<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 9, 1998
ARCADIA RECEIVABLES FINANCE CORP.
as originator of
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
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(Exact name of registrant as specified in its charter)
Delaware 333-48141 41-1743653
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(State or other jurisdiction (Commission (IRS employer
of incorporation) file number) identification No.)
7825 Washington Avenue South, Suite 410, Minneapolis, Minnesota 55439-2435
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(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 942-9880
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(Former name or former address, if changed since last report)
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Item 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
Item 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS.
Not applicable.
Item 5. OTHER EVENTS.
On December 9, 1998, the Registrant made available to prospective
investors a term sheet (the "Term Sheet") setting forth a
description of the initial collateral pool and the proposed
structure for the issuance of $225,000,000 aggregate principal
amount of asset-backed notes by Arcadia Automobile Receivables
Trust, 1998-E. The Term Sheet is attached hereto as Exhibit 99.
Item 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.
Not applicable.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
The following are filed herewith. The exhibit numbers correspond
with Item 601(b) of Regulation S-K.
Exhibit No. Description
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99 Term Sheet dated December 9, 1998 of Arcadia
Automobile Receivables Trust, 1998-E
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: December 11, 1998 ARCADIA RECEIVABLES FINANCE CORP.,
as originator of Arcadia Automobile
Receivables Trust, 1998-E
By: /s/ Brian S. Anderson
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Brian S. Anderson
Senior Vice President
<PAGE>
SUBJECT TO REVISION
TERM SHEET DATED DECEMBER 9, 1998
$225,000,000 AUTOMOBILE RECEIVABLES-BACKED NOTES
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
ISSUER
ARCADIA RECEIVABLES FINANCE CORPORATION
SELLER
ARCADIA FINANCIAL LTD.
SERVICER
Attached is a preliminary Term Sheet describing the structure, collateral pool
and certain aspects of the Arcadia Automobile Receivables Trust, 1998-E. The
Term Sheet has been prepared by the Seller for informational purposes only and
is subject to modification or change. The information and assumptions contained
in the Term Sheet are preliminary and will be superseded in their entirety by a
Prospectus Supplement and by any other additional information subsequently filed
with the Securities and Exchange Commission or incorporated by reference in the
relevant registration statement. In addition, the attached Term Sheet
supersedes any prior or similar term sheet.
None of the Underwriters named below and none of their respective affiliates
makes any representation as to the accuracy or completeness of any of the
information set forth in the attached Term Sheet. This cover sheet is not a
part of the Term Sheet.
THE REGISTRATION STATEMENT (INCLUDING A BASE PROSPECTUS) RELATING TO THE TRUST
HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND HAS BEEN DECLARED
EFFECTIVE. THE PROSPECTUS SUPPLEMENT RELATING TO THE SECURITIES OFFERED BY THE
TRUST WILL BE FILED AFTER THE SECURITIES HAVE BEEN PRICED AND ALL OF THE TERMS
AND INFORMATION ARE FINALIZED. THIS COMMUNICATION IS NOT AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE
SECURITIES OF THE TRUST IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL BEFORE THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE. YOU SHOULD REVIEW THE PROSPECTUS AND PROSPECTUS
SUPPLEMENT, AND YOUR INVESTMENT DECISION SHOULD BE BASED UPON THE INFORMATION IN
THE PROSPECTUS AND PROSPECTUS SUPPLEMENT AS OF THEIR PUBLICATION DATE. SALES OF
THE SECURITIES TO BE OFFERED BY THE TRUST MAY NOT BE CONSUMMATED UNLESS YOU HAVE
RECEIVED BOTH THE PROSPECTUS AND THE PROSPECTUS SUPPLEMENT. THE SECURITIES TO
BE OFFERED BY THE TRUST UNDER THE PROSPECTUS SUPPLEMENT HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION; ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
UNDERWRITERS OF THE NOTES
Credit Suisse First Boston Chase Securities Inc. NationsBanc Montgomery
Securities LLC
<PAGE>
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-E
TERM SHEET
SUBJECT TO REVISION
PARTIES
THE TRUST
Arcadia Automobile Receivables Trust, 1998-E will issue the Notes and be liable
for their payment. The Trust's principal asset will be a pool of automobile
loans.
SELLER
Arcadia Receivables Finance Corp. is a wholly-owned special-purpose subsidiary
of Arcadia Financial Ltd. Arcadia Receivables Finance Corp. will sell the
automobile loans to the Trust.
SERVICER
Arcadia Financial Ltd. will service the automobile loans held by the Trust.
THE INSURER
Financial Security Assurance Inc. will issue a note policy, which will guarantee
the payment of timely principal and interest due on the Notes, but only as set
forth in the section of the Prospectus Supplement entitled "The Note Policy."
The note policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
THE INDENTURE TRUSTEE
Norwest Bank Minnesota, National Association, will serve as the indenture
trustee and indenture collateral agent.
THE OWNER TRUSTEE
Wilmington Trust Company.
THE BACKUP SERVICER
Norwest Bank Minnesota, National Association.
ADMINISTRATOR
Wilmington Trust Company.
DATES
PRELIMINARY CUTOFF DATE
December 2, 1998. This is the date used for preparing the statistical
information used in this Term Sheet.
INITIAL CUTOFF DATE
December 17, 1998. The Trust will receive payments due on, or received with
respect to, the initial pool of automobile loans after this date.
