WFS Financial Reports Record First Quarter Earnings Results
IRVINE, Calif.--April 24, 2001--WFS Financial Inc today reported record earnings of $18.8 million, or $0.66 per diluted share for the first quarter of 2001 compared with $14.8 million, or $0.54 per diluted share for the same period a year earlier. On a comparative basis, net income increased 27% and earnings per share rose 22%.WFS Financial ("WFS"), continued to experience considerable origination growth with automobile contract purchases totaling $1.2 billion for the first quarter of 2001. This represents a 22% increase from the $970 million of automobile contracts purchased during the first quarter of 2000. As a result of higher contract originations, WFS' portfolio of serviced contracts reached $7.2 billion at March 31, 2001, up from $6.8 billion at Dec. 31, 2000. During the quarter, WFS issued $1 billion of automobile asset-backed securities accounted for as a secured financing.
Annualized credit loss experience for the first quarter improved by 15 basis points to 1.9% of average serviced automobile contracts compared with 2% a year earlier. Contracts 30 days or more delinquent improved 90 basis points to 2.3% at March 31, 2001 compared with 3.2% at Dec. 31, 2000.
"Our continued improvement in credit trends demonstrates the success of our credit scoring, underwriting and servicing technology and processes as well as our increased focus on prime lending over the past several years," said Schaefer.
Total revenues increased 21% to $102 million for the three months ended March 31, 2001 compared with $84.7 million for the same period a year earlier. Net interest income almost doubled while servicing income declined as the company accounts for its newer securitization transaction as secured financings rather than sales. Revenues from securitization transactions treated as sales are reported as servicing income while revenues from securitization transactions treated as secured financings are reported as net interest income.
Major components of revenue include net interest income that increased 75% to $65.4 million for the three months ended March 31, 2001 compared with $37.3 million for the period a year earlier. Servicing income totaled $36.8 million for the three months ended March 31, 2001 compared with $39.7 million for the same period a year ago.
The provision for credit losses was $20.1 million for the three months ended March 31, 2001 compared with $11.7 million for the same period a year ago. The increase in provision for credit losses was the result of a higher level of contracts held on the balance sheet resulting from the company accounting for its securitization transactions as secured financings rather than sales. The allowance for credit losses as a percentage of owned contracts outstanding totaled 1.9% at March 31, 2001 compared with 2.3% at Dec. 31, 2000.
Operating expenses totaled $50.7 million or 2.9% of average serviced contracts for the first quarter of 2001 compared with $47.7 million or 3.5% for the same period a year ago. Operating costs as a percent of total revenues declined to 50% for the first quarter of 2001 compared with 56% for the same period a year earlier.
During the second quarter of 2001, the company expects to sell approximately $1.5 billion of automobile contracts to its ultimate parent, Westcorp. This sale is designed to efficiently utilize capital and allow continued growth at WFS. The company expects to continue to service the contracts it intends to sell.
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 the whole loan sale completed in the third quarter of 2000 and 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 and believes that these portfolio basis statements assist in better understanding its business. If treated as secured financings, no gain on sale or subsequent contractual servicing and retained interest income is recognized. Instead, the earnings of the contracts in the securitization trusts and related financing costs are reflected over the life of the underlying pool of contracts.
On a portfolio basis, WFS earned $23.3 million, or $0.81 per diluted share for the first quarter of 2001 compared with $14.9 million, or $0.54 per diluted share for the same period a year earlier.
"Differences between portfolio basis earnings and reported earnings during the year 2000 and 2001 represent the transitional effect of treating our newer securitization transactions as secured financings rather than sales," said Schaefer.
"We expect that our reported earnings will ultimately approach our portfolio basis earnings as we continue to treat our future securitization transactions as secured financings."
WFS will host a conference call for analysts and investors at 9 a.m. (PDT) on Wednesday, April 25, 2001. As part of this conference call, WFS management will discuss, at greater length, earnings results for the first quarter as well as management's outlook for the rest of 2001. 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. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.
WFS is one of the nation's largest independent automobile finance companies. WFS specializes in originating, securitizing, and servicing new and used prime and non-prime credit quality automobile contracts through its nationwide relationships with automobile dealers. Information about WFS can be found at its Web site at http://www.wfsfinancial.com.
