Union Acceptance Corporation Reports Third Quarter Results:
20 April 2000
Union Acceptance Corporation Reports Third Quarter Results:
INDIANAPOLIS--April 19, 2000--Union Acceptance Corporation (Nasdaq:UACA)-- Receivable Acquisitions Increase 23%
-- Year-To-Date Earnings Up 17%
Union Acceptance Corporation (Nasdaq:UACA) today announced results for the third quarter ended March 31, 2000.
Net earnings for this quarter totaled $3.3 million, or $0.25 per diluted share, compared to net earnings of $4.3 million, or $0.32 per diluted share for the same period of fiscal 1999. Net earnings for the first nine months of fiscal 2000 increased by 17% to $10.9 million, or $0.82 per diluted share, compared to $9.2 million, or $0.70 per diluted share for the same period of fiscal 1999.
Receivable acquisitions for the third quarter of fiscal 2000 increased 23% to $395.6 million, compared to $321.9 million for the comparable period of fiscal 1999.
"Receivable acquisitions exceeded our expectations this quarter, particularly given that our expansion into the northeast will not be a factor until the fourth quarter," commented John Stainbrook, President and Chief Executive Officer. "We attribute the growth in receivable acquisitions to our long term dealer relationships and our consistency in acquiring prime receivables."
For the Nine-Month Period Ended March 31, 2000:
-- Earnings per diluted share climbed 17% to $0.82, compared to
$0.70 for the comparable period of fiscal 1999.
-- Total revenues rose $3.6 million to $75.6 million, a 5%
increase from $72.0 million in the comparable period of
fiscal 1999.
-- Annualized net credit losses (Tier I) fell to 2.23%,
compared to 2.29% in the comparable period of fiscal 1999.
The following tables set forth delinquency and credit loss experience related to the Tier I (prime) automobile portfolio. (The Tier I portfolio represents over 98% of the total servicing portfolio.)
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Delinquency Experience
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At March 31, At December 31,
2000 1999
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(Dollars in thousands)
Number of Number of
Receivables Amount Receivables Amount
----------- ---------- ----------- ----------
Servicing portfolio 225,458 $2,672,470 217,904 $2,540,391
Delinquencies
30-59 days 3,577 39,441 4,636 49,988
60-89 days 1,978 23,070 2,202 24,505
90 days or more 957 10,524 944 10,151
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Total delinquencies 6,512 73,035 7,782 84,644
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----------- ---------- ----------- ----------
Delinquency as
a percentage of
servicing portfolio 2.89% 2.73% 3.57% 3.33%
At March 31,
1999
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(Dollars in thousands)
Number of
Receivables Amount
----------- ----------
Servicing portfolio 207,705 $2,355,418
Delinquencies
30-59 days 3,650 37,890
60-89 days 1,633 17,279
90 days or more 646 6,818
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Total delinquencies 5,929 61,987
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Delinquency as a percentage of
servicing portfolio 2.85% 2.63%
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Credit Loss Experience
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Three Months Ended
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(Dollars in thousands)
March 31, December 31, March 31,
2000 1999 1999
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Average servicing portfolio $2,619,461 $2,537,094 $2,329,127
Gross charge-offs 25,467 24,948 19,139
Recoveries 10,417 9,698 7,643
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Net charge-offs 15,050 15,250 11,496
Gross charge-offs as a percentage
of average servicing portfolio(a) 3.89% 3.93% 3.29%
Recoveries as a percentage of
gross charge-offs 40.91% 38.87% 39.93%
Net charge-offs as a percentage
of average servicing portfolio(a) 2.30% 2.40% 1.97%
Nine Months Ended
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(Dollars in thousands)
March 31, March 31,
2000 1999
---------- ----------
Average servicing portfolio $2,557,339 $2,217,348
Gross charge-offs 71,504 62,129
Recoveries 28,787 24,098
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Net charge-offs 42,717 38,031
Gross charge-offs as a percentage
of average servicing portfolio(a) 3.73% 3.74%
Recoveries as a percentage of
gross charge-offs 40.26% 38.79%
Net charge-offs as a percentage
of average servicing portfolio(a) 2.23% 2.29%
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(a) Annualized
Selected Financial Results for the Quarter
The Company's total servicing portfolio grew to $2.7 billion at March 31, 2000, 12% higher than $2.4 billion at March 31, 1999.