SUBSEQUENT CUTOFF DATE
The Seller will designate a subsequent cutoff date with respect to each pool of
subsequent receivables purchased by the Trust after the closing date.
THE RECEIVABLES
The Trust will own a pool of retail installment sales contracts and promissory
notes purchased from motor vehicle dealers by Arcadia Financial in the ordinary
course of business. These receivables are secured by new and used automobiles
and light trucks.
On the closing date, pursuant to a sale and servicing agreement, the Trust will
purchase the initial receivables from the Seller that are expected to have an
aggregate principal balance of approximately $157,500,000 as of the Initial
Cutoff Date. The Trust will also purchase, subject to the satisfaction of
certain conditions, subsequent receivables prior to the distribution date in
February 1999 that are expected to have an aggregate principal balance of
approximately $67,500,000.
DESCRIPTION OF THE NOTES
GENERAL
The Trust will issue three classes of its asset-backed notes. The Notes are
designated as the "Class A-1 Notes," the "Class A-2 Notes" and the "Class A-3
Notes."
Each class of Notes will have the initial principal amount and interest rate set
forth in the following table. The dates on which the final payment of
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principal and interest on each class of Notes is scheduled to be made are
also set forth in the following table.
<TABLE>
<CAPTION>
Final
Initial Note Scheduled
Principal Distribution
Class Balance Date
----- --------------- ----------------
<S> <C> <C>
A-1 $64,000,000 July 15, 2002
A-2 $100,0000,000 September 15, 2003
A-3 $61,000,000 October 15, 2006
</TABLE>
The Notes will initially be issued in book-entry form only. The Notes will
be issued in minimum denominations of $1,000 and multiples of $1,000 in
excess thereof.
You may hold your Notes through The Depository Trust Company in the United
States or Cedel Bank, societe anonyme or in the Euroclear System in Europe.
The Notes will be secured solely by the pool of automobile loans and the
other assets of the Trust which are described under the section entitled "The
Receivables Pool."
TERMS OF THE NOTES
- - - DISTRIBUTION DATES
The Trust will make payments of interest and principal on the Notes on the
fifteenth day of each month commencing January 15, 1999. This day is known
as the distribution date. If the fifteenth day of a given month is not a
business day, the Trust will make the payment on the next following business
day. Payments will be made to holders of record of the Notes as of the
business day preceding the distribution date.
- - - INTEREST
Interest on the Notes will accrue at the applicable interest rate from a
distribution date to the day before the next distribution date. In the case
of the first distribution date, interest begins to accrue on the day of the
closing.
Interest on the Notes will be calculated on the following basis:
<TABLE>
<CAPTION>
CLASS OF NOTES CALCULATION METHOD
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<S> <C>
Class A-1 Notes actual/360
Class A-2 Notes 30/360
Class A-3 Notes 30/360
</TABLE>
- - - PRINCIPAL
The principal of the Notes will be payable on the distribution date. The
noteholders' principal distributable amount is calculated as the sum of:
1. the portion of all collections on the automobile loans allocable to
principal, including full and partial principal prepayments, received
during a monthly period,
2. the principal balance of each receivable that became a liquidated
receivable during the monthly period,
3. the principal balance of each receivable that was repurchased by
Arcadia Financial or the Seller as of the last day of the monthly period,
and, at the option of Financial Security Assurance Inc., the principal
balance of each receivable that was required to be, but was not, so
repurchased,
4. the aggregate amount of any reduction of the principal balance of a
receivable as a result of a court order in an insolvency proceeding, and
5. any unpaid portion of the amounts included in 1, 2, 3 and 4 above with
respect to a prior distribution date (because of insufficient available
cash).
Payments of principal on the Notes will be allocated among the classes as
follows:
- The Class A-1 Notes will receive 57% of the amount to be paid on each
distribution date and the Class A-2 Notes will receive 43% of the amount
paid on each distribution date until the Class A-1 Notes are paid off.
- Once the Class A-1 Notes are paid off, the Class A-2 Notes and Class
A-3 Notes will be "sequential pay" classes which will receive principal on
each distribution date as follows:
- once the Class A-1 Notes are paid off, the Class A-2 Notes will
continue to amortize, until they are paid off; and
- once the Class A-2 Notes are paid off, the Class A-3 Notes will begin
to amortize until they are paid off.
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In addition, the outstanding principal amount of any class, to the extent not
previously paid, will be payable on such class's final scheduled distribution
date.
- - - OPTIONAL REDEMPTION
The Class A-3 Notes, if still outstanding, may be redeemed in whole, but not
in part, on any distribution date on which the Seller or the Servicer
exercises its "clean-up call" option to purchase the receivables. This can
only occur after the pool balance declines to 10% or less of its original
balance. The redemption price is equal to the unpaid principal amount of the
Notes of each such class plus accrued and unpaid interest thereon.
- - - MANDATORY REDEMPTION
IF PRE-FUNDING ACCOUNT IS NOT DEPLETED
Each class of Notes will be redeemed in part in the event that any portion of
the approximately $67,500,000 deposited in a segregated pre-funding account
with the Indenture Trustee remains on deposit in such account on February 15,
1999. If the amount to be redeemed is $100,000 or less, the Indenture Trustee
will pay 57% of that amount to the Class A-1 Notes and 43% of that amount to
the Class A-2 Notes. If the amount to be redeemed is greater than $100,000,
the Indenture Trustee will use the money to redeem each class of Notes in an
amount equal to such class's pro rata share (based on the respective current
principal amount of each class of Notes) of the redemption amount. If the
redemption amount is greater than $100,000, a redemption premium will also be
payable.
