WFS Financial Reports Year-End and Fourth Quarter Results
IRVINE, Calif.--Jan. 25, 2005--WFS Financial Inc reported that net income for 2004 rose 12% to a record $182 million compared with $162 million last year. Earnings per share rose 12% to a record $4.44 for the 12 months ended Dec. 31, 2004, compared with $3.95 for 2003. Fourth quarter net income increased 53% to $43.7 million for the three months ended Dec. 31, 2004, compared with $28.6 million for the same period a year ago. Earnings per diluted share increased 51% to $1.06 for the three months ended Dec. 31, 2004, compared with $0.70 per diluted share for the same period a year earlier."Our strong net income was primarily the result of a significant improvement in credit performance," said Tom Wolfe, CEO of WFS Financial. "Our emphasis on risk-focused underwriting, our effective auto lending servicing platform and an improving economy all contributed to the improvement in our credit performance even as we achieved 11% year-over-year origination growth."
Annualized credit loss experience improved 63 basis points to 2.01% of average managed automobile contracts for the fourth quarter compared with 2.64% for the same period a year earlier. For the 12 months ended Dec. 31, 2004, credit loss experience improved 61 basis points to 1.99% compared with 2.60% for 2003. The percentage of outstanding automobile contracts 30 days or more delinquent improved 66 basis points to 2.24% at Dec. 31, 2004, compared, with 2.90% a year ago.
Provision for credit losses declined to $59.0 million for the three months ended Dec. 31, 2004, compared with $69.6 million for the same period a year earlier as a result of lower chargeoff experience and stronger portfolio characteristics. For the 12 months ended Dec. 31, 2004, the provision for credit losses declined to $192 million compared with $234 million last year. At Dec. 31, 2004, the allowance for credit losses totaled $252 million or 2.6% of loans receivable compared with $240 million or 2.8% at Dec. 31, 2003.
Automobile contract purchases totaled $1.6 billion for the fourth quarter of 2004, a 17% increase from the same period a year earlier. For the 12 months ended Dec. 31, 2004, automobile contract purchases totaled $6.6 billion, an 11% increase over 2003. The company's portfolio of managed automobile contracts grew to $11.6 billion at Dec. 31, 2004, up from $10.6 billion a year earlier.
Net interest income grew 7% to $159 million for the fourth quarter compared with $148 million for the same period a year earlier as total average interest-earning assets increased $599 million to $9.9 billion and net interest margin widened 16 basis points to 5.98% on the total portfolio for the fourth quarter compared with the same period a year ago. For the 12 months ended Dec. 31, 2004, net interest income declined 3% to $584 million compared with $602 million for the same period a year earlier as total average interest-earning assets decreased $198 million to $9.4 billion as a result of whole loan sales and net interest margin decreased 9 basis points to 5.88% on the total portfolio for the year compared with the same period a year ago.
The company issued $1.4 billion of automobile receivable asset-backed securities during the quarter with a weighted average cost of funds of 3.1%. The company continues to be the largest non-captive issuer of automobile asset-backed securities in the United States, having issued a total of $41 billion of such securities in 65 transactions to date.
Noninterest income was $34.4 million for the three months ended Dec. 31, 2004, compared with $31.8 million for the same period a year earlier. For the 12 months ended Dec. 31, 2004, noninterest income was $155 million compared with $142 million for 2003.
Noninterest expense totaled $62.7 million or 2.18% of average managed contracts for the fourth quarter compared with $62.7 million or 2.38% of average managed contracts for the same period a year earlier. For the 12 months ended Dec. 31, 2004, noninterest expense totaled $245 million or 2.21% of average managed contracts compared with $241 million or 2.40% of average managed contracts a year ago.
As previously announced, Westcorp, WFS' ultimate parent, is in the process of converting Western Financial Bank to a California state commercial bank and merging WFS Financial into Western Financial Bank as part of the acquisition of the minority interest in WFS Financial. The conversion is contingent upon approval by the Board of Governors of the Federal Reserve of Westcorp's application to become a bank holding company. The merger also remains subject to approval by the majority of WFS Financial's minority shareholders.
