Westcorp Reports Fourth Quarter and Record Year End Earnings Results
IRVINE, Calif.--Jan. 23, 2001--Westcorp , the financial services holding company whose principal subsidiaries are WFS Financial Inc and Western Financial Bank Tuesday reported earnings of $19.0 million, or $0.59 per diluted share for the fourth quarter of 2000 compared with $15.5 million, or $0.58 per diluted share for the same period a year earlier.For all of 2000, the company recorded a 42% increase in net income to $74.7 million compared with $52.6 million in 1999. Earnings per share rose 27% to $2.53 per diluted share in 2000 compared with $1.99 per diluted share in 1999.
"Our 2000 results represent our most profitable year ever," said Joy Schaefer, president. "Our record financial performance continues to be driven by three main factors: our growth in automobile contract originations at wider interest margins; our improvement in credit quality; and our ability to leverage our infrastructure to lower operating cost levels. The improvement in these areas and our record earnings results validates the successful execution of our corporate strategies."
Through its subsidiary, WFS Financial ("WFS"), Westcorp continued to experience considerable origination growth with automobile contract purchases totaling $996 million for the fourth quarter of 2000. This represents a 23% increase from the $811 million of automobile contracts purchased during the same period a year ago. For the year, automobile contract originations totaled $4.2 billion, an increase of $879 million or 26% over the $3.3 billion originated last year. As a result of higher contract originations, WFS' portfolio of serviced contracts reached $6.8 billion at Dec. 31, 2000, up from $5.4 billion at Dec. 31, 1999.
Annualized credit loss experience for the fourth quarter improved by 12 basis points to 2.3% of average serviced automobile contracts compared with 2.4% a year earlier. For all of 2000, automobile credit loss experience improved 22 basis points to 1.9% compared with 2.1% for 1999. Automobile contracts 30 days or more delinquent increased to 3.2% at Dec. 31, 2000 compared with 2.8% at Dec. 31, 1999.
Other components of income include the following:
Net interest income increased $44.5 million to $86.1 million for the
three months ended Dec. 31, 2000 compared with $41.6 million for
the same period a year earlier. For all of 2000, net interest
income increased $126 million to $270 million compared with $144
million for the same period a year ago. Net interest income
increased as more automobile contracts were held on the balance
sheet as the company utilized its own liquidity sources and
completed securitization transactions totaling $3.9 billion
accounted for as secured financings.
The company's cost of funds increased to 6.81% for the fourth quarter
of 2000 compared with 5.49% a year earlier due to an unfavorable
interest rate environment as well as an increase in the amount of
on-balance sheet secured financing for automobile contracts at
higher rates. However, higher interest costs were offset by the
continuing growth in the number of transaction accounts held by
the company. At Dec. 31, 2000, these deposits totaled $898 million
compared with $697 million at Dec. 31, 1999.
Noninterest income totaled $34.9 million and $178 million for the
three and 12 months ended Dec. 31, 2000 compared with $44.1
million and $210 million for the same periods a year earlier.
Noninterest income declined as the amount of gain on sale of
automobile contracts declined as recent securitization
transactions were accounted for as secured financings. However,
this decline was offset by higher automobile servicing income
resulting from a higher level of automobile contracts serviced.
Gain on sale of contracts represented only 1.7% of total revenues
for the 12 months ended Dec. 31, 2000 compared with 14.5% a
year earlier. The company does not expect to record gain on sale
of contracts in the foreseeable future.
Provision for credit losses was $30.0 million and $82.1 million for the three and 12 months ended Dec. 31, 2000 compared with $6.0 million and $38.4 million for the same respective periods a year earlier. The increase in provision for credit losses is the result of a higher level of automobile contracts held on the balance sheet. The allowance for credit losses as a percentage of owned loans outstanding totaled 2.1% and 2.9% at Dec. 31, 2000 and Dec. 31, 1999, respectively.
Noninterest expense totaled $55.3 million and $221 million for the three and 12 months ended Dec. 31, 2000 compared with $50.5 million and $217 million for the same comparable periods a year ago. Noninterest expense as a percentage of total revenues improved to 49% for all of 2000 compared with 61% in 1999. The company's ability to keep noninterest expenses relatively flat while significantly growing its business is the result of efficiency improvement strategies initiated in its auto finance operations as well as the result of the company exiting the mortgage banking business.
The financial schedules attached to this earnings release include tables presenting pro forma portfolio basis statements of income. These statements present the company's results under the assumption that all its securitization transactions are treated as secured financings rather than sales. The company believes that such a presentation is an important performance measure of its operations. If treated as secured financings, no gain on sale or subsequent contractual servicing and retained interest income is recognized. Instead, the earnings on contracts in the securitization trusts and related financing costs are reflected over the life of the underlying pool of contracts.
