MINNEAPOLIS, Oct. 21 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
today reported net income of $8.3 million, or $0.21 per diluted share, on
total revenues of $64.3 million for the third quarter ended September 30, 1999
compared to net income of $8.3 million, or $0.21 per diluted share, on total
revenues of $64.6 million in the 1998 third quarter.
For the nine months ended September 30, 1999, Arcadia reported net income
of $31.0 million, or $0.78 per diluted share, on total revenues of
$205.7 million compared to a net loss, after special charges, of
$88.2 million, or $2.26 per diluted share, on total revenues of $85.0 million
in the comparable 1998 period. Results for the 1998 period reflect the
effects of an after tax, non-cash charge of $99.9 million, or $2.56 per
diluted share, taken in the second quarter of 1998.
Arcadia did not record a provision for income taxes in either the
three- or nine-month periods ended September 30, 1999 due to the utilization
of net operating loss carryforwards.
The earnings for the quarter were reduced as a result of a permanent
impairment to two of the company's 22 outstanding securitization transactions
by approximately $6.7 million, or $0.17 per share. These pools had a
temporary impairment through June 30, 1999 that became permanent because of
the combination of a rise in interest rates and a difference between the
expected and actual loan performance of the two specific loan pools.
At the same time, the equity of the company actually increased by
$22 million for three reasons: the current quarter income of the company, the
amortization of last quarter's temporary adjustment and the current quarter's
permanent adjustment.
Richard A. Greenawalt, Arcadia's chief executive officer, said, "Arcadia's
operations are performing more efficiently today than they have in the past
several years. Losses continue to perform at or better than our expectations
as evidenced in our static pools. Based upon our recent results, our loan
purchasing has become much more dependable and predictable, and our loan
servicing is improving each quarter. Our employees are trained better, they
are given more tools with which to do their jobs, and we are having less
employee turnover due in part to these changes. Our risk management analytics
continue to make a positive impression on those counter parties who routinely
review us. Finally, we still are tracking along our plans to become cash flow
positive."
The following table presents portfolio performance data for the past
eight quarters:
Period ended:
Loan losses Reserves 30+ day 60+ day
as % of as % of delinquencies delinquencies
average serv. securitized (incl. repos)
portfolio portfolio
September 30, 1999 3.87% 7.57% 4.48% 1.28%
June 30, 1999 4.17% 7.93% 3.71% 1.02%
March 31, 1999 4.28% 8.05% 3.64% 1.00%
December 31, 1998 4.34% 8.18% 4.78% 1.23%
September 30, 1998 4.29% 8.07% 4.08% 1.06%
June 30, 1998 4.20%* 8.46% 3.79% 1.23%
March 31, 1998 3.91% 4.70% 3.53% 1.16%
December 31, 1997 3.58% 4.75% 3.63% 1.23%
* excluding one-time charge for change in estimated recovery rates.
Greenawalt noted that while 30+ day delinquencies have stayed in a
consistent range between the company's expectations of 3.50% to 5.00%, they
did increase slightly more than forecast during the quarter. Greenawalt
attributed this increase primarily to an installment loan system conversion
that took place during September 1999. "We continue to be pleased with the
improvements in our loan losses and with the generally stable trend our
portfolio continues to produce. Our static pool results also show this
consistency and show the month to month improvements we have been striving
for," said Greenawalt.
Arcadia purchased $594.9 million in automobile loans during the 1999 third
quarter, compared to $629.7 million in the 1999 second quarter and
$570 million in the 1998 third quarter. The interest rate spread on the
$633 million of asset-backed bonds securitized during the quarter was 10.46%
compared to an interest rate spread of 11.29% on the bonds securitized during
the 1999 second quarter and 10.42% on the bonds securitized during the 1998
third quarter. "Once again, favorable portfolio performance trends and
effective risk-adjusted loan pricing enabled us to complete our last
securitization despite unfavorable conditions in the market for asset-backed
securities," said Greenawalt. "Additionally, we have recently implemented a
series of pricing increases designed to offset the compression in our interest
rate spreads caused in part by rising interest rates."