Earnings Conference Call
WFS Financial, along with its parent, Westcorp, will host a conference call for analysts and investors at 7:30 a.m. (PST) on Wednesday, Jan. 26, 2005. 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, 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. Information about Westcorp can be found at its Web site at http://www.westcorpinc.com.
Westcorp, through its subsidiary, WFS Financial, is one of the nation's largest independent automobile finance companies. WFS Financial 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. WFS Financial is a publicly owned company whose common stock is traded on the Nasdaq under the symbol WFSI. Information about WFS Financial can be found at its Web site at http://www.wfsfinancial.com.
Westcorp, through its subsidiary, Western Financial Bank, operates 20 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 of 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 the 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 credit quality trends and higher automobile origination growth. In particular, there can be no assurances that improved credit quality trends or origination growth identified in this press release will continue in future periods.
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.
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 the effect of 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 Jan. 2, 20055, 2005. 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 For the
Three Months Ended Twelve Months Ended
Dec. 31, Dec. 31,
2004 2003 2004 2003
(Dollars in thousands, except per share
amounts)
Interest income:
Loans, including fees $235,126 $232,369 $888,231 $982,946
Other 3,686 2,574 11,904 10,058
TOTAL INTEREST
INCOME 238,812 234,943 900,135 993,004
Interest expense:
Notes payable on
automobile secured
financing 70,786 76,681 274,541 349,359
Other 9,432 10,309 41,783 42,042
TOTAL INTEREST
EXPENSE 80,218 86,990 316,324 391,401
NET INTEREST INCOME 158,594 147,953 583,811 601,603
Provision for credit
losses 58,961 69,578 192,315 233,800
NET INTEREST INCOME
AFTER PROVISION FOR
CREDIT LOSSES 99,633 78,375 391,496 367,803
Noninterest income:
Automobile servicing 33,125 30,952 137,593 119,015
Gain on sale of
contracts 13,792 18,725
Other 1,261 860 3,395 4,758
TOTAL
NONINTEREST
INCOME 34,386 31,812 154,780 142,498
Noninterest expense:
Salaries and employee
benefits 40,652 38,321 159,571 149,829
Credit and
collections 8,758 8,933 32,812 35,448
Data processing 5,043 3,837 16,498 16,659
Occupancy 2,944 3,343 11,423 13,383
Other 5,266 8,280 25,080 26,075
TOTAL
NONINTEREST
EXPENSE 62,663 62,714 245,384 241,394
INCOME BEFORE INCOME
TAX 71,356 47,473 300,892 268,907
Income tax 27,673 18,836 118,651 106,519
NET INCOME $43,683 $28,637 $182,241 $162,388
Earnings per common
share:
Basic $1.06 $0.70 $4.44 $3.96
Diluted $1.06 $0.70 $4.44 $3.95
Weighted average number
of common shares
outstanding:
Basic 41,038,003 41,032,393 41,036,408 41,026,067
Diluted 41,081,156 41,078,684 41,079,337 41,069,263
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
Dec. 31, Dec. 31,
2004 2003
(Dollars in thousands)
ASSETS
Cash $87,963 $79,314
