Westcorp Expectations Met on 1-Cent-a-Share Earnings
Westcorp Inc., which said earlier this month it expected “break-even” quarterly earnings, posted a profit Friday of only $287,000, or 1 cent a share, for the third quarter.
The modest profit for the holding company of Western Financial Savings Bank in Irvine was a big drop from $5.4 million, or 32 cents a share, earned for the same period last year. Quarterly revenue fell 16% to $68.8 million from $82.2 million.
Previously, the company said that the continuing real estate slump prompted its S&L; to lower the value of nine joint ventures during the third quarter, causing a $9.2-million charge-off and an addition of $8 million to reserves for possible future losses.
In addition, the company said Friday, the recession has pushed up its rate of non-performing assets--primarily bad apartment loans--to 4% of total assets at the end of September, compared to a 3% ratio at the end of June. Regulators want bad loans kept below 3%.
“While we are not pleased to report these results, we are gratified that the strength of our ongoing business enables the company to take these measures and still report year-to-date earnings of $10.3 million,” said Stephen W. Prough, Westcorp’s president and chief operating officer.
The nine-month earnings were down 32% from a profit of $15.2 million for last year’s first three quarters. Revenue for the period fell 17% to $206.9 million from $249.9 million. The company also reduced assets to $2.5 billion at the end of September from $2.7 billion a year earlier.
The S&L; has been operating under a supervisory agreement it signed with federal regulators to improve internal systems, reduce bad and questionable loans, and maintain levels of capital higher than those typically required of thrifts. Regulators have just started a routine annual audit.
Western Financial, created a decade ago by the merger of a thrift and loan active in auto loans and a small S&L;, has long funded as many car loans as home loans. In the third quarter, it funded $162.9 million in vehicle loans and $150.9 million in mortgages. It sells most of the auto loans to comply with regulations requiring that 70% of a thrift’s assets be in home financing.
