White River Capital, Inc. Announces Results for 2005; Net Income for the Fourth Quarter of 2005 Totaled $3.2 million; Net Income for 2005 Totaled $16.5 million
INDIANAPOLIS--March 29, 2006--White River Capital, Inc. (Pink Sheets:WRVC) ("White River") today announced the following:FOURTH QUARTER RESULTS
Net income for the fourth quarter 2005 was $3.2 million, or $0.84 per diluted share, compared to a fourth quarter 2004 net loss of $(2.1) million, or $(6.68) per diluted share. The results for the fourth quarter of 2005 are primarily due to:
-- activity from the Coastal Credit LLC ("Coastal Credit") subsidiary which contributed $1.7 million to net income,
-- a recovery for estimated credit losses instead of a provision, and
-- the discontinuation of the charge to the Master Trust on the Union Acceptance Company LLC ("UAC") subsidiary 2003-A securitized financed receivables resulting in a reduction to the overall charge to the Master Trust.
ANNUAL EARNINGS
Net income for the year ended December 31, 2005, was $16.5 million, or $11.02 per diluted share. Included in these results is a gain from the extinguishment of debt at UAC totaling $11.4 million. The improvement in 2005 compared to the $(7.3) million net loss in 2004 is primarily due to:
-- the increase in accretion income related to distributions from the UAC subsidiary Master Trust,
-- activity from the Coastal Credit subsidiary which contributed $2.4 million,
-- a recovery for estimated credit losses of $1.5 million instead of a provision, and
-- the elimination of a substantial portion of the accretion and interest expense associated with creditor liabilities after White River purchased 89.1% of the restructured subordinated notes and 57.3% of the general unsecured claims of UAC.
The weighted average number of common shares outstanding during a period is weighted for the portion of the period that the shares were outstanding. The 3.5 million shares issued by White River in its subscription offering, which was completed on August 31, 2005, were outstanding for 123 of 365 days for the year ended December 31, 2005. The relatively short time period these shares were outstanding resulted in a significantly different weighted average number of shares for the year ended December 31, 2005 (1,498,549 diluted weighted average number of common shares outstanding) compared to the period end common share count (3,810,155 shares).
Net pro forma income per share for the year ended December 31, 2005, assuming the acquisition of Coastal Credit, the issuance of the $15 million secured note, and the subscription offering were all completed on January 1, 2005, was $4.58 per diluted share (3,812,808 pro forma diluted weighted average number of common shares outstanding).
White River completed the acquisition of Coastal Credit on August 31, 2005. The results of operations for Coastal Credit have been included in the consolidated financial statements since the purchase date.
INTEREST ON RECEIVABLES
Interest on receivables for the fourth quarter of 2005 totaled $11.0 million compared to $3.5 million for the fourth quarter of 2004. Interest on receivables for the year ended December 31, 2005 totaled $28.8 million compared to $13.0 million for the year ended December 31, 2004. The increase in interest on receivables resulted largely from the increase in off balance sheet securitized receivables repurchased in 2005 compared to 2004 and the activity of Coastal Credit.
ACCRETION AND OTHER INTEREST
Accretion and other interest increased to $478 thousand compared to $296 thousand for the three months ended December 31, 2005 and 2004, respectively. Accretion and other interest increased to $8.5 million compared to $1.0 million for the years ended December 31, 2005 and 2004, respectively. These increases are attributable to an increase in accretion income related to distributions from the UAC subsidiary Master Trust. UAC has accrued increases in the fair value of beneficial interest in Master Trust due to lower than expected credit losses during 2005 resulting in the increase in accretion income.
RECOVERY (PROVISION) FOR ESTIMATED CREDIT LOSSES
Recovery (provision) for estimated credit losses was a recovery of $4.3 million compared to a provision of $(4.5) million for the three months ended December 31, 2005 and 2004, respectively. Recovery (provision) for estimated credit losses was a recovery of $1.5 million compared to a provision of $(11.0) million for the twelve months ended December 31, 2005 and 2004, respectively. UAC significantly contributed to the recovery from estimated credit losses due to the improved performance of the securitized finance receivable portfolio during 2005.
