$700 Million in Warehouse Funding Secured, Cash Flows Improving
MINNEAPOLIS, Oct. 22 /PRNewswire/ -- Arcadia Financial Ltd. (NYSE: AAC)
today reported net income of $7,295,000, or $.19 per diluted share, on total
revenues of $63,574,000 for the third quarter ended September 30, 1998. The
company did not incur any income tax expense in the third quarter as a result
of net operating losses resulting from non-cash charges taken in the quarter
ended June 30, 1998. Had the company incurred income tax expense in the
period, it would have reported net income of $4,523,000, or $.12 per diluted
share. In the comparable 1997 period, the company reported net income of
$7,789,000, or $.20 per diluted share, on total revenues of $63,664,000.
For the nine months ended September 30, 1998, the company reported a net
loss after special charges of $82,425,000, or $2.11 per diluted share, on
total revenues of $81,226,000. Results for the 1998 period reflect the
effects of an after tax, non-cash charge of $99.9 million, or $2.56 per share,
taken in the second quarter of 1998. Excluding the special charges, the
company would have reported net income of $14,712,000, or $.38 per diluted
share, for the first nine months of 1998.
For the comparable 1997 period, the company reported a net loss of
$61,807,000, or $1.60 per diluted share, on total revenues of $74,640,000.
Results for the nine months ended September 30, 1997 reflect the effects of
special charges totaling $79.7 million, or $2.06 per share, taken in the first
quarter of 1997. Excluding the special charges, the company would have
reported net income of $17,812,000, or $.46 per diluted share, for the nine
months ended September 30, 1997.
Richard A. Greenawalt, Arcadia's president and chief executive officer,
said Arcadia's third quarter results demonstrate the progress the company is
making in streamlining operations and improving operating effectiveness. "As
we expected, our changes in strategy and operating practices are benefiting
core operating earnings," said Greenawalt. "While our net interest rate
spreads suffered from interest rate movements, we believe our third quarter
results continue to reflect the profitable book of business we have been
originating."
Greenawalt said the company has reduced expenses, primarily through
improvements in efficiency and the deployment of new business systems. Third
quarter operating expenses, as a percent of the average servicing portfolio,
were 3.38 percent, compared to 3.50 percent in the second quarter and
3.49 percent in the comparable year-ago period.
Greenawalt noted that the company recently closed on a $150 million
warehouse borrowing facility structured by Credit Suisse First Boston and a
$150 million warehouse borrowing facility structured by Chase Securities Inc.
These new one-year committed warehouse facilities will replace the company's
current $300 million warehouse facility. These facilities, when combined with
the company's $400 million facility led by Bank of America and J.P. Morgan,
give the company total warehouse commitments of $700 million.
Cash released from restricted cash spread accounts totaled approximately
$44 million during the third quarter, up from $35 million in the second
quarter and $25 million in the first quarter.
"We currently have $66.9 million in cash and cash equivalents on our
balance sheet and with committed warehousing at $700 million, our liquidity
and capital positions remain strong," said Greenawalt. "Given the current
turmoil in the financial markets, our ability to establish these un-wrapped
warehouse funding agreements represents a strong vote of confidence in our
business from our bankers and other liquidity partners."
Recovery rates on repossessed vehicles were above the assumptions the
company adopted in the June 1998 quarter. The company's inventory of
repossessed vehicles was $36 million at September 30, 1998, down from
$49 million at September 30, 1997. In addition, the company has reduced the
average age of that inventory from 110 days at September 30, 1997, to 64 days
at September 30, 1998. "As previously announced, we are eliminating our
retail remarketing program and will be liquidating our repossessed inventory
exclusively through wholesale channels by year end," said Greenawalt.
"While we saw a slight increase in delinquencies during the quarter, our
loan losses were within the range we expected. Our loan purchases appear to
continue to benefit from our use of improved analytics, incorporation of
additional credit scoring information and tight alignment with our risk-based
pricing model. We believe this improved underwriting is helping us continue
to reduce risk and volatility in our business," said Greenawalt.
Third Quarter Highlights
-- Third quarter loan purchases totaled $570.0 million, compared to
$572.9 million in the 1998 second quarter and $760.3 million in the 1997 third
quarter.
-- The net interest rate spread on the $554.7 million of loans securitized
in the 1998 third quarter was 9.30%, compared to 9.85% on the $571.8 million
of loans securitized in the 1998 second quarter and 8.41% on the
$754.2 million of loans securitized in the 1997 third quarter.
-- Operating expenses as a percentage of the average servicing portfolio
were 3.38% in the 1998 third quarter, compared to 3.50% (excluding the
$10 million special charge) in the 1998 second quarter and 3.49% in the 1997
third quarter.
-- The company's servicing portfolio at September 30, 1998 totaled
$5.14 billion, compared to $5.09 billion at June 30, 1998 and $4.82 billion at
September 30, 1997.
