U.S. Regulators Shut Saddleback National

Saddleback National Bank, plagued by high operating costs and bad loans since it opened three years ago, was declared insolvent and closed Thursday by federal regulators.

The bank, which opened in Laguna Hills on Aug. 11, 1983, had lost nearly $2.2 million by the end of last year. It had only $529,000 in capital at the end of April and continuing losses had exhausted that by Thursday, said Robert J. Herrmann, deputy U.S. Comptroller of the Currency.

Herrmann attributed the failure to high overhead costs and bad loans in a number of areas. After taking over the bank, Herrmann’s office appointed the Federal Deposit Insurance Corp. as receiver.

The FDIC, which insures deposits up to $100,000, said it also will cover 65% of the $140,000 in uninsured deposits at the bank.

La Habra-based Landmark Bank has acquired some of Saddleback’s assets and all of its $12.8 million in insured deposits, as well as the uninsured balances being covered by the FDIC. Landmark plans to make the money available to customers when it reopens Saddleback under its own name at about noon today, according to an FDIC spokesman.

Landmark paid the FDIC $8 million for selected Saddleback assets and $15,000 for the right to receive the deposits. In return, the FDIC will cover all insured deposits--effectively giving Landmark Bank nearly $12.9 million.

Landmark, which long has wanted to open a branch in south Orange County, is expected to try to lure many of the 1,100 Saddleback account holders into becoming Landmark customers.

Depositors have 18 months to open accounts at Landmark or elsewhere, and until then, checks drawn on insured Saddleback National accounts will be honored, FDIC spokesman William Olcheski said.

Only Bank to Bid

Landmark was the only bank to bid for Saddleback’s assets and deposits, he said.

Saddleback National is the 44th bank in the nation to fail this year. It is the third California bank and the second in Orange County to collapse.

Valencia Bank in Santa Ana was closed by regulators on Feb. 7. Since 1982, nine Orange County banks have failed.

Saddleback’s chairman, Laguna Hills lawyer James D. Gunderson, was out of town Thursday, and its three other directors and its president, Joseph Sheaff Jr., could not be reached for comment.

‘Never Got off the Ground’

“They never got off the ground,” said Gerry Findley, a Brea banking consultant and publisher of Findley Reports on California Banks. “They’ve been going backwards ever since they opened.”

Findley said the bank was “liberal” in its salaries and benefits and was paying a higher rent than it should have for its office in the expensive financial center outside affluent Leisure World--the nation’s largest gated retirement community.

At least five banks and 12 savings institutions are in a five-block area off the main gate near El Toro Road, and Findley said bankers are finding it a tough market.

“At one time, Leisure World was considered a desireable area because it had good deposit sources,” he said. “But those deposits are not as important anymore because there are no loans there. And deposits were becoming much more expensive because those people do a lot of shopping” for high interest rates on their savings.

“As a banking location, the area does not have the same meaning it used to, and that was evident three to five years ago,” Findley said.

Statistics Findley compiled from regulatory reports show that last year Saddleback National had $881,000 in fixed assets--leasehold improvements, furniture and fixtures--and that the amount was “a pretty steep price when they don’t own their own building.”

Other troubled banks in the county appear to be rebounding, Findley said. Barring unforeseen changes, he predicted that no more banks in the county will fail this year.