California Commercial Bankshares, a Santa Ana company that eight months ago was trying to acquire two other Orange County banks, said Friday that it had a 22.6% drop in net income for the third quarter and had abolished its residential mortgage division.
California Commercial, the holding company for National Bank of Southern California, also laid off about 30 employees who worked in the mortgage division and is referring home-buying customers to three other banks. Most of the employees were being paid by commission only, a company executive said.
Losses in mortgage banking activities caused the company to post net income of $253,000 for the third quarter, compared to $327,000 earned in last year's third quarter. For the first nine months, the company reported a slight increase in net income, to $739,000 from $731,000 earned last year.
The losses and the "uncertain outlook for residential mortgage origination activity" forced the bank to get out of the individual home lending business, William Jacoby, president and chief executive of both the company and the bank, said in a prepared statement.
The mortgage banking losses, amounting to about $100,000, occurred when the bank sold a portfolio of loans at a discount because interest rates jumped, said Abdul Memon, the company's vice president and controller. In addition, Memon said, the existing staff was not originating enough loans in the slower home-buying market to cover overhead.
Last year, in its only full year in operation, the residential mortgage division accounted for $213,000, or nearly 10%, of the company's pretax revenues, Memon said.
California Commercial's assets at the end of September were $132.1 million, a 9.2% increase over the $121 million in assets a year earlier.
National Bank's total deposits rose 10.1% to $120.1 million at the end of the period from $109.1 million a year earlier, while net loans and leases rose 1% to $84.2 million this year from $83.2 million last year.
Only eight months ago, California Commercial was trying to arrange a three-way merger with Corporate National Bank in Santa Ana and El Camino Bancorp, the holding company for El Camino Bank in Anaheim.
The merger would have made National Bank the biggest bank in Orange County, but the deal fell through a month later, in part because of the always thorny issue of who would get the top management roles in the new company. Other difficulties also helped to scuttle the deal.
El Camino since then has agreed to merge into Citizens Holdings, the parent of Citizens Bank of Costa Mesa, which will continue to operate El Camino Bank as a separate entity.