Independent Banks’ Profits for 9 Months Top All ’87 Income

Orange County’s 39 independent banks posted combined 9-month net income of $30.3 million, an amount that exceeds their earnings for all of 1987.

Much of the 9-month income came in the third quarter when the continuing healthy economy coupled with slightly increased interest rates helped to pad the banks’ vaults with $13.1 million in earnings.

The third-quarter gains even helped most of the money-losing banks work their way out of problems, according to regulatory statistics compiled by an industry consulting firm, Sheshunoff Information Service Inc. in Austin, Tex.

All but two of the county’s banks posted profits for the third quarter, compared to six in the second quarter, and all but five ended the 9-month period in the black.

Bankers expect that fourth-quarter results will give them their highest profits since the deregulation of financial institutions in 1982. The banks’ combined $27-million net income for 1987 marked the first profitable year for the county’s banking industry since before 1982.

Consultants warn, however, that this year will be tougher on banks as interest rates rise and fears of a recession mount.

Those concerns can be seen already in the otherwise glowing statistics for the period ended Sept. 30.

The amount of bad loans, for instance, is growing.

Non-performing loans--those that are being repaid slowly or aren’t being repaid at all--account for 2.1% of all loans made by county banks. Typically, banks like to keep non-performing loans below 1%. They see trouble if the level rises above 3%.

At the end of June, the ratio was 1.51%.

Alex Sheshunoff, head of the Texas consulting firm that bears his name, points to the non-performing loan ratio as a barometer to gauge the potential for future problems--and the future health--of banks. In a recession or declining economy, those loans would be the first to cause losses.

Another worry is the combined annualized return on assets. The ROA, a standard measure of performance in the banking industry, stood at a combined 0.81% for county banks at the end of September. That’s better than what the major banks usually achieve, but it’s still down from a combined ROA of 1.00% at the end June.

ORANGE COUNTY BANKS RANKED BY ASSETS

At Sept. 30, 1988

Non- Nine performing Months % Change Loans as % Net Assets from of Gross * Income Bank (millions) Dec. 1987 Loans (thous.) Commercial Center $248.6 6.9 12.80 $2,876 Eldorado 242.6 22.0 1.22 2,438 CommerceBank 238.5 9.5 1.16 1,792 Sunwest 216.6 20.0 2.08 1,521 Security Pacific State 210.1 99.0 0.30 4,012 Bank of Newport 195.2 13.5 0.85 682 National Bank of So. Cal. 186.5 37.4 1.85 1,179 Far Western 153.6 -34.0 17.31 2,580 Landmark 148.4 8.1 0.20 971 Orange National 145.6 16.9 0.33 943 Pioneer 124.8 15.5 0.87 1,539 El Camino 124.8 14.1 0.77 1,493 Citizens Bank of 117.4 3.2 1.76 1,451 Costa Mesa Liberty National 108.6 5.7 1.27 691 Pacific National 97.0 21.1 3.71 277 Pacific Inland 87.7 2.1 2.14 -752 American Commerce 82.7 9.3 1.25 1,003 National Mission Viejo National 77.4 22.4 0.60 740 Huntington National 76.8 16.1 0.16 602 Marine National 69.8 18.9 1.08 242 Corporate 69.2 23.7 0.14 723 Frontier, N.A. 68.1 6.4 1.58 396 California City, N.A. 59.3 18.3 0.32 335 American Interstate 55.1 -8.8 2.74 276 Monarch 52.9 -11.4 2.92 -112 Mariners, N.A. 51.6 25.7 1.18 321 Bank of Westminster 48.9 4.9 0.43 76 Colonial, N.A. 46.6 7.1 0.01 804 Bank of Anaheim, N.A. 45.1 11.9 0.07 236 Dana Niguel, N.A. 41.6 13.0 0.39 206 Bank of San Clemente 41.5 10.5 0.18 86 Founders National 41.2 12.9 0.40 263 Bank of Orange Cty 33.0 16.5 5.39 -112 Bank of Yorba Linda 31.4 6.2 1.60 429 Grand National 29.3 -13.7 1.50 63 First American Capital, 26.1 18.6 4.87 487 N.A. Laguna, N.A. 25.4 -7.4 3.66 -420 United American 24.3 8.8 2.37 128 Mission Valley, N.A. 14.8 0.1 2.45 -140 TOTALS 3,758.1 8.7 2.10 30,325

Annual % Return on Avg. Bank Assets Commercial Center 1.59 Eldorado 1.48 CommerceBank 1.05 Sunwest 1.01 Security Pacific State 3.43 Bank of Newport 0.50 National Bank of So. Cal. 0.98 Far Western 1.78 Landmark 0.90 Orange National 0.93 Pioneer 1.71 El Camino 1.72 Citizens Bank of 1.59 Costa Mesa Liberty National 0.86 Pacific National 0.43 Pacific Inland -1.15 American Commerce 1.67 National Mission Viejo National 1.36 Huntington National 1.13 Marine National 0.49 Corporate 1.53 Frontier, N.A. 0.80 California City, N.A. 0.84 American Interstate 0.65 Monarch -0.27 Mariners, N.A. 0.93 Bank of Westminster 0.21 Colonial, N.A. 2.46 Bank of Anaheim, N.A. 0.77 Dana Niguel, N.A. 0.71 Bank of San Clemente 0.30 Founders National 0.92 Bank of Orange Cty -0.49 Bank of Yorba Linda 1.90 Grand National 0.27 First American Capital, 2.70 N.A. Laguna, N.A. -2.14 United American 0.74 Mission Valley, N.A. -1.28 TOTALS ** 0.81

* Before extraordinary items.

** Return based on year-end assets. Source: Sheshunoff Information Service Inc.