Banks Posting Lower Quarter, 9-Month Profits : Finance: Pressed by a sluggish economy and higher deposit insurance premiums, Orange County’s 35 community banks posted a combined net income drop of 67% for three months ended Sept. 30.

Pressed by the sluggish economy and higher deposit insurance premiums, Orange County’s 35 community banks posted sharply lower profits for both the third quarter and first nine months of 1991.

Local banks reported combined net income of $4.3 million for the three months ended Sept. 30, a 67% drop from $12.9 million for the corresponding period in 1990.

Aggregate earnings plummeted 76% for the first nine months of 1991, to $8.7 million from $36.9 million in the 1990 period, according to regulatory figures compiled by Sheshunoff Information Services Inc. in Austin, Tex.

The drop in earnings for the first nine months was even worse than many bankers and consultants had predicted for banks statewide.

Gerry Findley, a Brea banking consultant, had earlier estimated a 25% drop in income for all banks. More recently, however, he said problems at the state’s big banks will probably make that figure much worse.

California’s 485 banks lost a combined $74 million in the third quarter, contrasted with an $859 million profit a year earlier, according to the Federal Deposit Insurance Corp. It was the worst performance by California banks since the second quarter of 1987, when several large banks posted huge losses on loans to developing countries.

The fortunes of Orange County’s financial institutions have always been closely tied to real estate. As the current recession lingers, banks are making fewer loans of any type, including real estate, and setting aside much of their earnings for potential loan losses.

“A lot of fee income had been generated in construction lending, mortgage lending and so forth,” said David Brown, chief financial officer of Eldorado Bank in Tustin. “Now there’s a lack of fee income. There aren’t many loans.”

In a recession, both business and private borrowers become scarce, he said.

Local banks also were squeezed, he said, by the fast fall in the prime rate. Banks couldn’t drop their interest rates on deposits fast enough to keep up with the lower lending rates, which dampened profits, Brown said.

Finally, with the nation’s deposit insurance system in jeopardy, banks have been hit with ever higher premiums for deposit insurance. Last year, rates increased 18% from 19.5 cents for every $100 in deposits to 23 cents.

At Eldorado, the higher rates increased expenses by $203,000, Brown said. “And the talk we hear is to expect another rate increase to 29 cents on July 1,” he said.

Such problems caused havoc among county banks. Only five posted higher nine-month earnings compared to 1990, and only seven managed to reduce the amount of bad loans. The ratio of bad loans to total loans--an omen of harder times ahead--rose at most county banks.

Orange County Bank and Thrift Scoreboard

BANKS

Ranked by assets ASSETS Nine month, 1991, results (millions) Bank 1991 1990 Security Pacific State $409.7 $329.9 National Bank of So. Calif. 368.4 329.7 CommerceBank 301.8 317.1 Eldorado 295.2 283.2 Bank of Newport 292.0 278.7 Sunwest 272.1 287.6 Commercial Center 268.5 250.9 Pioneer 212.8 201.1 Pacific National 201.4 103.7 Landmark 182.5 183.6 Orange National 167.7 167.5 Liberty National 151.8 149.0 Mission Viejo National 144.8 159.9 Frontier N.A. 137.7 151.1 American Commerce National 137.4 136.1 Pacific Inland 127.3 100.2 Huntington National 111.0 119.9 Corporate 99.5 96.2 Marine National 86.0 81.1 Mariners 81.9 75.7 Colonial N.A. 80.5 68.7 Bank of Anaheim N.A. 70.4 68.1 Bank of Westminster 66.4 68.9 Bank of San Clemente* 64.0 67.4 Monarch Bank 59.9 59.4 Dana Niguel N.A. 57.8 83.3 Grand National 54.1 29.7 Founders National** 50.2 56.9 American Interstate 49.3 67.0 Bank of Yorba Linda 48.9 35.2 Bank of Orange County 46.4 31.4 Mission Valley N.A.*** 42.7 43.1 United American 40.4 40.8 First American Capital N.A. 35.3 34.6 Laguna N.A. 13.3 17.1 Totals 4,829.1 4,574.1

