O.C Banks More Profitable in 2nd Quarter : Financial institutions: Thrifts lose $21.2 million, solely due to $132-million loss by Irvine’s ITT Federal.


Orange County’s community banks, which posted modest first-quarter profits, turned in a stronger performance for the second quarter with combined earnings of $12.5 million, one reason why so many have been swept away in mergers and acquisitions this year.

The profits at the county’s 22 banks rose significantly over first-quarter earnings and represented a turnaround from last year’s money-losing quarter, according to figures compiled by Sheshunoff Information Services Inc. in Austin, Tex.

The county’s 10 savings and loans, however, lost $21.2 million for the second quarter. But those results were distorted by the $132.2-million loss that ITT Federal Bank in Irvine took before it was sold. Without ITT, the local S&L; group was profitable.

The totals include results from seven Orange County banks and three S&Ls; that have been sold recently or are about to be sold.


Many financial institutions have finally shrugged off the lingering effects of the long recession, said Edward E. Schmidt of the Findley Group, a bank consulting and information services company in Anaheim.

Banks, in particular, have become more careful in scrutinizing borrowers and more creative in raising fees for various customer services, he said.

“They also are finally reaping the benefits of cost-cutting measures that they put in place during the last two or three years,” Schmidt said.

But while banks have lowered their loan losses, Sheshunoff figures indicate that future problems loom. Slow-paying and delinquent loans, as well as non-producing assets, made up 3.38% of their total assets, while the national average for community banks is 1.13%.

“When you’re anywhere east of California, bankers still look at this area as the black hole when it comes to quality loans,” said Edward J. Carpenter of the Carpenter & Associates industry consulting firm in Irvine.

The county’s banks, he said, still aren’t earning up to their potential.

“The local banks are doing well by comparison with their past, but they’re not doing well in comparison with the rest of the banks in the country,” Carpenter said. “They’re still about 31% behind” in terms of standard measures of profitability.

Last year, the same 22 banks lost $214,000 altogether for the second quarter. In the first six months this year, the banks earned $17.25 million, compared with a $2 million loss for last year’s first half.

Banks were led in the first half by Sunwest Bank in Tustin, which had been a money-losing operation until a restructuring and sale of a sister bank this year boosted its profits to $3.5 million. Los Angeles National Bank in Buena Park and Eldorado Bank in Tustin earned $3.47 million and $2 million, respectively. Troubled Pacific Inland Bank in Anaheim was the only local bank to post a loss--$831,000--for the first half.

S&Ls; have benefited from the continued stability in interest rates after hikes last year ended the long boom in the mortgage refinancing market.

Home buyers since have turned more toward thrifts for loans, dealing mortgage companies a blow. But, Carpenter said, mortgage companies still make more than 60% of the loans in Orange County.

A bill pending in Congress would transform S&L; charters into bank charters, and some thrifts are marketing their checking accounts more heavily as they prepare to act more bank-like.

Action on the bill, a complicated measure that must include funding for deposit insurance for thrifts, is being delayed until April, Schmidt said. Meanwhile, the thrift industry continues to turn in better results, he said.

For local S&Ls;, the same 10 thrifts lost $5.2 million for last year’s second quarter. For the first six months this year, they earned $48.7 million, compared with earnings of $140.2 million for last year’s first half. But the results this year included ITT Federal’s massive loss, which amounted to $139 million for the first half.

Thrifts were led by Newport Beach-based Household Bank, which earned $102.6 million in the first half before its California operations were sold, and American Savings Bank in Irvine, which earned $61.8 million.

A decade ago, Orange County was home to 45 community banks and 33 thrifts, but the local industry was ravaged by bank and thrift failures as executives bet poorly on the economy, made unconventional investments into such things as wind farms and steer manure, or committed outright fraud.

Now, financial institutions have been merging to create more competitive and more efficient operations.

Of the seven banks sold recently, only Liberty National in Huntington Beach and Marine National in Irvine are expected to keep their names under new owners.

A St. Louis banker bought two others, Commercial Center in Santa Ana and Huntington National in Huntington Beach, along with a local thrift, Irvine City Bank in Irvine, and merged them into a new entity, First Bank & Trust of California, based in Santa Ana.

Others disappearing from the local banking scene are Landmark Bank in La Habra, Mariners Bank in San Clemente and Corporate Bank in Santa Ana.

Carpenter predicts that by the end of the year, all but 10 local banks will have been sold to new operators or merged out of existence.

“While bank profits are going up, their stock value is not showing the same upward curve,” Schmidt said. “Since their stock prices are not showing their true values, acquisitions are very attractive.”

With pending changes in laws to allow interstate branching, he said, “I see the acquisition market just as strong or heating up even more in the next few years.”


Orange County Bank Scoreboard

Second quarter

Ranked by assets


Assets Net income (millions) (thousands) Bank 1995 1994 1995 1994 Southern California $481.8 $403.6 $338 $466 National Bank of So. Calif. 320.8 333.7 247 52 Eldorado 309.2 306.5 1,069 598 Landmark 240.1 217.7 489 424 Orange National 202.9 189.2 631 142 Pacific National 165.9 177.6 341 -702 Commercial Center 163.9 308.8 1,568 105 Liberty National 141.8 145.1 408 -576 Sunwest 116.5 144.1 3,446 -74 Marine National 105.2 94.7 153 -124 Grand National 100.4 88.2 390 405 Los Angeles National 94.7 80.3 3,172 175 Huntington National 89.0 95.3 -76 35 Frontier, N.A. 84.5 96.0 202 -347 Mariners 77.2 82.4 179 119 Corporate 75.5 82.9 198 -56 Monarch Bank 63.2 64.9 5 21 Bank of Westminster 58.5 52.9 94 118 Bank of Orange County 57.1 58.5 108 -297 Bank of Yorba Linda 53.8 52.9 115 115 Pacific Inland 48.5 102.2 -584 -587 Dana Niguel, N.A. 33.6 34.7 35 -226 Totals 3,084.1 3,212.2 12,528 -214


Net income: Does not include non-recurring events

Source: Sheshunoff Information Services Inc., Austin, Tex.

Orange County S&L; Scoreboard

Second-quarter results

Ranked by assets


Assets Net income (millions) (thousands) S&L; 1995 1994 1995 1994 American $19,369.0 $17,261.1 $29,602 -$10,576 Household 8,061.0 8,557.2 67,691 2,997 Downey 4,750.0 3,713.5 1,861 729 Western Financial 2,967.0 2,126.2 10,765 -105 ITT Federal 643.5 3,959.0 -132,205 86 Standard Pacific 391.0 432.5 -553 587 Fullerton 263.7 263.8 2,502 827 Universal 207.4 199.5 -1,112 46 Irvine City 81.2 78.9 -119 -80 Pioneer 69.9 59.5 280 247 Orange County Totals 36,803.7 36,651.2 -21,288 -5,242


Net income: Does not include non-recurring events

Source: Sheshunoff Information Services Inc.