Net earnings for the quarter ended March 31, 2000 were $3.3 million or $0.25 per diluted share, a decrease from the $4.3 million for the same period of fiscal 1999. The decrease was primarily related to a lower gain on sale of receivables, net of impairments. This decrease was partially offset by an increase in net interest margin after provision for estimated credit losses.
The net interest margin after provision for estimated credit losses increased to $7.3 million for the third quarter of fiscal 2000, from $4.7 million for the third quarter of fiscal 1999. This increase is primarily related to an increase in Retained Interest and other interest income.
Retained Interest and other interest income was $6.7 million and $4.9 million for the quarters ended March 31, 2000 and 1999, respectively. The 38% increase is primarily due to larger discount accretion. Increased discount accretion resulted from larger initial discount recorded for the gain on sale of receivables. During the fourth quarter of fiscal 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 on a prospective basis. 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 $0.8 million in the quarter ended March 31, 2000, from $1.2 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 $2.8 million for the quarter ended March 31, 2000, compared to $6.4 million for the quarter ended March 31, 1999. The gain on sale of receivables, net of impairments, consisted primarily of gains on securitization transactions of $2.8 million and $10.7 million, for the quarters ended March 31, 2000 and 1999, respectively, and a charge for other than temporary impairments of Retained Interest of $4.3 million in the quarter ended March 31, 1999. There was no charge for impairments in the quarter ended March 31, 2000. The decrease in the gain on sale of receivables, net, is primarily due to a lower net spread (gross spread less servicing fees, upfront costs, ongoing credit enhancement and trustee fees, and hedging gain or losses) on the securitization in the quarter ended March 31, 2000. The net spread on the securitization completed in the quarter ended March 31, 2000 was 4.94%, compared to 6.16% on the securitization completed in the quarter ended March 31, 1999.
Servicing fees for the quarter ended March 31, 2000 were $ 6.2 million, an 11% increase over $5.6 million for the quarter ended March 31, 1999. This increase was the result of a higher average securitized servicing portfolio.
Operating expenses totaled $12.6 million for the quarter ended March 31, 2000, or 1.89% 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 $2.8 million at March 31, 2000, and is reported as Accumulated other comprehensive earnings, net of income taxes.
At March 31, 2000, $246.7 million of warehouse capacity was utilized, and an additional $39.0 million was available to borrow, based on the outstanding principal balance of eligible receivables. In addition, the Company maintained cash on hand of $9.4 million, for total available cash of $48.4 million as of March 31, 2000.
Union Acceptance Corporation maintains a web site at www.unionacceptance.com that contains additional information on the Company.
