Union Acceptance Announces Results for the Q2 of Fiscal 2000
25 January 2000
Union Acceptance Corporation Announces Results for the Second Quarter of Fiscal 2000
INDIANAPOLIS--Jan. 25, 2000--Union Acceptance Corporation today announced results for the second quarter ended December 31, 1999.Net earnings totaled $2.1 million, or $0.16 per diluted share, compared to net earnings of $2.9 million, or $0.22 per diluted share, reported for the quarter ended December 31, 1998. Fiscal 2000 year-to-date earnings totaled $7.6 million, or $0.57 per diluted share, exceeding the $5.0 million, or $0.38 per diluted share, for the first six months of fiscal 1999.
John Stainbrook, President and Chief Executive Officer, commented, "In a rising interest rate environment, we were pleased that we were able to maintain reasonable origination margins for receivables securitized this quarter and improve credit quality with this quarter's acquisitions. However, we were disappointed in the deterioration in the credit quality of the older pools leading to impairment charges for the quarter."
"Pools securitized subsequent to our strategic underwriting changes in fiscal 1997, continue to perform within levels projected by our business model," noted Chief Financial Officer, Rick Brown. "Losses on these more recent pools are also in line with assumptions used in our gain on sale calculations. In large part, overall losses and delinquencies demonstrated their seasonal nature of increasing during the fall and winter, as expected."
Selected Key Results
| -- | The Company's total servicing portfolio grew to $2.6 billion at December 31, 1999, or 10.2% higher than $2.3 billion at December 31, 1998. |
| -- | Receivable acquisitions for the quarter ended December 31, 1999 were $263.8 million, compared to $361.9 million for the quarter ended December 31, 1998. |
| -- | Net earnings for the quarter ended December 31, 1999 decreased $0.8 million, or 26.5%, from the net earnings reported for the quarter ended December 31, 1998. |
| -- | Fiscal 2000 year-to-date net earnings increased $2.6 million, or 52.0%, from the year-to-date net earnings reported at December 31, 1998. |
| -- | Total revenues decreased to $22.1 million in the quarter ended December 31, 1999, from $22.9 million in the quarter ended December 31, 1998. Year-to-date total revenues increased 9.8% to $50.1 million, from year-to-date total revenues reported at December 31, 1998. |
| -- | Tier I credit losses totaled 2.40% for the quarter ended December 31, 1999, compared to 2.15% for the quarter ended December 31, 1998. Year-to-date Tier I net credit losses were 2.19%, compared to 2.46% year-to-date Tier I net credit losses at December 31, 1998. |
| -- | Delinquency on the Tier I automobile portfolio was 3.33% at December 31, 1999, compared to 3.04% at December 31, 1998. |
| -- | Recovery rates on the Tier I automobile portfolio for the quarter ended December 31, 1999 increased to 38.87%, compared to 37.79% for the quarter ended December 31, 1998. |
| -- | The Company securitized $302.7 million during the quarter ended December 31, 1999, for a gain on sale of $5.2 million. This compares to $275.9 million securitized in the quarter ended December 31, 1998, for a gain of $5.8 million. |
| -- | At December 31, 1999, $127.4 million of warehouse capacity was utilized, and an additional $43.3 million was available to borrow, based on the outstanding principal balance of eligible receivables. In addition, the Company maintained cash on hand of $10.9 million for total available cash of $54.2 million as of December 31, 1999. Total available cash was $59.6 million at December 31, 1998. |
"Increasing treasury rates will continue to put pressure on our volume and margins," commented Mr. Stainbrook. "Therefore, geographic expansion, including the northeastern part of the country, and a focus on growth within existing markets, will take on a higher priority in the March and June 2000 quarters. We are optimistic that the positive effects of expansion coupled with an increased concentration on acquisitions will be apparent by the end of the fourth quarter."