UPON EVENT OF DEFAULT
If an event of default under the indenture occurs, the Notes may be
accelerated and subject to immediate payment at par. Only Financial Security
Assurance Inc. can declare an event of default, except in unusual
circumstances. The note policy issued by Financial Security Assurance Inc.
does not guarantee payment of any amounts that become due on an accelerated
basis, unless Financial Security Assurance Inc. elects, in its sole
discretion, to pay such amounts in whole or in part. However, following an
acceleration of the Notes, the note policy will continue to cover payments of
principal and interest in accordance with its terms.
OTHER MATTERS
PRE-FUNDING ACCOUNT
Contingent upon the written consent of Financial Security Assurance Inc. and
the satisfaction of certain other conditions, the Seller will sell additional
automobile loans to the Trust during a period beginning on the date of
closing and ending not later than February 15, 1999. This period of time is
known as the "funding period." The pre-funded amount will be maintained as
an account in the name of the Indenture Trustee.
The pre-funded amount is initially expected to equal approximately
$67,500,000 and, during the funding period, will be reduced by the principal
balance of subsequent receivables purchased by the Trust. The Seller expects
that the pre-funded amount will be reduced to less than $100,000 by the
February 1999 distribution date. Any pre-funded amount remaining at the end
of the funding period will be distributed in the manner described under
"Mandatory Redemption" above. Prior to being used to purchase subsequent
receivables or paid to noteholders, the pre-funded amount will be invested
from time to time in eligible investments.
RESERVE ACCOUNT
So long as there is money in the pre-funding account, funds will be held in a
reserve account. The money held in the pre-funding account probably will
generate less interest than the amount of interest due on the same amount of
Notes, and the interest paid on the automobile loans owned by the Trust may
not be enough to make up the difference. As a result, the Indenture Trustee
will establish a reserve account, and will use funds deposited there to cover
any such shortfall.
COLLECTION ACCOUNT
Except under certain conditions, the Servicer will establish one or more
accounts in the name of the Indenture Trustee for the benefit of Noteholders.
All payments from obligors that are received on behalf of the Trust will be
deposited in the collection account no later than two business days after
receipt.
PRIORITY OF DISTRIBUTIONS
On each distribution date, the Indenture Trustee will withdraw the available
funds from the collection account and apply the funds to the following (in
the order of priority indicated):
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1. to the Servicer, the amount the Servicer is entitled to be reimbursed
for prior monthly advances,
2. to the Owner Trustee and the Indenture Trustee, any unpaid trustee fees
and other similar fees,
3. to the Servicer, the servicing fee for the related monthly period and
any overdue servicing fees,
4. into the note distribution account, the amount of interest to be paid
on the Notes,
5. into the note distribution account, the amount of principal to be paid
on the Notes,
6. to Financial Security Assurance Inc., amounts owing and not paid to
Financial Security Assurance Inc., and
7. the remaining balance, if any, to a financial institution acting as
collateral agent on behalf of Financial Security Assurance Inc., the
Indenture Trustee (on behalf of the noteholders) and the trustees for other
trusts and warehousing facilities established by the Seller.
TAX STATUS
It is contemplated that for federal income tax purposes the Notes will be
characterized as debt and the Trust will not be characterized as an
association or a publicly traded partnership taxable as a corporation.
ERISA CONSIDERATIONS
Subject to certain considerations, it is contemplated that the Notes will be
eligible for purchase by employee benefit plans.
RATING OF THE NOTES
The Notes must receive at least the following ratings from Standard & Poor's,
a division of the McGraw-Hill Companies, Inc., and Moody's Investors Service,
Inc. in order to be issued:
<TABLE>
<CAPTION>
Rating
----------------------------
Class S&P Moody's
- - -------------- ------------ --------------
<S> <C> <C>
A-1 AAA Aaa
A-2 AAA Aaa
A-3 AAA Aaa
</TABLE>
You must not assume that the ratings initially assigned to the Notes will not
subsequently be lowered or withdrawn by the rating agencies.
THE RECEIVABLES POOL
GENERAL
The receivables pool will include the following:
- initial receivables and all amounts due thereunder after the initial
cutoff date, and
- any subsequent receivables and all amounts due thereunder after the
applicable subsequent cutoff date.
All of the receivables are or will be retail installment sales contracts or
promissory notes purchased by Arcadia Financial from dealers who regularly
originate and sell these types of contracts or Notes to Arcadia Financial.
The initial receivables and the subsequent receivables will be selected from
automobile loans in Arcadia Financial's portfolio for inclusion in the
receivables pool in compliance with several criteria, some of which are set
forth below under the heading "Selection Criteria." Arcadia Financial and
the Seller believe that the selection procedures are not adverse to
noteholders and believe that no adverse selection procedures will be used in
selecting the receivables.
The Trust will only be obligated to purchase the subsequent receivables on a
subsequent transfer date if the following criteria are met:
1. The weighted average annual percentage rate (APR) of such receivables
will not be lower than one percentage point below the weighted average APR
of the preliminary initial receivables on the preliminary cutoff date;
2. the weighted average remaining term of such receivables will not be
greater than 67 months nor less than 60 months;
3. not more than 90% of the aggregate principal balance of such
receivables will be attributable to loans for the purchase of used financed
vehicles; and
4. not more than 3% of the aggregate principal balance of such receivables
will be attributable to receivables with an APR in excess of 21%.
