Union Acceptance Corporation Announces Second Quarter Results: Origination Volume Up 85% - Retail Dealer Network Increases 24%
18 January 2001
Union Acceptance Corporation Announces Second Quarter Results: Origination Volume Up 85% - Retail Dealer Network Increases 24%
INDIANAPOLIS--Jan. 18, 2001--Union Acceptance Corporation today announced financial and operational results for the second quarter ended December 31, 2000.Net earnings for the quarter totaled $5.3 million, or $0.40 per diluted share, before giving effect to the earnings impact of derivative instruments on held for sale receivables. This compares with net earnings of $2.1 million, or $0.16 per diluted share, for the comparable period of fiscal 2000. Net earnings for the quarter ended December 31, 2000, after accounting for the earnings impact of derivative instruments on held for sale receivables, totaled $3.8 million, or $0.29 per diluted share.
Fiscal 2001 year-to-date earnings climbed 30% to $9.8 million, or $0.74 per diluted share, before giving effect to the earnings impact of derivative instruments on held for sale receivables. This compares with net earnings of $7.6 million, or $0.57 per diluted share, for the comparable period of fiscal 2000. Fiscal 2001 year-to-date earnings after accounting for the earnings impact of derivative instruments on held for sale receivables, totaled $6.8 million, or $0.51 per diluted share.
Receivable acquisition volume for the quarter ended December 31, 2000 increased 85% to $489.2 million, compared to $263.8 million in the comparable quarter of fiscal 2000. Year-to-date volume increased 79% to $1.1 billion, compared to $594.1 million during the comparable period of fiscal 2000.
"We continue to see the benefits of our improved risk based pricing strategy reflected in both higher spreads and higher credit scores," commented John Stainbrook, President and Chief Executive Officer. "Superior pricing in addition to an attractive competitive environment played a large role in this quarter's volume, our highest volume ever for a December quarter."
Selected Key Results
| -- | The Company's total servicing portfolio grew 30% to $3.3 billion at December 31, 2000, compared to $2.6 billion at December 31, 1999. |
| -- | The Company's retail network of dealerships grew 24% to 5,443 as of December 31, 2000, compared to 4,387 at December 31, 1999. |
| -- | Total revenues (before the impact of derivative instruments on held for sale receivables) for the quarter ended December 31, 2000, increased 47% to $32.5 million from $22.1 million in the comparable quarter of fiscal 2000. |
| -- | The Company securitized $510.0 million in receivables for the quarter ended December 31, 2000, compared to $302.7 million securitized in the comparable quarter of fiscal 2000. |
| -- | In conjunction with the securitization, the Company reported a net gain on sale of receivables of $4.3 million (net of a $3.5 million loss on interest rate swaps on securitized receivables and a $2.1 million charge for other than temporary impairments of Retained Interest). This compares to a net gain of $1.3 million (net of a $0.3 million hedging loss and a $4.0 million charge for other than temporary impairments of Retained Interest) for the comparable period of fiscal 2000. |
| -- | Net gain on sales of receivables totaled 13.2% of total revenues for the quarter ended December 31, 2000, compared to 6% for the comparable quarter of fiscal 2000. Fiscal 2001 year-to-date net gain on sales of receivables totaled 10.4% of total revenues, compared to 15.6% for the comparable period of fiscal 2000. |
| -- | Operating expenses totaled $14.4 million or 1.75% of the average servicing portfolio for the quarter ended December 31, 2000. This compares to $11.7 million or 1.82% for the comparable quarter of fiscal 2000. |
| -- | Delinquency on the Tier I automobile portfolio was 3.50% at December 31, 2000, compared to 3.33% at December 31, 1999. |
| -- | Annualized Tier I credit losses totaled 2.35% for the quarter ended December 31, 2000, compared to 2.40% for the comparable quarter of fiscal 2000. |
| -- | At December 31, 2000, $227.1 million of warehouse capacity was utilized, and an additional $4.2 million was available to borrow based on the outstanding principal balance of eligible receivables. In addition, the Company maintained cash on hand of $6.5 million and a working capital line of credit of $15.0 million, for total available cash of $25.7 million as of December 31, 2000. Total available cash was $54.2 million at December 31, 1999. |
| -- | The Company's net pre-tax unrealized gain included in Retained Interest was $9.9 million at December 31, 2000, compared to $3.5 million at December 31, 1999. Net of taxes, the unrealized gain included in Retained Interest totaled $6.2 million at December 31, 2000 and is reported as Accumulated Other Comprehensive Income. |