CREDIT (CHARGE) TO MASTER TRUST, NET
The credit (charge) to Master Trust, net was a $(5.1) million charge for the three months ended December 31, 2005 compared to $2.9 million credit for the three months ended December 31, 2004 and a $(10.3) million charge for the year ended December 31, 2005 compared to a $4.5 million credit for the year ended December 31, 2004. Charge to Master Trust, net is an expense related to future transfers of funds to the Master Trust from on balance sheet securitized finance receivables of UAC. As additional off balance sheet securitized finance receivables were purchased and the performance of UAC's on balance sheet securitized finance receivables improved, interest income increased, and thus the amounts related to future transfers of funds owed to the Master Trust increased resulting in an increase in the charge to Master Trust, net. This increase in the charge to the Master Trust during 2005 was partially offset by the discontinuation of the charge related to the UAC 2003-A securitized financed receivables in anticipation of this pool of receivables being fully released from collateralized arrangements when the collateralized financing note related to these receivables becomes fully paid in 2006.
GAIN FROM EXTINGUISHMENT OF DEBT
There was a $25 thousand gain from extinguishment of debt activity for the three months ended December 31, 2005 and no such activity occurred for the three months ended December 31, 2004. Gain from extinguishment of debt was $11.4 million for the year ended December 31, 2005. This gain is related to the purchase by White River of 57.3% of the general unsecured claims and 89.1% of the restructured subordinated notes of UAC during this period. Financial Accounting Standard 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, requires that such activity be recognized as extinguishment of debt. The UAC general unsecured claims, restructured subordinated notes and accrual notes purchased by White River remain outstanding but are owed by UAC to its parent, White River. No such activity occurred for the year ended December 31, 2004.
CREDIT QUALITY
The following tables set forth delinquency, loan loss reserve levels, and securitized pool loss information for Coastal Credit and UAC:
Coastal Credit LLC
Delinquency Rates Experienced - Finance Receivables
(in thousands except percentages)
December 31,
2005
Finance receivables - gross balance $ 97,820
Delinquencies:
30-59 days 1,124
60-89 days 768
90+ days 878
-------------
Total delinquencies $ 2,770
=============
Delinquencies as a percentage of finance receivables -
gross balance 2.8%
Coastal Credit LLC
Allowance for Loan Losses - Finance Receivables
(in thousands except percentages)
Four
Months Ended
December 31,
2005
Balance at August 31, 2005 $ 5,200
Charge-offs, net of recoveries (1) (782)
Provision for estimated credit losses 1,613
--------------
Balance at the end of the period $ 6,031
==============
Net charge offs $ 782
Finance receivables, net of unearned finance charges $ 87,952
Allowance for loan losses as a percent of finance
receivables, net of unearned finance charges 6.86%
Annualized net charge offs as a percent of finance
receivables, net of unearned finance charges 2.67%
Allowance for loan losses as a percent of annualized
net charge offs 257.08%
(1) Charge-offs do not include loans subject to SOP 03-3 which were
charged off during the four months ended December 31, 2005.
Union Acceptance Company LLC
Delinquency Rates
(in thousands except percentages)
December 31, December 31,
2005 2004
Securitized finance receivables principal
balance $ 115,031 $ 125,866
Delinquencies:
30-59 days 7,703 6,751
60-89 days 2,390 2,283
90+ days 1,271 1,252
------------ ------------
Total delinquencies $ 11,364 $ 10,286
============ ============
Delinquencies as a percentage of securitized
finance receivables 9.9% 8.2%
Off-balance sheet finance receivables
principal balance $ 82,300 $ 361,253
Delinquencies:
30-59 days 2,737 11,374
60-89 days 859 4,107
90+ days 553 1,784
------------ ------------
Total delinquencies $ 4,149 $ 17,265
============ ============
Delinquencies as a percentage of securitized
finance receivables 5.0% 4.8%
Union Acceptance Company LLC
Allowance for Loan Losses - On Balance Sheet Securitized Finance
Receivables
(in thousands except percentages)
Twelve Months Ended December 31,
2005 2004
Balance at the beginning of period $ 11,722 $ 5,006
Allowance at purchase 5,163 3,604
Charge-offs (21,637) (17,453)
Recoveries 14,333 9,540
Provision (recovery) for estimated
credit losses (3,078) 11,025
---------------- ---------------
Balance at the end of the period $ 6,503 $ 11,722
================ ===============
Net charge offs $ 7,304 $ 7,913
Securitized finance receivables $ 115,031 $ 125,866
Allowance for loan losses as a percent
of securitized finance receivables 5.65% 9.31%
Annualized net charge offs as a
percent of securitized finance
receivables 6.35% 6.29%
Allowance for loan losses as a percent
of net charge offs 89.03% 148.14%
ABOUT WHITE RIVER, COASTAL CREDIT AND UAC
White River is the holding company for Coastal Credit LLC and Union Acceptance Company LLC.
