Western Bancorp Warns of Lower Earnings for Quarter

Western Bancorp of Newport Beach said Thursday that fourth-quarter profits will fall 5% below an analyst’s estimates because of a drop in interest rates and warned that 1999 earnings will remain under pressure.

The owner of Southern California Bank and Santa Monica Bank was expected to earn 45 cents a share, according to First Call Corp. A 5% shortfall would amount to 2.25 cents, bringing profit to 42.75 cents.

Western Bancorp shares fell $3.19, to $29.13 in trading of 341,700 shares, six times the three-month daily average.

One-third of Western Bancorp’s deposits don’t bear interest, so when interest rates drop, its ability to reduce its cost of funds is limited. For competitive reasons, though, it must reduce the interest it charges on loans or risk losing borrowing customers.

Net interest margin, the difference between the rate the bank pays for funds and the rate it receives on loans and securities, is expected to fall to 6% from 6.2% in the third quarter, the company said.

Western Bancorp owns two banks in Southern California, Southern California Bank, which has 15 branches and specializes in asset-backed lending, and Santa Monica Bank, which has 16 branches and specializes in trust and investment management services.