FELTON -- Phil LaChapelle, who came in a year ago to turn around Liberty Bank, said Friday things are "going in the right direction."
The bank, based in South San Francisco, has branches in Felton and Boulder Creek. Liberty has reduced its nonperforming loans from 6 percent earlier this year to 3.5 percent in the third quarter.
"We're working aggressively to resolve nonperforming loans and it's borne fruit," said LaChapelle, who replaced Larry Woods as president and chief executive officer.
"We added capital in the fourth quarter," added Tom Amendola, Liberty Bank executive vice president, citing an infusion of $1.45 million in October.
Six weeks before his departure, Woods signed a regulatory agreement with Federal Reserve Bank of San Francisco, which remains in effect.
"It tends to keep you focused," said LaChapelle, who expects positive reports at the next regulatory examination.
According to Bauer Financial, Liberty Bank posted a third quarter loss of $126,000 and a year to date loss of $768,000 with a three-star rating of adequate. LaChapelle said a lot of costs were incurred due to changes in technology, from Harland Phoenix to Fiserv and a move to cloud computing.
Bank of the West earned Bauer's top rating, five stars, after its year-to-date income of $435 million nearly matched the 2011 total income of $442 million.
Other ratings remain unchanged.
Valley Community Bank, which signed a regulatory
Patelco, the biggest credit union serving Santa Cruz County, earned Bauer's five-star rating after reporting third quarter earnings of $14 million. Last year's earnings were $12 million.
Santa Cruz Community Credit Union, Santa Cruz County Employees Credit Union and Watsonville Hospital Federal Credit Union all posted third quarter losses.
Don Seeman, who heads Watsonville Hospital credit union, said the loss resulted from shifting funds into a set-aside for loan losses after foreclosures on manufactured housing.
"We don't believe it's a trend," he said, expecting a "decent profit" for the fourth quarter.
"We've done a couple of RV loans," he added, and there's a demand for new vehicle loans now that dealers are backing off zero percent loans. "We offer 1.9 percent for better borrowers."
Attempts to reach Santa Cruz Community Credit Union and Santa Cruz County Employees Credit Union were not successful Friday.
Follow Sentinel reporter Jondi Gumz on Twitter at Twitter.com/jondigumz
Bauer ratings, third quarter 2012
Banks Rating 9/30/12 6/30/12 Assets YTD Income %Non-performing assets
Bank of America 3 1/2 stars 3 1/2 stars $1.4T $9.8B 5.1%
Bank of the West 5 stars 4 stars $58B $435M 1.2%
Citibank 4 stars 4 stars $1.3T $9.9B 1.3%
Comerica 5 stars 5 stars $62B $441M 1.3%
JP Morgan Chase 3 1/2 stars 3 1/2 stars $1.8T $10.2B 2.1%
Liberty Bank 3 stars 3 stars $219.7M ($768,000) 3.5%
Lighthouse Bank 5 stars 5 stars $166.8M $1.3M .5%
Rabobank 3 1/2 stars 3 1/2 stars $11B $56M 3.4%
Santa Barbara Bank & Trust* 4 stars 3 1/2 stars $5.9B $77.4M 1.5%
Santa Cruz County Bank 4 stars 4 stars $346M $2M 1.1%
US Bank 4 stars 4 stars $324.1B $4.1B 2.4%
Union Bank 5 stars 5 stars $84.5B $452.9M .9%
Valley Community Bank 2 stars 2 stars $166.6M ($2.7M) 5.3%
Wells Fargo 3 1/2 stars 3 1/2 stars $1.2T $12B 4.2%
Credit unions Rating 9/30/12 6/30/12 Assets YTD Income %Non-performing assets
Bay Federal 3 stars 3 stars $672.1M $1.6M 1.1%
Monterey No rating No rating $198.2M $1.8M .4%
Patelco 5 stars 4 stars $3.9B $43.2M 1.1%
Santa Cruz Community 3 stars 3 stars $104.1M ($1M) .8%
Santa Cruz County Employees 4 stars 4 stars $25.9M ($2,000) .1%
Watsonville Hospital 4 stars 4 stars $11.5M ($125,000) .3% *Acquired by Union Bank
SOURCE: Bauer Financial