The company refers to these pro forma results as "portfolio basis" statements of income since the contracts would have remained in the contract portfolio on balance sheet if accounted for as secured financings. The company monitors the periodic portfolio basis earnings of its serviced contract portfolio and believes that these portfolio basis statements assist in better understanding its business.
On a portfolio basis, Westcorp earned $22.9 million, or $0.71 per diluted share for the fourth quarter of 2000 compared with $16.7 million, or $0.63 per diluted share for the same period a year earlier. For the year ended Dec. 31, 2000, Westcorp earned, on a portfolio basis, $90.4 million, or $3.06 per diluted share compared with $55.3 million, or $2.09 per diluted share for the same period a year ago.
"Differences between portfolio basis earnings and reported earnings during the year 2000 represent the transitional effect of treating our newer automobile asset-backed securitization transactions as secured financings rather than sales," said Schaefer. "We expect that our portfolio basis earnings and reported earnings will ultimately rise up to portfolio basis earnings as we continue to treat our future securitization transactions as secured financings."
Westcorp will host a conference call for analysts and investors at 8 a.m. (PST) on Wednesday, Jan. 24, 2001. As part of this conference call, Westcorp management will discuss, at greater length, earnings results for the fourth quarter as well as management's outlook for future quarters. For a live Internet broadcast of this conference call, go to the company's Web site to register, download, and install any necessary audio software.
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2000 1999 2000 1999
(Dollars in thousands, except per share amounts)
Interest income:
Loans,
including
fees $ 152,640 $ 56,366 $ 439,336 $ 195,373
Mortgage-backed
securities 35,578 24,300 128,231 87,631
Investment
securities 125 149 535 1,607
Other 3,893 4,269 15,719 13,005
TOTAL
INTEREST
INCOME 192,236 85,084 583,821 297,616
Interest expense:
Deposits 38,192 28,232 133,610 106,067
Federal Home
Loan Bank
advances and
other
borrowings 64,892 11,785 152,094 28,140
Securities sold
under agreements
to repurchase 3,030 3,493 27,950 19,102
TOTAL
INTEREST
EXPENSE 106,114 43,510 313,654 153,309
NET INTEREST
INCOME 86,122 41,574 270,167 144,307
Provision for
credit losses 30,036 5,964 82,133 38,400
NET INTEREST INCOME
AFTER PROVISION
FOR CREDIT
LOSSES 56,086 35,610 188,034 105,907
Noninterest income:
Automobile
lending 31,217 40,836 158,701 188,706
Mortgage
banking (77) (1,924) 6,856 6,047
Investment and
mortgage-backed
securities gains
(losses) 98 5 (628) 1,308
Insurance
income 2,025 1,297 6,984 6,126
Miscellaneous 1,682 3,838 5,730 7,819
TOTAL NONINTEREST
INCOME 34,945 44,052 177,643 210,006
Noninterest expenses:
Salaries and associate
benefits 31,838 29,722 131,895 129,582
Credit and
collections 5,522 5,470 21,150 21,833
Occupancy 3,302 3,482 12,495 12,751
Data processing 4,568 4,350 16,931 15,108
Telephone 1,407 1,482 5,868 6,660
Miscellaneous 8,637 5,971 32,852 31,503
TOTAL NONINTEREST
EXPENSES 55,274 50,477 221,191 217,437
INCOME BEFORE INCOME
TAXES 35,757 29,185 144,486 98,476
Income taxes 13,532 12,204 58,132 41,460
INCOME BEFORE MINORITY
INTEREST 22,225 16,981 86,354 57,016
Minority interest
in earnings of
subsidiaries 3,270 1,726 11,852 6,522
INCOME BEFORE
EXTRAORDINARY
ITEM 18,955 15,255 74,502 50,494
Extraordinary gain
from early
extinguishment of
debt (net of income
taxes of $4, $143,
$167 and $1,544,
respectively) 6 198 241 2,132
NET INCOME $ 18,961 $ 15,453 $ 74,743 $ 52,626
Net income per
common share --
basic:
Income before
extraordinary
item $ 0.59 $ 0.57 $ 2.53 $ 1.91
Extraordinary
item 0.00 0.01 0.01 0.08
Net income $ 0.59 $ 0.58 $ 2.54 $ 1.99
Net income per
common share --
diluted:
Income before
extraordinary
item $ 0.59 $ 0.57 $ 2.52 $ 1.91
Extraordinary
item 0.00 0.01 0.01 0.08
Net income $ 0.59 $ 0.58 $ 2.53 $ 1.99
Weighted average
number of common
shares outstanding:
Basic 31,928,914 26,550,094 29,494,497 26,503,796
