WFS Financial Reports Record Third Quarter Net Income
IRVINE, Calif.--Oct. 21, 2003--| -- Net income rose to a record $75.6 million for the quarter |
-- Earnings per share increased to a record $1.84 for the quarter
-- Sold $1.7 billion of automobile contracts to parent for an $18.7 million cash gain on sale
-- Delinquencies declined 73 basis points to 2.70% at end of the quarter
-- Credit losses improved 15 basis points to 2.58% for the third quarter
WFS Financial Inc today reported that net income increased to a record $75.6 million for the third quarter of 2003 compared with $23.3 million for the same period a year ago. Earnings per diluted share rose to a record $1.84 for the third quarter of 2003 compared with $0.57 for the same period a year earlier. For the nine months ended Sept. 30, 2003, net income increased to a record $134 million or $3.26 per diluted share compared with $64.1 million or $1.62 per diluted share for the same period a year earlier.
During the quarter, WFS sold $1.7 billion of automobile contracts on a whole loan basis to a subsidiary of WFS' ultimate parent company, Westcorp, at a price of 103%. As a result, WFS Financial recorded a cash gain on sale of $18.7 million and reduced its allowance for credit losses commensurate with the amounts of the contracts sold.
"This sale enhances our ability to efficiently grow our business," said Tom Wolfe, CEO of WFS Financial. "Overall net income improved, even without the benefit of the sale, as a result of improved asset quality trends and higher automobile origination growth. Originations from our national dealer relationships and newer geographic markets contributed to this growth. Additionally, overall used car sales improved this quarter, which also contributed to our growth. Our improved credit loss experience this quarter reflects our continued shift towards a higher concentration of prime credit quality originations and some stabilization of the used car market."
Automobile contract purchases totaled $1.7 billion for the third quarter of 2003, a 17% increase from the same period a year earlier. For the nine months ended Sept. 30, 2003, automobile contract purchases totaled $4.6 billion compared with $4.2 billion a year ago. As a result of higher contract originations, the company's portfolio of managed automobile contracts reached $10.5 billion at Sept. 30, 2003, up from $9.3 billion a year ago.
Annualized credit loss experience for the third quarter improved 15 basis points to 2.58% of average managed automobile contracts compared with 2.73% for the same period a year ago. For the nine months ended Sept. 30, 2003, annualized credit loss experience was 2.59% compared with 2.56% for the same period a year earlier. The percentage of outstanding automobile contracts 30 days or more delinquent improved 73 basis points to 2.70% at Sept. 30, 2003 compared with 3.43% for the same period a year ago.
Net interest income increased 27% to $157 million for the three months ended Sept. 30, 2003 compared with $124 million for the same period a year ago. For the nine months ended Sept. 30, 2003, net interest income grew 34% to $454 million compared with $338 million for the same period a year earlier. Net interest margin for the three months ended Sept. 30, 2003 was 5.98% compared with 5.85% for the same period a year earlier. For the nine months ended Sept. 30, 2003, net interest margin was 5.99% compared with 6.41% for the same period a year ago. 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.
Provision for credit losses totaled $24.6 million for the three months ended Sept. 30, 2003 compared with $63.1 million for the same period a year ago. The decline in provision for credit losses is the result of reducing the allowance for credit losses for the $1.7 billion of automobile contracts sold. For the nine months ended Sept. 30, 2003, provision for credit losses totaled $164 million compared with $163 million for the same period a year earlier. The allowance for credit losses as a percentage of owned automobile contracts outstanding was 2.8% at Sept. 30, 2003 compared with 2.6% for the same period a year earlier.
Total noninterest income, which includes the cash gain on sale and other automobile servicing related fee income, increased 65% to $49.9 million for the three months ended Sept. 30, 2003 compared with $30.2 million for the same period a year earlier. The increase was primarily the result of WFS selling $1.7 billion of automobile contracts to its parent for a cash gain. For the nine months ended, Sept. 30, 2003, noninterest income increased 22% to $111 million compared with $91.0 million for the same period a year earlier.
Noninterest expense of $57.6 million improved to 2.2% of average managed contracts for the third quarter of 2003 compared with $52.7 million or 2.3% for the same period a year ago. For the nine months ended Sept. 30, 2003, noninterest expense of $179 million improved to 2.4% compared with $161 million or 2.5% for the same period a year earlier.