| -- | The Company's allowance for estimated credit losses on securitized receivables was 4.47% at December 31, 2000, compared to 4.47% at December 31, 1999. |
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, At Sept. 30, At Dec. 31,
2000 2000 1999
------------------ ------------------ -------------------
(Dollars in thousands)
Number of Number of Number of
Receivables Amount Receivables Amount Receivables Amount
----------- ------ ----------- ------ ----------- ------
Servicing
portfolio 263,984 $3,324,102 252,293 $3,133,025 217,904 $2,540,391
Delinquencies
30-59 days 5,792 64,651 5,120 56,184 4,636 49,988
60-89 days 2,924 35,130 2,482 29,062 2,202 24,505
90 days
or more 1,444 16,462 1,158 12,918 944 10,151
------- ---------- ------- ---------- ------- ----------
Total
delinquencies 10,160 116,243 8,760 98,164 7,782 84,644
------- ---------- ------- ---------- ------- ----------
------- ---------- ------- ---------- ------- ----------
Delinquency as
a percentage
of servicing
portfolio 3.85% 3.50% 3.47% 3.13% 3.57% 3.33%
----------------------------------------------------------------------
----------------------------------------------------------------------
Credit Loss Experience
----------------------
Three Months Ended Six Months Ended
--------------------------------- --------------------
(Dollars in thousands)
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2000 2000 1999 2000 1999
---------- ---------- ---------- ---------- ----------
Average
servicing
portfolio $3,274,480 $3,031,640 $2,537,094 $3,153,060 $2,526,278
Gross charge-offs 31,643 27,099 24,948 58,742 46,037
Recoveries 12,372 11,112 9,698 23,484 18,370
---------- ---------- ---------- ---------- ----------
Net charge-offs 19,271 15,987 15,250 35,258 27,667
Gross charge-offs
as a percentage
of average
servicing
portfolio(1) 3.87% 3.58% 3.93% 3.73% 3.64%
Recoveries as
a percentage of
gross charge-offs 39.10% 41.01% 38.87% 39.98% 39.90%
Net charge-offs
as a percentage
of average
servicing
portfolio(1) 2.35% 2.11% 2.40% 2.24% 2.19%
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(1) Annualized
In addition to reporting results of operations in accordance with generally accepted accounting principles ("GAAP"), the Company has elected to present, below, pro forma portfolio-based statements of earnings which account for securitization transactions as secured financings rather than sales of receivables. In its consolidated financial statements prepared in accordance with GAAP, the Company records a gain on the sale of receivables in securitization transactions primarily representing the discounted estimated future servicing cash flows to be received by the Company related to the receivables sold. Future servicing cash flows are the projected cash flows resulting from the difference between the weighted average coupon rate of the receivables sold and the weighted average certificate rate paid to investors in the securitized trusts, less an allowance for estimated credit losses, the Company's contractual servicing fee of 1.00% and ongoing trust and credit enhancement fees.
The pro forma portfolio-based statements of earnings set forth below (following the presentation of the Company's historical selected financial data), present the Company's operating results under the assumption that securitization transactions are secured financings and no gain on sale, retained interest income, or servicing fee income is recognized. Instead, interest income, fee income, interest expense and other costs related to the asset-backed securities are recognized over the life of the securitized receivables. Credit losses are recorded as incurred. The pro forma portfolio-based statements of earnings and related data do not present the Company's operating results in accordance with GAAP. The pro forma portfolio-based data is presented solely for illustrative purposes to assist readers in their understanding of the Company's business and its financial performance. Such data is not intended to be an indication of any future results of operations of the Company and such data does not provide all information that would be provided with financial statements prepared in accordance with GAAP if the Company had accounted for its securitizations as secured financings.
"We are pleased to be providing pro forma portfolio-based statements of earnings," stated Rick Brown, Chief Financial Officer. "We believe the presentation of our financial results in this format demonstrates the efficiency of our business model and the positive results we have experienced due to our commitment to a prime portfolio and a centralized operating structure."
Union Acceptance Corporation will host a conference call at 12:00 p.m. Eastern Time on Thursday, January 18, 2001. The dial-in number for participation in this conference call is 800-473-8695. For an Internet replay of the conference call or additional information on the Company, please go the Company's web site, www.unionacceptance.com.
