Itt Federal Bank

Orange County's dwindling savings and loan industry, pushing low-starting adjustable rate mortgages while interest rates in general rose last year, needed its two biggest thrifts to help it record combined annual earnings of $240.6 million. Without American Savings Bank in Irvine and Household Bank in Newport Beach, the county's 11 other S&Ls would have posted a combined loss of $10 million last year.

For California banks and savings and loans, stable interest rates and a continuing economic recovery should boost loan volume and profits in 1995, as has already been shown in robust first-quarter earnings reports. But even if they get a breather from interest rate turbulence, bankers and thrift executives can't expect a year of relaxation.

Orange County's community banks put a rough year behind them by recording a combined profit of $4.9 million for the first quarter, and the county's savings and loans continued to show strength, though a now-defunct thrift pushed overall results into the red.

Orange County's savings and loans, feeling the effects of last year's rising interest rates and lackluster loan demand, saw their combined income for the third quarter slide 30% to $53.2 million. The county's 14 S&Ls--less than half the number that existed here a decade ago--had earned $76.5 million for the third quarter of 1993, when interest rates were at their lowest level in years and homeowners were refinancing their mortgages to bring down monthly payments.

Buoyed for the second straight year by a runaway refinancing market, Orange County's savings and loans had combined earnings of $309 million last year to give the once-beleaguered local industry back-to-back profitable years for the first time in more than a decade. The county's 19 thrifts continued to roll with the mortgage refinancing wave last year as homeowners took advantage of the lowest interest rates in two decades.

Buoyed by a runaway refinancing market, Orange County's savings and loan industry ended a decade-long drought by posting a profit of $302.1 million for 1992. In previous years, local thrifts' earnings have been dragged down by losses at failed S&Ls that regulators seized but continued to operate. Last year, such failures among the county's 22 thrifts didn't damage earnings much. The same S&Ls earned a profit for 1991, but the industry as a whole lost $20.

Orange County's community banks, which posted modest first-quarter profits, turned in a stronger performance for the second quarter with combined earnings of $12.5 million, one reason why so many have been swept away in mergers and acquisitions this year. The profits at the county's 22 banks rose significantly over first-quarter earnings and represented a turnaround from last year's money-losing quarter, according to figures compiled by Sheshunoff Information Services Inc. in Austin, Tex.

Orange County's savings and loans posted a combined $92 million loss for the first quarter, the majority of it from the massive amount of red ink that continues to flow from the failed Lincoln Savings & Loan in Irvine. The aggregate quarterly loss posted by 28 thrifts based in the county is expected to grow even larger once regulators release figures for three other failed institutions: Western Empire Savings in Yorba Linda and Mercury Savings and Huntington Savings, both in Huntington Beach.

For banks and thrifts, 1990 has been a year of renewed regulation. In Orange County and throughout the nation, federal banking and thrift regulators used a stiff, wide broom to sweep away anything remotely resembling trouble at the institutions they examined. Empowered by the 1989 federal law--the Financial Institutions Reform, Recovery and Enforcement Act--that restructured the thrift industry, beefed-up federal agencies have been scrutinizing bank and savings and loan assets as never before.