Wall Street has not treated Imperial Credit Industries gently in the past three years, with the Torrance-based finance house's stock falling from nearly $25 in late 1997 to under $4 in trading last week.

The short story is that business lender Imperial Credit, a 1993 spin-off of Imperial Bancorp, stubbed its toe in the late 1990s by moving into consumer finance, including sub-prime auto lending. Problem was, too many auto buyers welshed on their bills, leading to losses in 1998 and 1999.

"Defaults were higher than expected," conceded Wayne Snavely, chief executive of Imperial Credit. "But we are out of that business now."

Imperial Credit has also retreated from the consumer mortgage lending business and gone back to its basics loaning money to small- and medium-sized businesses in Southern California, usually collateralized by assets or receivables.

In addition, Snavely's company has been buying back (retiring) its own debt and its own stock in an effort to generate some pizzazz on Wall Street. "We are de-leveraging our balance sheet, and we have bought back 15 percent of our stock," Snavely said.

Still, not everything Imperial Credit does is plain-vanilla lending. It recently formed a Small Business Investment Corporation (often referred to as SBIC and pronounced like "civic" but with a "b"). Through this vehicle, it will both lend and take equity positions or warrants in Southern California companies a sort of merchant banking.

Imperial Credit has been lending and taking warrants on a limited basis already, but Snavely said that activity will grow with the SBIC. In addition, Imperial Credit also owns Beverly Hills-based Imperial Capital Group, an investment banking shop.

Will Wall Street respond favorably to the restructured Imperial Credit? One observer said it will take time. Not only must Imperial Credit start posting earnings, but the Street has to start trusting the company again. Imperial Credit has hinted before that there was light at the end of the tunnel, only to see more losses darken the perception of investors.

Imperial Credit posted a net loss of $16.9 million (51 cents per diluted share) for the first quarter ended March 31, compared with net income of $6.8 million (18 cents) in the year-earlier quarter. Snavely did not want to project any future earnings, but he did note that analysts are expecting profits to start again in the current quarter, and to run at about 20 cents for each quarter of this year, and then 25 cents a quarter next year. "If that holds, you can buy us (today) at three-and-a-half times (next year's) earnings," Snavely said.


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