Imperial Corp. of America, parent company of Imperial Savings of California, has reduced its expected 1989 net income to $16 million, down from a previously announced goal of about $30 million, Vice President Andy Micheletti said Monday.
The revision was prompted by “an increase in estimated future losses” in ICA’s wholesale consumer loan portfolio, which includes automobile leases, car loans and mobile home loans, Micheletti said Monday.
Those anticipated losses were driven by “higher levels of delinquency and lower recovery rates” in connection with consumer loan portfolios that ICA has purchased in the past, Micheletti said.
The problem-plagued wholesale consumer loan portfolio earlier contributed to a $15.6-million net loss during the fourth quarter ended Dec. 31, 1988. At that time, San Diego-based ICA established $50 million in reserves to cover anticipated loan losses, including some losses associated with the wholesale consumer loan portfolio. ICA also eliminated its fourth-quarter dividend.
Because of the past and anticipated losses, ICA has begun to phase out its wholesale consumer loan business, Micheletti said. Wholesale consumer loans account for $1.6 billion, or about 19%, of ICA’s $8.9 billion in total loans and mortgage-related securities.
ICA is now “restructuring” the mortgage banking and consumer lending department that handled wholesale consumer loan originations, Micheletti said. Several executives in the department who directed the wholesale consumer loan origination business “are no longer with us,” Micheletti said. Some of the department’s 50 employees will be reassigned or lose their jobs because of the restructuring, Micheletti said.
In January, ICA Chairman Kenneth Thygerson predicted that ICA’s 1989 net income would “return to levels of profitability experienced during the first three quarters of 1988.” ICA reported $30 million in net income during those three quarters.
“That isn’t going to happen,” Micheletti said Monday. “We expect 1989 earnings to be something close to $16 million or worse.”
The $16 million net income would match the 1989 total that ICA reported for 1988. ICA reported $51 million in net income during 1987.
ICA’s 1989 consumer loan losses “will depend upon the delinquency level for the remainder of the year, among other factors,” Micheletti said.
However, the delinquency rates experienced during 1988 and early 1989 “may indicate continued high levels of delinquencies which previously were expected to decline,” Micheletti said.