Bucking Recession, Westcorp Posts 2 Records for Earnings

Despite lower revenue last year, Westcorp Inc., the parent company of Western Financial Savings Bank, posted record annual and fourth-quarter earnings as it bucked the recession by making more loans than it did the previous year.

The Irvine firm’s annual net income rose last year 80%, to $21.1 million or $1.20 per share; it had earnings the previous year of $11.7 million, or 67 cents per share. Annual revenue fell 6% last year, to $327.7 million from $350 million in 1990.

The 26-branch savings and loan--long known for making more auto loans than real estate loans--has been gobbling up a bigger share of the recession’s auto loan market.

The thrift sells those loans to Wall Street brokerages, which issue securities backed by the car loans. Such transactions help Western Financial meet thrift laws requiring that its own loan portfolio consist primarily of mortgages.

Last year, the thrift sold more than $700 million in auto loans--a record. That huge amount, together with the sale of some real estate loans, caused Westcorp’s total assets to drop 10%, to $2.7 billion at the end of December from $3 billion a year earlier.

“To come through a year such as this with these results confirms the strength of our business focus,” said Stephen W. Prough, the company’s president. “We concentrate strictly on consumer finance and residential lending.”

Like most other financial institutions during the recession, the company also improved its spread between the amount it earns in interest and the amount it pays out. The recession has forced down interest rates but, as usual, deposit rates fall quicker than loan rates, giving institutions a bigger profit margin.

Westcorp’s fourth-quarter profit of $5.9 million, or 33 cents per share, far eclipsed its 1990 earnings of $725,000, or 4 cents per share. Quarterly revenue dropped 13% in 1990’s final quarter, to $77.7 million from $89.7 million.