US Facilities 3rd-Quarter Income Drops : Earnings: The holding company says it would have made more than $1 million had it not tried to acquire an insurance firm.

US Facilities Corp., citing expenses of $860,000 from a previously undisclosed takeover attempt, said Wednesday that its net income fell 14% to $265,000 for the third quarter ended Sept. 30.

The Costa Mesa holding company for underwriting management and reinsurance firms said it would have earned more than $1 million had it not been for expenses resulting from an attempted acquisition of an insurance firm, which company officials declined to identify.

US Facilities posted revenue of $17.1 million for the third quarter, a 4% increase over revenue of $16.4 million in last year’s third quarter.

For the first nine months, the company posted net income of $1.9 million, up 46% from $1.3 million for the corresponding year-earlier period. Revenue rose 13% to $51.4 million from $45.4 million last year.

The company had not announced previously that it was close to acquiring a particular firm, though it had said in its last annual report that it hoped to grow this year through acquisitions.

Mark Burke, chief financial officer, said US Facilities did not believe it had to divulge negotiations with a California-based insurance underwriting company because no definitive agreement had been reached.

The expenses--mainly for investment bankers, lawyers, accountants, actuaries and travel--had been accumulated over the past year and were to be part of the acquisition cost. When the deal fell through, he said, US Facilities had to acknowledge the expenses and write them off.

Whether shareholders should have been told earlier that acquisition expenses were being incurred but not accounted for in company financial statements is a “tough call,” said Jeffrey Kilpatrick, president of Newport Securities Corp. in Costa Mesa. The better approach, he said, would have been to disclose as much as possible and write off expenses as they occurred.

US Facilities will continue to look for other companies to acquire, Burke said, but there is “nothing specific in the mill right now.”

The company’s stock, which has traded as high as $5.75 a share in the last 12 months, closed Wednesday at $2.75, down 12.5 cents from Tuesday’s close.