Los Angeles community banks and thrifts will continue to feel the economic aftershocks of January's Northridge earthquake for months to come, according to bankers and analysts.

Like the worst of the earthquake damage itself, however, some banks will be spared, while others won't be so lucky.

"Thrifts are going to feel some pain from the earthquake," said Campbell Chaney, a bank analyst at Dakin Securities in San Francisco. "As far as commercial banks, their biggest problems is just a slowdown in business. It's a softer hit, and it's hard to get your hands around what a get your hands around what a lost opportunity cost a bank. The effects will hit them in the second and third quarters."

Hopes of Recovery

The timing of the quake was especially unfortunate because Southern California community thrifts and banks, hit worst by the state's recession, were counting on 1994 to be a momentumbuilding year after three years of gloom and frequent failures.

Quaker City Bancorp, a thrift holding company that recently converted from mutual to stock ownership, appears to have taken the biggest single hit. Quaker City did an exhaustive exammation of the credits affected by the earthquake, which struck the San Fernando Valley in norhtwest L.A. on January 17.

"We have worked diligently to assess damage and to minimize the impact of this natural disaster on our borrowerss and our loan portfolio," said J.L. Thomas, chief executive of Whittier-based Quaker City.

Multifamily Portfolio

Quaker City, like the thrifts in the region most affected by the quake, has a substantial portfolio of multifamily properties - which were the worst damaged in the disaster.

All told, Quaker City has identified moderate to severe damage to properties securing 38 loans with an aggregate balance of $12.7 million, or 2.8% of its total real estate portfolio. As of March 31, Quaker City had granted forbearance - leniency to borrowers in technical default - on 22 of the

affected loans.


The result will be a loss in the March fiscal quarter numbers, which Quaker City hasn't released yet. Mr. Thomas said the efforts to control the impact of the quake on its portfolio would continue, but did not predict further losses related directly to the damage.

First Republic Bancorp, a San Francisco thrifts with significant multifamily exposure in Los Angeles, was less definite on what the impact would be.

"Although we have contacted all our borrowers and made inspections of all the properties, we have not been able to determine the full extent of damage or, importantly, the related economic impact to borrows and properties securing our loans," said James H. Herbert 2d, CEO. "The reserve amount represents our best current estimate."

First Republic, with $1.5 billion in assets, took a $4 million special earthquake reserve, which cut its income from $2.9 million a year ago to $660,000 in the first quarter.

Not all thrifts were hit that hard - at least not that they know of now. Redfed Bancorp, another thrift that recently made the mutual-to-stock switch, said it couldn't identify any credits out of 34 loans in the affected area, that will have trouble being paid in a timely manner.

The Redlands-based $915 million-asset thrift did say, however, that the quake's economic impact on the region could have an adverse effect on its performance in 1994. Redfed lost money in 1993, and more than 5% of its assets are not performing.

Business Development Hurt

CU Bancorp, Encino, which owns California United Bank, said that while the quake did not affect its portfolio, the business development challenge in its aftermath is formidable.

"During the first quarter, we focused on developing middle-market business in an environment already impacted by normal seasonal lending slowdowns and then harshly affected by a devastating earthquake," said CEO Stephen G. Carpenter.

Mr. Carpenter added, however, that the $262 million-asset bank's commercial business, which is focused in the quake-affected area, continues to grow.

Mr. Chaney, the analyst, said the impact of the quake won't be that severe, despite the disparate accounts of its effects on different financial institutions.

"Most thrifts will forbear on the affected credits, but those forbearances will just be amortized over the life of the loan," he said. "Banks just won't be that hard hit. Earnings could be a penny or two shy of expectations in the second and third quarters."

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