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The aggregate principal balance of the initial receivables is expected to be
approximately 70% of the aggregate initial principal balance of the Notes.
However, except for the criteria described above, there will be no required
characteristics of the subsequent receivables and the receivables included in
the initial receivables originated after the preliminary cutoff date.
Therefore, following the transfer of subsequent receivables to the Trust, the
aggregate characteristics of the entire receivables pool may vary from those
of the preliminary initial receivables.
DELINQUENCY, CREDIT LOSS AND REPOSSESSION INFORMATION
The following tables set forth information relating to Arcadia Financial's
delinquency, credit loss and repossession experience for each period
indicated with respect to all loans it has purchased and continues to
service. This information includes the experience with respect to all loans
in Arcadia Financial's portfolio of loans serviced during each period. This
includes loans which do not meet the criteria for selection as a receivable.
DELINQUENCY EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
At December 31,
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1995 1996 1997 At September 30, 1998
--------------------- --------------------- --------------------- ----------------------
Number Number Number Number
of Loans Balances of Loans Balances of Loans Balances of Loans Balances
-------- ---------- -------- ---------- -------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Servicing Portfolio at End of Period 185,241 $2,267,107 302,450 $3,791,857 411,429 $4,956,090 447,542 $5,137,798
Delinquencies:
31-60 days 1,536 $ 17,667 3,884 $ 47,225 8,297 $ 100,161 9,820 $ 114,398
61-90 days 520 5,694 1,255 15,877 3,635 45,485 3662 43,666
91 days or more 614 6,881 2,911 37,019 3,019 34,047 4,363 51,440
-------- ---------- ------- ---------- ------- ---------- ------- ----------
Total Automobile Loans
Delinquent 31 or More Days 2,670 $ 30,242 8,050 $ 100,121 14,951 $ 179,693 17,845 $ 209,504
-------- ---------- ------- ---------- ------- ---------- ------- ----------
-------- ---------- ------- ---------- ------- ---------- ------- ----------
Delinquencies as a Percentage
of Number of Loans and Amount
Outstanding at End of Period(2) 1.44% 1.33% 2.66% 2.64% 3.63% 3.63% 3.99% 4.08%
Amount in Repossession 1,489 $ 17,676 4,651 $ 64,929 6,083 $ 55,300 5,912 $ 35,739
-------- ---------- ------- ---------- ------- ---------- ------- ----------
-------- ---------- ------- ---------- ------- ---------- ------- ----------
</TABLE>
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(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously sold
loans which Arcadia Financial continues to service.
(2) Amounts shown do not include loans which are less than 31 days delinquent.
CREDIT LOSS AND REPOSSESSION EXPERIENCE(1)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months
Year Ended Decmber 31 Ended
-------------------------------------- September 30,
1995 1996 1997 1998(4)
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<S> <C> <C> <C> <C>
Average Servicing Portfolio Outstanding
During the Period . . . . . . . . . . . . . . . . . . $1,534,720 $3,015,411 $4,458,677 $5,062,745
Average Number of Loans Outstanding
During the Period . . . . . . . . . . . . . . . . . . 128,783 242,419 362,626 431,694
Number of Charge-Offs . . . . . . . . . . . . . . . . 5,020 14,403 24,616 25,399
Gross Charge-Offs(2) . . . . . . . . . . . . . . . . $ 11,247 $ 35,642 $ 165,233 $ 192,322
Recoveries (3) . . . . . . . . . . . . . . . . . . . 911 5,653 9,855 13,589
---------- ---------- ---------- -------------
Net Losses . . . . . . . . . . . . . . . . . . . . . $ 10,336 $ 29,989 $ 155,378 $ 178,733
---------- ---------- ---------- -------------
---------- ---------- ---------- -------------
Gross Charge-Offs as a Percentage of Average
Servicing Portfolio . . . . . . . . . . . . . . 0.73% 1.18% 3.71% 5.07%
Net Losses as a Percentage of Average
Servicing Portfolio . . . . . . . . . . . . . . 0.67% 0.99% 3.48% 4.71%
</TABLE>
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(1) All amounts and percentages are based on the principal amount scheduled to
be paid on each loan. The information in the table includes previously
sold loans which Arcadia Financial continues to service.
(2) Gross charge-offs represent principal amounts which management estimated to
be uncollectible after the consideration of anticipated proceeds from the
disposition of repossessed assets and selling expenses.
(3) Includes post-disposition amounts received on previously charged off loans.
(4) Percentage calculations for the nine months ended September 30, 1998 are
annualized.
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The increase in the rate of delinquencies, gross charge-offs, net losses and
repossessions during 1996, experienced by both the Premier and Classic
programs, was primarily due to the following:
1. increased demands on Arcadia Financial's servicing and collection
resources as the result of rapid growth in its servicing portfolio and as a
result of continued expansion of the Classic loan program (which generally
requires greater collection efforts than the Premier program),
2. the performance of a discontinued earlier version of Arcadia
Financial's Classic product for first time automobile buyers and Arcadia
Financial's financed repossession program, which experienced significantly
higher delinquencies, repossessions and losses than Arcadia Financial's
other products and programs and
3. the continued seasoning of Arcadia Financial's servicing portfolio.
