Westcorp Revises Third Quarter Earnings Forecast

    IRVINE, Calif.--Sept. 21, 2001--Westcorp today announced that its third quarter earnings on both a reported and portfolio basis will be less than previously forecasted as a result of continued slowing in the economy. Reported earnings are expected to be approximately $8 million or $0.22 per diluted share for the third quarter of 2001 compared with $18.2 million or $0.57 per diluted share for the same period a year earlier and $16.9 million or $0.50 per diluted share last quarter. The company is scheduled to report third quarter earnings results on Oct. 16, 2001.
    The weakness in the economy has led to higher credit losses due to a higher number of repossessions and bankruptcies as well as lower wholesale prices for automobiles at auction. As a result, the company expects credit losses to be approximately 2.5% in the third quarter.
    Forecasted results for the third quarter include $28 million in provisions for credit losses in excess of chargeoffs as well as an additional $11 million in residual interest asset amortization expense. These non-cash charges are expected to impact third quarter reported earnings by $0.64 per diluted share. Westcorp has not created any new residual interest assets since the first quarter of 2000 and expects its residual interest assets to represent just 8% of equity by the end of the year.
    "In the face of continued weakness in the economy, exacerbated by the tragic events of last week, we are actively adding provisions for credit losses and increasing the rate of amortization on our residual interest assets," said Joy Schaefer, president of Westcorp. "We expect credit losses to peak in the fourth quarter and then begin to improve and stabilize in 2002. Our previously announced shift to a greater focus on prime credit quality contracts and new originations based on lower car values will minimize the long-term effects of the slowdown on our portfolio going forward."
    Credit losses may increase to as much as 3.00% in the fourth quarter of this year as a result of seasonal factors and the continued economic slowdown. Credit losses are estimated to be in the 2.3% to 2.6% range for 2002. As a result, the company expects fourth quarter earnings to be approximately $13 million or $0.35 per diluted share and 2002 earnings to range from $2.25 to $2.50 per diluted share.
    Portfolio basis earnings in the third quarter are expected to be $28 million or $0.76 per diluted share compared with $23.9 million or $0.75 per diluted share for the third quarter of last year and $23.8 million or $0.71 per diluted share reported in the second quarter of this year. Westcorp expects portfolio basis earnings to be approximately $24 million, or $0.68 per diluted share in the fourth quarter and increase to a range of $2.90 to $3.30 per share for 2002.
    Portfolio basis earnings present the company's results under the assumption that all 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 managed basis statements assist in better understanding its business. When securitizations are treated as secured financings, no gain on sale or subsequent contractual servicing and retained interest income is recognized. Instead, the earnings of the securitization trusts and related financing costs are reflected over the life of the underlying pool of contracts.
    Westcorp will host a conference call for analysts and investors at 8 a.m. (PDT) on Wednesday, Oct. 17, 2001. As part of this conference call, Westcorp management will discuss, at greater length, earnings results for the third quarter as well as management's outlook for the rest of 2001 and 2002. 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.
    Westcorp is a financial services holding company whose principal subsidiaries are WFS Financial Inc and Western Financial Bank. Westcorp is a publicly owned company whose common stock is traded on the New York Stock Exchange under the symbol WES. Information about Westcorp can be found at its Web site at www.westcorpinc.com.
    Westcorp, through its subsidiary, 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 www.wfsfinancial.com.
    Westcorp, through its subsidiary, Western Financial Bank, operates 25 retail bank branches throughout California and provides commercial banking services in Southern California. Information on the products and services offered by the bank can be found at its Web site at www.wfb.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 Westcorp. 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 world events or changes in general economic conditions and the effect of new laws, regulations and court decisions. You are cautioned not to place 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.