The bankruptcy of Southern Pacific Funding Corp., losses at Franchise Mortgage Acceptance Corp., and a poor yearend market for home equity loans crippled earnings at Imperial Credit Industries and Imperial Bancorp.
Imperial Bancorp, parent of Imperial Bank of Inglewood, Calif., on Tuesday reported an 11% decline in 1998 annual income, to $43.7 million, and a 21% decline for the fourth quarter, to $16.9 million.
It attributed the decline to lower earnings at Imperial Credit of Torrance, Calif. At yearend, Imperial Bancorp owned 8.9 million shares of Imperial Credit, or 24.3% of its outstanding shares. The banking company has been trying to sell its stake in recent months.
A one-time, $2.1 million charge related to cancellation of a spinoff of a small unit of the banking company contributed to the decline.
Imperial Credit reported a $73.6 million net loss for 1998 and a 90% decrease in income for the fourth quarter, to $6.6 million. The loss was due primarily to a writeoff of its investment in Southern Pacific Funding, the Lake Oswego, Ore., home equity lender that filed for bankruptcy, Imperial Credit said.
The third quarter's unstable asset-backed securities market also led to a $97.5 million charge by Imperial Credit.
Its fourth-quarter earnings decline was due to its 35% ownership of Franchise Mortgage Acceptance, Los Angeles. Franchise Mortgage said last week that it was taking a $39 million hedge loss.
Imperial Credit's losses also included a charge for the discontinued operations of Auto Marketing Network Inc.