Westcorp Reports Record First Quarter Net Income
IRVINE, Calif.--April 23, 2003--| -- | Net income rose 40% to a record $23.5 million for the quarter |
| -- | Earnings per share increased 30% to $0.60 for the quarter |
| -- | Total revenues grew 22% to $194 million for the quarter |
| -- | Automobile delinquencies declined 109 basis points to 2.41% at end of the quarter |
| -- | Remaining off balance sheet trusts were re-consolidated |
Westcorp today reported that net income increased 40% to a record $23.5 million for the first quarter of 2003 compared with $16.9 million for the same period a year ago. Earnings per diluted share rose 30% to $0.60 for the first quarter of 2003 compared with $0.46 for the same period a year earlier.
"Our record earnings represent the culmination of eliminating off balance sheet accounting as well as our ability to effectively manage our business through a difficult business environment," said Tom Wolfe, president of Westcorp. "Our earnings results are no longer based on estimated future cash flows from securitization transactions but rather actual cash flows earned over the life of the automobile contracts that we originate."
Annualized credit loss experience for the first quarter increased 10 basis points to 2.86% of average managed automobile contracts compared with 2.76% for the same period a year ago. The percentage of outstanding contracts 30 days or more delinquent improved 109 basis points to 2.41% at March 31, 2003 compared with 3.50% at Dec. 31, 2002. The allowance for credit losses as a percentage of owned contracts outstanding was 2.8% at March 31, 2003 compared with 2.9% at Dec. 31, 2002.
"Our credit loss experience this quarter reflects continued general weakness in the economy and depressed wholesale used car prices," said Wolfe. "However, the improvement in the percentage of automobile contracts delinquent, the percentage of repossessed automobiles in inventory and our shift to a higher concentration of prime credit quality originations are key indicators that credit trends will improve during the next few quarters."
Automobile contract purchases totaled $1.4 billion for the first quarter of 2003, 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 $9.7 billion at March 31, 2003, up from $9.4 billion at Dec. 31, 2002.
Total revenues grew 22% for the three months ended March 31, 2003 to $194 million compared with $159 million for the same period a year earlier.
Net interest income increased 17% to $166 million for the three months ended March 31, 2003 compared with $142 million for the same period a year ago. Net interest margin for the three months ended March 31, 2003 was 5.02% compared with 5.57% for the same period a year earlier. Net interest income increased as more automobile contracts were held on the balance sheet offset by narrower net interest margins as the company continues to shift its portfolio to a higher percentage of prime credit quality automobile contracts.
Total deposits grew 11% or $213 million to $2.1 billion at March 31, 2003 compared with $1.9 billion after the company's sale of its Northern California retail banking offices in September 2002 with the growth almost entirely in transaction accounts. During the quarter, the company opened its first new Southern California retail banking office and expects to open three more locations during the remainder of the year.
Total noninterest income, which includes primarily automobile servicing related fee income, improved 62% to $27.8 million for the three months ended March 31, 2003 compared with $17.2 million for the same period a year earlier. This improvement was primarily the result of the elimination of non-cash amortization of residual interests and an increase in total managed automobile contracts.
Noninterest expense totaled $68.4 million or 35% of total revenues for the first quarter of 2003 compared with $60.9 million or 38% for the same period a year ago. The increase in noninterest expense was primarily the result of higher collection related costs.
Provision for credit losses totaled $79.9 million for the three months ended March 31, 2003 compared with $65.7 million for the same period a year ago. The increase is primarily the result of higher credit loss experience as well as setting aside allowance for credit losses for re-consolidated automobile contracts from securitization trusts formerly treated as off balance sheet transactions.
Effective Jan. 1, 2003, the company re-consolidated the remaining assets of trusts for all securitization transactions that were initially treated as sales for accounting purposes. There was no gain or loss recorded as a result of this re-consolidation. The re-consolidation of these assets represents the final step taken by the company to eliminate gain on sale accounting.