The significant rise in repossession inventory levels during 1996 was the
result of the growth in Arcadia Financial's servicing portfolio and increased
utilization of retail distribution channels to liquidate repossessed
automobiles.
The increase in delinquencies, gross charge-offs and net losses during 1997
was primarily due to the continued seasoning of Arcadia Financial's existing
servicing portfolio to include a greater proportion of loans in the period of
highest probability for delinquencies and defaults (generally 6 to 14 months
from the date of origination), especially with respect to Arcadia Financial's
Premier loan portfolio. Much of the increase in performance statistics was
due to performance of loans originated in 1995 and the first half of 1996.
As expected, performance statistics also increased during 1997 as a result of
a rise in the proportion of Classic loans in Arcadia Financial's portfolio.
At December 31, 1997, the portfolio consisted of approximately 43% Classic
loans compared to 29% at December 31, 1996. Net losses during the year were
further affected by selling an increased proportion of repossessed vehicles
through wholesale auctions. During 1997, Arcadia Financial liquidated
approximately 54% of all repossessed vehicles sold through wholesale auctions
compared to 30% during 1996. Because recovery rates are generally lower on
vehicles sold at auction compared to those liquidated through retail
channels, the increased utilization of auctions has increased net losses
experienced by Arcadia Financial. Included in the 1997 gross charge-off and
net loss statistics is a special charge of approximately $25 million
resulting from a revision to Arcadia Financial's inventory valuation policy,
which requires Arcadia Financial to record all repossessed vehicles at
recovery rates that reflect expected values to be achieved through wholesale
auctions, regardless of the specific asset disposition strategy to be
employed.
The increase in the rate of delinquencies at September 30, 1998, compared
with December 31, 1997, reflects the continued rise in the proportion of
Classic loans in Arcadia Financial's servicing portfolio, which approximated
53% of loans serviced at September 30, 1998, compared with 43% at December
31, 1997. Repossessed inventory has decreased since December 31, 1997,
primarily due to Arcadia Financial's decision to increase its use of
wholesale disposition channels to liquidate repossessed vehicles thereby
shortening the average number of days a vehicle is in inventory. During the
first nine months of 1998, Arcadia Financial sold approximately 77% of its
repossessed inventory through wholesale channels compared with 48% in the
same period in 1997, resulting in a reduction in the average number of days
vehicles are held in inventory to approximately 64 days at September 30, 1998
compared with 105 days at December 31, 1997.
Annualized gross charge-offs and net losses during the nine month period
ended September 30, 1998, include a charge of 0.57%. These numbers represent
the impact of a write-down of current inventory resulting from a revision to
the estimate of net realizable value and an additional provision primarily
associated with loans originated in connection with retail dispositions. The
remaining increase in gross charge-offs and net losses during the three and
nine months ended September 30, 1998, compared to the same periods a year ago
primarily reflects the continued rise in the proportion of Classic loans in
Arcadia Financial's servicing portfolio and the increase in the utilization
of wholesale disposition channels. Arcadia Financial announced that it is
planning to discontinue the sale of repossessed vehicles through retail
disposition channels and anticipates that it will be completely out of these
operations by the end of 1998. Arcadia Financial believes that its decision
to discontinue its retail remarketing operations will enable it to better
manage its level of repossessed inventory and improve the
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timing of excess cash flows released to it from securitization trusts as a
result of an increase in the speed at which repossessed vehicles can be
liquidated.
The loans in Arcadia Financial's servicing portfolio include loans other than
the receivables, including loans which do not meet the criteria for selection
as a receivable. There can be no assurance that the delinquency, loan loss
or repossession experience of the Trust with respect to the receivables will
be better than, worse than or comparable to the experience set forth above.
SELECTION CRITERIA
The preliminary initial receivables represent substantially all loans in
Arcadia Financial's portfolio, owned and not serviced for others, that
1. were not more than 30 days past due as of the preliminary cutoff date,
2. did not have a remaining principal balance as of the preliminary cutoff
date less than $500.00,
3. did not have a final scheduled payment date prior to March 1, 1999, and
4. were otherwise eligible under criteria established by Arcadia Financial
and Financial Security Assurance Inc.
CERTAIN OTHER CHARACTERISTICS
The preliminary initial receivables
1. had a remaining maturity, as of the Preliminary Cutoff Date, of at
least 3 months, but not more than 84 months,
2. had an original maturity of at least 6 months, but not more than 84
months,
3. had an original principal balance of at least $4,716.80 and not more
than $40,405.76,
4. had a remaining principal balance, as of the Preliminary Cutoff Date,
of at least $1,145.61 and not more than $40,405.76, and
5. had an APR of at least 7.74% and not more than 23.45%.
Approximately 12.98% of the aggregate principal balance of the preliminary
initial receivables was attributable to loans for the purchase of new
financed vehicles, and approximately 87.02% of the aggregate principal
balance was attributable to loans for the purchase of used financed vehicles.
The preliminary initial receivables were purchased from more than 2,400
dealers. Not more than 0.67% of the aggregate principal balance of the
preliminary initial receivables as of the preliminary cutoff date was
originated by any single dealer. The ten most significant dealers originated
approximately 4.80% of the aggregate principal balance as of the preliminary
cutoff date. Approximately 99.72% of the preliminary initial receivables are
simple interest obligations, and interest on the remaining 0.28% of the
preliminary initial receivables is computed on an actuarial basis, with
prepayment rebates computed according to the Rule of 78's. Neither the
Seller, Arcadia Financial nor the Servicer may substitute other loans for the
receivables at any time during the term of the sale and servicing agreement.