Other short-term investments - parent 763,921
Cash and due from banks 87,963 843,235
Restricted cash 363,783 245,399
Contracts receivable 9,563,057 8,716,268
Allowance for credit losses (252,465) (239,697)
Contracts receivable, net 9,310,592 8,476,571
Accrued interest receivable 55,126 55,275
Premises and equipment, net 30,820 29,206
Other 100,934 119,074
TOTAL ASSETS $9,949,218 $9,768,760
LIABILITIES
Lines of credit - parent $52,731 $21,811
Notes payable on automobile secured financing 8,105,275 8,157,601
Notes payable - parent 461,010 400,820
Amounts held on behalf of trustee 194,913 243,072
Other 104,812 126,587
TOTAL LIABILITIES 8,918,741 8,949,891
SHAREHOLDERS' EQUITY
Common stock (no par value; authorized
50,000,000 shares; issued and outstanding
41,038,003 shares in 2004 and 41,033,901
shares in 2003) 338,328 338,291
Paid-in capital 6,324 6,280
Retained earnings 689,429 507,188
Accumulated other comprehensive loss, net of
tax (3,604) (32,890)
TOTAL SHAREHOLDERS' EQUITY 1,030,477 818,869
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $9,949,218 $9,768,760
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
Dec. 31,
2004
Average Interest Yield/
Balance Rate
(Dollars in thousands)
Interest-earning assets:
Contracts receivable (a) $9,199,131 $235,126 10.17%
Investment securities 748,814 3,686 1.96
Total interest-earning assets $9,947,945 238,812 9.55%
Interest-bearing liabilities:
Lines of credit -- parent $86,450 875 4.02%
Notes payable -- parent 300,000 7,688 10.25
Notes payable on automobile
secured financing 8,356,948 70,786 3.39
Other 253,535 869 1.36
Total interest-bearing liabilities $8,996,933 80,218 3.57%
Net interest income and interest rate
spread $158,594 5.98%
Net yield on average interest-earning
assets 6.38%
For the Three Months Ended
Dec. 31,
2003
Average Interest Yield/
Balance Rate
(Dollars in thousands)
Interest-earning assets:
Contracts receivable (a) $8,416,748 $232,369 10.95%
Investment securities 931,902 2,574 1.10
Total interest-earning assets $9,348,650 234,943 9.97%
Interest-bearing liabilities:
Lines of credit -- parent $22,941 126 2.18%
Notes payable -- parent 400,820 9,924 9.90
Notes payable on automobile
secured financing 7,698,384 76,681 3.98
Other 267,555 259 0.39
Total interest-bearing liabilities $8,389,700 86,990 4.15%
Net interest income and interest rate
spread $147,953 5.82%
Net yield on average interest-earning
assets 6.33%
For the Twelve Months Ended
Dec. 31,
2004
Average Interest Yield/
Balance Rate
(Dollars in thousands)
Interest-earning assets:
Contracts receivable (a) $8,494,542 $888,231 10.46%
Investment securities 867,372 11,904 1.37
Total interest-earning assets $9,361,914 900,135 9.61%
Interest-bearing liabilities:
Lines of credit -- parent $54,188 1,831 3.38%
Notes payable -- parent 356,213 35,739 10.03
Notes payable on automobile
secured financing 7,759,865 274,541 3.54
Other 299,221 4,213 1.41
Total interest-bearing liabilities $8,469,487 316,324 3.73%
Net interest income and interest rate
spread $583,811 5.88%
Net yield on average interest-earning
assets 6.24%
For the Twelve Months Ended
Dec. 31,
2003
Average Interest Yield/
Balance Rate
(Dollars in thousands)
Interest-earning assets:
Contracts receivable (a) $8,721,637 $982,946 11.27%
Investment securities 838,285 10,058 1.20
Total interest-earning assets $9,559,922 993,004 10.39%
Interest-bearing liabilities:
Lines of credit -- parent $43,532 993 2.28%
Notes payable -- parent 402,947 39,888 9.90
Notes payable on automobile
secured financing 8,215,265 349,359 4.25
Other 189,555 1,161 0.61
Total interest-bearing liabilities $8,851,299 391,401 4.42%
Net interest income and interest rate
spread $601,603 5.97%
Net yield on average interest-earning
assets 6.29%
(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
Q4 2004 Q3 2004 Q2 2004
(Dollars in thousands, except per share
amounts)
Earnings:
Net interest income $158,594 $148,775 $136,000
Provision for credit losses 58,961 59,957 53,421
Noninterest income 34,386 36,517 34,732
Noninterest expense 62,663 62,174 61,630
Income before taxes 71,356 63,161 55,681
Income taxes 27,673 25,057 22,135
Net income $43,683 $38,104 $33,546
Equity:
Earning per share - basic $1.06 $0.93 $0.82
Earning per share - diluted $1.06 $0.93 $0.82
Book value per share (period
end) (a) $25.20 $24.13 $23.20
Stock price per share (period
end) $50.56 $46.55 $49.51
Total equity to assets (a) 10.39% 10.28% 10.30%
Return on average equity (a) 17.27% 15.69% 14.33%
Average shares outstanding -
diluted 41,081,156 41,080,978 41,079,727
Loan Portfolio:
Automobile contracts
purchased $1,583,787 $1,799,106 $1,666,842
Automobile contracts managed
(period end) $11,560,890 $11,440,353 $11,113,148
Number of accounts managed
(period end) 876,695 869,038 853,193
Average automobile contracts
managed $11,512,626 $11,268,695 $10,946,273
Credit Quality:
Delinquency rate (30+ days) 2.24% 2.24% 2.21%
Repossessions to total
contracts 0.07% 0.06% 0.06%
Net chargeoffs (annualized) 2.01% 1.95% 1.73%
Allowance to automobile
contracts 2.64% 2.64% 2.67%
Operations:
Total assets $9,949,218 $9,631,069 $9,245,683
Noninterest expense to
average contracts 2.18% 2.21% 2.25%
Q1 2004 Q4 2003
(Dollars in thousands, except per
share amounts)
Earnings:
Net interest income $140,442 $147,953
Provision for credit losses 19,976 69,578
Noninterest income 49,144 31,812
Noninterest expense 58,916 62,714
Income before taxes 110,694 47,473
Income taxes 43,786 18,836
Net income $66,908 $28,637
Equity:
Earning per share - basic $1.63 $0.70
Earning per share - diluted $1.63 $0.70
Book value per share (period
end) (a) $22.39 $20.76
Stock price per share (period
end) $43.32 $42.46
Total equity to assets (a) 10.62% 8.72%
Return on average equity (a) 30.21% 13.69%
Average shares outstanding -
diluted 41,078,787 41,078,684
Loan Portfolio:
Automobile contracts purchased $1,585,173 $1,356,505
Automobile contracts managed
(period end) $10,850,314 $10,596,665
Number of accounts managed
(period end) 840,566 826,122
Average automobile contracts
managed $10,726,048 $10,549,972
Credit Quality:
Delinquency rate (30+ days) 1.91% 2.90%
Repossessions to total
contracts 0.06% 0.10%
Net chargeoffs (annualized) 2.27% 2.64%
Allowance to automobile
contracts 2.70% 2.75%
Operations:
Total assets $8,653,690 $9,768,760
Noninterest expense to average
contracts 2.20% 2.38%
(a) Excludes other comprehensive income.