Diluted 32,033,090 26,639,037 29,525,677 26,505,128
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
Dec. 31, 2000 Dec. 31, 1999
(Dollars in thousands)
ASSETS
Cash $ 61,543 $ 33,645
Interest bearing deposits
with other financial institutions 720 720
Other short-term investments 66,500 137,000
Cash and due from banks 128,763 171,365
Investment securities available
for sale 10,734 10,111
Mortgage-backed securities available
for sale 2,230,448 1,431,376
Loans held for sale -- 1,469,741
Loans receivable 4,924,053 712,157
Allowance for credit losses (104,006) (64,217)
Loans receivable, net 4,820,047 2,117,681
Amounts due from trusts 357,051 439,022
Retained interest in securitized
assets 111,558 167,277
Premises and equipment, net 83,991 84,989
Other assets 125,318 76,953
TOTAL ASSETS $ 7,867,910 $ 4,498,774
LIABILITIES
Deposits $ 2,478,487 $ 2,212,309
Notes payable on automobile
secured financing 3,501,179 469,586
Securities sold under agreements
to repurchase 178,821 249,675
Federal Home Loan Bank
advances 409,570 240,744
Amounts held on behalf of
trustee 494,858 687,274
Other liabilities 71,221 59,140
TOTAL LIABILITIES 7,134,136 3,918,728
Subordinated debentures 189,962 199,298
Minority interest 56,644 28,030
SHAREHOLDERS' EQUITY:
Common stock, (par value $1.00
per share; authorized 45,000,000
shares; issued and outstanding
31,931,826 shares in 2000 and
26,597,344 shares in 1999) 31,932 26,597
Paid-in capital 246,889 190,137
Retained earnings 223,163 157,465
Accumulated other comprehensive
loss, net of tax (14,816) (21,481)
TOTAL SHAREHOLDERS' EQUITY 487,168 352,718
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,867,910 $ 4,498,774
WESTCORP AND SUBSIDIARIES
OTHER SELECTED FINANCIAL DATA
(UNAUDITED)
(Dollars in thousands)
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2000 1999 2000 1999
LOAN ORIGINATIONS
Consumer $ 999,038 $ 814,013 $ 4,232,115 $ 3,355,732
Real estate 9,100 12,468 33,124 276,936
Commercial 71,080 59,389 266,342 237,316
Total $ 1,079,218 $ 885,870 $ 4,531,581 $ 3,869,984
INTEREST RATE SPREAD -- OWNED LOANS
Yield on interest-earning
assets 11.34% 9.34% 10.74% 8.92%
Cost of interest-bearing
liabilities 6.81% 5.49% 6.44% 5.31%
Interest spread 4.53% 3.85% 4.30% 3.61%
OWNED LOAN LOSS EXPERIENCE
Consumer 1.89% 1.25% 1.53% 1.31%
Real estate 0.47% 0.22% 0.31% 0.09%
Total 1.67% 0.83% 1.27% 0.72%
December, 2000 Dec. 31, 1999
Amount Percent Amount Percent
OWNED LOAN DELINQUENCY 60+
Consumer $ 30,157 0.7% $ 8,001 0.5%
Real estate 7,754 1.5% 9,513 1.6%
Total $ 37,911 0.8% $ 17,514 0.8%
Dec. 31, Dec. 31,
2000 1999
MANAGED PORTFOLIO
Consumer $ 6,819,480 $ 5,355,687
Real estate 468,653 688,855
Commercial 165,709 125,545
Total $ 7,453,842 $ 6,170,087
WESTCORP AND SUBSIDIARIES
PORTFOLIO BASIS STATEMENTS OF INCOME
(UNAUDITED)
Three Months Twelve Months
Ended Dec. 31, Ended Dec. 31,
2000 1999 2000 1999
(Dollars in thousands, except per share amounts)
Interest
income $ 280,129 $ 216,198 $ 1,011,637 $ 799,587
Interest
expense 155,835 111,677 549,476 411,379
Net interest
income 124,294 104,521 462,161 388,208
Net
chargeoffs (1) 39,182 32,300 117,807 103,638
Provision for
growth (2) 4,705 3,385 23,233 20,310
Provision for
credit
losses 43,887 35,685 141,040 123,948
Net interest
income after
provision for
credit
losses 80,407 68,836 321,121 264,260
Noninterest
income 18,247 14,588 76,728 64,001
Noninterest
expense 55,289 51,811 222,156 224,960
Income before
income tax 43,365 31,613 175,693 103,301
Income tax (3) 16,411 13,219 70,572 43,491
Income before
minority
interest 26,954 18,394 105,121 59,810
Minority interest 4,103 1,896 14,963 6,614
Income before
extraordinary
item 22,851 16,498 90,158 53,196
Extraordinary gain
from early
extinguishment of
debt 6 198 241 2,132
Portfolio
basis net
income $ 22,857 $ 16,696 $ 90,399 $ 55,328
Portfolio basis
net income per
common share --
diluted:
Income before
extraordinary
item $ 0.71 $ 0.62 $ 3.05 $ 2.01
Extraordinary
item 0.00 0.01 0.01 0.08
Net income $ 0.71 $ 0.63 $ 3.06 $ 2.09
(1) Represents actual chargeoffs incurred during the period, net
of recoveries.