Greenawalt noted that the company expects to decrease loan purchases to
between $1.6 billion and $1.8 billion in 2000 from its current expectation of
approximately $2.2 billion for 1999 to help reduce the company's capital and
liquidity requirements. "With a lower volume of loan purchases, we should be
able to reduce loan participation fees paid to dealers, initial deposits to
securitization spread accounts and other variable costs related to our loan
buying activities," he said. Greenawalt noted that Arcadia has been cash flow
positive (excluding debt payments and initial deposits to cash spread
accounts) since the beginning of 1999.
During the 1999 third quarter, Arcadia completed the introduction of a new
custom credit scorecard. The new scorecard further refines Arcadia's core
loan buying and pricing criteria, incorporating additional predictors of loan
performance gleaned from ongoing analysis of the company's $5.3 billion
portfolio of automobile loans.
"This third-generation scorecard incorporates several additional
predictors of profitability potential and default risk. It will narrow the
range of loans we are interested in buying, slowing the pace of our loan
purchases while focusing us on those offering the most attractive
risk-adjusted returns," said Greenawalt. "Our new scorecard should allow us
to reduce loan volume while achieving a higher return on equity. In other
words, we expect our loans that are purchased utilizing these scorecards will
produce higher returns. Remember, when we introduced our last scorecard in
early 1998, we saw yields rise and loss content decrease. We would expect the
same thing to happen again with our new version."
Currently, Arcadia has $700 million of total warehousing capacity. During
the third quarter, Arcadia renewed a $150 million warehouse facility with
Credit Suisse First Boston and a $400 million credit facility with Bank of
America and J.P. Morgan. The company extended the $150 million Chase
warehouse facility through January 15, 2000. This Chase facility will no
longer be needed in 2000 due to the company's plans to reduce loan origination
volume.
Commenting on recent rating agency downgrades of the company's senior
debt, Greenawalt said he believes that the company's improving performance and
changes to its loan purchasing volume should generate positive cash flow and
rebuild equity.
Third Quarter Highlights
* Arcadia purchased $594.9 million in automobile loans during the 1999
third quarter, compared to $629.7 million in the 1999 second quarter and
$570 million in the 1998 third quarter.
* Annualized net losses as a percentage of the average servicing portfolio
were 3.87% at September 30, 1999 compared to 4.17% at June 30, 1999 and
4.29% for the quarter ended September 30, 1998.
* Reserves for loan losses totaled $386.0 million at September 30, 1999,
or 7.57% of the securitized servicing portfolio, compared to
$397.9 million, or 7.93% of the securitized servicing portfolio, at
June 30, 1999 and $413.1 million, or 8.07% of the securitized servicing
portfolio, at September 30, 1998.
* The net interest rate spread on the $633 million of loans securitized
in the 1999 third quarter was 10.46% compared to 11.29% on the loans
securitized in the 1999 second quarter and 10.42% on the loans
securitized in the 1998 third quarter.
* Operating expenses as a percentage of the average servicing portfolio
were 3.21% in the 1999 third quarter compared to 3.37% in the 1999
second quarter and 3.38% in the 1998 third quarter.
* Cash released from restricted spread accounts totaled approximately
$63 million in the 1999 third quarter compared to $45 million in the
1999 second quarter and $35 million in the 1998 third quarter.
* The company's servicing portfolio at September 30, 1999 totaled
$5.3 billion compared to $5.2 billion at June 30, 1999 and $5.1 billion
at September 30, 1998.
* The company's book value increased to $6.33 per share at September 30,
1999 from $5.81 per share at June 30, 1999.
Arcadia Financial Ltd. is a Minneapolis-based consumer financial services
company specializing in purchasing, selling and servicing retail installment
contracts for new and used automobiles originated in 45 states. The company,
founded in 1990, is the nation's largest independent provider of automobile
financing. Its Regional Buying Centers are located in Arizona; northern and
southern California; Colorado; Florida; Georgia; Maryland; Massachusetts;
Minnesota; Missouri; New York; North Carolina; Tennessee; north, south and
west Texas; and Washington.