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 5,400 manufacturer-franchised dealerships in 40 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, 2000, 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, 2000 June 30, 2000
----------------------------------------------------------------------
Cash and cash equivalents $ 6,446 $ 14,792
Restricted cash 9,325 13,010
Receivables held for sale, net 243,604 206,701
Retained interest in securitized assets 247,372 208,431
Accrued interest receivable 2,316 1,727
Property, equipment, and
leasehold improvements, net 9,536 9,494
Other assets 25,006 23,983
---------------------
Total assets $543,605 $478,138
---------------------
---------------------
Amounts due under warehouse facilities $227,057 $152,235
Long-term debt 155,000 177,000
Accrued interest payable 5,465 5,408
Amounts due to trusts 14,494 14,487
Dealer premiums payable 2,968 3,663
Current and deferred income taxes payable 9,797 9,740
Other payables and accrued expenses 9,249 5,576
---------------------
Total liabilities 424,030 368,109
---------------------
Common stock 58,733 58,632
Accumulated other comprehensive earnings,
net of taxes 6,195 3,564
Retained earnings 54,647 47,833
---------------------
Total shareholders' equity 119,575 110,029
---------------------
Total liabilities and shareholders' equity $543,605 $478,138
---------------------
---------------------
----------------------------------------------------------------------
30+ Delinquency at: Dec. 31, 2000 June 30, 2000 Dec. 31, 1999
-----------------------------------------
Tier I 3.50% 2.82% 3.33%
Tier II 15.00% 11.26% 13.62%
-----------------------------------------
Total 3.58% 2.92% 3.50%
-----------------------------------------
-----------------------------------------
----------------------------------------------------------------------
Allowance Data at:
Allowance for estimated credit
losses on securitized
receivables $ 138,906 $ 119,003 $ 107,625
Securitized receivables serviced $3,109,149 $2,676,655 $2,408,857
Allowance as a percentage of
securitized receivables serviced 4.47% 4.45% 4.47%
----------------------------------------------------------------------
Managed Receivable Data at:
Receivables held for sale
-------------------------
Tier I $ 237,851 $ 202,167 $ 173,082
Tier II 1,589 1,656 618
Securitized
-----------
Tier I 3,086,251 2,645,983 2,367,307
Tier II 22,898 30,672 41,550
Receivables serviced for others 544 637 741
-----------------------------------------
Total Servicing Portfolio $3,349,133 $2,881,115 $2,583,298
-----------------------------------------
-----------------------------------------
----------------------------------------------------------------------
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: 2000 1999 2000 1999
------------------------------------------ --------------------
Interest on receivables
held for sale $ 10,853 $ 6,684 $ 25,224 $ 14,829
Retained interest
and other 8,005 6,442 15,305 12,170
-------- -------- -------- --------
Total interest
income 18,858 13,126 40,529 26,999
Interest expense 8,478 6,179 19,519 12,743
-------- -------- -------- --------
Net interest
margin 10,380 6,947 21,010 14,256
Provision for estimated
credit losses 1,250 665 2,225 1,415
-------- -------- -------- --------
Net interest margin
after provision
for estimated
credit losses 9,130 6,282 18,785 12,841
Gain on sales of
receivables, net 7,805 1,261 15,672 7,791
Loss on interest
rate swaps on
securitized
receivables (3,536) -- (8,886) --
Loss on interest
rate swaps on held
for sale receivables (2,269) -- (4,709) --
Servicing fees, net 7,626 6,188 14,345 12,256
Late charges and
other fees 1,711 1,508 3,466 3,013
-------- -------- -------- --------
Other revenues 11,337 8,957 19,888 23,060
-------- -------- -------- --------
Salaries and benefits 8,490 6,737 16,408 13,664
Other general and
administrative fees 5,928 4,993 11,440 9,907
-------- -------- -------- --------
Total operating
expenses 14,418 11,730 27,848 23,571
-------- -------- -------- --------
Earnings before
provision for
income taxes 6,049 3,509 10,825 12,330
Provision for
income taxes 2,234 1,361 4,001 4,763
-------- -------- -------- --------
Net earnings $ 3,815 $ 2,148 $ 6,824 $ 7,567
-------- -------- -------- --------
-------- -------- -------- --------
------------------------------------------------------------------
Per Common Share Data:
Earnings (diluted
and basic) $ 0.29 $ 0.16 $ 0.51 $ 0.57
Book value $ 8.99 $ 7.47 $ 8.99 $ 7.47
Weighted average
shares outstanding 13,286,514 13,264,379 13,282,073 13,257,519
------------------------------------------------------------------
Receivable Acquisition Volume:
Tier I $489,223 $263,821 $1,065,636 $594,103
Securitization Volume:
Tier I $510,001 $302,692 $1,010,000 $667,484
