WFS Financial Reports First Quarter Earnings
IRVINE, Calif.--April 15, 2002--WFS Financial Inc today reported GAAP net income of $18.2 million, or $0.50 per diluted share for the first quarter of 2002 compared with $18.8 million, or $0.66 per diluted share for the same period a year ago.Earnings on a portfolio basis grew to $29.9 million, or $0.81 per diluted share for the first quarter of 2002 compared with $23.3 million, or $0.81 per diluted share for the same period a year earlier.
"Our strong first quarter results are indicative of our ability to successfully manage through various economic cycles such as the recent recession," said Tom Wolfe, president and CEO of WFS Financial. "In addition, we achieved these results even as we strengthened our balance sheet by reducing the level of residual interest assets, increasing our allowance for credit losses and issuing additional equity."
Earnings per share for the quarter were also impacted by the 33% increase in shares outstanding resulting from the issuance of 6.4 million shares through a rights offering completed by the company during the second quarter of last year and the issuance of 6.1 million shares through a rights offering successfully completed in the first quarter of this year.
The company raised a total of $226 million in additional capital from both of these offerings. This additional capital is designed to enhance shareholder value by supporting the growth the company continues to experience in its nationwide automobile finance business. For the quarter, total shareholders' equity increased by $132 million.
Automobile contract purchases totaled $1.3 billion for the first quarter of 2002, a 7% increase from the same period a year earlier. As a result of higher contract originations, the company's portfolio of managed automobile contracts reached $8.4 billion at March 31, 2002, up from $8.2 billion at Dec. 31, 2001. Reported earnings also continued to be impacted by the transitional effects related to the elimination of off balance sheet accounting for securitization transactions.
This includes $17 million in provisions for credit losses in excess of chargeoffs as the company continues to move its assets on balance sheet and $14 million of non-cash, residual interest asset amortization expense. The company has reduced its residual interest assets to $23 million at March 31, 2002 and expects this asset to be fully amortized no later than the end of the year.
Portfolio basis earnings treat all securitization transactions as on balance sheet transactions. Therefore, portfolio basis earnings are not impacted by the non-cash amortization expense of the residual interest asset recorded on a GAAP basis in connection with off balance sheet securitizations, nor are they impacted by higher provision for credit losses resulting from the transitional effect of treating newer securitization transactions as secured financings rather than sales.
Total revenues grew 29% for the three months ended March 31, 2002 to $132 million compared with $102 million for the same periods a year earlier.
Net interest income increased 57% to $103 million for the three months ended March 31, 2002 compared with $65.4 million for the same period a year earlier. Net interest margin for the three months ended March 31, 2002 was 6.78% compared with 7.23% for the same period a year earlier. Net interest income increased as more automobile contracts were held on the balance sheet even as net interest margins declined on an owned basis.
Total servicing income, which includes income from off balance sheet securitization transactions, declined to $29.1 million for the three months ended March 31, 2002 compared with $36.8 million for the same period a year earlier. This decline was the result of the company no longer treating securitization transactions as sales.
Provision for credit losses totaled $49.7 million for the three months ended March 31, 2002 compared with $20.1 million for the same period a year ago. The significant increase in provision for credit losses was the result of a higher level of automobile contracts held on the balance sheet resulting from accounting for securitization transactions as secured financings rather than sales and the slowdown in the economy. The allowance for credit losses as a percentage of owned contracts outstanding was 2.5% at March 31, 2002 and Dec. 31, 2001.
The percentage of outstanding contracts 30 days or more delinquent decreased 121 basis points to 2.51% at March 31, 2002 compared with 3.72% at Dec. 31, 2001. Annualized credit loss experience for the first quarter increased 90 basis points to 2.76% of average managed automobile contracts compared with 1.86% for the same period a year ago.
"We are beginning to see positive signs in our asset quality trends that suggest the worst part of the economic recession may be behind us," said Wolfe. "We experienced a lower than expected number of repossessions, higher resale prices at auctions and lower delinquencies in the portfolio for the first quarter. We expect to see further improvement in our asset quality trends during the rest of this year."
Operating expenses totaled $52.0 million or 2.5% of average serviced contracts for the first quarter of 2002 compared with $50.7 million or 2.9% for the same period a year ago.
