Return to Basics Good for Cornerstone S

When it opened for business in Mission Viejo six months ago, Cornerstone Savings & Loan Assn. disregarded the wide authority it had under state law to offer a variety of savings and checking services and to make a variety of loans and investments.

Unlike most of the new savings institutions that have opened since 1980, it concentrated its activities in the two traditional S&L; areas: savings accounts and mortgage lending.

So far, the business plan is paying off. At the end of the year, after four months of business, Cornerstone posted a net income of $247,000, its president, Ernest J. Casarez, said.

Its $18 million in deposits at year-end consisted only of money market and regular passbook savings accounts and certificates of deposit. Its total loans of $8 million went into construction and permanent loans on single-family housing, apartments, industrial and office buildings.

“The idea was that by concentrating in a few areas, we could offer attractive rates,” Casarez said. “For example, we’ve offered 8% on CDs since the day we opened.”

Gerry Findley, a Brea financial institutions consultant, said Cornerstone’s operation is “what savings institutions did up to 1980” before state law was changed to allow more diversified activities. As S&Ls; ventured into the banking domain, he said, they often ran into trouble.

Cornerstone’s assets totaled $21 million at the end of the year, and its net worth was 13.8%, well above the 7% net worth that regulators require of new S&Ls.;

“We’re very happy with what we’re doing,” Casarez said. “We thought a big problem in the industry was overhead--too many people doing too many things. So we limited ourselves.”

Only seven employees work in the 3,000-square-foot office off Crown Valley Parkway that Casarez said is designed like a business office, not a bank. “We have an open lobby and private offices--no tellers,” he said.

Four of the employees are among the nine shareholders who put up $3 million to capitalize the S&L--Casarez;, Chairman Richard J. Bennett, Controller Robert Thomas and Senior Vice President Debbie Newbrough.

Cornerstone is one of the few savings institutions to open in California after a moratorium on new S&Ls; was imposed last spring by federal and state regulators.