-- Loans delinquent more than 30 days were 4.08% of the loan servicing
portfolio at September 30, 1998, compared to 3.79% at June 30, 1998 and 2.88%
at September 30, 1997.
-- Annualized net losses as a percentage of the average servicing
portfolio were 4.29% for the quarter ended September 30, 1998, compared to
5.92% for the quarter ended June 30, 1998 and 3.11% for the quarter ended
September 30, 1997. The 5.92% loss rate for the second quarter of 1998
included 4.20% of normal portfolio losses and $21.7 million, or 1.72%, of one
time charges.
-- Reserves for loan losses totaled $413.1 million, or 8.04% of the
servicing portfolio, at September 30, 1998, compared to $429.2 million, or
8.44% of the servicing portfolio, at June 30, 1998 and $218.3 million, or
4.52% of the servicing portfolio, at September 30, 1997.
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 18 Regional Buying Centers are located in Arizona; northern
and southern California; Colorado; Florida; Georgia; Maryland; Massachusetts;
Minnesota; Missouri; New York; North Carolina; Ohio; 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 those projected. The most significant among these risks and
uncertainties are (1) the company's ability to achieve adequate interest rate
spreads, (2) the level of delinquencies, gross charge-offs and net losses, and
(3) the level of operating expenses. Earnings may also be affected by the
effects of economic factors on consumer debt and by competitive pressures.
Additional risks which may affect the company's future performance are
detailed under the caption "Cautionary Statements" in Exhibit 99.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998.
(Selected financial information follows.)
Arcadia Financial LTD
Selected Financial and Other Operating Data
September 30, 1998
Three months ended Nine Months Ended
Dollars in thousands, Sept. 30, Sept. 30, Sept. 30, Sept. 30,
except per share data 1998 1997 1998 1997
REVENUES:
Net interest margin $15,058 $17,157 $44,107 $49,557
Gain on sale of loans,
net of special charges 27,280 28,788 (23,967) (22,640)
Servicing fee income 21,236 17,719 61,086 47,723
63,574 63,664 81,226 74,640
EXPENSES:
Operating expenses 43,353 40,701 143,878 120,269
Long term debt and
other interest expense 12,926 10,400 38,619 28,642
Total expenses 56,279 51,101 182,497 148,911
Operating income (loss)
before income taxes
and expenses 7,295 12,563 (101,271) (74,271)
Income tax expense
(benefit) -- 4,774 (18,846) (28,292)
Net income (loss) before
extraordinary item 7,295 7,789 (82,425) (45,979)
Extraordinary item -- -- -- (15,828)
Net income (loss) $7,295 $7,789 $(82,425) $(61,807)
Basic Earnings per Share:
Income (loss) per common
share before extraordinary
item $0.19 $0.20 $(2.11) $(1.19)
Extraordinary item per
common share -- -- -- (0.41)
Net income (loss) per
common share $0.19 $0.20 $(2.11) $(1.60)
Diluted Earnings per Share:
Income (loss) per share
before extraordinary item $0.19 $0.20 $(2.11) $(1.19)
Extraordinary item
per share -- -- -- (0.41)
Net Income (loss) per share $0.19 $0.20 $(2.11) $(1.60)
Weighted average shares
outstanding
Basic 39,142,050 38,740,078 39,031,668 38,615,060
Diluted 39,279,813 39,231,962 39,031,668 38,615,060
Number of buying centers 18 18
Servicing portfolio
(in millions) $5,137.8 $4,824.6
Delinquencies as a
percentage of
servicing portfolio 4.08% 2.88%
Book value per common
share $6.84 $8.88
Automobile loan purchases
(in millions) $570.0 $760.3 $1,726.9 $2,280.7
Annualized net losses as a
percentage of average
servicing portfolio 4.29% 3.11% 4.71% 3.44%
September 30, December 31,
Dollars in thousands 1998 1997
ASSETS
Cash and cash equivalents $6,328 $17,274
Due from securitization trust 98,384 107,207
Auto loans held for sale 20,045 49,133
Finance income receivable 345,298 371,985
Restricted cash in spread accounts 252,923 250,297
Other assets 47,468 49,854
Total assets $770,446 $845,750
LIABILITIES AND SHAREHOLDERS' EQUITY
Amounts due under warehouse facilities $57,843 $30,880
Senior term notes 366,403 365,640
Subordinated notes 48,902 50,772
Capital lease obligations 3,735 5,368
Deferred income taxes -- 18,846
Accounts payable and accrued liabilities 25,718 26,302
Total liabilities 502,601 497,808
Shareholders' equity 267,845 347,942
Total liabilities and
shareholders' equity $770,446 $845,750
SOURCE Arcadia Financial
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http://www.prnewswire.com/comp/652638.html or fax,
800-758-5804, ext. 652638
CONTACT:
Scott Fjellman, Investor Relations of
Arcadia, 612-944-4582
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