(2) Represents additional allowance for credit losses we would set
aside due to an increase in the serviced contract portfolio.
(3) Such tax effect is based upon our tax rate for the respective
period.
WESTCORP AND SUBSIDIARIES
RECONCILIATION OF GAAP BASIS NET INCOME TO PORTFOLIO BASIS NET INCOME
(UNAUDITED)
Three Months Twelve Months
Ended Dec. 31, Ended Dec. 31,
2000 1999 2000 1999
(Dollars in thousands)
GAAP net
income $ 18,961 $ 15,453 $ 74,743 $ 52,626
Portfolio basis
adjustments:
Gain on sales
of contracts (6,471) (7,719) (51,345)
Retained interest
income (8,044) (9,924) (41,767) (47,812)
Contractual
servicing
income (8,654) (12,404) (51,429) (46,847)
Net interest
income 38,172 62,581 191,994 242,878
Provision for
credit losses (13,851) (29,721) (58,907) (85,549)
Operating
expenses (15) (1,635) (965) (6,500)
Minority
interest (833) (168) (3,111) (92)
Total portfolio
basis
adjustments 6,775 2,258 28,096 4,733
Net tax
effect (1) 2,879 1,015 12,440 2,031
Portfolio basis
net income $ 22,857 $ 16,696 $ 90,399 $ 55,328
(1) Such tax effect is based upon our tax rate for the respective
period.
WESTCORP AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT DEC. 31, 2000
Period 1996-B 1996-C 1996-D 1997-A 1997-B 1997-C 1997-D 1998-A 1998-B
1 0.01% 0.00% 0.02% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.09% 0.09% 0.10% 0.08% 0.06% 0.05% 0.05% 0.04% 0.02%
3 0.20% 0.22% 0.24% 0.20% 0.15% 0.12% 0.14% 0.11% 0.08%
4 0.35% 0.52% 0.44% 0.36% 0.33% 0.29% 0.31% 0.25% 0.18%
5 0.61% 0.74% 0.71% 0.62% 0.56% 0.46% 0.56% 0.44% 0.38%
6 0.88% 0.98% 0.93% 0.85% 0.77% 0.67% 0.75% 0.66% 0.59%
7 1.14% 1.27% 1.16% 1.12% 1.10% 0.93% 0.99% 0.95% 0.83%
8 1.42% 1.52% 1.43% 1.45% 1.40% 1.16% 1.24% 1.23% 1.03%
9 1.67% 1.77% 1.72% 1.70% 1.70% 1.37% 1.47% 1.50% 1.21%
10 1.91% 1.98% 2.03% 2.02% 2.00% 1.66% 1.75% 1.79% 1.40%
11 2.18% 2.21% 2.34% 2.32% 2.22% 1.94% 2.06% 2.03% 1.53%
12 2.38% 2.49% 2.62% 2.61% 2.43% 2.16% 2.35% 2.21% 1.62%
13 2.58% 2.73% 2.97% 2.92% 2.66% 2.40% 2.63% 2.39% 1.74%
14 2.79% 2.99% 3.27% 3.14% 2.91% 2.65% 2.86% 2.49% 1.84%
15 2.95% 3.21% 3.53% 3.30% 3.15% 2.90% 3.05% 2.60% 1.96%
16 3.14% 3.47% 3.79% 3.55% 3.47% 3.15% 3.19% 2.72% 2.10%
17 3.38% 3.70% 4.02% 3.77% 3.77% 3.36% 3.32% 2.85% 2.22%
18 3.55% 3.94% 4.19% 3.94% 3.97% 3.55% 3.42% 2.98% 2.40%
19 3.80% 4.18% 4.43% 4.21% 4.20% 3.70% 3.50% 3.11% 2.55%