WFS, along with its parent company, Westcorp will host a conference call for analysts and investors at 8 a.m. (PDT) on Tuesday, April 16, 2002. As part of this conference call, the company's management will discuss, at greater length, earnings results for the quarter as well as management's outlook for the remainder of 2002.
For a live Internet broadcast of this conference call, go to the company's Web site at http://www.wfsfinancial.com 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 pre-owned prime and non-prime credit quality automobile contracts through its nationwide relationships with automobile dealers.
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to the company's future prospects, developments and business strategies. These statements are subject to uncertainties and factors relating to the company's operations and business environment, all of which are difficult to predict and many of which are beyond its control, that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements.
These forward-looking statement are identified by their use of terms and phrases as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," and similar terms and phrases, including references to assumptions.
The following factors are among those that may cause actual results to differ materially from the forward-looking statements:
| -- | Changes in general economic and business conditions; |
| -- | Interest rate fluctuations; |
| -- | The company's financial condition and liquidity, as well as future cash flow earnings; |
| -- | Competition; |
| -- | The company's level of operating expenses; |
| -- | The effect of new laws, regulations, court decisions or significant litigation; |
| -- | The availability of sources of funding; |
| -- | The level of chargeoffs on the automobile contracts that the company originates; and |
| -- | Other significant unexpected events. |
If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected. The company does not undertake to update its forward-looking statements to reflect future events or circumstances.
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
2002 2001
(Dollars in thousands,
except per share amounts)
REVENUES
Interest income $ 171,432 $ 122,329
Interest expense 68,554 56,952
Net interest income 102,878 65,378
Servicing income 29,050 36,755
TOTAL REVENUES 131,928 102,133
EXPENSES
Provision for credit losses 49,708 20,068
Operating expenses:
Salaries and associate benefits 31,624 31,301
Credit and collections 8,029 6,403
Data processing 4,261 4,224
Miscellaneous 8,095 8,763
TOTAL OPERATING EXPENSES 52,009 50,691
TOTAL EXPENSES 101,717 70,759
INCOME BEFORE INCOME TAX 30,211 31,374
Income tax 11,997 12,606
NET INCOME $ 18,214 $ 18,768
Net income per common share:
Basic $ 0.50 $ 0.66
Diluted $ 0.50 $ 0.66
Weighted average number of common shares
outstanding:
Basic 36,671,932 28,456,296
Diluted 36,732,122 28,562,625
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, 2002 Dec. 31, 2001
(Unaudited)
(Dollars in thousands)
ASSETS
Cash and short-term investments $ 772,300 $ 30,100
Investment securities available
for sale 4,546 4,668
Contracts receivable 5,913,430 5,215,718
Allowance for credit losses (147,732) (131,827)
Contracts receivable, net 5,765,698 5,083,891
Amounts due from trusts 128,622 184,952
Retained interest in securitized
assets 22,536 37,392
Premises and equipment, net 32,403 33,826
Accrued interest receivable 38,895 37,100