Coastal Credit is a specialized subprime auto finance company, headquartered in Virginia Beach, Virginia, engaged primarily in (1) acquiring retail installment sales contracts from both franchised and independent automobile dealers which have entered into contracts with purchasers of used and, to a much lesser extent, new cars and light trucks, and (2) servicing the contract portfolio. Coastal Credit commenced operations in Virginia in 1987 and conducts business in seventeen states - Arizona, California, Delaware, Florida, Georgia, Louisiana, Maryland, Mississippi, Nevada, North Carolina, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia and Washington - through its seventeen branch locations.
Union Acceptance Company LLC is a specialized auto finance company, based in Indianapolis, Indiana, which holds and oversees its portfolio of approximately $197.7 million in non-prime auto receivables, as of December 31, 2005. As of such date, its portfolio is held approximately 41.6% in off-balance sheet securitizations, 58.2% through subsidiary non-recourse financings and 0.2% directly or by subsidiaries not subject to financing. Since August 2003, UAC is continuing business activities under a confirmed Second Amended and Restated Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code under which net proceeds from its residual interest in its receivables portfolios and other bankruptcy estate assets must be paid to creditors holding notes and claims under the plan. During 2005, White River purchased and now directly owns approximately 88% of such notes and claims.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
Additional information is available in White River's public filings with the U.S. Securities and Exchange Commission (the "SEC") (which can be viewed on the SEC's website at www.sec.gov), including but not limited to its Current Reports on Form 8-K dated August 12, 2005 and September 2, 2005, and its Quarterly Reports on Form 10-Q dated August 26, 2005 and November 14, 2005. White River's 2005 subscription offering was effected under a Registration Statement on Form S-1/S-4 (Reg. No. 333-123909) which is also available on the SEC's website.
FORWARD-LOOKING STATEMENTS
This press release contains certain forward-looking information about White River that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of White River. White River cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to:
-- losses and prepayments on our receivable portfolios;
-- general economic, market, or business conditions;
-- changes in interest rates, the cost of funds, and demand for our financial services;
-- changes in our competitive position;
-- our ability to manage growth and integrate acquired businesses;
-- the opportunities that may be presented to and pursued by us;
-- competitive actions by other companies;
-- changes in laws or regulations;
-- the outcome of pending litigation;
-- changes in the policies of federal or state regulators and agencies.
These and other risks are described in White River's public filings with the SEC; see, in particular, risk factors described in White River's registration statement on Form S-1/S-4 (Reg. No. 333-123909), on file with the SEC. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, White River's results could differ materially from those expressed in, implied or projected by such forward-looking statements. White River assumes no obligation to update such forward-looking statements.
WHITE RIVER CAPITAL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS December 31, 2005 December 31, 2004
Cash and cash equivalent $ 6,878 $ 3,745
Restricted cash 22,739 23,530
Securitized finance receivables--
net 109,506 115,165
Finance receivables--net 70,784 -
Beneficial interest in Master Trust 13,968 3,677
Deferred costs - 634
Goodwill 35,097 -
Deferred tax assets 4,707 -
Other assets 3,315 4,179
----------------- -----------------
TOTAL $ 266,994 $ 150,930
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
LIABILITIES:
Collateralized financing $ 122,293 $ 132,257
Line of credit 51,500 -
Secured note payable 15,000 -
Subordinated debentures 7,700 -
Note payable - Coastal Credit
purchase holdback 3,840 -
Accrued interest 2,131 7,100
Amounts due to Master Trust 7,417 6,640
Creditor notes payable 1,461 11,445
Due to Castle Creek - 634
Other payables and accrued expenses 2,291 1,156
----------------- -----------------
Total liabilities 213,633 159,232
----------------- -----------------
SHAREHOLDERS' EQUITY:
Preferred Stock, without par
value, authorized 3,000,000
shares; none issued and
outstanding - -
Common Stock, without par value,
authorized 20,000,000 shares;
3,810,155 issued and
outstanding 179,157 145,900
Warrants 534 -
Accumulated other comprehensive
income 13,305 1,943
Accumulated deficit (139,635) (156,145)
----------------- -----------------
Total shareholders' equity
(deficiency) 53,361 (8,302)
----------------- -----------------
TOTAL $ 266,994 $ 150,930
================= =================
WHITE RIVER CAPITAL, INC.