This news release contains forward-looking statements that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from historical results of from those results currently anticipated
or projected. Such factors include, among other things, the following:
increased delinquency and loan loss rates; accounting and regulatory changes;
interest rate fluctuations; difficulties or delays in the securitization of
automobile loans; availability of adequate short- and long-term financing;
general economic and business conditions; and other matters set forth under
the caption "Cautionary Statements" in exhibit 99.1 to the company's quarterly
report of Form 10-Q for the quarter ended June 30, 1999.
Arcadia Financial LTD
Selected Financial and Other Operating Data
September 30, 1999
Three months ended Nine months ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
Dollars in thousands, except
per share data
REVENUES:
Net interest margin $23,889 $22,675 $67,500 $63,593
Gain on sale of loans 16,671 20,667 70,175 (39,631)
Servicing fee income 23,755 21,236 67,986 61,086
Total revenues 64,315 64,578 205,661 85,048
EXPENSES:
Operating expenses 42,097 43,353 129,589 143,878
Long term debt and other
interest expense 13,938 12,926 41,061 38,619
Total expenses 56,035 56,279 170,650 182,497
Operating income
before income taxes 8,280 8,299 35,011 (97,449)
Income tax expense -- -- -- (9,235)
Net income before
cumulative effect $8,280 $8,299 $35,011 $(88,214)
Cumulative effect of change
in accounting
net of taxes of $0 -- -- (3,976) --
Net income after
cumulative effect $8,280 $8,299 $31,035 $(88,214)
Basic Earnings per Share:
Operating income per share
before cumulative
effect-basic $0.21 $0.21 $ 0.89 $(2.26)
Cumulative effect
per share-basic $-- $-- $(0.10) $--
Net income per
share-basic $0.21 $0.21 $0.79 $(2.26)
Diluted Earnings per Share
Operating income per share
before cumulative
effect-diluted $0.21 $0.21 $ 0.88 $(2.26)
Cumulative effect
per share-diluted $-- $-- $(0.10) $--
Net income per
share-diluted $0.21 $0.21 $0.78 $(2.26)
Weighted average shares outstanding:
Basic 39,395,014 39,142,050 39,324,308 39,031,668
Diluted 40,353,565 39,279,813 39,944,512 39,031,668
Number of
buying centers 17 18
Servicing portfolio
(in millions) $5,260.8 $5,137.8
Delinquencies as a
percentage of
servicing portfolio 4.48% 4.08%
Book value per
common share $6.33 $6.70
Automobile loan
purchases (in millions)$594.9 $570.0 $1,807.0 $1,726.9
Annualized net losses
as a percentage of
average servicing
portfolio 3.87% 4.29% 4.11% 4.71%
September 30, December 31,
Dollars in thousands 1999 1998
ASSETS
Cash and cash equivalents $16,092 $10,827
Due from securitization trust -- 62,081
Auto loans held for sale 162,585 17,899
Retained interests in
securitized assets (a) 629,115 587,946
Other assets 47,584 48,930
Total assets $ 855,376 $ 727,683
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts due under
warehouse facilities $ 126,860 $--
Senior term notes 367,420 366,657
Subordinated notes 82,548 51,898
Capital lease obligations 2,704 3,384
Deferred income taxes -- --
Accounts payable and
accrued liabilities 26,253 36,935
Total liabilities 605,785 458,874
Shareholders' equity 249,591 268,809
Total liabilities
and shareholders' equity $ 855,376 $ 727,683
(a) Includes restricted cash deposits in spread accounts of $354.2 million
and $227.7 million at September 30, 1999 and December 31, 1998,
respectively.
SOURCE Arcadia Financial Ltd.
 back to top
Company News On-Call:
http://www.prnewswire.com/comp/652638.html or fax,
800-758-5804, ext. 652638
CONTACT:
Scott R. Fjellman, Investor Relations, of
Arcadia Financial Ltd., 612-944-4582
|