Other assets 60,980 78,828
TOTAL ASSETS $ 6,825,980 $ 5,490,757
LIABILITIES
Lines of credit --
parent $ 51,731 $ 421,175
Notes payable on automobile secured
financing 5,559,316 4,005,925
Notes payable -- parent 150,000 67,500
Amounts held on behalf of trustee 416,951 476,910
Other liabilities 50,907 53,954
TOTAL LIABILITIES 6,228,905 5,025,464
SHAREHOLDERS' EQUITY
Common stock, (no par value;
authorized 50,000,000 shares;
issued and outstanding 41,001,500
shares in 2002 and 34,820,178 in 2001) 338,058 227,568
Paid-in capital 4,337 4,337
Retained earnings 280,924 262,710
Accumulated other comprehensive loss,
net of tax (26,244) (29,322)
TOTAL SHAREHOLDERS' EQUITY 597,075 465,293
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,825,980 $ 5,490,757
WFS FINANCIAL INC AND SUBSIDIARIES
OTHER SELECTED FINANCIAL DATA
(UNAUDITED)
(Dollars in thousands)
Three Months Ended
March 31,
2002 2001
CONTRACT
ORIGINATIONS $1,265,526 $1,182,431
March 31, 2002 Dec. 31, 2001
MANAGED
CONTRACTS Amount Percent Amount Percent
Owned
contracts $5,804,606 69.06% $5,119,044 62.79%
Off balance
sheet
securitizations 1,005,549 11.96 1,215,058 14.90
Whole loan
sales to
parent 1,595,479 18.98 1,818,780 22.31
Total managed
contracts $8,405,634 100.00% $8,152,882 100.00%
MANAGED
DELINQUENCY AND
REPOSSESSIONS March 31, 2002 Dec. 31, 2001
Amount Percent Amount Percent
Contracts
managed at
end of period $8,405,634 $8,152,882
Period of
delinquency
30-59 days $ 149,217 1.78% $ 217,873 2.67%
60 days or
more 62,026 0.73 85,290 1.05
Total contracts
delinquent $ 211,243 2.51% $ 303,163 3.72%
Total
repossessions $ 6,141 0.07% $ 7,553 0.09%
MANAGED CONTRACTS Three Months Ended
LOSS EXPERIENCE March 31,
2002 2001
Contracts managed at end of
period $ 8,405,634 $ 7,190,457
Average contracts managed during
the period $ 8,273,297 $ 6,998,682
Gross charge offs $ 79,792 $ 48,226
Recoveries 22,633 15,746
Net charge offs $ 57,159 $ 32,480
Net charge offs as a percentage of
average managed contracts
outstanding during period 2.76% 1.86%
WFS FINANCIAL INC AND SUBSIDIARIES
PORTFOLIO BASIS STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
2002 2001
(Dollars in thousands,
except per share
amounts)
Interest income $ 259,796 $ 233,250
Interest expense 119,545 123,076
Net interest income 140,251 110,174
Net chargeoffs (a) 57,159 32,481
Provision for growth (b) 2,598 5,607
Provision for credit losses 59,757 38,088
Net interest income after
provision for credit losses 80,494 72,086
Other income 21,588 18,002
Operating expenses 52,433 51,179
Income before income tax 49,649 38,909
Income tax (c) 19,716 15,634
Portfolio basis net income $ 29,933 $ 23,275
Portfolio basis net income
per common share -- diluted $ 0.81 $ 0.81
(a) Represents actual chargeoffs incurred during the period, net
of recoveries.
(b) Represents additional allowance for credit losses that would
be set aside due to an increase in the managed portfolio.
(c) 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,
2002 (a) 2001 (a)
Interest income 12.8% 13.6%
Interest expense 5.9 7.0
Net interest income 6.9 6.6
Net chargeoffs 2.8 1.9
Provision for growth 0.1 0.3
Provision for credit losses 2.9 2.2
Net interest income after
provision for credit losses 4.0 4.4
Other income 1.1 1.0
Operating expenses 2.6 2.9
Income before income tax 2.5 2.5
Income tax 1.0 0.9
Portfolio basis net income 1.5% 1.6%
Average managed contracts $ 8,273,297 $ 6,998,682