The composition and distribution by APR and geographic concentration of the
receivables pool as of the preliminary cutoff date are set forth in the
following tables:
COMPOSITION OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
Number of Average Weighted Average
Weighted Average APR Aggregate Principal Receivables Principal Weighted Average Original Scheduled
of Receivables Balance in Pool Balance Remaining Term (1) Term (1)
-------------------- ------------------- ----------- ---------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
17.14% $81,339,294.10 5,827 $13,959.03 66.66 months 66.98 months
</TABLE>
- - ---------------------
(1) Based on scheduled payments due after the Preliminary Cutoff Date (in the
case of the Weighted Average Remaining Term) and assuming no prepayments on
the Preliminary Initial Receivables.
-7-
<PAGE>
DISTRIBUTION BY APR OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENT OF AGGREGATE
APR RANGE (%) RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
- - ------------- ----------- ----------------- --------------------
<S> <C> <C> <C>
7.00 to 7.99 . . . . . . . . . . . . . . . . 4 $ 61,667.84 0.08%
8.00 to 8.99 . . . . . . . . . . . . . . . . 10 117,633.80 0.14%
9.00 to 9.99 . . . . . . . . . . . . . . . . 26 325,942.90 0.40%
10.00 to 10.99 . . . . . . . . . . . . . . . 71 1,041,976.68 1.28%
11.00 to 11.99 . . . . . . . . . . . . . . . 142 2,203,373.96 2.71%
12.00 to 12.99 . . . . . . . . . . . . . . . 196 3,301,542.47 4.06%
13.00 to 13.99 . . . . . . . . . . . . . . . 288 4,604,126.74 5.66%
14.00 to 14.99 . . . . . . . . . . . . . . . 328 5,376,621.00 6.61%
15.00 to 15.99 . . . . . . . . . . . . . . . 358 5,553,064.04 6.83%
16.00 to 16.99 . . . . . . . . . . . . . . . 788 12,103,280.69 14.88%
17.00 to 17.99 . . . . . . . . . . . . . . . 1060 15,047,089.34 18.50%
18.00 to 18.99 . . . . . . . . . . . . . . . 1014 13,790,743.46 16.96%
19.00 to 19.99 . . . . . . . . . . . . . . . 868 10,687,877.10 13.14%
20.00 to 20.99 . . . . . . . . . . . . . . . 462 5,053,364.27 6.21%
21.00 to 21.99 . . . . . . . . . . . . . . . 172 1,711,333.01 2.10%
22.00 to 30.00 . . . . . . . . . . . . . . . 40 359,656.80 0.44%
----- -------------- ------
5,827 $81,339,294.10 100.00%
----- -------------- ------
----- -------------- ------
</TABLE>
- - ----------------------
(1) The sum of the individual Aggregate Principal Balance percentages may not
total 100.00% due to rounding.
GEOGRAPHIC CONCENTRATION OF THE PRELIMINARY INITIAL RECEIVABLES
AS OF THE PRELIMINARY CUTOFF DATE
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE PERCENTAGE OF AGGREGATE
STATE RECEIVABLES PRINCIPAL BALANCE PRINCIPAL BALANCE(1)
- - ----- ----------- ----------------- -----------------------
<S> <C> <C> <C>
Texas. . . . . . . . . . . . . . . . . . . . 1,003 $14,768,775.86 18.16
Florida. . . . . . . . . . . . . . . . . . . 426 5,991,623.24 7.38
California . . . . . . . . . . . . . . . . . 360 5,384,818.07 6.62
Colorado . . . . . . . . . . . . . . . . . . 335 4,654,876.78 5.72
South Carolina . . . . . . . . . . . . . . . 307 4,412,253.15 5.42
Georgia. . . . . . . . . . . . . . . . . . . 282 4,030,841.81 4.96
North Carolina . . . . . . . . . . . . . . . 259 3,774,702.83 4.64
Tennessee. . . . . . . . . . . . . . . . . . 271 3,723,572.75 4.58
Oregon . . . . . . . . . . . . . . . . . . . 200 2,703,180.52 3.32
Oklahoma . . . . . . . . . . . . . . . . . . 189 2,679,676.04 3.29
Arizona. . . . . . . . . . . . . . . . . . . 142 2,116,969.49 2.60
Massachusetts. . . . . . . . . . . . . . . . 159 1,973,114.92 2.43
New York . . . . . . . . . . . . . . . . . . 143 1,724,165.47 2.12
Missouri . . . . . . . . . . . . . . . . . . 124 1,594,138.50 1.96
Washington . . . . . . . . . . . . . . . . . 118 1,564,795.31 1.92
Minnesota. . . . . . . . . . . . . . . . . . 121 1,470,829.22 1.81
Connecticut. . . . . . . . . . . . . . . . . 113 1,436,893.55 1.77
Virginia . . . . . . . . . . . . . . . . . . 101 1,440,099.75 1.77
Kentucky . . . . . . . . . . . . . . . . . . 91 1,230,940.07 1.51
New Mexico . . . . . . . . . . . . . . . . . 78 1,163,726.61 1.43
Nevada . . . . . . . . . . . . . . . . . . . 62 1,044,860.40 1.28
Ohio . . . . . . . . . . . . . . . . . . . . 74 986,072.26 1.21
Nebraska . . . . . . . . . . . . . . . . . . 79 965,688.02 1.19
Utah . . . . . . . . . . . . . . . . . . . . 69 960,839.01 1.18
Illinois . . . . . . . . . . . . . . . . . . 66 889,859.52 1.09
Michigan . . . . . . . . . . . . . . . . . . 71 879,477.63 1.08
Maryland . . . . . . . . . . . . . . . . . . 59 836,356.73 1.03
New Hampshire. . . . . . . . . . . . . . . . 70 832,931.87 1.02
All other states . . . . . . . . . . . . . . 455 6,103,214.72 7.51
----- -------------- ------
TOTAL. . . . . . . . . . . . . . . . . . . . 5,827 $81,339,294.10 100.00
----- -------------- ------
----- -------------- ------
</TABLE>
- - --------------------
(1) The sum of the individual Aggregate Principal Balance percentages may not
total 100.00% due to rounding.