The following tables set forth delinquency and credit loss experience related to the Tier I (prime) automobile portfolio:
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Delinquency Experience
At Dec. 31, 1999 At Sept. 30, 1999
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(Dollars in thousands)
Number of Number of
Receivables Amount Receivables Amount
----------- ------ ----------- ------
Servicing portfolio 217,904 $ 2,540,391 217,296 $ 2,530,654
Delinquencies
30-59 days 4,636 49,988 4,714 50,734
60-89 days 2,202 24,505 1,955 20,439
90 days or more 944 10,151 875 9,291
Total delinquencies 7,782 84,644 7,544 80,464
Delinquency as a
percentage of
servicing
portfolio 3.57% 3.33% 3.47% 3.18%
At Dec. 31, 1998
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(Dollars in thousands)
Number of
Receivables Amount
----------- ------
Servicing portfolio 202,890 $ 2,277,112
Delinquencies
30-59 days 4,379 44,626
60-89 days 1,682 17,475
90 days or more 694 7,161
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Total delinquencies 6,755 69,262
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Delinquency as a
percentage of servicing
portfolio 3.33% 3.04%
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Credit Loss Experience
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Three Months Ended
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(Dollars in thousands)
Dec. 31, 1999 Sept. 30, 1999 Dec. 31,1998
------------- -------------- ------------
Average servicing
portfolio $2,537,094 $2,515,461 $2,234,753
Gross charge-offs 24,948 21,088 19,339
Recoveries 9,698 8,671 7,309
------------- -------------- ------------
Net charge-offs 15,250 12,417 12,030
Gross charge-offs
as a percentage of
average servicing
portfolio (1) 3.93% 3.35% 3.46%
Recoveries as a
percentage of
gross charge-offs 38.87% 41.12% 37.79%
Net charge-offs as a
percentage of average
servicing portfolio (1) 2.40% 1.97% 2.15%
Six Months Ended
(Dollars in thousands)
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Dec. 31, 1999 Dec. 31, 1998
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Average servicing
portfolio $ 2,526,278 $ 2,161,458
Gross charge-offs 46,037 42,990
Recoveries 18,370 16,455
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Net charge-offs 27,667 26,535
Gross charge-offs
as a percentage of
average servicing
portfolio (1) 3.64% 3.98%
Recoveries as a
percentage of
gross charge-offs 39.90% 38.28%
Net charge-offs as a
percentage of average
servicing portfolio (1) 2.19% 2.46%
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(1) Annualized
Selected Second Quarter Financial Results
Net earnings for the quarter ended December 31, 1999 were $2.1 million or $0.16 per diluted share, a decrease of $0.8 million from the comparable quarter of fiscal 1999. The decrease was primarily related to a lower gain on sale of receivables, net of impairments.
The net interest margin after provision for estimated credit losses increased to $6.3 million for the second quarter of fiscal 2000, from $4.4 million in the second quarter of fiscal 1999. This increase is primarily related to an increase in Retained Interest and other interest income and a reduction of the provision for estimated credit losses.
Retained interest and other interest income was $6.4 million and $5.2 million for the quarters ended December 31, 1999 and 1998, respectively. The $1.2 million or 24.0% increase is primarily due to larger discount accretion. Increased discount accretion resulted from larger initial discount recorded for the gain on sale of receivables. Beginning in June 1999, the Company increased discount rates used in the valuation of Retained Interest and calculation of the gain on sale of receivables which increased the initial discount recorded for each sale. A discount rate of 900 basis points over the two-year treasury rate is used for the gain on sale calculation.
The provision for estimated credit losses on the held for sale portfolio decreased to $0.7 million in the quarter ended December 31, 1999, from $1.3 million in the same period of fiscal 1999. This reduction is related to the continued improvement in performance of the held for sale portfolio.
Gain on sale of receivables, net of impairments, totaled $1.3 million for the quarter ended December 31, 1999, compared to $4.1 million for the quarter ended December 31, 1998. The gain on sale of receivables, net of impairments, consisted primarily of gains on securitization transactions of $5.2 million and $5.8 million, and charges for other than temporary impairments of Retained Interest of $4.0 million and $1.6 million for the quarters ended December 31, 1999 and 1998, respectively.
Charges for other than temporary impairments of Retained Interest of $4.0 million relate to older pools securitized prior to the underwriting changes in fiscal 1997. The valuation of Retained Interest is determined on a disaggregate basis (pool by pool); therefore, unrealized gains relating to more recent pools are not offset against impairments relating to the older pools.
Servicing fees for the quarter ended December 31, 1999 were $6.2 million, a 13.1% increase over $5.5 million for the quarter ended December 31, 1998. This increase was the result of a higher average securitized servicing portfolio.
Operating expenses totaled $11.7 million for the quarter ended December 31, 1999, or 1.82% of the average servicing portfolio which is well below the industry average. This ratio is comparable to previous quarters.
The Company's unrealized gain on Retained Interest totaled $2.2 million at December 31, 1999, and is reported as Accumulated Other Comprehensive Earnings.
Corporate Description
UAC is one of the nation's largest independent, indirect automobile finance companies. The Company's primary business is acquiring, securitizing and servicing prime retail installment sales contracts. These contracts are originated by dealerships affiliated with major domestic and foreign automobile manufacturers. The Company is focused on the upper-end of the credit quality spectrum. Union Acceptance Corporation commenced business in 1986 and currently acquires receivables from over 4,300 manufacturer-franchised dealerships in 35 states. By using state-of-the-art technology in a highly centralized underwriting and servicing environment, Union Acceptance Corporation enjoys one of the lowest cost operating structures in the independent prime automobile finance industry.
Forward Looking Information
This news release contains forward-looking statements regarding matters such as delinquency and credit loss trends, recoveries of repossessed vehicles, receivable acquisitions and other issues. Readers are cautioned that actual results may differ materially from such forward-looking statements. Forward-looking statements involve risks and uncertainties including, but not limited to, the relative unpredictability of changes in delinquency and credit loss rates, changes in acquisition volume, general economic conditions that affect consumer loan performance and consumer borrowing practices and other important factors detailed in the Company's annual report on Form 10-K for the fiscal year ended June 30, 1999, which was filed with the Securities and Exchange Commission.
Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Balance Sheet Data at: Dec. 31, 1999 June 30, 1999
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Cash and cash equivalents $ 10,876 $ 8,088
Restricted cash 12,430 12,379
Receivables held for sale, net 174,998 267,316
Retained interest in securitized assets 198,619 190,865
Accrued interest receivable 1,425 2,035
Property, equipment, and leasehold
improvements, net 9,727 8,375
Other assets 22,460 25,868
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Total assets $ 430,535 $ 514,926
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Amounts due under warehouse facilities $ 127,359 $ 185,500
Long-term debt 177,000 199,000
Accrued interest payable 4,506 5,287
Amounts due to trusts 14,018 13,152
Dealer premiums payable 1,122 2,564
Current and deferred income taxes payable 3,326 16,022
Other payables and accrued expenses 4,020 3,922
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Total liabilities 331,351 425,447
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Common stock 58,620 58,452
Accumulated other comprehensive earnings, 2,169 199
net of taxes
Retained earnings 38,395 30,828
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Total shareholders' equity 99,184 89,479
------------------------------
Total liabilities and shareholders'
equity $ 430,535 $ 514,926
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30+ Delinquency at: Dec. 31, Sept. 30, Dec. 31,
1999 1999 1998
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Tier I 3.33% 3.18% 3.04%
Tier II 13.62% 10.99% 9.66%
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Total 3.50% 3.32% 3.23%
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Allowance Data at:
Allowance for estimated
credit losses on
securitized receivables $ 107,625 $ 107,422 $ 96,512
Securitized receivables
serviced $ 2,408,857 $ 2,351,269 $ 2,101,706
Allowance as a percentage
of securitized receivables
serviced 4.47% 4.57% 4.59%
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Managed Receivable Data at:
Receivables held for sale
Tier I $ 173,082 $ 226,505 $ 237,777
Tier II 618 694 3,982
Securitized
Tier I 2,367,307 2,304,146 2,039,326
Tier II 41,550 47,123 62,380
Receivables serviced
for others 741 836 1,156
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Total Servicing
Portfolio $ 2,583,298 $ 2,579,304 $ 2,344,621
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Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Six Months Ended
December 31, December 31,
Income Statement
Data for the Period: 1999 1998 1999 1998
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Interest on
receivables
held for sale $ 6,684 $ 6,938 $ 14,829 $ 15,189
Retained interest
and other 6,442 5,195 12,170 10,827
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Total interest
income 13,126 12,133 26,999 26,016
Interest expense 6,179 6,496 12,743 13,601
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Net interest margin 6,947 5,637 14,256 12,415
Provision for estimated
credit losses 665 1,275 1,415 3,600
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Net interest margin
after provision for
estimated credit
losses 6,282 4,362 12,841 8,815
Gain on sales of
receivables, net 1,261 4,087 7,791 6,793
Servicing fees, net 6,188 5,469 12,256 10,422
Late charges and other
fees 1,508 1,173 3,013 2,379
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Other revenues 8,957 10,729 23,060 19,594
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Salaries and benefits 6,737 5,453 13,664 11,123
Other general and
administrative fees 4,993 4,856 9,907 9,177
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Total operating
expenses 11,730 10,309 23,571 20,300
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Earnings before
provision for
income taxes 3,509 4,782 12,330 8,109
Provision for income
taxes 1,361 1,859 4,763 3,129
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Net earnings $ 2,148 $ 2,923 $ 7,567 $ 4,980
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Per Common Share Data:
Earnings
(diluted and basic) $ 0.16 $ 0.22 $ 0.57 $ 0.38
Book value $ 7.47 $ 6.62 $ 7.47 $ 6.62
Weighted average
shares
outstanding 13,264,379 13,236,313 13,257,519 13,233,897
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Receivable Acquisition Volume:
Tier I $ 263,821 $ 357,262 $ 594,103 $ 754,242
Tier II -- 4,629 -- 12,142
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Total $ 263,821 $ 361,891 $ 594,103 $ 766,384
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Securitization Volume:
Tier I $ 302,692 $ 275,914 $ 667,484 $ 627,293
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Ratios:
Return on average
managed assets 0.30% 0.45% 0.53% 0.40%
Return on average
shareholders' equity 8.84% 14.75% 15.89% 12.86%
Operating expenses as
a percentage of
average servicing
portfolio 1.82% 1.79% 1.83% 1.82%
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Portfolio Performance:
Net credit loss
(annualized for
the period ended)
Tier I 2.40% 2.15% 2.19% 2.46%
Tier II 10.71% 6.45% 9.61% 7.32%
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Total 2.55% 2.28% 2.33% 2.60%
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