Losses Continue at O.C.’s Community Banks

Orange County’s community banks, still staggering from continued loan losses and the cash they must set aside in reserve for future problems, lost a combined $16.2 million for the first six months of 1994.

The county’s 25 banks were stung last year with an aggregate loss of $50.1 million. For the first and second quarters this year, they recorded red ink of $7 million and $9.2 million, respectively, according to Sheshunoff Information Services Inc. in Austin, Tex.

Community banks generally have been loath to recognize the effect of the recession on their loans, especially those backed by real estate, said J.B. Crowell, chairman of Eldorado Bank in Tustin.

“The major banks have recognized their bad loans and took their hits a year or so ago,” Crowell said, by writing down the value of their loans and putting money in reserve to cover potential losses.

“I think many community banks still are not providing sufficient reserves,” Crowell said. In addition, he said, the value of commercial and industrial properties, which back many loans, is “still scraping along the bottom.”

The community banks, which typically cater to local areas and small businesses, also were hurt somewhat by rising interest rates, he said. Investment portfolios are fetching less income at previously lower rates.

A dozen county banks lost money for the six-month period, while 13 posted profits.

Leading the profitable banks was Eldorado, which earned $1.2 million for the first six months. Landmark Bank in La Habra and Grand National Bank in Santa Ana recorded profits of $617,000 and $605,000, respectively, for the first six months.

The money-losers were led by two banks that have since failed: Bank of Newport and Commerce-Bank, both in Newport Beach. They lost $9.8 million and $4.5 million, respectively, for the first half of the year.

Following were Pacific Inland Bank in Anaheim, with red ink totaling $1.3 million, and Sunwest Bank in Tustin, with a loss of $1.2 million for the period.

All the banks, according to Sheshunoff, are adequately or well capitalized, which means they have enough investor money set aside as their final reserve against any losses.

Meantime, the county’s eight thrift and loans--hybrids of banks and finance companies--earned $4.3 million for the six-month period. Half of that profit came from Fremont Investment & Loan in Orange, which earned $2.2 million for the period. Freedom Financial Thrift & Loan in Lake Forest was the only money-losing thrift and loan, posting a loss of $34,000.