White River Capital, Inc. Announces Results for the 2nd Quarter of 2006; Net Income for the Second Quarter of 2006 Totaled $3.6 Million
INDIANAPOLIS--July 27, 2006--White River Capital, Inc. (Pink Sheets:WRVC) ("White River") today announced net income for the second quarter 2006 was $3.6 million, or $0.94 per diluted share (based upon 3,868,828 diluted shares outstanding), compared to second quarter 2005 net income of $12.5 million, or $40.36 per diluted share (based upon 310,191 diluted shares outstanding). The results for the second quarter of 2006 are due to the following:-- activity from the Coastal Credit LLC ("Coastal Credit") subsidiary contributed $1.9 million to net income,
-- activity from the Union Acceptance Company LLC ("UAC") subsidiary contributed $0.8 million to net income (the result of $2.6 million of earnings from operations and a $(1.8) million loss from creditor notes payable extinguishment of debt and inter-company transfers),
-- activity at the holding company contributed $0.5 million to net income (the result of a $(1.1) million loss from interest and holding company expenses and a $1.6 million gain from creditor notes payable extinguishment of debt and inter-company transfers), and
-- an income tax benefit of $0.4 million.
On June 9, 2006, UAC sold receivables in Chapter 13 bankruptcy status from its portfolio to an unrelated third party. These accounts had a combined secured and unsecured receivable balance of approximately $10.6 million which, on each account, was previously charged off to a book value of zero during the Chapter 13 bankruptcy process.
Mark Ruh, President and Chief Operating Officer, stated, "During the second quarter, UAC had continued favorable portfolio performance, and this added $3.3 million in accumulated other comprehensive income to our equity base, while the successful Chapter 13 account sale from the UAC portfolio further enhanced the company's overall liquidity. Also, Coastal Credit continued its excellent overall performance." Mr. Ruh continued, "White River's earnings volatility will continue in the future as the UAC portfolio continues to liquidate."
Martin Szumski, Chief Financial Officer, commented, "We are pleased with the continued growth of our equity foundation during the second quarter. Our equity is now $64.9 million, and tangible equity is now $29.9 million. These values translate into a book value per share of $17.03 and a tangible book value per share of $7.83, while our tangible equity is now 15.75% of tangible assets."
INTEREST ON RECEIVABLES
Interest on receivables for the second quarter of 2006 totaled $9.6 million compared to $5.4 million for the second quarter of 2005. The increase in interest on receivables resulted largely from the activity of Coastal Credit, which White River acquired during the third quarter of 2005.
ACCRETION AND OTHER INTEREST
Accretion and other interest decreased to $2.7 million compared to $4.2 million for the quarters ended June 30, 2006, and 2005, respectively. The Chapter 13 account sale from the UAC portfolio contributed approximately $1.4 million of the accretion and other interest during the second quarter 2006. However, the overall decrease is attributable to a decrease in accretion income related to lower cash distributions from the UAC Master Trust account.
RECOVERY (PROVISION) FOR ESTIMATED CREDIT LOSSES
Recovery (provision) for estimated credit losses was a $523,000 recovery compared to a $(1.4) million provision for the quarters ended June 30, 2006, and 2005, respectively. UAC significantly contributed to the recovery for estimated credit losses with a $1.6 million recovery due to the improved performance of the securitized finance receivable portfolio during the second quarter 2006. The provision at Coastal Credit for the quarter ended June 30, 2006, was $(1.0) million.
CHARGE TO MASTER TRUST, NET
The charge to Master Trust, net was $(2.4) million for the quarter ended June 30, 2006, compared to $(1.4) million for the quarter ended June 30, 2005. 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 the performance of UAC's on balance sheet securitized finance receivables has improved, there has been a recovery for estimated credit losses, and interest income has increased. Thus, the amounts related to future transfers of funds owed to the Master Trust has increased resulting in an increase in the charge to Master Trust, net.
GAIN (LOSS) FROM EXTINGUISHMENT OF DEBT
The loss from extinguishment of debt was $(0.2) million for the quarter ended June 30, 2006. This value is the net of a $(1.8) million loss at UAC and a $1.6 million gain at the holding company from the creditor notes payable extinguishment of debt and inter-company transfers. More specifically, this activity is related to (1) the purchase by White River during this period of almost all of UAC's remaining general unsecured claims which it did not already own, and (2) to distributions from UAC to the holding company on UAC debt owned by the holding company. The gain from extinguishment of debt was $11.1 million for the quarter ended June 30, 2005. This gain is related to the purchase by White River of a significant portion of UAC's restructured subordinated notes during June 2005.