-8-
<PAGE>
WEIGHTED AVERAGE LIFE OF THE SECURITIES
Prepayment on automotive receivables can be measured relative to a prepayment
standard or model. The model used in this Term Sheet, the Absolute
Prepayment Model, or ABS, represents an assumed rate of prepayment each month
relative to the original number of receivables in a pool of receivables. ABS
further assumes that all the receivables are the same size and amortize at
the same rate and that each receivable in each month of its life will either
be paid as scheduled or be prepaid in full. For example, in a pool of
receivables originally containing 10,000 receivables, a 1% ABS rate means
that 100 receivables prepay each month. ABS does not purport to be an
historical description of prepayment experience or a prediction of the
anticipated rate of prepayment of any pool of receivables, including the
receivables.
Because the rate of payment of principal of each class of Notes will depend
on the rate of payment (including prepayments) of the principal balance of
the receivables, final payment of any class of Notes could occur
significantly earlier than the respective final scheduled distribution dates.
Reinvestment risk associated with early payment of the Notes will be borne
exclusively by the noteholders.
The table below captioned "Percent of Initial Note Principal Amount at
Various ABS Percentages" has been prepared on the basis of the
characteristics of the receivables. The table assumes that
1. the receivables prepay in full at the specified constant percentage of
ABS monthly, with no defaults, losses or repurchases,
2. each scheduled monthly payment on the receivables is made on the last
day of each month and each month has 30 days,
3. payments on the Notes are made on each distribution date (and each
distribution date is assumed to be the fifteenth day of each applicable
month), and
4. the Servicer does not exercise its option to purchase the receivables.
Pool 1 has been modeled with a cutoff date of December 17, 1998, and Pool 2
is assumed to be delivered one month later. The table indicates the
projected weighted average life of each class of Notes and sets forth the
percent of the initial principal amount of each class of Notes that is
projected to be outstanding after each of the distribution dates shown at
various constant ABS percentages. The table also indicates the month in
which the Servicer can exercise its optional clean-up call and the associated
weighted average life.
The table also assumes that the receivables have been aggregated into
hypothetical pools with all of the receivables within each pool having the
following characteristics and that the level scheduled monthly payment for
each of the pools (which is based on its aggregate principal balance, APR,
original term to maturity and remaining term to maturity as of the cutoff
date) will be such that each pool will be fully amortized by the end of its
remaining term to maturity.
<TABLE>
<CAPTION>
ORIGINAL TERM REMAINING TERM
AGGREGATE TO MATURITY TO MATURITY
POOL PRINCIPAL BALANCE APR (IN MONTHS) (IN MONTHS)
---- ----------------- ----- -------------- --------------
<S> <C> <C> <C> <C>
1. . . . . . . . $157,500,000 17.14 67 67
2. . . . . . . . $67,500,000 17.14 67 67
</TABLE>
The actual characteristics and performance of the receivables will differ
from the assumptions used in constructing the table. The assumptions used
are hypothetical and have been provided only to give a general sense of how
the principal cash flows might behave under varying prepayment scenarios.
For example, it is unlikely that the receivables will prepay at a constant
level of ABS until maturity or that all of the receivables will prepay at the
same level of ABS. Moreover, the diverse terms of receivables within each of
the hypothetical pools could produce slower or faster principal distributions
than indicated in the table at the various constant percentages of ABS
specified, even if the original and remaining terms to maturity of the
receivables are as assumed. Any difference between such assumptions and the
actual characteristics and performance of the receivables, or actual
prepayment experience, will affect the percentages of initial amounts
outstanding over time and the weighted average lives of each class of Notes.