Earnings Conference Call
Westcorp, along with its subsidiary WFS Financial, will host a conference call for analysts and investors at 9 a.m. (PDT) on Thursday, April 24, 2003. As part of this conference call, the company's management will discuss earnings results for the quarter. For a live Internet broadcast of this conference call, go to the company's Web site at http://www.westcorpinc.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.
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.
Westcorp is an equal credit opportunity lender. The company does not discriminate in any credit transactions on the basis of race, color, national origin, religion, sex, marital status, or age.
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 pre-owned 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.
Westcorp, through its subsidiary, Western Financial Bank, operates 18 retail bank branches 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 http://www.wfb.com.
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 statements are identified by use of terms and phrases such 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 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.
A further list of these risks, uncertainties and other matters can be found in the company's filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the company's actual results may vary materially from those expected, estimated or projected. The information contained in this news release is as of April 23, 2003. The company assumes no obligation to update any forward-looking statements to reflect future events or circumstances.
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended March 31,
2003 2002
(Dollars in thousands,
except share and per
share amounts)
Interest income:
Loans, including fees $281,288 $232,912
Mortgage-backed securities
and other 26,214 29,284
TOTAL INTEREST INCOME 307,502 262,196
Interest expense:
Deposits 17,556 21,010
Notes payable on automobile
secured financing 110,799 92,018
Other 12,857 7,042
TOTAL INTEREST EXPENSE 141,212 120,070
NET INTEREST INCOME 166,290 142,126
Provision for credit losses 79,884 65,698
NET INTEREST INCOME AFTER
PROVISION FOR CREDIT LOSSES 86,406 76,428
Noninterest income:
Automobile lending 20,949 11,674
Other 6,804 5,485
TOTAL NONINTEREST INCOME 27,753 17,159
Noninterest expense:
Salaries and associate benefits 39,455 34,871
Credit and collections 9,546 8,077
Data processing 4,568 4,580
Other 14,870 13,331
TOTAL NONINTEREST EXPENSE 68,439 60,859
INCOME BEFORE INCOME TAX 45,720 32,728
Income tax 18,226 12,964
INCOME BEFORE MINORITY INTEREST 27,494 19,764
Minority interest in earnings of subsidiaries 3,945 2,911
NET INCOME $23,549 $16,853
Net income per common share:
Basic $0.60 $0.46
Diluted $0.60 $0.46
Weighted average number of common shares
outstanding:
Basic 39,202,850 36,791,744
Diluted 39,452,915 36,980,861
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
March 31, Dec. 31,
2003 2002
(Dollars in thousands)
ASSETS
