When George L. Graziadio and the late George M. Eltinge founded Imperial Bank in 1963, they drew upon their experience in shopping centers and other types of investments to put together a different, entrepreneurial sort of financial company.

They created subsidiaries in such areas as electronic payment verification, entertainment finance, and subprime lending, with an eye to spinning them off at a profit.

The strategy worked well until September, when the stock market slide foiled the latest such plan. The scheduled Oct. 1 spinoff of Imperial Financial Group, which houses a trust business and does small-business and entertainment lending, was postponed.

That leaves the holding company, $6.3 billion-asset Imperial Bancorp, having to rethink an approach and pattern that stopped working the way they used to.

"We got whammied here," said Mr. Graziadio, chairman, president, and chief executive officer of the parent company. He is not giving up hope that the spinoff can occur "in a more favorable environment."

But other options may be considered. And there are pieces that have to be picked up in the wake of a loss in the third quarter.

Imperial had wanted to bolster the balance sheet of the new spinoff by transferring its 24% stake in an earlier one, Imperial Credit Industries Inc., which makes high-risk consumer loans.

The affiliate lost $109.4 million in the third quarter. Imperial Bancorp reported a $3.1 million loss, equal to 8 cents a share, versus a profit of $14.9 million or 36 cents, a year earlier.

"It came about through no fault of Imperial Bank," Mr. Graziadio said in a recent interview.

Despite the tumult, the parent is not rushing to unload the Imperial Credit stock and maintains an upbeat outlook.

"Imperial Credit Industries going forward feels that its prospects are bright, and we'd be silly to move out of that stock at today's prices," Daniel R. Mathis, president and chief operating officer of Imperial Bank, said Thursday.

For the fourth quarter, Torrance, Calif.-based Imperial Credit is expecting to turn a profit, hitting analysts' consensus earnings-per-share estimate of 30 cents to 32 cents, said H. Wayne Snavely, chairman, president, and CEO.

He said the losses resulted from its stock holdings, and "we don't expect to see any further declines that would drop the stocks down lower."

But Imperial has to let go of Imperial Credit. Regulators have deemed its business mix to be "nonincidental to banking" and, therefore the bank's stake must be below 20%.

Mr. Mathis said the options for dealing with Imperial Bancorp's stake in Imperial Credit are: go ahead with the original plan, using the Imperial Credit stock as a significant part of the capital; apply to regulators for an exception letting the holding company keep the Imperial Credit stock; trade the Imperial Credit stock for assets that are within the realm of permissible business for a bank; or sell the stock outright and take capital gains.

The Imperial Credit spinoff is regarded as a success, having provided more than $70 million in after-tax profit for the banking company's shareholders since it went public in 1992, Mr. Mathis said.

Bank analyst Thomas F. Theurkauf of Keefe, Bruyette & Woods Inc. said Imperial "is working furiously" to come up with alternatives "that would basically insulate the bank from the volatility" of Imperial Credit's stock.

Imperial Credit shares, which reached a 52-week high of $26.50 March 24, closed Thursday at $6.25, up 6.25 cents for the day.

Imperial Bancorp closed at $13.565, down 93.75 cents. The price was as high as $33.125 last December and hit a 52-week low of $12.0625 on Sept. 22, less than two weeks after the Imperial Financial spinoff was canceled.

For now, Imperial is buying back stock-the board authorized the repurchase of one million shares last month, on top of 1.65 million announced in January-and is still looking at spinoffs. One might be Imperial Technology Solutions, which electronically verifies and automates collections of patient receivables for health-care providers.

That strategy makes Imperial "unique in terms of how they manage their capital," said Mark Morgan, an analyst with Dain Rauscher, Minneapolis. "Yet they retain a residual interest so they get the benefit of what they've built."

But he added, "What's the ultimate goal here? You become an incubator for small companies."

"We think the shares (of Imperial Bancorp) are very underpriced," Mr. Graziadio said, adding, "I think the stock is a steal."

The banker is not merely being defensive; many analysts share his view.

"The core bank remains quite strong," said Mr. Theurkauf. "I felt that the downdraft in the stock was overdone."

Imperial does most of its lending to small and middle-market companies, which provide 50% to 60% of the bank's revenues. Loans are made to companies with annual sales of $1 million to $600 million. The bank has developed niches in entertainment, health care, international trade and finance, and title and escrow for homebuyers and corporations.

The loan portfolio swelled 40% during the first half, due mostly to the addition of new employees who are out on the street and on the phone raking in business, Mr. Graziadio said.

"We are continually seeking good people, and some of the mergers have played right into our hands," he said. He says loan growth is healthy and the portfolio well diversified.

The bank has six offices in southern California, five in northern California, and last year it opened its first out-of-state subsidiary in Phoenix. It also has seven loan production offices in fast-growing markets such as Austin, Tex., Boston, and Reston, Va. The bank has speciality divisions with additional locations, including an international trade finance office in Hong Kong.

Mr. Graziadio said Imperial's loan boom has legs and there are no "great exposures."

But some analysts have registered concerns about asset quality. Charlotte Chamberlain of Jefferies & Co., Los Angeles, cited a $7 million chargeoff in the second quarter related to a $12.9 million participation in a syndicated loan to a health-care company. Any recession would make matters worse, she warned.

Nonaccrual loans on Sept. 30 were $34.5 million, or 1.01% of total loans, up from $9.2 million, or 0.37%, a year earlier.

Joseph K. Morford of Van Kasper & Co. said the problems of the last quarter should now be stabilizing.

"Our credit procedures do not wane or waver because of a larger volume," Mr. Graziadio said. "Our procedures are very, very strict, very intact. ... We are a careful lender."

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