22 County-Based Banks Post Strong 1st Quarter : Finance: After rough 1994, they have combined profit of $4.9 million. Local S&Ls; remain healthy.

Orange County’s community banks put a rough year behind them by recording a combined profit of $4.9 million for the first quarter, and the county’s savings and loans continued to show strength, though a now-defunct thrift pushed overall results into the red.

A slight increase in borrowing, better control of costs and higher quality loans helped the 22 banks based in the county at the end of March to improve over last year’s first quarter, when they lost an aggregate $484,000, according to regulatory figures compiled by Sheshunoff Information Services Inc. in Austin, Tex.

“For most banks, we’re seeing more improvement in the second quarter, and we also expect a strong second half,” said Gary Findley, an Anaheim banking lawyer and consultant with the Findley Group.

The local banks, which eked out a $1.4-million profit for last year, also are putting more deposits to work in loans than in lower-paying securities, thus improving earnings, said Richard Korsgaard, president of Mariners Bank in San Clemente.

“I’m really encouraged about our industry,” said Craig Collette, president of Landmark Bank in La Habra. “Banks are starting to look good--not great--but good.”

The county’s 12 S&Ls; lost $35.4 million, but that was caused by the aberrational $117.1-million loss that ITT Federal Bank took in connection with its sale in June to First Nationwide Bank. Otherwise, county S&Ls; earned $81.6 million, a 13% increase over last year’s first-quarter profit of $72.1 million, excluding ITT.

The larger S&Ls;, in particular, are doing well because they are able to make mortgages outside of the stagnant Orange County housing market, said Edward J. Carpenter, an Irvine banking and thrift consultant. S&Ls; also are putting more money into real estate-related securities when they can’t find good loans to make, he said.

“Most lenders in Orange County are diversified and are doing business on a statewide basis,” said Stephen W. Prough, president of Downey Savings & Loan in Newport Beach. “Orange County is an important part of our loan portfolio, but we have other parts that are continuing to perform better.”

Both banks and thrifts put their houses in order last year by cutting costs and making better loans. The result during the first quarter, while interest rates were steady, was a bigger profit margin. The bottom line also was enhanced because most financial institutions had little need to set aside money in reserve for possible loan losses.

While bankers are seeing a slight increase in loan demand from their customary corporate clients, thrift executives have continued to search for home loans to make locally.

“Home sales are still a question mark in people’s minds because of the county’s bankruptcy,” Prough said. “It doesn’t mean the value isn’t here.”

For the first quarter, local banks were led by Eldorado Bank in Tustin, which earned $965,000. It was followed by Orange National Bank in Orange and Landmark, which earned $645,000 and $508,000, respectively.

Only three banks saw red ink. Pacific Inland Bank in Anaheim lost $247,000, followed by Corporate Bank in Santa Ana and Dana Niguel Bank in Dana Point, which lost $55,000 and $26,000, respectively.

On the S&L; side, the giants led the way with Household Bank in Irvine earning $43.3 million from what was once a seven-state operation. It has since been sold to Home Savings of America. American Savings Bank in Irvine, the nation’s fourth-largest thrift, earned $34.1 million, and Western Financial Savings Bank in Irvine recorded quarterly net income of $6.8 million.

Half of the thrifts lost money. Union Federal Savings Bank lost $8.2 million and has since sold all but a lone Los Angeles branch. Universal Savings Bank in Orange posted a much smaller loss, $347,000.

The improving condition of the county’s banks and S&Ls; comes during one of the biggest periods of voluntary consolidation in both industries. Five county banks and five county thrifts have been sold or are in the process of being sold.

“Bank boards are more willing to give up control, which they always were jealous of before,” said J.B. Crowell, Eldorado’s chief executive. “They’re beginning to look more after the shareholders’ interests.”