Cash and due from banks $93,202 $84,215
Investment securities available for sale 7,037 10,425
Mortgage-backed securities available for sale 2,790,310 2,649,657
Loans receivable 10,180,166 9,443,901
Allowance for credit losses (281,030) (269,352)
Loans receivable, net 9,899,136 9,174,549
Amounts due from trusts 101,473
Premises and equipment, net 76,069 78,664
Other 303,707 311,893
TOTAL ASSETS $13,169,461 $12,410,876
LIABILITIES
Deposits $2,084,725 $1,974,984
Notes payable on automobile secured financing 9,265,725 8,422,915
Securities sold under agreements to
repurchase 226,783 276,600
Federal Home Loan Bank advances 282,742 336,275
Amounts held on behalf of trustee 177,642
Subordinated debentures 397,406 400,561
Other 168,489 107,036
TOTAL LIABILITIES 12,425,870 11,696,013
Minority interest 105,798 101,666
SHAREHOLDERS' EQUITY
Common stock, (par value $1 per share;
authorized 65 million shares; issued
and outstanding 39,204,709 shares at
March 31, 2003 and 39,200,474 shares
at Dec. 31, 2002) 39,205 39,200
Paid-in capital 350,122 350,018
Retained earnings 344,374 325,529
Accumulated other comprehensive loss, net of
tax (95,908) (101,550)
TOTAL SHAREHOLDERS' EQUITY 637,793 613,197
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $13,169,461 $12,410,876
WESTCORP AND SUBSIDIARIES
OTHER SELECTED FINANCIAL DATA
(UNAUDITED)
(DOLLARS IN THOUSANDS)
Three Months Ended
March 31,
2003 2002
LOAN ORIGINATIONS
Consumer (a) $1,353,928 $1,266,189
Real estate 4,314 9,139
Commercial 96,684 61,268
Total $1,454,926 $1,336,596
NET INTEREST MARGIN
Yield on interest-earning
assets 9.71% 10.73%
Cost of interest-bearing
liabilities 4.69 5.16
Interest margin 5.02% 5.57%
March 31, 2003 Dec. 31, 2002
MANAGED AUTOMOBILE
DELINQUENCY Amount Percent Amount Percent
AND REPOSSESSIONS
Contracts managed at
end of period $9,650,229 $9,389,974
Period of delinquency
30-59 days $165,052 1.71% $238,204 2.54%
60 days or more 67,065 0.70 90,291 0.96
Total contracts
delinquent $232,117 2.41% $328,495 3.50%
Total repossessions $10,966 0.11% $16,433 0.18%
MANAGED AUTOMOBILE Three Months Ended
CONTRACTS March 31,
LOSS EXPERIENCE
2003 2002
Contracts managed at end
of period $9,650,229 $8,405,634
Average contracts
managed during the
period $9,533,314 $8,273,297
Gross chargeoffs $90,779 $79,792
Recoveries 22,598 22,633
Net chargeoffs $68,181 $57,159
Net chargeoffs as a
percentage of average
managed contracts
outstanding during
period 2.86% 2.76%
March 31, Dec. 31,
2003 2002
MANAGED PORTFOLIO
Consumer (a) $9,650,352 $9,390,114
Real estate 225,405 242,200
Commercial 147,967 147,375
Total $10,023,724 $9,779,689
(a) Includes automobile contracts and other consumer loans.
WESTCORP AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT MARCH 31, 2003
The following table sets forth the cumulative static pool losses
by month for all outstanding public securitized pools:
Period (1) 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% 0.04%
3 0.11% 0.11% 0.11% 0.10% 0.10% 0.09% 0.13% 0.11%
4 0.23% 0.20% 0.26% 0.25% 0.20% 0.24% 0.27% 0.24%