White River now owns approximately 99% of UAC's general unsecured claims. White River continues to own 89.1% of UAC's subordinated notes.
INCOME TAX BENEFIT
On a quarterly basis, White River calculates the deferred tax asset valuation allowance based on the estimated taxable income for the future five year period and makes adjustments as required. For the quarter ended June 30, 2006, this adjustment resulted in an income tax benefit of $439,000. This income tax benefit was the result of a $470,000 benefit from the reversal of a portion of the deferred tax asset valuation allowance partially offset by state income tax expenses of $31,000.
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)
June 30, December 31,
2006 2005
Finance receivables - gross balance $105,512 $ 97,820
Delinquencies:
30-59 days 1,121 1,124
60-89 days 558 768
90+ days 548 878
-------- -----------
Total delinquencies $ 2,227 $ 2,770
======== ===========
Delinquencies as a percentage of finance
receivables - gross balance 2.1% 2.8%
Coastal Credit LLC
Allowance for Loan Losses - Finance Receivables
(in thousands except percentages)
Quarter Ended Six Months Ended
June 30, 2006 June 30, 2006
Balance at beginning of period $ 5,916 $ 6,031
Charge-offs, net of recoveries (1,117) (2,303)
Provision for estimated credit losses 1,033 2,104
------------- ---------------
Balance at the end of the period $ 5,832 $ 5,832
============= ===============
Net charge offs $ 1,117 $ 2,303
Finance receivables, net of unearned
finance charges $ 95,598 $ 95,598
Allowance for loan losses as a percent
of finance receivables, net of
unearned finance charges 6.10% 6.10%
Annualized net charge offs as a
percent of finance receivables, net
of unearned finance charges 4.67% 4.82%
Allowance for loan losses as a percent
of annualized net charge offs 130.53% 126.62%
Union Acceptance Company LLC
Delinquency Rates
(in thousands except percentages)
June 30, December 31,
2006 2005
Securitized finance receivables principal
balance $ 58,710 $ 115,031
Delinquencies:
30-59 days 4,134 7,703
60-89 days 1,001 2,390
90+ days 410 1,271
--------- -----------
Total delinquencies $ 5,545 $ 11,364
========= ===========
Delinquencies as a percentage of securitized
finance receivables 9.4% 9.9%
Off-balance sheet finance receivables
principal balance $ 54,146 $ 82,300
Delinquencies:
30-59 days 2,122 2,737
60-89 days 394 859
90+ days 195 553
--------- -----------
Total delinquencies $ 2,711 $ 4,149
========= ===========
Delinquencies as a percentage of securitized
finance receivables 5.0% 5.0%
Union Acceptance Company LLC
Allowance for Loan Losses - On Balance Sheet Securitized Finance
Receivables
(in thousands except percentages)
Quarters Ended June 30, Six Months Ended June 30,
----------------------- -------------------------
2006 2005 2005 2005
---------- ---------- ---------- ------------
Balance at the
beginning of period $ 4,867 $ 12,758 $ 6,503 $ 11,722
Allowance at
purchase - 362 - 3,032
Charge-offs (2,064) (4,901) (6,316) (10,599)
Recoveries 2,842 3,843 6,391 7,458
Provision (recovery)
for estimated
credit losses (1,556) 1,363 (2,489) 1,812
---------- ---------- ---------- ------------
Balance at the end
of the period $ 4,089 $ 13,425 $ 4,089 $ 13,425
========== ========== ========== ============
Net charge offs
(recoveries) $ (778) $ 1,058 $ (75) $ 3,141
Securitized finance
receivables $ 58,710 $ 142,338 $ 58,710 $ 142,338
Allowance for loan
losses as a percent
of securitized
finance receivables 6.96% 9.43% 6.96% 9.43%
Annualized net
charge offs
(recoveries) as a
percent of
securitized finance
receivables -5.30% 2.97% -0.26% 4.41%
Allowance for loan
losses as a percent
of annualized net
charge offs nm (a) 317.23% nm (a) 213.71%
(a) not meaningful
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 $114.2 million in non-prime auto receivables, as of June 30, 2006. 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 and 2006, White River purchased and now directly owns approximately 90% of UAC's notes and general unsecured 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 Annual Report on Form 10-K for the year ended December 31, 2005,
-- its Proxy Statement on Schedule 14A dated April 10, 2006, and
-- its Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.