This news release contains forward-looking statements. These forward-looking statements are subject to many risks and uncertainties that could cause actual results to differ significantly from historical results or from those anticipated by WFS. The most significant risks and uncertainties the company faces are the level of chargeoffs, as an increase in the level of chargeoffs will decrease its earnings; the company's ability to originate new contracts in a sufficient amount to reach its needs, as a decrease in the amount of contracts it originates will decrease its earnings; a decrease in the difference between the average interest rate the company receives on contracts it originates and the rate of interest it must pay to fund such contracts, as a decrease will reduce its earnings; the continued availability of sources of funding for its operations, as a reduction in the availability of funding will reduce its ability to originate contracts; the level of notes treated as secured financings, as the level will impact the timing of revenue recognized; and the level of operating costs, as an increase in those costs will reduce its net earnings.
There are other risks and uncertainties the company faces, including the effect of changes in general economic conditions and the effect of new laws, regulations and court decisions. You are cautioned not to place undue reliance on forward-looking statements. You should carefully review the factors referred to above and other documents the company files from time to time with the Securities and Exchange Commission, including quarterly reports on Form 10-Q and annual reports on Form 10-K.
WFS FINANCIAL INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, 2001 2000 (Dollars in thousands, except per share amounts) REVENUES Interest income $ 122,329 $ 61,025 Interest expense 56,975 23,728 Net interest income 65,354 37,297 Servicing income 36,755 39,690 Gain on sale of contracts 7,719 TOTAL REVENUES 102,109 84,706 EXPENSES Provision for credit losses 20,068 11,677 Operating expenses: Salaries and associate benefits 31,277 30,587 Credit and collections 6,403 5,410 Data processing 4,224 3,845 Miscellaneous 8,763 7,837 TOTAL OPERATING EXPENSES 50,667 47,679 TOTAL EXPENSES 70,735 59,356 INCOME BEFORE INCOME TAX 31,374 25,350 Income tax 12,606 10,584 NET INCOME $ 18,768 $ 14,766 Net income per common share: Basic $ 0.66 $ 0.54 Diluted $ 0.66 $ 0.54 Weighted average number of common shares outstanding: Basic 28,456,296 27,424,479 Diluted 28,562,625 27,547,335 WFS FINANCIAL INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) March 31, 2001 December 31, 2000 (Dollars in thousands) ASSETS Cash and short-term investments $ 19,261 $ 25,296 Investment securities available for sale 6,166 6,517 Contracts receivable 4,001,657 3,049,475 Allowance for credit losses (77,624) (71,308) Contracts receivable, net 3,924,033 2,978,167 Amounts due from trusts 304,121 366,125 Retained interest in securitized assets 98,167 111,558 Premises and equipment, net 37,859 36,526 Accrued interest receivable 27,023 23,116 Other assets 15,496 27,832 TOTAL ASSETS $ 4,432,126 $ 3,575,137 LIABILITIES Secured lines of credit - parent $ 248,139 $ 235,984 Notes payable on automobile secured financing 