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County's S&Ls Post Profit of $33.7 Million for Quarter

June 24, 1989|JAMES S. GRANELLI | Times Staff Writer

Orange County's 35 savings and loans posted a combined profit of $33.7 million in the first quarter of 1989, as the financial strength of bigger thrifts erased losses at more than half of the county's S&Ls.

Several institutions that only last year were insolvent and were dragging down the financial results of healthy thrifts have been turned--with government aid--into profitable S&Ls.

Their return to health offset the losses at 18 S&Ls, including 10 smaller ones with assets of less than $200 million at the end of March, according to the Federal Home Loan Bank of San Francisco, which released the statistics.

The county's savings institutions haven't posted an annual profit for at least six years.

Smaller institutions were hurt more acutely than their bigger brethren by higher interest rates and slimmer profit margins that wreaked havoc with earnings, according to industry leaders and consultants.

And not much change is seen for the second quarter, according to Kirk Hallahan, senior vice president of the California League of Savings Institutions, a state trade organization.

"Lending is soft because real estate is soft," Hallahan said. "With rates coming down recently, people are holding back to see if they come down more before they buy."

The higher interest rates in the first quarter and most of the second meant that "thrifts are closing fewer loans, and they can't take in the loan fee income and they can't take in interest income," said Barry Rubens, chief executive officer of California Research Report, a Santa Monica industry consulting and publishing firm.

"They get caught in a squeeze play," he said. "Their costs go up, but their revenue doesn't go up as much."

Larger thrifts don't feel the impact as much, partly because they can take advantage of economies of scale, he explained.

The biggest collective boost for Orange County S&Ls came from the $42 million earned by American Savings Bank, one of two offshoots of the failed American Savings & Loan, which had bogged down county results in previous years.

In addition, Downey Savings & Loan earned $21 million, and its Butterfield Savings subsidiary earned an additional $3 million.

But beyond American and Downey, no county S&L posted double-digit earnings.

As in past quarters, the biggest losers also were the most troubled institutions. Lincoln Savings & Loan, which was seized be regulators in April and recently was declared insolvent, lost nearly $29 million.

Pacific Savings Bank and First California Savings Bank, both seized and operated by regulators, lost $11.5 million and $1.9 million, respectively.

The remaining money-losing institutions were each less than $1 million in the red.

As of the end of March, the county had three insolvent S&Ls--Pacific, First California and Perpetual Savings Assn.--and at least five thrifts with inadequate capital.

For the first quarter, the state's 189 S&Ls posted aggregate earnings of $233 million.

Hallahan said that statewide, there are 23 S&Ls that are insolvent under regulatory standards.

ORANGE COUNTY S&L SCOREBOARD

First quarter of 1989.

Assets Capital Profit Savings and Loan (thous.) (thous.) (thous.) New West $22,023,873 $200,010 $0 American 15,399,555 629,693 42,418 Lincoln 5,251,509 192,244 -28,790 Household Bank 4,978,749 302,149 -725 Far West 4,604,865 212,343 5,867 Downey 3,719,488 264,904 21,007 Western Financial 2,581,885 211,266 3,087 Mercury 2,473,209 76,246 -768 Beverly Hills 1,668,926 53,341 1,341 Pacific 1,079,678 -238,301 -11,465 United California 676,725 35,743 9 Newport Balboa 621,691 40,664 826 Guardian 604,010 30,826 2,300 Charter 458,246 14,871 -20 Fullerton 346,250 24,746 640 San Clemente 330,343 11,628 -251 Universal 254,367 13,009 867 Standard Pacific 251,959 16,421 -106 Western Empire 245,810 16,482 -709 Malibu 202,179 10,379 77 Sterling 197,788 19,894 1,217 Westport 162,696 6,881 -11 First California 161,360 -75,001 -1,874 Huntington 122,649 684 89 Beach 96,769 5,877 148 Irvine City 91,273 4,286 -25 Security 77,465 989 247 Constitution 74,894 1,528 -168 Cornerstone 66,041 3,711 -95 Delta 57,271 801 -169 Plaza 56,721 3,555 -68 American Interstate 27,339 589 -529 Perpetual 18,736 -10,229 -585 Pioneer 15,161 572 -111 Totals $68,999,480 $2,082,801 $33,671

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