Hitching its wagon to the recovering Southern California economy, North County Bank, Escondido, Calif., has taken just a year to ride out a restrictive cease-and-desist order.

The $240 million-asset bank announced May 14 the lifting of a Federal Deposit Insurance Corp. order to reduce its substandard loans and maintain a capital ratio of 7.5%. The order had been imposed in April 1995.

"We knew it would just be a matter of time before we got out from underneath the order," said James M. Gregg, chief executive officer. "It was just doing the right things to make it happen."

The turnaround at North County, which is based in San Diego County, can be seen in its earnings reports. In 1994, North County earned just $85,000. But last year it netted $1.5 million. The profit, coupled with a $2 million private placement of stock, increased the bank's capital significantly.

This year's first quarter was also strong, with a profit of $533,000, up from $496,000 in the same period of 1995. Mr. Gregg said North County's capital ratio is 8.45%.

North County has also put a dent in its substandard loans. Its ratio of nonperforming loans to total loans fell from 3.27% at the end of 1994 to 3.08% a year later.

Last year the bank didn't have the foreclosed-property expenses it had in 1994, "which was a direct result of the economy," Mr. Gregg said. "We were earning money in 1994, but the losses ate up the money."

North County has benefited from the stabilization of Southern California real estate prices. The region's land values had gone into a free-fall earlier in the decade that hurt many financial institutions.

Mr. Gregg said the bank has been able to sell most of its foreclosed real estate piece by piece.

"Everybody put a lot of effort into meeting the goals outlined in the order," he said. "We put our noses to the grindstone and got it done."

Mr. Gregg said that with the cease-and-desist order lifted North County has its eye on growth, including possible expansion through acquisition.

North County faces quite a bit of competition on that score. Several out-of-state companies have been active in the acquisition market in both San Diego and Riverside counties. In addition to branches in San Diego and San Marcos, North County also has offices in the Riverside County communities of Temecula, Murrieta, Beaumont, and Banning.

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