3,080,798 2,249,363 Notes payable - parent 146,219 146,219 Amounts held on behalf of trustee 582,135 590,715 Other liabilities 47,134 35,651 TOTAL LIABILITIES 4,104,425 3,257,932 SHAREHOLDERS' EQUITY Common stock, (no par value; authorized 50,000,000 shares; issued and outstanding 28,463,426 shares in 2001 and 28,446,837 in 2000) 112,200 112,070 Paid-in capital 4,337 4,337 Retained earnings 219,829 201,062 Accumulated other comprehensive loss, net of tax (8,665) (264) TOTAL SHAREHOLDERS' EQUITY 327,701 317,205 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,432,126 $ 3,575,137 WFS FINANCIAL INC AND SUBSIDIARIES OTHER SELECTED FINANCIAL DATA (UNAUDITED) (Dollars in thousands) Three Months Ended March 31, 2001 2000 CONTRACT ORIGINATIONS $ 1,182,431 $ 970,481 Contract sales $ 660,000 Secured financing $ 1,000,000 540,000 CONTRACT SALES AND SECURITIZATIONS $ 1,000,000 $ 1,200,000 SERVICED DELINQUENCY March 31, 2001 December 31, 2000 Amount Percent Amount Percent Contracts serviced at end of period $7,190,457 $6,818,182 Period of delinquency 30-59 days $ 113,434 1.58% $ 157,843 2.32% 60 days or more 52,159 0.73 59,166 0.86 Total contracts delinquent $ 165,593 2.30% $ 217,009 3.18% SERVICED CONTRACT Three Months Ended LOSS EXPERIENCE March 31, 2001 2000 Contracts serviced at end of period $ 7,190,457 $ 5,664,144 Average contracts serviced during the period $ 6,998,682 $ 5,480,129 Gross charge offs $ 48,226 $ 40,952 Recoveries 15,746 13,484 Net charge offs $ 32,480 $ 27,468 Net charge offs as a percentage of average contracts outstanding during period 1.86% 2.01% WFS FINANCIAL INC AND SUBSIDIARIES PORTFOLIO BASIS STATEMENTS OF INCOME (UNAUDITED) Three Months Ended March 31, 2001 2000 (Dollars in thousands, except per share amounts) Interest income $ 233,250 $ 180,470 Interest expense 123,076 86,876 Net interest income 110,174 93,594 Net chargeoffs(1) 32,481 27,466 Provision for growth(2) 5,607 5,165 Provision for credit losses 38,088 32,631 Net interest income after provision for credit losses 72,086 60,963 Other income 18,002 14,692 Operating expenses 51,179 50,112 Income before income tax 38,909 25,543 Income tax(3) 15,634 10,665 Portfolio basis net income $ 23,275 $ 14,878 Portfolio basis net income per common share - diluted $ 0.81 $ 0.54 (1) Represents actual chargeoffs incurred during the period, net of recoveries. (2) Represents additional allowance for credit losses that would be set aside due to an increase in the serviced portfolio. (3) Such tax effect is based upon the company's tax rate for the respective period. WFS FINANCIAL INC AND SUBSIDIARIES PORTFOLIO BASIS YIELD TABLE (UNAUDITED) Three Months Ended March 31, 2001(1) 2000(1) Interest income 13.6% 13.2% Interest expense 7.0 6.3 Net interest income 6.6 6.9 Net chargeoffs 1.9 2.0 Provision for growth 0.3 0.4 Provision for credit losses 2.2 2.4 Net interest income after provision for credit losses 4.4 4.5 Other income 1.0 1.1 Operating expenses 2.9 3.7 Income before income tax 2.5 1.9 Income tax 0.9 0.8 Portfolio basis net income 1.6% 1.1% Average serviced contracts $ 6,998,682 $ 5,480,129 (1) Rates are calculated by dividing amounts by average serviced contracts for the respective periods. WFS FINANCIAL INC AND SUBSIDIARIES