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 4,600 manufacturer-franchised dealerships in 38 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: March 31, 2000 June 30, 1999
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Cash and cash equivalents $ 9,381 $ 8,088
Restricted cash 14,751 12,379
Receivables held for sale, net 302,525 267,316
Retained interest in
securitized assets 194,633 190,865
Accrued interest receivable 2,493 2,035
Property, equipment, and
leasehold improvements, net 9,962 8,375
Other assets 22,340 25,868
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Total assets $556,085 $514,926
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Amounts due under warehouse
facilities $246,691 $185,500
Long-term debt 177,000 199,000
Accrued interest payable 2,474 5,287
Amounts due to trusts 13,897 13,152
Dealer premiums payable 2,370 2,564
Current and deferred income
taxes payable 5,441 16,022
Other payables and accrued
expenses 5,130 3,922
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Total liabilities 453,003 425,447
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Common stock 58,632 58,452
Accumulated other
comprehensive earnings, net
of taxes 2,771 199
Retained earnings 41,679 30,828
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Total shareholders' equity 103,082 89,479
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Total liabilities and
shareholders' equity $556,085 $514,926
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30+ Delinquency at: March 31, December 31, March 31,
2000 1999 1999
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Tier I 2.73% 3.33% 2.63%
Tier II 15.41% 13.62% 8.28%
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Total 2.91% 3.50% 2.77%
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Allowance Data at:
Allowance for estimated
credit losses on securitized
receivables $ 105,916 $ 107,625 $ 100,208
Securitized receivables
serviced $2,411,047 $2,408,857 $2,178,751
Allowance as a percentage
of securitized receivables
serviced 4.39% 4.47% 4.60%
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Managed Receivable Data at:
Receivables held for sale
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Tier I $ 290,500 $ 173,082 $ 235,751
Tier II 7,863 618 1,194
Securitized
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Tier I 2,381,969 2,367,307 2,119,661
Tier II 29,078 41,550 59,090
Receivables serviced for
others 695 741 1,028
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Total Servicing Portfolio $2,710,105 $2,583,298 $2,416,724
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Union Acceptance Corporation
Selected Financial Data
(Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
March 31, March 31,
Income Statement Data -----------------------------------------------
for the Period: 2000 1999 2000 1999
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Interest on receivables
held for sale $ 8,221 $ 8,087 $ 23,050 $ 23,276
Retained interest and
other 6,704 4,875 18,874 15,702
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Total interest income 14,925 12,962 41,924 38,978
Interest expense 6,805 6,996 19,548 20,597
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Net interest margin 8,120 5,966 22,376 18,381
Provision for estimated
credit losses 840 1,225 2,255 4,825
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Net interest margin
after provision for
estimated credit
losses 7,280 4,741 20,121 13,556
Gain on sales of
receivables, net 2,754 6,386 10,545 13,179
Servicing fees, net 6,217 5,601 18,473 16,023
Late charges and other
fees 1,667 1,442 4,680 3,821
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Other revenues 10,638 13,429 33,698 33,023
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Salaries and benefits 7,354 6,328 21,018 17,451
Other general and
administrative fees 5,215 4,913 15,122 14,090
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Total operating
expenses 12,569 11,241 36,140 31,541
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Earnings before
provision for income
taxes 5,349 6,929 17,679 15,038
Provision for income
taxes 2,065 2,665 6,828 5,794
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Net earnings $ 3,284 $ 4,264 $ 10,851 $ 9,244
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Per Common Share Data:
Earnings (diluted and
basic) $ 0.25 $ 0.32 $ 0.82 $ 0.70
Diluted earnings $ 0.25 $ 0.32 $ 0.82 $ 0.70
Book value $ 7.76 $ 6.94
Weighted average shares
outstanding 13,277,632 13,249,260 13,264,175 13,238,944
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Receivable Acquisition Volume:
Tier I $ 395,594 $ 321,406 $ 989,697 $1,075,648
Tier II -- 450 -- 12,592
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Total $ 395,594 $ 321,856 $ 989,697 $1,088,240
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Securitization Volume:
Tier I $ 282,722 $ 320,545 $ 950,206 $ 947,838
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Ratios:
Return on average
managed assets 0.45% 0.64% 0.51% 0.48%
Return on average
shareholders' equity 13.24% 20.34% 14.98% 15.49%
Operating expenses as a
percentage of average
servicing portfolio 1.89% 1.88% 1.85% 1.84%
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Portfolio Performance:
Net credit loss (annualized
for the period ended)
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Tier I 2.30% 1.97% 2.23% 2.29%
Tier II 8.24% 6.00% 9.21% 6.90%
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Total 2.38% 2.08% 2.35% 2.42%
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