20 3.98% 4.36% 4.65% 4.40% 4.39% 3.81% 3.60% 3.25% 2.69%
21 4.14% 4.53% 4.80% 4.59% 4.53% 3.91% 3.69% 3.35% 2.79%
22 4.31% 4.67% 5.07% 4.81% 4.67% 4.00% 3.81% 3.48% 2.85%
23 4.46% 4.84% 5.27% 5.00% 4.75% 4.11% 3.96% 3.62% 2.89%
24 4.58% 5.01% 5.47% 5.14% 4.81% 4.21% 4.10% 3.70% 2.92%
25 4.74% 5.17% 5.65% 5.24% 4.88% 4.30% 4.23% 3.75% 2.97%
26 4.87% 5.34% 5.80% 5.33% 4.94% 4.44% 4.34% 3.80% 3.04%
27 4.98% 5.50% 5.91% 5.39% 5.04% 4.56% 4.44% 3.87% 3.13%
28 5.11% 5.67% 5.98% 5.44% 5.11% 4.66% 4.51% 3.92% 3.18%
29 5.21% 5.78% 6.06% 5.50% 5.21% 4.77% 4.54% 3.98% 3.24%
30 5.31% 5.89% 6.12% 5.56% 5.31% 4.79% 4.56% 4.06% 3.32%
31 5.42% 5.98% 6.17% 5.65% 5.40% 4.83% 4.57% 4.11% 3.38%
32 5.50% 6.02% 6.24% 5.71% 5.48% 4.86% 4.63% 4.17%
33 5.55% 6.06% 6.29% 5.79% 5.52% 4.88% 4.67% 4.22%
34 5.58% 6.11% 6.34% 5.85% 5.54% 4.90% 4.71% 4.27%
35 5.60% 6.14% 6.39% 5.89% 5.56% 4.92% 4.76%
36 5.62% 6.16% 6.44% 5.93% 5.58% 4.98% 4.80%
37 5.65% 6.17% 6.47% 5.96% 5.61% 5.01% 4.84%
38 5.68% 6.22% 6.53% 5.98% 5.64% 5.06%
39 5.70% 6.27% 6.56% 6.01% 5.66% 5.10%
40 5.71% 6.30% 6.58% 6.01% 5.67% 5.14%
41 5.74% 6.34% 6.58% 6.02% 5.69%
42 5.76% 6.35% 6.59% 6.04% 5.71%
43 5.77% 6.37% 6.60% 6.06% 5.72%
44 5.79% 6.37% 6.60% 6.07%
45 5.79% 6.36% 6.61% 6.08%
46 5.79% 6.36% 6.62% 6.10%
47 5.78% 6.36% 6.63%
48 5.78% 6.36% 6.63%
49 5.77% 6.36% 6.64%
50 5.75% 6.37%
51 5.75% 6.37%
52 5.74% 6.37%
53 5.75%
54 5.74%
55 5.75%
Prime
Mix 58% 55% 51% 54% 55% 53% 49% 57% 67%
WESTCORP AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT DEC. 31, 2000
Period 1998-C 1999-A 1999-B 1999-C 2000-A 2000-B 2000-C 2000-D
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.04% 0.04% 0.04% 0.02% 0.03% 0.02% 0.04% 0.03%
3 0.11% 0.11% 0.11% 0.10% 0.10% 0.09% 0.13%
4 0.23% 0.20% 0.26% 0.25% 0.20% 0.24% 0.27%
5 0.39% 0.33% 0.47% 0.40% 0.36% 0.39% 0.46%
6 0.50% 0.46% 0.66% 0.56% 0.55% 0.59%
7 0.61% 0.62% 0.87% 0.71% 0.71% 0.78%
8 0.75% 0.76% 1.00% 0.86% 0.91% 0.99%
9 0.86% 0.92% 1.13% 1.01% 1.10%
10 1.00% 1.11% 1.24% 1.14% 1.27%
11 1.17% 1.30% 1.35% 1.34%
12 1.32% 1.47% 1.44% 1.52%
13 1.48% 1.61% 1.58% 1.74%
14 1.66% 1.73% 1.74% 1.94%
15 1.79% 1.81% 1.85% 2.09%
16 1.91% 1.89% 2.03%
17 2.01% 2.00% 2.16%
18 2.07% 2.10% 2.30%
19 2.11% 2.24%
20 2.17% 2.35%
21 2.24% 2.46%
22 2.34% 2.55%
23 2.43% 2.63%
24 2.52%
25 2.62%
26 2.71%
27
28
29
30
31
Prime
Mix 70% 70% 70% 67% 69% 69% 68% 70%