Book Value per Share and Tangible Book Value per Share
(in thousands except share related values)
December 31, December 31,
2005 2004
Total shareholders' equity (deficit) $ 53,361 $ (8,302)
Less goodwill (35,097) -
------------ ------------
Tangible book value $ 18,264 $ (8,302)
============ ============
Shares outstanding 3,810,155 310,191
Book value per share $ 14.00 ($26.76)
Tangible book value per share $ 4.79 ($26.76)
WHITE RIVER CAPITAL, INC.
4TH QUARTER CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share and share amounts)
Three Months Ended December 31,
2005 2004
INTEREST:
Interest on receivables $ 11,028 $ 3,468
Accretion and other interest 478 296
--------------- ---------------
Total interest income 11,506 3,764
Interest expense (3,672) (3,485)
--------------- ---------------
Net interest margin 7,834 279
Recovery (provision) for estimated
credit losses 4,309 (4,541)
--------------- ---------------
Net interest margin (deficiency) after
recovery (provision) for estimated
credit losses 12,143 (4,262)
--------------- ---------------
OTHER REVENUES:
Credit (charge) to Master Trust--net (5,074) 2,852
Gain from extinguishment of debt 25 -
Other income 54 641
--------------- ---------------
Total other revenues
(charges), net (4,995) 3,493
--------------- ---------------
OTHER EXPENSES:
Salaries and benefits 1,740 125
Third party servicing expense 681 624
Other operating expenses 1,446 302
Bankruptcy costs 52 253
--------------- ---------------
Total other expenses 3,919 1,304
--------------- ---------------
INCOME (LOSS) BEFORE INCOME TAXES 3,229 (2,073)
INCOME TAXES - -
--------------- ---------------
NET INCOME (LOSS) $ 3,229 $ (2,073)
=============== ===============
NET INCOME (LOSS) PER COMMON SHARE
(BASIC) $ 0.85 $ (6.68)
=============== ===============
NET INCOME (LOSS) PER COMMON SHARE
(DILUTED) $ 0.84 $ (6.68)
=============== ===============
BASIC WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 3,810,155 310,191
=============== ===============
DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 3,841,458 310,191
=============== ===============
WHITE RIVER CAPITAL, INC.
ANNUAL CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share and share amounts)
Twelve Months Ended December 31,
2005 2004 2003
INTEREST:
Interest on receivables $ 28,803 $ 12,985 $ 9,799
Accretion and other interest 8,530 1,028 5,917
----------- ----------- -----------
Total interest income 37,333 14,013 15,716
Interest expense (15,204) (13,108) (15,171)
----------- ----------- -----------
Net interest margin 22,129 905 545
Recovery (provision) for
estimated credit losses 1,465 (11,025) (874)
----------- ----------- -----------
Net interest margin (deficiency)
after recovery (provision) for
estimated credit losses 23,594 (10,120) (329)
----------- ----------- -----------
OTHER REVENUES:
Servicing fee income - - 5,355
Credit (charge) to Master Trust--
net (10,253) 4,485 (178)
Gain from extinguishment of debt 11,352 - -
Gain on fair valuation of
creditor liabilities - - 51,604
Gain on sale of servicing
platform and equipment--net - - 6,582
Other income 668 2,934 3,636
----------- ----------- -----------
Total other revenues, net 1,767 7,419 66,999
----------- ----------- -----------
OTHER EXPENSES:
Salaries and benefits 2,462 434 4,260
Third party servicing expense 3,323 2,344 637
Other operating expenses 2,770 1,126 7,768
Impairment of retained
interest/beneficial interest in
master trust - - 39,154
Valuation loss on receivables
held for sale--net - - 280
Bankruptcy costs 296 657 8,897
----------- ----------- -----------
Total other expenses 8,851 4,561 60,996
----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 16,510 (7,262) 5,674
INCOME TAXES - - -
----------- ----------- -----------
NET INCOME (LOSS) $ 16,510 $ (7,262) $ 5,674
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE
(BASIC) $ 11.08 $ (23.41) $ 18.29
=========== =========== ===========
NET INCOME (LOSS) PER COMMON SHARE
(DILUTED) $ 11.02 $ (23.41) $ 18.29
=========== =========== ===========
BASIC WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 1,489,607 310,191 310,191
=========== =========== ===========
DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 1,498,549 310,191 310,191
=========== =========== ===========