------------------------------------------------------------------
Ratios:
Return on average
managed assets 0.42% 0.54% 0.39% 0.53%
Return on average
shareholders' equity 13.40% 8.84% 12.33% 15.89%
Operating expenses
as a percentage of
average servicing
portfolio 1.75% 1.82% 1.75% 1.83%
------------------------------------------------------------------
Portfolio Performance:
Net credit loss (annualized for the period ended)
-------------------------------------------------
Tier I 2.35% 2.40% 2.24% 2.19%
Tier II 10.33% 10.71% 8.16% 9.61%
------------------ ------------------
Total 2.42% 2.55% 2.29% 2.33%
------------------ ------------------
------------------ ------------------
------------------------------------------------------------------
Pro forma information for the earnings impact of derivative
instruments on held for sale receivables related to FAS 133:
Total revenues $ 30,195 $ 22,083 $ 60,417 $ 50,059
Pro forma adjustment 2,269 -- 4,709 --
-------------------- --------------------
Pro forma total
revenues $ 32,464 $ 22,083 $ 65,126 $ 50,059
-------------------- --------------------
-------------------- --------------------
Pro forma net
earnings $ 5,256 $ 2,148 $ 9,814 $ 7,567
Pro forma earnings
per common share
(diluted and basic) $ 0.40 $ 0.16 $ 0.74 $ 0.57
Pro forma return on
average managed
assets 0.58% 0.54% 0.56% 0.53%
Pro forma return on
average shareholders'
equity 18.33% 8.84% 17.57% 15.89%
------------------------------------------------------------------
Union Acceptance Corporation
Pro Forma Portfolio-Based Financial Data(1)
(Dollars in thousands)
(Unaudited)
----------------------------------------------------------------------
The pro forma portfolio-based statements of earnings were as follows:
Three Months Ended Six Months Ended
December 31 December 31
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Interest income, fee
and other income $106,129 $ 81,482 $204,713 $163,106
Funding costs (63,115) (48,375) (120,552) (96,576)
-------- -------- -------- --------
Net margin 43,014 33,107 84,161 66,530
Operating expenses (14,418) (11,730) (27,848) (23,571)
Credit losses (19,933) (16,429) (36,377) (29,920)
-------- -------- -------- --------
Pre-tax
portfolio-based
earnings 8,663 4,948 19,936 13,039
Income taxes(2) (3,197) (1,910) (7,357) (5,033)
-------- -------- -------- --------
Net portfolio-based
earnings $ 5,466 $ 3,038 $ 12,579 $ 8,006
-------- -------- -------- --------
-------- -------- -------- --------
Portfolio-based
earnings per share $ 0.41 $ 0.23 $ 0.95 $ 0.60
-------- -------- -------- --------
-------- -------- -------- --------
----------------------------------------------------------------------
The pro forma return on average managed receivables was as follows:
Three Months Ended Six Months Ended
December 31 December 31
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
Interest income, fee
and other income 12.86% 12.63% 12.87% 12.68%
Funding costs -7.65% -7.50% -7.58% -7.51%
-------- -------- -------- --------
Net margin 5.21% 5.13% 5.29% 5.17%
Operating expenses -1.75% -1.82% -1.75% -1.83%
Credit losses -2.42% -2.55% -2.29% -2.33%
-------- -------- -------- --------
Pre-tax
portfolio-based
earnings 1.04% 0.76% 1.25% 1.01%
Income taxes -0.39% -0.30% -0.46% -0.39%
-------- -------- -------- --------
Net portfolio-based
earnings 0.65% 0.46% 0.79% 0.62%
-------- -------- -------- --------
-------- -------- -------- --------
Average Managed
Receivables $3,300,185 $2,581,182 $3,180,689 $2,573,233
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The following is a reconciliation of the pro forma portfolio-based net
earnings to GAAP net earnings:
Three Months Ended Six Months Ended
December 31 December 31
-------------------- --------------------
2000 1999 2000 1999
-------- -------- -------- --------
GAAP Net Earnings $ 3,815 $ 2,148 $ 6,824 $ 7,567
Gain on sales of
receivables, net (7,805) (1,261) (15,672) (7,791)
Retained interest
and other (5,608) (4,673) (10,797) (8,722)
Servicing fee (7,626) (6,188) (14,345) (12,256)
Net margin 36,530 29,326 70,481 57,983
Credit losses (19,933) (16,429) (36,377) (29,920)
Provision for
estimated credit
losses 1,250 665 2,225 1,415
Loss on interest
rate swaps 5,805 -- 13,595 --
-------- -------- -------- --------
Net adjustments 2,613 1,440 9,110 709
Tax effect of
adjustments (962) (550) (3,355) (270)
-------- -------- -------- --------
Net portfolio-based
earnings $ 5,466 $ 3,038 $ 12,579 $ 8,006
-------- -------- -------- --------
-------- -------- -------- --------
(1) These portfolio-based financial statements do not present the
Company's results of operations in accordance with GAAP and are
provided for illustrative purposes only.
(2) Tax effect is based upon the Company's effective tax rate for the
respective period.