Earnings Conference Call
WFS, along with its parent company Westcorp, will host a conference call for analysts and investors at 9 a.m. (PDT) on Wednesday, Oct. 22, 2003. As part of this conference call, the company's management will discuss further the earnings results for the quarter. For a live Internet broadcast of this conference call, please 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.
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, 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 press release contains forward-looking statements within the meaning Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. 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. Forward-looking statements in this press release relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable. In addition, these statements relate to the company's future prospects, developments and business strategies and include information regarding the company's improved asset quality trends and higher automobile origination growth and the company's shift towards a higher concentration of prime credit quality originations and automobile contracts.
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. In particular, there can be no assurances that improved asset quality trends, automobile origination growth, improved credit loss experience or other operational improvements identified in this press release will continue in future periods.
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, including hedging activities; the company's financial condition and liquidity, as well as future cash flow and earnings and the level of operating expenses; competition; the effect, interpretation, or application of new or existing laws, regulations, court decisions and significant litigation; and the level of chargeoffs on the automobile contracts that the company originates.
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 press release is as of Oct. 2, 20031, 2003. The company assumes no obligation to update any forward-looking statements to reflect future events or circumstances.
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
For the Three For the Nine
Months Ended Months Ended
Sept. 30, Sept. 30,
2003 2002 2003 2002
(Dollars in thousands, except per share amounts)
Interest
income:
Loans, including
fees $ 251,477 $ 216,743 $ 750,577 $ 582,028
Other 2,220 3,542 7,484 7,555
TOTAL
INTEREST
INCOME 253,697 220,285 758,061 589,583
Interest
expense:
Notes
payable
on
automobile
secured
financing 85,830 84,140 272,678 225,491
Other 10,447 11,709 31,733 25,891
TOTAL
INTEREST
EXPENSE 96,277 95,849 304,411 251,382
NET INTEREST
INCOME 157,420 124,436 453,650 338,201
Provision for credit
losses 24,551 63,098 164,222 163,486
NET INTEREST INCOME
AFTER
PROVISION FOR
CREDIT LOSSES 132,869 61,338 289,428 174,715
Noninterest income:
Automobile
servicing 29,936 27,638 88,017 84,627
Gain on sale of
contracts 18,725 18,725
Other 1,194 2,555 3,944 6,329
TOTAL
NONINTEREST
INCOME 49,855 30,193 110,686 90,956
Noninterest
expense:
Salaries and
employee
benefits 36,052 31,038 111,508 95,282
Credit and
collections 8,618 8,312 26,515 26,419
Data processing 4,037 4,182 12,822 12,612
Occupancy 3,364 3,180 10,040 9,569
Other 5,492 5,973 17,795 16,769
TOTAL
NONINTEREST
EXPENSE 57,563 52,685 178,680 160,651
INCOME BEFORE INCOME
TAX 125,161 38,846 221,434 105,020
Income tax 49,610 15,505 87,683 40,963
NET INCOME $ 75,551 $ 23,341 $ 133,751 $ 64,057
Earnings per
common share:
Basic $ 1.84 $ 0.57 $ 3.26 $ 1.62
Diluted $ 1.84 $ 0.57 $ 3.26 $ 1.62
Weighted
average
number of
common
shares
outstanding:
Basic 41,026,679 41,019,800 41,023,935 39,583,103
Diluted 41,076,405 41,065,805 41,069,573 39,632,361
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
Sept. 30, 2003 Dec. 31, 2002
(Dollars in thousands)
ASSETS
Cash and due from banks $767,575 $715,807