WFS FINANCIAL INC AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
AT Dec. 31, 2004
The following table sets forth the cumulative static pool losses by
month for all outstanding public securitized pools:
Period (a) 2001-A 2001-B
(c) 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% 0.04%
4 0.20% 0.21% 0.20% 0.15% 0.10% 0.14% 0.16% 0.11%
5 0.33% 0.33% 0.35% 0.29% 0.18% 0.27% 0.26% 0.18%
6 0.50% 0.50% 0.49% 0.43% 0.32% 0.44% 0.38% 0.29%
7 0.70% 0.69% 0.65% 0.60% 0.49% 0.57% 0.50% 0.41%
8 0.84% 0.87% 0.81% 0.84% 0.66% 0.70% 0.61% 0.53%
9 1.04% 1.05% 0.95% 1.06% 0.82% 0.82% 0.78% 0.66%
10 1.24% 1.22% 1.07% 1.28% 0.96% 0.96% 0.94% 0.80%
11 1.45% 1.36% 1.20% 1.48% 1.10% 1.10% 1.08% 0.93%
12 1.67% 1.53% 1.37% 1.67% 1.26% 1.24% 1.28% 1.06%
13 1.90% 1.67% 1.55% 1.82% 1.39% 1.38% 1.43% 1.21%
14 2.09% 1.81% 1.74% 1.99% 1.51% 1.53% 1.59% 1.31%
15 2.25% 2.00% 1.97% 2.14% 1.68% 1.70% 1.77% 1.40%
16 2.41% 2.19% 2.16% 2.27% 1.83% 1.88% 1.92% 1.50%
17 2.54% 2.37% 2.36% 2.45% 1.99% 2.03% 2.05% 1.60%
18 2.73% 2.60% 2.59% 2.62% 2.16% 2.15% 2.16% 1.70%
19 2.93% 2.80% 2.78% 2.80% 2.31% 2.28% 2.25% 1.85%
20 3.11% 3.01% 2.95% 2.99% 2.46% 2.41% 2.37% 1.99%
21 3.34% 3.19% 3.14% 3.15% 2.60% 2.52% 2.49% 2.14%
22 3.54% 3.34% 3.29% 3.31% 2.72% 2.62% 2.62% 2.27%
23 3.72% 3.49% 3.41% 3.45% 2.86% 2.74% 2.73% 2.37%
24 3.92% 3.62% 3.57% 3.58% 2.95% 2.83% 2.84%
25 4.10% 3.75% 3.73% 3.69% 3.03% 2.96% 2.95%
26 4.23% 3.87% 3.88% 3.80% 3.13% 3.08% 3.06%
27 4.36% 4.00% 4.04% 3.92% 3.22% 3.21%
28 4.47% 4.15% 4.20% 4.02% 3.33% 3.31%
29 4.56% 4.28% 4.35% 4.12% 3.41% 3.41%
30 4.67% 4.40% 4.46% 4.22% 3.50%
31 4.81% 4.52% 4.57% 4.30% 3.58%
32 4.92% 4.64% 4.69% 4.39% 3.66%
33 5.04% 4.73% 4.77% 4.49%
34 5.13% 4.83% 4.85% 4.56%
35 5.24% 4.93% 4.92%
36 5.31% 4.99% 5.01%
37 5.39% 5.05% 5.09%
38 5.45% 5.11% 5.16%
39 5.50% 5.17% 5.22%
40 5.56% 5.24% 5.27%
41 5.61% 5.29% 5.32%
42 5.66% 5.33%
43 5.70% 5.39%
44 5.75% 5.43%
45 5.81%
46 5.84%
47 5.87%
Prime Mix (b) 68% 71% 71% 76% 70% 87% 85% 80%
Period (a) 2003-3 2004-1
2003-2 (c) 2003-4 (c) 2004-2 2004-3 2004-4
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
2 0.00% 0.00% 0.01% 0.00% 0.00% 0.02% 0.00%
3 0.02% 0.02% 0.03% 0.02% 0.03% 0.06% 0.04%
4 0.06% 0.06% 0.08% 0.06% 0.07% 0.13%
5 0.14% 0.13% 0.14% 0.11% 0.15% 0.21%
6 0.25% 0.23% 0.21% 0.19% 0.24%
7 0.36% 0.32% 0.28% 0.27% 0.33%
8 0.48% 0.40% 0.35% 0.34% 0.41%
9 0.59% 0.47% 0.44% 0.42%
10 0.70% 0.55% 0.54% 0.52%
11 0.80% 0.62% 0.61% 0.59%
12 0.89% 0.71% 0.73%
13 0.98% 0.80% 0.83%
14 1.08% 0.88% 0.93%
15 1.20% 0.97%
16 1.31% 1.07%
17 1.41% 1.16%
18 1.53%
19 1.66%
20 1.76%
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
Prime Mix (b) 80% 82% 84% 82% 82% 81% 78%
(a) Represents the number of months since inception of the
securitization.
(b) Represents the original percentage of prime automobile contracts
securitized within each pool.
(c) 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.