2 4.2 Western Financial 2,160.9 2,482.4 8.6 8.6 Union Federal 942.2 1,358.7 4.9 4.9 Independence One 916.5 1,010.5 11.2 11.2 Plaza Home Mortgage 753.7 334.9 5.7 5.7 Long Beach 661.4 720.4 7.2 7.2 United California 465.0 501.8 3.3 3.3 Standard Pacific 355.6 395.0 7.8 7.8 Fullerton 280.0 314.0 5.2 5.2 Universal 205.5 224.0 6.6 6.6 Guardian (a) 189.1 221.7 -41.8 -41.8 Irvine City 88.3 90.4 5.9 5.9 Pioneer 59.0 49.2 6.4 6.4 Cornerstone 48.5 55.5 5.2 5.2 Golden State (a) 46.1 57.4 2.1 2.1 Delta (a) 14.7 21.3 -25.3 -25.3 Orange County Totals $40,378.2 $39,879.4 5.8% 5.9%
UACY* Risk-based capital Savings and Loan %/assets American 12.2% Household Bank 13.4 Downey 17.1 ITT Federal 8.5 Western Financial 17.8 Union Federal 8.2 Independence One 21.4 Plaza Home Mortgage 10.1 Long Beach 12.3 United California 7.2 Standard Pacific 15.4 Fullerton 10.8 Universal 12.0 Guardian (a) -61.3 Irvine City 12.2 Pioneer 13.6 Cornerstone 8.0 Golden State (a) 55.3 Delta (a) -439.2 Orange County Totals 12.7%
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NET INCOME (thousands) Savings and Loan 1993 1992 American $112,133 $252,546 Household Bank 131,880 65,961 Downey 43,666 41,850 ITT Federal 25,089 -856 Western Financial 12,917 1,019 Union Federal -31,653 -17,936 Independence One 9,758 8,820 Plaza Home Mortgage 19,667 14,490 Long Beach 5,094 6,264 United California -5,488 -226 Standard Pacific 3,337 3,760 Fullerton -717 -9,082 Universal -198 302 Guardian (a) -11,937 -52,355 Irvine City 465 671 Pioneer 283 295 Cornerstone -1,696 -360 Golden State (a) -717 -496 Delta (a) -2,822 -700 Orange County Totals $309,061 $313,967
* Federal law requires S&Ls; to have 1.5% tangible, 4% core and 8% risk-based capital as a ratio to assets.
(a) Failed. Seized and operated by regulators.
Source: Office of Thrift Supervision.