Ranked by assets % NON-PERFORMING Nine month, 1991, results TO TOTAL LOANS Bank 1991 1990 Security Pacific State 0.97 0.15 National Bank of So. Calif. 2.44 0.09 CommerceBank 4.78 0.83 Eldorado 1.33 0.87 Bank of Newport 3.01 2.14 Sunwest 3.15 2.81 Commercial Center 17.46 0.73 Pioneer 3.24 2.18 Pacific National 1.64 0.36 Landmark 1.67 0.58 Orange National 0.55 0.85 Liberty National 2.27 2.87 Mission Viejo National 13.27 4.18 Frontier N.A. 2.15 0.40 American Commerce National 4.48 1.07 Pacific Inland 7.25 0.73 Huntington National 1.40 0.75 Corporate 5.31 0.08 Marine National 1.57 0.19 Mariners 0.18 0.00 Colonial N.A. 0.80 0.00 Bank of Anaheim N.A. 0.23 0.12 Bank of Westminster 5.10 0.15 Bank of San Clemente* 1.17 0.00 Monarch Bank 0.42 0.77 Dana Niguel N.A. 3.97 2.24 Grand National 0.22 0.03 Founders National** 0.65 2.51 American Interstate 2.77 1.49 Bank of Yorba Linda 0.03 1.24 Bank of Orange County 0.00 3.90 Mission Valley N.A.*** 12.86 7.50 United American 1.28 1.59 First American Capital N.A. 4.00 3.02 Laguna N.A. 1.26 0.00 Totals N/A N/A

Ranked by assets 9 MONTH NET INCOME Nine month, 1991, results (thousands) Bank 1991 1990 Security Pacific State $5,946 $7,533 National Bank of So. Calif. 2,125 2,538 CommerceBank 679 2,800 Eldorado 2,368 2,828 Bank of Newport 586 2,165 Sunwest -680 1,883 Commercial Center -1,032 2,949 Pioneer 1,615 1,869 Pacific National 480 451 Landmark 1,441 1,560 Orange National 368 478 Liberty National 651 1,140 Mission Viejo National -6,857 856 Frontier N.A. -124 764 American Commerce National 746 1,193 Pacific Inland 381 229 Huntington National 651 914 Corporate 862 943 Marine National 210 430 Mariners 509 746 Colonial N.A. 14 630 Bank of Anaheim N.A. 522 430 Bank of Westminster 222 368 Bank of San Clemente* 402 411 Monarch Bank 85 141 Dana Niguel N.A. -295 610 Grand National -227 2 Founders National** -683 125 American Interstate 96 92 Bank of Yorba Linda 194 60 Bank of Orange County 165 334 Mission Valley N.A.*** -1,068 -359 United American -362 -61 First American Capital N.A. -831 123 Laguna N.A. -435 -291 Totals 8,724 36,884

Notes: Bad loans should not exceed 3% of total loans, according to bankers and regulators.

* Bank of San Clemente has since merged into Eldorado Bank.

** Founders National has since merged into Landmark Bank.

*** Federal regulators seized and closed Mission Valley Bank on Oct. 1.

THRIFT & LOANS

Ranked by assets ASSETS % NON-PERFORMING Nine month, 1991, results (millions) TO TOTAL LOANS T&L; 1991 1990 1991 1990 First Fidelity 467.3 382.4 11.73 10.05 Investors 253.2 204.3 1.79 0.76 Citizens 94.4 85.2 1.37 0.69 South Coast 81.2 69.2 10.33 2.82 Assured* 57.8 68.3 15.06 1.40 First Security 54.6 39.8 3.95 6.52 Huntington Pacific 47.8 54.3 6.21 3.37 Heritage 40.7 51.4 2.64 3.96 Centennial 25.4 28.7 7.66 7.10 Tustin 26.9 22.1 2.33 5.13 North American 21.6 23.9 4.48 2.47 Freedom Financial 22.9 22.2 11.58 5.41 Franklin 13.2 12.2 0.84 1.69 Totals 1,207.6 1,064.0 N/A N/A

THRIFT & LOANS

Ranked by assets 9 MONTH NET INCOME Nine month, 1991, results (thousands) T&L; 1991 1990 First Fidelity 5,638 6,753 Investors 1,582 705 Citizens 765 444 South Coast 201 841 Assured* -2,509 469 First Security 996 1,061 Huntington Pacific -122 -668 Heritage -201 -65 Centennial -296 328 Tustin 121 -94 North American -129 113 Freedom Financial 286 573 Franklin 39 -208 Totals 6,371 10,252

Note: Bad loans should not exceed 3% of total loans, according to bankers and regulators. Asset and bad loan ratios are as of Sept. 30.

* Regulators seized and closed Assured Thrift & Loan on Jan. 3.

Source: Sheshunoff Information Services Inc., Austin, Texas