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Non-Tech : Wescorp and WFSI

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To: Paul Senior who wrote (1)	3/5/1998 1:26:00 AM
From: Jeff Lawlor	Read Replies (2) of 56

Hi Paul, Thought I would respond to you on this thread regarding your WES suggestion. Based on just a cursory look at WES, I think it is fairly promising. Here are my positives and negatives: + 1. 77% growth in mortgage loans from 96 to 97. 62% growth in 4Q97 over 4Q96. + 2. Continued strength in economy and housing market should continue growth pattern through most of 1998. +/- 3. Restructuring program put in for 1Q98 will cut 20% of workforce and significantly reduce expenses. (This is a problem area for WES. Their ROE and NPM are low in comparison to other reasonably priced equivalents). Reduction in expenses coupled with continued growth in top-line should boost returns in second half of 1998. + 4. Decent dividend yield. + 5. Equity-to-Assets ratio of 9.4%. Peter Lynch recommends 7.5 or greater. + 6. Commercial is 2.2% of loan volume. The lower the better. + 7. Real Estate Owned is less than 0.5% and has been dropping. + 8. Undervalued with P/B and P/E low in comparison to industry. +/- 9. Loan losses were higher in 1997, however, trend is slowing. + 10. 60 Day Delq are declining. - 11. Spread declined significantly in Q4. Must watch this trend. - 12. Low returns with ROE ~ 10% and NPM ~ 7.5%. WES needs to improve their returns before we will see any increase in shareholder value and they seem to be addressing this with restructuring program in 1Q98. Top-line growth is promising with strong housing market projected through most of 1998. I am definitely keeping my eye on this one. However, I would like to see the 10-K before taking a significant position. Sub-prime auto lending will always keep me concerned about this one. WES has to ensure that they don't get caught up in the growth game by sacrificing asset quality. All IMHO, Jeff p.s. Thanks for the tip.

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