(a) Rates are calculated by dividing amounts by average managed
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,
2002 2001
(Dollars in thousands)
GAAP basis net income $ 18,214 $ 18,768
Portfolio basis adjustments:
Retained interest expense (income) 11,649 (2,836)
Contractual servicing income (19,111) (15,917)
Net interest income 37,373 44,820
Provision for credit losses (10,049) (18,020)
Operating expenses (424) (512)
Total portfolio basis adjustments 19,438 7,535
Net tax effect (a) 7,719 3,028
Portfolio basis net
income $ 29,933 $ 23,275
(a) 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, 2002
Period 1998-A 1998-B 1998-C 1999-A 1999-B 1999-C 2000-A 2000-B
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.04% 0.02% 0.04% 0.04% 0.04% 0.02% 0.03% 0.02%
3 0.11% 0.08% 0.11% 0.11% 0.11% 0.10% 0.10% 0.09%
4 0.25% 0.18% 0.23% 0.20% 0.26% 0.25% 0.20% 0.24%
5 0.44% 0.38% 0.39% 0.33% 0.47% 0.40% 0.36% 0.39%
6 0.66% 0.59% 0.50% 0.46% 0.66% 0.56% 0.55% 0.59%
7 0.95% 0.83% 0.61% 0.62% 0.87% 0.71% 0.71% 0.78%
8 1.23% 1.03% 0.75% 0.76% 1.00% 0.86% 0.91% 0.99%
9 1.50% 1.21% 0.86% 0.92% 1.13% 1.01% 1.10% 1.17%
10 1.79% 1.40% 1.00% 1.11% 1.24% 1.14% 1.27% 1.33%
11 2.03% 1.53% 1.17% 1.30% 1.35% 1.34% 1.45% 1.44%
12 2.21% 1.62% 1.32% 1.47% 1.44% 1.52% 1.58% 1.57%
13 2.39% 1.74% 1.48% 1.61% 1.58% 1.74% 1.73% 1.72%
14 2.49% 1.84% 1.66% 1.73% 1.74% 1.94% 1.85% 1.86%
15 2.60% 1.96% 1.79% 1.81% 1.85% 2.09% 2.00% 2.04%
16 2.72% 2.10% 1.91% 1.89% 2.03% 2.27% 2.15% 2.24%
17 2.85% 2.22% 2.01% 2.00% 2.16% 2.39% 2.37% 2.39%
18 2.98% 2.40% 2.07% 2.10% 2.30% 2.53% 2.52% 2.55%
19 3.11% 2.55% 2.11% 2.24% 2.42% 2.67% 2.67% 2.73%
20 3.25% 2.69% 2.17% 2.35% 2.50% 2.81% 2.83% 2.93%
21 3.35% 2.79% 2.24% 2.46% 2.58% 2.92% 2.99% 3.12%
22 3.48% 2.85% 2.34% 2.55% 2.67% 3.10% 3.16% 3.27%
23 3.62% 2.89% 2.43% 2.63% 2.77% 3.28% 3.34% 3.38%
24 3.70% 2.92% 2.52% 2.71% 2.87% 3.38% 3.49%
25 3.75% 2.97% 2.62% 2.77% 3.01% 3.55% 3.63%
26 3.80% 3.04% 2.71% 2.82% 3.14% 3.68%
27 3.87% 3.13% 2.80% 2.89% 3.16% 3.84%
28 3.92% 3.18% 2.87% 2.96% 3.29% 3.98%
29 3.98% 3.24% 2.90% 3.02% 3.40% 4.14%
30 4.06% 3.32% 2.95% 3.09% 3.50% 4.19%
31 4.11% 3.38% 3.00% 3.17% 3.61%
32 4.17% 3.43% 3.02% 3.20% 3.68%
33 4.22% 3.47% 3.08% 3.27% 3.74%
34 4.27% 3.48% 3.14% 3.35%
35 4.32% 3.52% 3.15% 3.41%
36 4.34% 3.54% 3.21% 3.47%
37 4.35% 3.58% 3.25% 3.52%
38 4.38% 3.63% 3.30% 3.55%
39 4.39% 3.66% 3.35%
40 4.43% 3.65% 3.39%
41 4.45% 3.69% 3.39%
42 4.50% 3.73%
43 4.47% 3.75%
44 4.50% 3.79%
45 4.52% 3.81%
46 4.55% 3.81%
47 4.56%
48 4.56%
49 4.56%
Prime
Mix 57% 67% 70% 70% 70% 67% 69% 69%
WFS FINANCIAL INC AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT MARCH 31, 2002
Period 2000-C 2000-D
1 0.00% 0.00%
2 0.04% 0.04%
3 0.13% 0.11%
4 0.27% 0.24%
5 0.46% 0.39%
6 0.65% 0.54%
7 0.81% 0.74%
8 0.93% 0.93%
9 1.07% 1.13%
10 1.24% 1.34%
11 1.41% 1.50%
12 1.62% 1.74%
13 1.86% 1.95%
14 2.04% 2.21%
15 2.25% 2.48%
16 2.45% 2.71%
17 2.68% 2.89%
18 2.88%
19 3.08%
20 3.23%
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
Prime
Mix 68% 70%
WFS FINANCIAL INC AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT MARCH 31, 2002
Period 2001-A 2001-B 2001-C 2002-1
1 0.00% 0.00% 0.00% 0.00%
2 0.03% 0.03% 0.04%
3 0.09% 0.10% 0.09%
4 0.20% 0.21% 0.20%
5 0.33% 0.33% 0.35%
6 0.50% 0.50% 0.49%
7 0.70% 0.69% 0.65%
8 0.84% 0.87% 0.81%
9 1.04% 1.05%
10 1.24% 1.22%
11 1.45% 1.36%
12 1.67%
13 1.90%
14 2.09%
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Prime
Mix 72% 73% 76% 70%