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 under Item 1A in White River's Annual Report on Form 10-K for the year ended December 31, 2005, 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. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
ASSETS June 30, 2006 December 31, 2005
Cash and cash equivalents $ 6,409 $ 6,878
Restricted cash 18,083 22,739
Securitized finance receivables--net 55,080 109,506
Finance receivables--net 77,758 70,784
Beneficial interest in Master Trust 20,676 13,968
Goodwill 35,097 35,097
Deferred tax assets 5,756 4,707
Other assets 5,810 3,315
------------ -----------------
TOTAL $ 224,669 $ 266,994
============ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Collateralized financing $ 65,342 $ 122,293
Line of credit 57,500 51,500
Secured note payable 15,000 15,000
Subordinated debentures 7,700 7,700
Note payable - Coastal Credit
purchase holdback - 3,840
Accrued interest 1,853 2,131
Amounts due to Master Trust 7,314 7,417
Creditor notes payable 1,634 1,461
Other payables and accrued expenses 3,377 2,291
------------ -----------------
Total liabilities 159,720 213,633
------------ -----------------
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;
3,813,155 and 3,810,155 issued and
outstanding at June 30, 2006 and
December 31, 2005, respectively 179,259 179,157
Warrants 534 534
Accumulated other comprehensive
income 20,025 13,305
Accumulated deficit (134,869) (139,635)
------------ -----------------
Total shareholders' equity 64,949 53,361
------------ -----------------
TOTAL $ 224,669 $ 266,994
============ =================
WHITE RIVER CAPITAL, INC.
Book Value per Share and Tangible Book Value per Share
(in thousands except share related values)
June 30, December 31,
2006 2005
Total shareholders' equity $ 64,949 $ 53,361
Less goodwill (35,097) (35,097)
---------- ------------
Tangible book value $ 29,852 $ 18,264
========== ============
Shares outstanding 3,813,155 3,810,155
Book value per share $ 17.03 $ 14.00
Tangible book value per share $ 7.83 $ 4.79
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
Quarters Ended June 30, Six Months Ended June 30,
2006 2005 2006 2005
INTEREST:
Interest on
receivables $ 9,577 $ 5,407 $ 19,609 $ 9,887
Accretion and other
interest 2,697 4,169 3,407 5,719
------------ -------- ----------- ------------
Total interest
income 12,274 9,576 23,016 15,606
Interest expense (3,082) (4,320) (6,423) (8,344)
------------ -------- ----------- ------------
Net interest margin 9,192 5,256 16,593 7,262
Recovery
(provision) for
estimated credit
losses 523 (1,363) 385 (1,812)
------------ -------- ----------- ------------
Net interest margin
after recovery
(provision) for
estimated credit
losses 9,715 3,893 16,978 5,450
------------ -------- ----------- ------------
OTHER REVENUES:
Charge to Master
Trust--net (2,370) (1,429) (4,757) (3,052)
Gain (loss) from
extinguishment of
debt (202) 11,061 (202) 11,061
Other income 319 168 426 426
------------ -------- ----------- ------------
Total other
revenues, net (2,253) 9,800 (4,533) 8,435
------------ -------- ----------- ------------
OTHER EXPENSES:
Salaries and
benefits 2,127 78 4,123 171
Third party
servicing expense 477 817 1,180 1,627
Other operating
expenses 1,611 217 3,217 606
Bankruptcy costs 57 61 131 170
------------ -------- ----------- ------------
Total other
expenses 4,272 1,173 8,651 2,574
------------ -------- ----------- ------------
INCOME BEFORE
INCOME TAXES 3,190 12,520 3,794 11,311
INCOME TAX BENEFIT 439 - 971 -
------------ -------- ----------- ------------
NET INCOME $ 3,629 $ 12,520 $ 4,765 $ 11,311
============ ======== =========== ============
NET INCOME PER
COMMON SHARE
(BASIC) $ 0.95 $ 40.36 $ 1.25 $ 36.46
============ ======== =========== ============
NET INCOME PER
COMMON SHARE
(DILUTED) $ 0.94 $ 40.36 $ 1.23 $ 36.46
============ ======== =========== ============
BASIC WEIGHTED
AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING 3,813,155 310,191 3,812,989 310,191
============ ======== =========== ============
DILUTED WEIGHTED
AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 3,868,828 310,191 3,866,358 310,191
============ ======== =========== ============