Union Acceptance Corporation Announces Third Quarter Results
INDIANAPOLIS--April 19, 2001--Union Acceptance Corporation today announced financial and operational results for the third quarter ended March 31, 2001.Net earnings for the quarter climbed 39% to $4.6 million, or $0.34 per diluted share, before giving effect to the earnings impact of derivative instruments on held for sale receivables. This compares with net earnings of $3.3 million, or $0.25 per diluted share, for the comparable period of fiscal 2000. Net earnings for the quarter ended March 31, 2001, after accounting for the earnings impact of derivative instruments on held for sale receivables, totaled $6.5 million, or $0.49 per diluted share.
Fiscal 2001 year-to-date earnings climbed 32% to $14.4 million, or $1.08 per diluted share, before giving effect to the earnings impact of derivative instruments on held for sale receivables. This compares with net earnings of $10.9 million, or $0.82 per diluted share, for the comparable period of fiscal 2000. Fiscal 2001 year-to-date earnings after accounting for the earnings impact of derivative instruments on held for sale receivables, totaled $13.4 million, or $1.00 per diluted share.
"Refinement of our risk-based pricing strategy allowed us to price for a stronger return on managed assets on new receivables," commented John Stainbrook, President and Chief Executive Officer. "This strategy is bolstered by strengthened credit quality evidenced by higher average credit scores."
Selected Key Results for the Quarter Ended March 31, 2001 and
Recent Developments
| -- | The Company announced that, as part of its capital strategy, it would issue to holders of its outstanding common stock, subscription rights entitling holders to purchase additional shares of common stock. A registration statement relating to this offering was filed with the Securities and Exchange Commission on April 6, 2001, but has not yet become effective. |
| -- | The Company's total servicing portfolio grew 24% to $3.4 billion, compared to $2.7 billion at March 31, 2000. |
| -- | Receivable acquisition volume decreased 15% to $336.6 million with an average credit score of 685, compared to $395.6 million with an average credit score of 664 in the comparable period of fiscal 2000. Year-to-date volume increased 42% to $1.4 billion, compared to $989.7 million for the comparable period of fiscal 2000. |
| -- | The Company's retail network of dealerships grew 21% to 5,561 at March 31, 2001, compared to 4,604 at March 31, 2000. |
| -- | The Company securitized $573.0 million of which $430 million of receivables were delivered in the March quarter, compared to $282.7 million securitized in the comparable period of fiscal 2000. |
| -- | The Company reported a net gain on sale of receivables of $2.4 million (net of a $10.5 million loss on interest rate swaps on securitized receivables and a $2.8 million charge for other than temporary impairments of Retained Interest). This compares to a net gain of $2.8 million (net of a $2.4 million gain on interest rate swaps on securitized receivables) for the comparable period of fiscal 2000. |
| -- | The gross and net spreads on the 2001-A securitization were 7.43% and 5.12% respectively, compared to 5.88% and 4.94% for the securitization completed in the comparable period of fiscal 2000. |
| -- | Total revenues (before the impact of derivative instruments on held for sale receivables), increased 22% to $31.2 million from $25.6 million in the comparable period of fiscal 2000. |
| -- | Net gain on sales of receivables totaled 7.7% of total revenues, compared to 10.8% for the comparable period of fiscal 2000. Fiscal 2001 year-to-date net gain on sales of receivables totaled 9.5% of total revenues, compared to 13.9% for the comparable period of fiscal 2000. |
| -- | Operating expenses totaled $14.8 million or 1.76% of the average servicing portfolio. This compares to $12.6 million or 1.89% for the comparable period of fiscal 2000. |
| -- | Annualized Tier I credit losses totaled 2.59%, compared to 2.30% for the comparable period of fiscal 2000. |
| -- | The Company's allowance for estimated credit losses on securitized receivables was 4.44% at March 31, 2001, compared to 4.39% at March 31, 2000. |
| -- | Delinquency on the Tier I portfolio was 3.04% at March 31, 2001, compared to 2.73% at March 31, 2000. Delinquency as a percentage of the Tier I portfolio improved 46 basis points from December 31, 2000 to March 31, 2001. |
| -- | At March 31, 2001, $119.5 million of warehouse capacity was utilized, and an additional $0.6 million was available to borrow based on the outstanding principal balance of eligible receivables. In addition, the Company maintained cash on hand of $5.3 million and a working capital line of credit with capacity of $12.5 million, for total available cash of $18.4 million at March 31, 2001. Total available cash was $48.4 million at March 31, 2000. |
