County Savings and Loans Post Sluggish Results in ’94 : Thrifts: The industry needed its two biggest members to climb into the plus column. Rising interest rates, slow economy is blamed.
Orange County’s dwindling savings and loan industry, pushing low-starting adjustable rate mortgages while interest rates in general rose last year, needed its two biggest thrifts to help it record combined annual earnings of $240.6 million.
Without American Savings Bank in Irvine and Household Bank in Newport Beach, the county’s 11 other S&Ls; would have posted a combined loss of $10 million last year. As it is, last year’s results pale beside the local industry’s big money years of 1992 and 1993 when combined earnings eclipsed the $300-million mark each year.
Local S&L; executives attributed the sluggish showing not only to rising rates and low ARM starting rates but also to the lingering drag on the local economy and Southern California’s declining property values.
“Lending just went into the tank in 1994,” said William S. Smith, president of Irvine City Bank, which saw a dip of more than 6% in both total assets and total loans. “It was about as bad as I’ve seen it for single-family home loans. There just isn’t a lot of business out there.”
Eight thrifts, ranging from American to tiny Pioneer Savings & Loan in Newport Beach, reported profits. Household Bank, whose California operations are being sold to Home Savings of America, led the money-earners with $140.8 million in net income. American, the nation’s fourth-largest thrift with $18.6 billion in loans and other assets, earned $109.2 million.
Pioneer, with only $64.6 million in assets, reported net income of $56,000. Fullerton Savings & Loan earned $2.4 million, and its president, Carl W. Gregory, considered last year a victory for his institution.
“It was a year of recovery for us. We came from losses back to profitability,” Gregory said. “I know the industry itself slowed. . . . There are still some problem institutions, and last year was a tough year. We expect ’95 to be good” for the industry.
The five money-losers were led by Union Federal Savings Bank, which recorded $21.9 million in red ink. It was followed by Plaza Home Mortgage Bank in Santa Ana with a $20 million loss and ITT Federal Bank in Irvine with a $13.9 million loss.
Plaza was sold recently to Fleet National Bank in Providence, R.I., and ITT Federal’s management team has moved out of the county.
Besides Plaza and Household, two other county thrifts--Irvine City Bank and Independence One Bank of California in Mission Viejo--have agreed to be sold. Independence One sold its businesses and returned its charter to Michigan National Corp., its parent company. Irvine City expects to be merged into First Banks in St. Louis by late June.
“Small institutions and big institutions are having a very difficult time making money for their shareholders,” Smith said. “It’s been horrendous. I think you’ll see banking continue to consolidate, with the bigger institutions buying up the smaller ones.”
Orange County was once home to 33 S&Ls;, but many failed as bad management, bad loans and outright fraud sank them. In addition, some healthy ones merged into other institutions as part of the industry’s consolidation. By the time Irvine City Bank leaves, there will be only eight thrifts based in the county.
“We’re just like the Rams, we’re going to St. Louis,” Smith said. “But we’re different: We make money.”
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Savings and Loan Scoreboard
Here’s how Orange County’s S&Ls; fared in 1994, ranked by assets:
Core Assets capital Net income (millions) (as % of (thousands) 1994 1993 assets)* 1994 1993 American $18,552.2 $17,297.4 5.07 $109,207 $112,133 Household Bank 9,487.2 9,156.0 5.72 140,768 131,880 Downey 4,650.4 3,471.7 7.22 23,532 43,666 ITT Federal 4,273.0 3,266.6 6.04 (13,944) 25,089 Western Financial 2,752.5 2,160.9 6.62 19,564 12,917 Union Federal 885.0 942.2 3.12 (21,884) (31,653) Independence One 467.6 916.5 10.10 4,377 9,758 Plaza Home Mortgage 661.6 753.7 2.67 (20,094) 19,667 Standard Pacific 424.0 355.6 6.24 (1,285) 3,337 Fullerton 263.3 280.0 6.00 2,448 (717) Universal 205.4 205.5 5.19 (2,222) (198) Irvine City 82.3 88.3 6.27 97 465 Pioneer 64.6 59.0 5.94 56 283 Total $42,769.1 $38,953.4 $240,620 $326,627
* Federal law requires S&Ls; to have a minimum of 3% core capital. Well-capitalized thrifts have capital in excess of 5% of assets.
S&Ls; that have been sold since December or are in the process of being sold.
Figures in parenthesis are losses.
Source: Sheshunoff Information Services Inc., Austin, Texas