RECONCILIATION OF GAAP BASIS NET INCOME TO PORTFOLIO BASIS NET INCOME (UNAUDITED) Three Months Ended March 31, 2001 2000 GAAP basis net income $ 18,768 $ 14,766 Portfolio basis adjustments: Gain on sales of contracts (7,719) Retained interest income (2,836) (13,316) Contractual servicing income (15,917) (11,682) Net interest income 44,820 55,635 Provision for credit losses (18,020) (20,954) Operating expenses (512) (1,771) Total portfolio basis adjustments 7,535 193 Net tax effect(1) 3,028 81 Portfolio basis net income $ 23,275 $ 14,878 (1) Such tax is based on the company's tax rate for the respective period. WFS FINANCIAL INC AND SUBSIDIARIES CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED) AT MARCH 31, 2001 Period 1997 1997 1997 1998 1998 1998 1999 1999 1999 2000 -B -C -D -A -B -C -A -B -C -A 1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2 0.06% 0.05% 0.05% 0.04% 0.02% 0.04% 0.04% 0.04% 0.02% 0.03% 3 0.15% 0.12% 0.14% 0.11% 0.08% 0.11% 0.11% 0.11% 0.10% 0.10% 4 0.33% 0.29% 0.31% 0.25% 0.18% 0.23% 0.20% 0.26% 0.25% 0.20% 5 0.56% 0.46% 0.56% 0.44% 0.38% 0.39% 0.33% 0.47% 0.40% 0.36% 6 0.77% 0.67% 0.75% 0.66% 0.59% 0.50% 0.46% 0.66% 0.56% 0.55% 7 1.10% 0.93% 0.99% 0.95% 0.83% 0.61% 0.62% 0.87% 0.71% 0.71% 8 1.40% 1.16% 1.24% 1.23% 1.03% 0.75% 0.76% 1.00% 0.86% 0.91% 9 1.70% 1.37% 1.47% 1.50% 1.21% 0.86% 0.92% 1.13% 1.01% 1.10% 10 2.00% 1.66% 1.75% 1.79% 1.40% 1.00% 1.11% 1.24% 1.14% 1.27% 11 2.22% 1.94% 2.06% 2.03% 1.53% 1.17% 1.30% 1.35% 1.34% 1.45% 12 2.43% 2.16% 2.35% 2.21% 1.62% 1.32% 1.47% 1.44% 1.52% 1.58% 13 2.66% 2.40% 2.63% 2.39% 1.74% 1.48% 1.61% 1.58% 1.74% 1.73% 14 2.91% 2.65% 2.86% 2.49% 1.84% 1.66% 1.73% 1.74% 1.94% 15 3.15% 2.90% 3.05% 2.60% 1.96% 1.79% 1.81% 1.85% 2.09% 16 3.47% 3.15% 3.19% 2.72% 2.10% 1.91% 1.89% 2.03% 2.27% 17 3.77% 3.36% 3.32% 2.85% 2.22% 2.01% 2.00% 2.16% 2.39% 18 3.97% 3.55% 3.42% 2.98% 2.40% 2.07% 2.10% 2.30% 2.53% 19 4.20% 3.70% 3.50% 3.11% 2.55% 2.11% 2.24% 2.42% 20 4.39% 3.81% 3.60% 3.25% 2.69% 2.17% 2.35% 2.50% 21 4.53% 3.91% 3.69% 3.35% 2.79% 2.24% 2.46% 2.58% 22 4.67% 4.00% 3.81% 3.48% 2.85% 2.34% 2.55% 23 4.75% 4.11% 3.96% 3.62% 2.89% 2.43% 2.63% 24 4.81% 4.21% 4.10% 3.70% 2.92% 2.52% 2.71% 25 4.88% 4.30% 4.23% 3.75% 2.97% 2.62% 2.77% 26 4.94% 4.44% 4.34% 3.80% 3.04% 2.71% 2.82% 27 5.04% 4.56% 4.44% 3.87% 3.13% 2.80% 28 5.11% 4.66% 4.51% 3.92% 3.18% 2.87% 29 5.21% 4.77% 4.54% 3.98% 3.24% 2.90% 30 5.31% 4.79% 4.56% 4.06% 3.32% 31 5.40% 4.83% 4.57% 4.11% 3.38% 32 5.48% 4.86% 4.63% 4.17% 3.43% 33 5.52% 4.88% 4.67% 4.22% 3.47% 34 5.54% 4.90% 4.71% 4.27% 3.48% 35 5.56% 4.92% 4.76% 4.32% 36 5.58% 4.98% 4.80% 4.34% 37 5.61% 5.01% 4.84% 4.35% 38 5.64% 5.06% 4.89% 39 5.66% 5.10% 4.92% 40 5.67% 5.14% 4.92% 41 5.69% 5.17% 42 5.71% 5.17% 43 5.72% 5.17% 44 5.74% 45 5.74% 46 5.73% 47 48 49 50 51 52 53 54 55 Prime Mix 55% 53% 49% 57% 67% 70% 70% 70% 67% 69% WFS FINANCIAL INC AND SUBSIDIARIES CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED) AT MARCH 31, 2001 Period 2000-B 2000-C 2000-D 2001-A 1 0.00% 0.00% 0.00% 0.00% 2 0.02% 0.04% 0.04% 0.03% 3 0.09% 0.13% 0.11% 4 0.24% 0.27% 0.24% 5 0.39% 0.46% 0.39% 6 0.59% 0.65% 7 0.78% 0.81% 8 0.99% 0.93% 9 1.17% 10 1.33% 11 1.44% 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 Prime Mix 69% 68% 70% 72%