Westcorp Inc. Enjoys 26% Profit Increase

Westcorp Inc., the parent company of Western Financial Savings Bank in Irvine, reported a 26% increase in net income last year as it overcame higher expenses and losses in its small junk bond portfolio.

The holding company posted net income of $11.7 million in 1990, compared to net earnings of $9.3 million the year before. The company’s revenue grew 11% last year to $346.2 million from $313 million the previous year.

The company’s assets increased slightly to $2.96 billion at the end of December from $2.89 billion a year earlier.

While earnings were up last year, the company incurred higher costs for developing and converting to a new data processing system and for consolidating the company into new headquarters in Irvine.

Western Financial also lost an unspecified amount in selling and writing down its risky, high-yield corporate securities known as junk bonds. From a one-time high of $99 million, the savings and loan now has $4.4 million worth of junk bonds to eliminate.

Under a 1989 federal law that restructures the thrift industry, S&Ls; must get rid of their junk bonds by mid-1994.

The thrift also increased its reserve for possible loan losses, anticipating potential real estate defaults. Its total allowance at the end of the year rose to $22.8 million, or 0.9% of its loans outstanding. But for the third straight year, it had no foreclosed properties on its books at the end of December.

The losses and write-downs, blunted in part by a higher profit margin, were taken in the fourth quarter. That caused the company’s net income to plunge 68% to $724,000 for the last quarter from $2.3 million in earnings for the final quarter of 1989.

WESTCORP’S PERFORMANCE

Despite higher costs and junk bond losses, Westcorp Inc. posted $11.7 million in net income last year, a 26% increase over the previous year’s earnings. The expenses and losses, however, caused its fourth-quarter profits to plunge 68%. One of its more worrisome portfolios--its junk bond holdings--was reduced to only $4.4 million.

Figures are in thousands, except per-share data.

4th Qtr 4th Qtr 12 Months 12 Months 1990 1989 1990 1989 Revenue $86,087 $83,365 $346,197 $312,976 Net income 724 2,278 11,686 9,252 Per-share income 0.05 0.14 0.71 0.56 Per-share dividend 0.03 0.05 0.12 0.10 Assets* 2,964,485 2,890,102

* As of Dec. 31 each year

Source: Westcorp Inc.