Restricted cash 186,319 71,763
Contracts receivable 8,355,094 7,975,503
Allowance for credit losses (229,765) (227,673)
Contracts receivable, net 8,125,329 7,747,830
Amounts due from trusts 101,473
Premises and equipment, net 28,618 32,084
Other 168,693 192,509
TOTAL ASSETS $9,276,534 $8,861,466
LIABILITIES
Lines of credit -- parent $14,350 $62,048
Notes payable on automobile secured
financing 7,792,477 7,394,943
Notes payable -- parent 400,820 408,010
Amounts held on behalf of trustee 199,920 298,863
Other 92,614 63,070
TOTAL LIABILITIES 8,500,181 8,226,934
SHAREHOLDERS' EQUITY
Common stock (no par value;
authorized 50,000,000 shares;
Issued and outstanding 41,028,564
shares at Sept. 30, 2003
and 41,020,033 shares at Dec. 31, 2002) 338,254 338,186
Paid-in capital 5,372 5,372
Retained earnings 478,551 344,800
Accumulated other comprehensive loss,
net of tax (45,824) (53,826)
TOTAL SHAREHOLDERS' EQUITY 776,353 634,532
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $9,276,534 $8,861,466
The following table presents information relative to the average
balances and interest rates on an owned basis for the periods
indicated:
For the Three Months
Ended Sept. 30,
2003
Average Yield/
Balance Interest Rate
(Dollars in thousands)
Interest earning assets:
Contracts receivable (a) $8,937,943 $251,477 11.16%
Investment securities 818,003 2,220 1.08
Total interest earning assets $9,755,946 253,697 10.32%
Interest bearing liabilities:
Lines of credit -- parent $50,488 265 2.08%
Notes payable -- parent 401,374 9,937 9.90
Notes payable on automobile
secured financing 8,220,400 85,830 4.18
Other 206,450 245 0.47
Total interest bearing liabilities $8,878,712 96,277 4.34%
Net interest income and interest rate
spread $ 157,420 5.98%
Net yield on average interest
earning assets 6.45%
For the Three Months
Ended Sept. 30,
2002
Average Yield/
Balance Interest Rate
(Dollars in thousands)
Interest earning assets:
Contracts receivable (a) $7,050,231 $216,743 12.20%
Investment securities 780,734 3,542 1.80
Total interest earning assets $7,830,965 220,285 11.16%
Interest bearing liabilities:
Lines of credit -- parent $70,551 525 2.95%
Notes payable -- parent 441,819 10,834 9.81
Notes payable on automobile secured
financing 6,318,116 84,140 5.32
Other 391,155 350 0.36
Total interest bearing liabilities $7,221,641 95,849 5.31%
Net interest income and interest rate
spread $ 124,436 5.85%
Net yield on average interest
earning assets 6.36%
For the Nine Months
Ended Sept. 30,
2003
Average Yield/
Balance Interest Rate
(Dollars in thousands)
Interest earning assets:
Contracts receivable (a) $8,823,266 $750,577 11.37%
Investment securities 807,703 7,484 1.24
Total interest earning assets $9,630,969 758,061 10.52%
Interest bearing liabilities:
Lines of credit -- parent $50,471 868 2.30%
Notes payable -- parent 403,664 29,963 9.90
Notes payable on automobile
secured financing 8,333,795 272,678 4.36
Other 163,270 902 0.74
Total interest bearing liabilities $8,951,200 304,411 4.53%
Net interest income and interest rate
spread $ 453,650 5.99%
Net yield on average interest earning
assets 6.28%
For the Nine Months
Ended Sept. 30,
2002
Average Yield/
Balance Interest Rate
(Dollars in thousands)
Interest earning assets:
Contracts receivable (a) $6,246,900 $582,028 12.46%
Investment securities 544,448 7,555 1.86
Total interest earning assets $6,791,348 589,583 11.61%
Interest bearing liabilities:
Lines of credit -- parent $125,441 2,579 2.75%
Notes payable -- parent 308,517 22,444 9.70
Notes payable on automobile
secured financing 5,533,389 225,491 5.42
Other 472,789 868 0.24
Total interest bearing liabilities $6,440,136 251,382 5.20%
Net interest income and interest rate
spread $ 338,201 6.41%
Net yield on average interest earning
assets 6.64%
Note (a): For the purpose of these computations, nonaccruing
contracts are included in the average amounts outstanding.
