Westcorp to Close 32 Offices Amid Restructuring

Citing bad loans and anticipating slower growth in automobile loans, Westcorp Inc. said Tuesday that it is restructuring its WFS Financial Inc. subsidiary by closing 32 offices in eight Western states.

About 150 employees will be dismissed as WFS consolidates its dealer centers and branch divisions into one Western division with 27 offices, said Lee A. Whatcott, Westcorp’s chief financial officer.

“We also poured a lot of money into technology, automation, centralization in the last few years, and we’re looking to reap the benefits of that modernization,” he said.

The restructuring plan is expected to reduce operating expenses by $12 million a year, the company said. But first, the company will take a one-time charge of about $9 million for the first quarter this year to cover severance and other costs related to the restructuring.

“Our goal is to improve profitability and enhance shareholder value through a more cost-effective operating structure and greater loan volumes,” Whatcott said.

The earnings of WFS, a publicly traded subsidiary, will continue to be affected by slower growth in automobile loan volume and bad loans, the company said.

Bad auto loans for the fourth quarter were 3.4% of serviced automobile contracts, compared with 3.3% for the last quarter of 1996. For the year, losses were 3%, compared with 2.3% for the previous year.

The growth in auto loan contracts slowed for the year and fell 2% in the last quarter to $523 million from $534 million a year earlier. For the year, originations grew 9% to $2.3 billion from $2.1 billion the previous year. Whatcott said the company expects about an 8% growth this year.

Westcorp, which also owns Western Financial Bank, a savings and loan, posted fourth-quarter earnings of $10.1 million, or 38 cents a share, a 29% increase from $7.8 million, or 30 cents a share, for the final quarter of 1996. Revenue rose 12% to $125.4 million from $111.4 million.

For the year, the company earned $36.8 million, or $1.40 a share, up 16% from $31.8 million, or $1.21 a share, for the previous year. Revenue rose 15% to $488.6 million from $423.6 million.

The company released news of the restructuring after the stock market closed for the day. WFS stock gained $1.44 a share Tuesday to close at $11.25 in Nasdaq trading.