Pacific & Western Credit Corp. swung to a loss in the third quarter as it took a $3.7 million charge on one of its preferred share positions.

The London, Ont.-based financial services company said the net loss for the quarter ended July 31 was $4.2 million, or 31¢ a share, compared to a profit of $127,000, or 1¢ a share for the same period last year.

The company said its third quarter results were negatively impacted by a charge of $3.7 million ($2.5 million after income taxes) relating to “a security whose decline in value was determined to be other than temporary.”

“This quarter we determined that there was a permanent impairment in the value of one of our preferred share positions that had been trading below our amortized cost for sometime. This resulted in a $2.5 million reduction of income after taxes,” said .

“A large portion of this charge had already been reflected in shareholders’ equity and in the bank’s regulatory capital as a result of previously recorded mark-to-market adjustments relating to this security,” the company said in a release.

Total loans increased to $949 million from $923 million a year ago.

Total assets were $1.43 billion compared to $1.23 billion a year ago.

Total revenue was negative $2.2 million for
the quarter compared to $3.9 million a year ago. The decrease in total revenue from a year ago was due primarily to the impairment writedown of $3.7 million on securities and a compression of spreads,
primarily in the company’s securities portfolio.

Total allowances for credit losses were $3.5 million at the end of the quarter compared to $3.2 million a year ago. The provision for credit losses as a percentage of average loans for the quarter was 0.02%, the same as a year ago.

Return on equity plunged to -42.21% from 0.45% in the year-ago period.

Pacific & Western Credit Corp. is the parent company of Pacific & Western Bank of Canada.

PWBank is a branchless financial institution with over $1.4 billion in assets. It specializes in providing innovative financing to large corporate and government entities including hospitals, school boards, universities and colleges, municipalities and provincial and federal government agencies.