5 0.39% 0.33% 0.47% 0.40% 0.36% 0.39% 0.46% 0.39%
6 0.50% 0.46% 0.66% 0.56% 0.55% 0.59% 0.65% 0.54%
7 0.61% 0.62% 0.87% 0.71% 0.71% 0.78% 0.81% 0.74%
8 0.75% 0.76% 1.00% 0.86% 0.91% 0.99% 0.93% 0.93%
9 0.86% 0.92% 1.13% 1.01% 1.10% 1.17% 1.07% 1.13%
10 1.00% 1.11% 1.24% 1.14% 1.27% 1.33% 1.24% 1.34%
11 1.17% 1.30% 1.35% 1.34% 1.45% 1.44% 1.41% 1.50%
12 1.32% 1.47% 1.44% 1.52% 1.58% 1.57% 1.62% 1.74%
13 1.48% 1.61% 1.58% 1.74% 1.73% 1.72% 1.86% 1.95%
14 1.66% 1.73% 1.74% 1.94% 1.85% 1.86% 2.04% 2.21%
15 1.79% 1.81% 1.85% 2.09% 2.00% 2.04% 2.25% 2.48%
16 1.91% 1.89% 2.03% 2.27% 2.15% 2.24% 2.45% 2.71%
17 2.01% 2.00% 2.16% 2.39% 2.37% 2.39% 2.68% 2.89%
18 2.07% 2.10% 2.30% 2.53% 2.52% 2.55% 2.88% 3.08%
19 2.11% 2.24% 2.42% 2.67% 2.67% 2.73% 3.08% 3.22%
20 2.17% 2.35% 2.50% 2.81% 2.83% 2.93% 3.23% 3.40%
21 2.24% 2.46% 2.58% 2.92% 2.99% 3.12% 3.38% 3.59%
22 2.34% 2.55% 2.67% 3.10% 3.16% 3.27% 3.54% 3.78%
23 2.43% 2.63% 2.77% 3.28% 3.34% 3.38% 3.67% 3.96%
24 2.52% 2.71% 2.87% 3.38% 3.49% 3.52% 3.83% 4.18%
25 2.62% 2.77% 3.01% 3.55% 3.63% 3.63% 4.00% 4.41%
26 2.71% 2.82% 3.14% 3.68% 3.75% 3.73% 4.16% 4.58%
27 2.80% 2.89% 3.16% 3.84% 3.86% 3.84% 4.35% 4.79%
28 2.87% 2.96% 3.29% 3.98% 3.97% 3.97% 4.50% 4.96%
29 2.90% 3.02% 3.40% 4.14% 4.09% 4.11% 4.64% 5.08%
30 2.95% 3.09% 3.50% 4.19% 4.21% 4.26% 4.79%
31 3.00% 3.17% 3.61% 4.30% 4.33% 4.40% 4.92%
32 3.02% 3.20% 3.68% 4.38% 4.47% 4.50% 5.02%
33 3.08% 3.27% 3.74% 4.46% 4.59% 4.61%
34 3.14% 3.35% 3.81% 4.57% 4.68% 4.70%
35 3.15% 3.41% 3.87% 4.66% 4.79% 4.78%
36 3.21% 3.47% 3.91% 4.76% 4.86%
37 3.25% 3.52% 3.97% 4.84% 4.93%
38 3.30% 3.55% 4.03% 4.96%
39 3.35% 3.58% 4.09% 5.03%
40 3.39% 3.61% 4.13% 5.13%
41 3.39% 3.63% 4.18% 5.20%
42 3.42% 3.66% 4.23% 5.24%
43 3.45% 3.68% 4.28%
44 3.47% 3.72% 4.33%
45 3.48% 3.75% 4.35%
46 3.50% 3.79%
47 3.52% 3.80%
48 3.56% 3.83%
49 3.58% 3.85%
50 3.60% 3.85%
51 3.62%
52 3.63%
53 3.64%
54
55
Prime Mix
(2) 70% 70% 70% 67% 68% 69% 68% 68%
Period (1) 2001-A 2001-B 2001-C 2002-1 2002-2 2002-3 2002-4 2003-1
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.03% 0.03% 0.04% 0.01% 0.00% 0.02% 0.02% 0.01%
3 0.09% 0.10% 0.09% 0.06% 0.03% 0.06% 0.07%
4 0.20% 0.21% 0.20% 0.15% 0.10% 0.14% 0.16%
5 0.33% 0.33% 0.35% 0.29% 0.18% 0.27% 0.26%
6 0.50% 0.50% 0.49% 0.43% 0.32% 0.44%
7 0.70% 0.69% 0.65% 0.60% 0.49% 0.57%
8 0.84% 0.87% 0.81% 0.84% 0.66% 0.70%
9 1.04% 1.05% 0.95% 1.06% 0.82%
10 1.24% 1.22% 1.07% 1.28% 0.96%
11 1.45% 1.36% 1.20% 1.48% 1.10%
12 1.67% 1.53% 1.37% 1.67%
13 1.90% 1.67% 1.55% 1.82%
14 2.09% 1.81% 1.74%
15 2.25% 2.00% 1.97%
16 2.41% 2.19% 2.16%
17 2.54% 2.37% 2.36%
18 2.73% 2.60% 2.59%
19 2.93% 2.80% 2.78%
20 3.11% 3.01% 2.95%
21 3.34% 3.19%
22 3.54% 3.34%
23 3.72% 3.49%
24 3.92%
25 4.10%
26 4.23%
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
Prime Mix
(2) 71% 71% 76% 70% 87% 85% 80% 80%
(1) Represents the number of months since the inception of the
securitization.
(2) Represents the original percentage of prime automobile
contracts securitized within each pool.