Viejo Bancorp Continues Turnaround, Nets $86,000

Continuing a turnaround that began in the final months of 1985, Viejo Bancorp, holding company for Mission Viejo National Bank, posted $86,000 net income for the second quarter, up from a year earlier loss of $766,000.

In the first six months, the company reported consolidated net earnings of $158,000, contrasted with a $1 million loss in the same period last year.

The company has also completed a public stock offering that raised $2.1 million in new capital, more than doubling its regulatory bank capital to $2.7 million from $1.1 million a year ago.

Additionally, according to Jack Barnes, president and chief executive officer of both the holding company and the bank, Viejo Bancorp is about to open two new operating subsidiaries, Viejo Escrow Corp. and Viejo Home Loans Inc., a second trust deed lender.

As of June 30, Viejo Bancorp’s assets were $36.9 million, a 16.8% increase over the $31.6 million in assets a year ago. With the stock offering, the bank’s ratio of capital to assets climbed to 7.4% at the end of June, up from 3.4% a year earlier. Regulators require a 6% ratio.

The bank also showed major gains in its loan portfolio and in deposits. Total loans at the end of the six-month period rose 28.8% to $32.2 million from $25 million, and total deposits grew 14.6% to $34.4 million from $30 million.

The gains are more dramatic when contrasted with Mission Viejo National Bank’s Dec. 31, 1985, figures. The effects of a bitter board split and high salaries and other expenses last year had reduced the bank’s assets, loans and deposits and left the company with a $1.9-million loss at the end of 1985. Since then, assets have grown 54%, loans have risen 50% and deposits have jumped 52%.

“We’ve reorganized, recapitalized and restated our theme,” Barnes said. “Our theme is ‘we want to make money and have fun,’ and we can’t have fun if we’re not making money.”

Since taking over Sept. 9 as the bank’s third president in a year, Barnes has taken cost-cutting measures that have included reductions in fringe benefits and salaries, which are down to $85,000 a month for the entire staff from $140,000. New employee bonus and stock-option plans, he said, had boosted the morale of the bank’s 49 employees and helped to turn the company around.

Viejo Bancorp has been turning a profit on operations since November, Barnes said. He predicted that earnings this year will be at least $500,000 and could hit $1.5 million.

The public stock offering and employee stock-option program, meanwhile, have diluted the holdings of the bank’s two biggest stockholders, Barnes and W.T. Brady, the chairman. Brady’s interest was cut to 25% from 37%, and Barnes’ interest was cut to 10% from 14%. The company gained 40 new stockholders in the offering and now has 326 stockholders and 1.77 million shares outstanding.