WFS FINANCIAL AND SUBSIDIARIES
OTHER FINANCIAL DATA AND STATISTICAL SUMMARY
(Dollars in thousands, except per
share amounts and number of accounts)
Q3 2003 Q2 2003 Q1 2003
Earnings:
Net interest
income $ 157,420 $ 154,410 $ 141,820
Provision for
credit
losses 24,551 66,876 72,795
Noninterest
income 49,855 29,807 31,024
Noninterest
expense 57,563 61,924 59,193
Income before
taxes 125,161 55,417 40,856
Income taxes 49,610 21,832 16,241
Net income $ 75,551 $ 33,585 $ 24,615
Equity:
Earning per
share-basic $ 1.84 $ 0.82 $ 0.60
Earning per
share-diluted 1.84 0.82 0.60
Book value
per share
(period end)(a) 20.04 18.20 17.38
Stock price
per share
(period end) 37.03 33.35 19.39
Total equity
to assets (a) 8.86% 7.29% 7.29%
Return on
average
equity (a) 38.45 18.37 14.10
Average
shares
outstanding-diluted 41,076,405 41,070,904 41,065,341
Loan
Portfolio:
Automobile
contracts
purchased $ 1,683,402 $ 1,586,616 $ 1,352,053
Automobile
contracts
managed
(period
end) 10,476,948 10,049,965 9,650,229
Number of
accounts
managed
(period
end) 818,125 796,688 775,090
Average
automobile
contracts
managed $10,284,067 $ 9,839,661 $ 9,533,314
Return on
average
automobile
contracts (b) 2.94 1.37 1.03
Credit
Quality:
Delinquency
rate (30+ days) 2.70% 2.75% 2.41%
Reposessions
to total
contracts 0.11 0.09 0.11
Net
chargeoffs
(annualized) 2.58 2.33 2.86
Allowance to
automobile
contracts 2.75 2.78 2.75
Operations:
Total assets $ 9,276,534 $10,234,651 $ 9,776,594
Noninterest
expense to
average
contracts 2.24% 2.52% 2.48%
Q4 2002 Q3 2002
(Dollars in thousands, except per share
amounts and number of accounts)
Earnings:
Net interest
income $ 132,736 $ 124,436
Provision for
credit
losses 85,607 63,098
Noninterest
income 28,346 30,193
Noninterest
expense 52,255 52,685
Income before
taxes 23,220 38,846
Income taxes 5,189 15,505
Net income $ 18,031 $ 23,341
Equity:
Earning per
share-basic $ 0.44 $ 0.57
Earning per
share-diluted 0.44 0.57
Book value
per share
(period end)(a) 16.78 16.33
Stock price
per share
(period end) 20.91 20.74
Total equity
to assets(a) 7.77% 8.09%
Return on
average
equity(a) 10.69 14.19
Average
shares
outstanding-diluted 41,065,015 41,065,805
Loan
Portfolio:
Automobile
contracts
purchased $ 1,211,016 $ 1,444,185
Automobile
contracts
managed
(period
end) 9,389,974 9,269,265
Number of
accounts
managed
(period
end) 757,269 751,654
Average
automobile
contracts
managed $ 9,366,392 $ 9,102,663
Return on
average
automobile
contracts(b) 0.77 1.03
Credit
Quality:
Delinquency
rate (30+ days) 3.50% 3.43%
Reposessions
to total
contracts 0.18 0.11
Net
chargeoffs
(annualized) 3.34 2.73
Allowance to
automobile
contracts 2.85 2.63
Operations:
Total assets $ 8,861,466 $ 8,281,129
Noninterest
expense to
average
contracts 2.23% 2.32%
Note (a): Excludes other comprehensive income.
Note (b): Net income (annualized) divided by average automobile
contracts managed.
WFS FINANCIAL INC AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT SEPT. 30, 2003
Period (1) 1999- 1999- 2000- 2000- 2000- 2000- 2001- 2001-
B C A B C(3) D A B(3)
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.04% 0.02% 0.03% 0.02% 0.04% 0.04% 0.03% 0.03%
3 0.11% 0.10% 0.10% 0.09% 0.13% 0.11% 0.09% 0.10%