| -- | The Company's net pre-tax unrealized gain included in Retained Interest was $5.8 million at March 31, 2001, compared to $4.5 million at March 31, 2000. Net of taxes, the unrealized gain included in Retained Interest totaled $3.6 million at March 31, 2001 and is reported as Accumulated Other Comprehensive Income. |
The following tables set forth delinquency and credit loss experience related to the Tier I (prime) servicing portfolio:
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Delinquency Experience
----------------------
At March 31, 2001 At December 31, 2000
------------------------ -----------------------
(Dollars in thousands)
Number of Number of
Receivables Amount Receivables Amount
----------- ---------- ----------- ----------
Servicing portfolio 264,539 $3,329,473 263,984 $3,324,102
Delinquencies
30-59 days 4,625 54,280 5,792 64,651
60-89 days 2,548 32,609 2,924 35,130
90 days or more 1,211 14,424 1,444 16,462
----------- ---------- ----------- ----------
Total delinquencies 8,384 $ 101,313 10,160 $ 116,243
=========== ========== ============ ==========
Delinquency as a
percentage of
servicing portfolio 3.17% 3.04% 3.85% 3.50%
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Delinquency Experience
----------------------
At March 31, 2000
-----------------------
(Dollars in thousands)
Number of
Receivables Amount
----------- ----------
Servicing portfolio 225,458 $2,672,470
Delinquencies
30-59 days 3,577 39,441
60-89 days 1,978 23,070
90 days or more 957 10,524
----------- ----------
Total delinquencies 6,512 $ 73,035
=========== ==========
Delinquency as a
percentage of
servicing portfolio 2.89% 2.73%
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----------------------------------------------------------------------
Credit Loss Experience
----------------------
Three Months Ended Nine Months Ended
-------------------------------- ---------------------
(Dollars in thousands)
March 31, December 31, March 31, March 31, March 31,
2001 2000 2000 2001 2000
---------- ---------- ---------- ---------- ----------
Average
servicing
portfolio $3,356,833 $3,274,480 $2,619,461 $3,220,984 $2,557,339
Gross
charge-offs 37,526 31,643 25,467 96,268 71,504
Recoveries 15,800 12,372 10,417 39,285 28,787
---------- ---------- ---------- ---------- ----------
Net
charge-offs $ 21,726 $ 19,271 $ 15,050 $ 56,983 $ 42,717
========== ========== ========== ========== ==========
Gross
charge-offs
as a
percentage
of average
servicing
portfolio (1) 4.47% 3.87% 3.89% 3.99% 3.73%
Recoveries as
a percentage
of gross
charge-offs 42.10% 39.10% 40.91% 40.81% 40.26%
Net
charge-offs
as a
percentage
of average
servicing
portfolio (1) 2.59% 2.35% 2.30% 2.36% 2.23%
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(1) Annualized
In addition to reporting results of operations in accordance with generally accepted accounting principles ("GAAP"), the Company has elected to present, below, pro forma portfolio-based statements of earnings which account for securitization transactions as secured financings rather than sales of receivables. In its consolidated financial statements prepared in accordance with GAAP, the Company records a gain on the sale of receivables in securitization transactions primarily representing the discounted estimated future servicing cash flows to be received by the Company related to the receivables sold. Future servicing cash flows are the projected cash flows resulting from the difference between the weighted average coupon rate of the receivables sold and the weighted average note rate paid to investors in the securitized trusts, less an allowance for estimated credit losses, the Company's contractual servicing fee of 1.00% and ongoing trust and credit enhancement fees.
The pro forma portfolio-based statements of earnings set forth below (following the presentation of the Company's historical selected financial data), present the Company's operating results under the assumption that securitization transactions are secured financings and no gain on sale, retained interest income, or servicing fee income is recognized. Instead, interest income, fee income, interest expense and other costs related to the asset-backed securities are recognized over the life of the securitized receivables. Credit losses are recorded as incurred. The pro forma portfolio-based statements of earnings and related data do not present the Company's operating results in accordance with GAAP. The pro forma portfolio-based data is presented solely for illustrative purposes to assist readers in their understanding of the Company's business and its financial performance. Such data is not intended to be an indication of any future results of operations of the Company and such data does not provide all information that would be provided with financial statements prepared in accordance with GAAP if the Company had accounted for its securitizations as secured financings.
Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Balance Sheet Data at: March 31, 2001 June 30, 2000
----------------------------------------------------------------------
Cash and cash equivalents $ 5,329 $ 14,792
Restricted cash 7,761 13,010
Receivables held for sale,
net 127,312 206,701
Retained interest in
securitized assets 266,115 208,431
Accrued interest
receivable 1,028 1,727
Property, equipment, and
leasehold improvements,
net 9,511 9,494
Other assets 27,082 23,983
---------------------------
Total assets $ 444,138 $ 478,138
===========================
Notes payable $ 122,022 $ 152,235
Long-term debt 155,000 177,000
Accrued interest payable 2,028 5,408
Amounts due to trusts 16,717 14,487
Dealer premiums payable 711 3,663
Current and deferred
income taxes payable 11,694 9,740
Other payables and accrued
expenses 12,431 5,576
---------------------------
Total liabilities 320,603 368,109
---------------------------
Common stock 58,733 58,632
Accumulated other
comprehensive earnings,
net of taxes 3,611 3,564
Retained earnings 61,191 47,833
---------------------------
Total shareholders'
equity 123,535 110,029
---------------------------
Total liabilities and
shareholders' equity $ 444,138 $ 478,138
===========================
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30+ Delinquency at: March 31, 2001 June 30, 2000 March 31, 2000
-----------------------------------------------
Tier I 3.04% 2.82% 2.73%
Tier II 12.51% 11.26% 15.41%
-----------------------------------------------
Total 3.10% 2.92% 2.91%
===============================================
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Allowance Data at:
Allowance for estimated
credit losses on
securitized receivables $ 143,270 $ 119,003 $ 105,916
Securitized receivables
serviced $ 3,228,640 $ 2,676,655 $ 2,411,047
Allowance as a percentage
of securitized
receivables serviced 4.44% 4.45% 4.39%
----------------------------------------------------------------------
Managed Receivable Data at:
Receivables held for sale
-------------------------
Tier I $ 120,872 $ 202,167 $ 290,500
Tier II 916 1,656 7,863
Securitized
-----------
Tier I 3,208,601 2,645,983 2,381,970
Tier II 20,039 30,672 29,078
Receivables serviced for
others 469 637 694
--------------------------------------------
Total Servicing
Portfolio $ 3,350,897 $ 2,881,115 $ 2,710,105
============================================
Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- ------------------------
Income Statement
Data for the
Period: 2001 2000 2001 2000
-------------------------------------------- ------------------------
Interest on
receivables held
for sale $ 10,727 $ 8,221 $ 35,951 $ 23,050
Retained
interest and other 8,379 6,704 23,684 18,874
---------------------- ------------------------
Total interest
income 19,106 14,925 59,635 41,924
Interest expense 8,903 6,805 28,422 19,548
---------------------- ------------------------
Net interest
margin 10,203 8,120 31,213 22,376
Provision for
estimated
credit losses 300 840 2,525 2,255
---------------------- ------------------------
Net interest
margin after
provision for
estimated
credit losses 9,903 7,280 28,688 20,121
Gain on sales of
receivables, net 12,880 2,754 28,552 10,545
Loss on interest
rate swaps on
securitized
receivables (10,475) -- (19,361) --
Gain (loss) on
interest rate
swaps on held for
sale receivables 3,122 -- (1,587) --
Servicing fees, net 7,805 6,217 22,150 18,473
Late charges and
other fees 1,924 1,667 5,390 4,680
---------------------- ------------------------
Other revenues 15,256 10,638 35,144 33,698
---------------------- ------------------------
Salaries and
benefits 8,814 7,354 25,222 21,018
Other general
and administrative
fees 6,017 5,215 17,457 15,122
---------------------- ------------------------
Total operating
expenses 14,831 12,569 42,679 36,140
---------------------- ------------------------
Earnings before
provision for
income taxes 10,328 5,349 21,153 17,679
Provision for
income taxes 3,794 2,065 7,795 6,828
---------------------- ------------------------
Net earnings $ 6,534 $ 3,284 $ 13,358 $ 10,851
====================== ========================
-------------------------------------------- ------------------------
Per Common Share
Data:
Earnings (diluted
and basic) $ 0.49 $ 0.25 $ 1.00 $ 0.82
Book value $ 9.29 $ 7.76 $ 9.29 $ 7.76
Weighted average
shares outstanding 13,298,482 13,277,632 13,308,178 13,264,175
----------------------------------------------------------------------
Receivable
Acquisitions: $ 336,630 $ 395,594 $ 1,402,266 $ 989,697
Receivables Sold: $ 430,003 $ 282,722 $ 1,440,003 $ 950,206
-------------------------------------------- ------------------------
Ratios:
Return on average
managed assets 0.71% 0.45% 0.50% 0.51%
Return on average
shareholders'
equity 22.40% 13.24% 15.81% 14.98%
Operating expenses
as a percentage of
average servicing
portfolio 1.76% 1.89% 1.75% 1.85%
-------------------------------------------- ------------------------
Portfolio
Performance:
Net credit loss
(annualized for
the period ended)
------------------
Tier I 2.59% 2.30% 2.36% 2.23%
Tier II 6.16% 8.24% 7.59% 9.21%
---------------------- ------------------------
Total 2.61% 2.38% 2.40% 2.35%
====================== ========================
-------------------------------------------- ------------------------
Pro forma information for the earnings impact of derivative
instruments on held for sale receivables related to FAS 133:
Total revenues $ 34,362 $ 25,563 $ 94,779 $ 75,622
Pro forma
adjustment (3,122) -- 1,587 --
---------------------- ------------------------
Pro forma total
revenues $ 31,240 $ 25,563 $ 96,366 $ 75,622
====================== ========================
Pro forma net
earnings $ 4,552 $ 3,284 $ 14,366 $ 10,851
Pro forma earnings
per common share
(diluted and basic) $ 0.34 $ 0.25 $ 1.08 $ 0.82
Pro forma return
on average managed
assets 0.49% 0.45% 0.54% 0.51%
Pro forma return on
average
shareholders'
equity 15.47% 13.24% 16.87% 14.98%
----------------------------------------------------------------------
Union Acceptance Corporation
Pro Forma Portfolio-Based Financial Data (1)
(Dollars in thousands)
(Unaudited)
----------------------------------------------------------------------
The pro forma portfolio-based statements of earnings were as
follows:
Three Months Ended Nine Months Ended
March 31 March 31
----------------------- ------------------------
2001 2000 2001 2000
----------------------- ------------------------
Interest income,
fee and other
income $ 110,576 $ 84,075 $ 315,289 $ 247,181
Funding costs (65,670) (48,829) (186,222) (145,405)
---------- ----------- ----------- -----------
Net margin 44,906 35,246 129,067 101,776
Operating expenses (14,831) (12,569) (42,679) (36,140)
Credit losses (22,067) (15,845) (58,444) (45,765)
---------- ----------- ----------- -----------
Pre-tax
portfolio-based
earnings 8,008 6,832 27,945 19,871
Income taxes (2) (2,955) (2,637) (10,312) (7,670)
---------- ----------- ----------- -----------
Net portfolio-based
earnings $ 5,053 $ 4,195 $ 17,632 $ 12,201
========== =========== =========== ===========
Portfolio-based
earnings per
share $ 0.38 $ 0.32 $ 1.33 $ 0.92
========== =========== =========== ===========
----------------------------------------------------------------------
The pro forma return on average managed receivables were as
follows:
Three Months Ended Nine Months Ended
March 31 March 31
----------------------- ------------------------
2001 2000 2001 2000
----------------------- ------------------------
Interest income,
fee and other
income 13.09% 12.65% 12.95% 12.67%
Funding costs -7.77% -7.35% -7.65% -7.45%
---------- ----------- ----------- -----------
Net margin 5.32% 5.30% 5.30% 5.22%
Operating expenses -1.76% -1.89% -1.75% -1.85%
Credit losses -2.61% -2.38% -2.40% -2.35%
---------- ----------- ----------- -----------
Pre-tax
portfolio-based
earnings 0.95% 1.03% 1.15% 1.02%
Income taxes -0.35% -0.40% -0.42% -0.39%
---------- ----------- ----------- -----------
Net portfolio-based
earnings 0.60% 0.63% 0.73% 0.63%
========== =========== =========== ===========
Average Managed
Receivables $3,379,047 $2,658,138 $ 3,246,809 $2,601,535
----------------------------------------------------------------------
The following is a reconciliation of the pro forma portfolio-based
net earnings to GAAP net earnings:
Three Months Ended Nine Months Ended
March 31 March 31
----------------------- ------------------------
2001 2000 2001 2000
----------------------- ------------------------
GAAP Net Earnings $ 6,534 $ 3,284 $ 13,358 $ 10,851
Gain on sales of
receivables, net (12,880) (2,754) (28,552) (10,545)
Retained interest
and other income (6,206) (4,977) (17,003) (13,699)
Servicing fee (7,805) (6,217) (22,150) (18,473)
Net margin 38,985 30,438 109,466 88,421
Credit losses (22,067) (15,845) (58,444) (45,765)
Provision for
estimated credit
losses 300 840 2,525 2,255
Loss on interest
rate swaps 7,353 -- 20,948 --
Net adjustments (2,320) 1,485 6,790 2,194
---------- ----------- ----------- -----------
Tax effect of
adjustments 839 (574) (2,516) (844)
---------- ----------- ----------- -----------
Net portfolio-based
earnings $ 5,053 $ 4,195 $ 17,632 $ 12,201
========== =========== =========== ===========
(1) These portfolio-based financial statements do not present the
Company's results of operations in accordance with GAAP and are
provided for illustrative purposes only.
(2) Tax effect is based upon the Company's effective tax rate for the
respective period.