4 0.26% 0.25% 0.20% 0.24% 0.27% 0.24% 0.20% 0.21%
5 0.47% 0.40% 0.36% 0.39% 0.46% 0.39% 0.33% 0.33%
6 0.66% 0.56% 0.55% 0.59% 0.65% 0.54% 0.50% 0.50%
7 0.87% 0.71% 0.71% 0.78% 0.81% 0.74% 0.70% 0.69%
8 1.00% 0.86% 0.91% 0.99% 0.93% 0.93% 0.84% 0.87%
9 1.13% 1.01% 1.10% 1.17% 1.07% 1.13% 1.04% 1.05%
10 1.24% 1.14% 1.27% 1.33% 1.24% 1.34% 1.24% 1.22%
11 1.35% 1.34% 1.45% 1.44% 1.41% 1.50% 1.45% 1.36%
12 1.44% 1.52% 1.58% 1.57% 1.62% 1.74% 1.67% 1.53%
13 1.58% 1.74% 1.73% 1.72% 1.86% 1.95% 1.90% 1.67%
14 1.74% 1.94% 1.85% 1.86% 2.04% 2.21% 2.09% 1.81%
15 1.85% 2.09% 2.00% 2.04% 2.25% 2.48% 2.25% 2.00%
16 2.03% 2.27% 2.15% 2.24% 2.45% 2.71% 2.41% 2.19%
17 2.16% 2.39% 2.37% 2.39% 2.68% 2.89% 2.54% 2.37%
18 2.30% 2.53% 2.52% 2.55% 2.88% 3.08% 2.73% 2.60%
19 2.42% 2.67% 2.67% 2.73% 3.08% 3.22% 2.93% 2.80%
20 2.50% 2.81% 2.83% 2.93% 3.23% 3.40% 3.11% 3.01%
21 2.58% 2.92% 2.99% 3.12% 3.38% 3.59% 3.34% 3.19%
22 2.67% 3.10% 3.16% 3.27% 3.54% 3.78% 3.54% 3.34%
23 2.77% 3.28% 3.34% 3.38% 3.67% 3.96% 3.72% 3.49%
24 2.87% 3.38% 3.49% 3.52% 3.83% 4.18% 3.92% 3.62%
25 3.01% 3.55% 3.63% 3.63% 4.00% 4.41% 4.10% 3.75%
26 3.14% 3.68% 3.75% 3.73% 4.16% 4.58% 4.23% 3.87%
27 3.16% 3.84% 3.86% 3.84% 4.35% 4.79% 4.36% 4.00%
28 3.29% 3.98% 3.97% 3.97% 4.50% 4.96% 4.47% 4.15%
29 3.40% 4.14% 4.09% 4.11% 4.64% 5.08% 4.56% 4.28%
30 3.50% 4.19% 4.21% 4.26% 4.79% 5.22% 4.67%
31 3.61% 4.30% 4.33% 4.40% 4.92% 5.34% 4.81%
32 3.68% 4.38% 4.47% 4.50% 5.02% 5.44% 4.92%
33 3.74% 4.46% 4.59% 4.61% 5.12% 5.54%
34 3.81% 4.57% 4.68% 4.70% 5.22% 5.66%
35 3.87% 4.66% 4.79% 4.78% 5.29% 5.76%
36 3.91% 4.76% 4.86% 4.85% 5.38%
37 3.97% 4.84% 4.93% 4.94% 5.47%
38 4.03% 4.96% 5.01% 4.99% 5.53%
39 4.09% 5.03% 5.08% 5.05%
40 4.13% 5.13% 5.13% 5.12%
41 4.18% 5.20% 5.18% 5.18%
42 4.23% 5.24% 5.24%
43 4.28% 5.28% 5.29%
44 4.33% 5.34%
45 4.35% 5.38%
46 4.38% 5.42%
47 4.39% 5.44%
48 4.41% 5.46%
49 4.43%
50 4.44%
51 4.46%
Prime
Mix
(2) 70% 67% 68% 69% 68% 68% 71% 71%
Period (1) 2001- 2002- 2002- 2002- 2002- 2003- 2003- 2003-
C 1 2 3 4 1 2 3(3)
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.04% 0.01% 0.00% 0.02% 0.02% 0.01% 0.00%
3 0.09% 0.06% 0.03% 0.06% 0.07% 0.04% 0.02%
4 0.20% 0.15% 0.10% 0.14% 0.16% 0.11% 0.06%
5 0.35% 0.29% 0.18% 0.27% 0.26% 0.18% 0.14%
6 0.49% 0.43% 0.32% 0.44% 0.38% 0.29%
7 0.65% 0.60% 0.49% 0.57% 0.50% 0.41%
8 0.81% 0.84% 0.66% 0.70% 0.61% 0.53%
9 0.95% 1.06% 0.82% 0.82% 0.78%
10 1.07% 1.28% 0.96% 0.96% 0.94%
11 1.20% 1.48% 1.10% 1.10% 1.08%
12 1.37% 1.67% 1.26% 1.24%
13 1.55% 1.82% 1.39% 1.38%
14 1.74% 1.99% 1.51% 1.53%
15 1.97% 2.14% 1.68%
16 2.16% 2.27% 1.83%
17 2.36% 2.45% 1.99%
18 2.59% 2.62%
19 2.78% 2.80%
20 2.95%
21 3.14%
22 3.29%
23 3.41%
24 3.57%
25 3.73%
26 3.88%
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
Prime
Mix
(2) 76% 70% 87% 85% 80% 80% 82% 84%
Note (1): Represents the number of months since the inception of
the securitization.
Note (2): Represents the original percentage of prime automobile
contracts securitized within each pool.
Note (3): Represents loans sold to Westcorp in whole loan sales
and subsequently securitized by Westcorp. WFS manages these contracts
pursuant to an agreement with Westcorp and the securitization trust.