-9-
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
DISTRIBUTION DATE CLASS A-1 NOTES CLASS A-2 NOTES
- - ----------------------- ------------------------------------------ ------------------------------------------
0.00% 1.00% 1.60% 2.00% 0.00% 1.00% 1.60% 2.00%
----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Closing Date .......... 100 100 100 100 100 100 100 100
01/15/99 .............. 99 97 97 96 99 99 98 98
02/15/99 .............. 97 94 92 90 99 97 96 95
03/15/99 .............. 95 90 87 85 98 95 94 93
04/15/99 .............. 93 86 82 79 97 93 91 90
05/15/99 .............. 91 82 77 73 96 91 89 87
06/15/99 .............. 89 79 72 68 95 90 87 84
07/15/99 .............. 87 75 67 62 94 88 84 82
08/15/99 .............. 85 71 63 57 93 86 82 79
09/15/99 .............. 83 67 58 51 92 84 80 77
10/15/99 .............. 81 64 53 46 91 82 77 74
11/15/99 .............. 79 60 49 41 90 81 75 71
12/15/99 .............. 77 56 44 36 89 79 73 69
01/15/00 .............. 75 53 39 31 88 77 71 66
02/15/00 .............. 73 49 35 25 87 75 69 64
03/15/00 .............. 71 46 30 20 86 74 66 62
04/15/00 .............. 68 42 26 15 85 72 64 59
05/15/00 .............. 66 38 22 11 84 70 62 57
06/15/00 .............. 64 35 17 6 83 69 60 55
07/15/00 .............. 62 31 13 1 81 67 58 52
08/15/00 .............. 59 28 9 0 80 65 56 48
09/15/00 .............. 57 24 5 0 79 63 54 42
10/15/00 .............. 54 21 1 0 78 62 52 37
11/15/00 .............. 52 17 0 0 77 60 48 32
12/15/00 .............. 50 14 0 0 76 58 44 28
01/15/01 .............. 47 11 0 0 74 57 39 23
02/15/01 .............. 44 7 0 0 73 55 35 18
03/15/01 .............. 42 4 0 0 72 54 30 13
04/15/01 .............. 39 1 0 0 71 52 26 9
05/15/01 .............. 37 0 0 0 69 49 22 5
06/15/01 .............. 34 0 0 0 68 45 18 0
07/15/01 .............. 31 0 0 0 67 41 14 0
08/15/01 .............. 28 0 0 0 65 38 10 0
09/15/01 .............. 25 0 0 0 64 34 6 0
10/15/01 .............. 23 0 0 0 63 31 3 0
11/15/01 .............. 20 0 0 0 61 27 0 0
12/15/01 .............. 17 0 0 0 60 24 0 0
01/15/02 .............. 14 0 0 0 58 20 0 0
02/15/02 .............. 11 0 0 0 57 17 0 0
03/15/02 .............. 8 0 0 0 55 13 0 0
04/15/02 .............. 4 0 0 0 54 10 0 0
05/15/02 .............. 1 0 0 0 52 7 0 0
06/15/02 .............. 0 0 0 0 50 3 0 0
07/15/02 .............. 0 0 0 0 46 0 0 0
08/15/02 .............. 0 0 0 0 42 0 0 0
09/15/02 .............. 0 0 0 0 38 0 0 0
10/15/02 .............. 0 0 0 0 35 0 0 0
11/15/02 .............. 0 0 0 0 31 0 0 0
12/15/02 .............. 0 0 0 0 27 0 0 0
01/15/03 .............. 0 0 0 0 23 0 0 0
02/15/03 .............. 0 0 0 0 19 0 0 0
03/15/03 .............. 0 0 0 0 15 0 0 0
04/15/03 .............. 0 0 0 0 11 0 0 0
05/15/03 .............. 0 0 0 0 6 0 0 0
06/15/03 .............. 0 0 0 0 2 0 0 0
07/15/03 .............. 0 0 0 0 0 0 0 0
08/15/03 .............. 0 0 0 0 0 0 0 0
09/15/03 .............. 0 0 0 0 0 0 0 0
10/15/03 .............. 0 0 0 0 0 0 0 0
11/15/03 .............. 0 0 0 0 0 0 0 0
12/15/03 .............. 0 0 0 0 0 0 0 0
1/15/04 ............... 0 0 0 0 0 0 0 0
2/15/04 ............... 0 0 0 0 0 0 0 0
3/15/04 ............... 0 0 0 0 0 0 0 0
- - -------------------------------------------------------------------------------------------------------------------------------
Weighted Average Life (years)(1) 1.9 1.2 0.9 0.8 3.0 2.1 1.7 1.5
</TABLE>
- - -----------------------
(1) The weighted average life of a Note is determined by (i) multiplying
the amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of the Note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF
THE RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND
PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
-10-
<PAGE>
PERCENT OF INITIAL NOTE PRINCIPAL AMOUNT
AT VARIOUS ABS PERCENTAGES
<TABLE>
<CAPTION>
DISTRIBUTION DATE CLASS A-3 NOTES
----------------- -------------------------------------------
0.00% 1.00% 1.60% 2.00%
----- ----- ----- -----
<S> <C> <C> <C> <C>
Closing Date 100 100 100 100
01/15/99 100 100 100 100
02/15/99 100 100 100 100
03/15/99 100 100 100 100
04/15/99 100 100 100 100
05/15/99 100 100 100 100
06/15/99 100 100 100 100
07/15/99 100 100 100 100
08/15/99 100 100 100 100
09/15/99 100 100 100 100
10/15/99 100 100 100 100
11/15/99 100 100 100 100
12/15/99 100 100 100 100
01/15/00 100 100 100 100
02/15/00 100 100 100 100
03/15/00 100 100 100 100
04/15/00 100 100 100 100
05/15/00 100 100 100 100
06/15/00 100 100 100 100
07/15/00 100 100 100 100
08/15/00 100 100 100 100
09/15/00 100 100 100 100
10/15/00 100 100 100 100
11/15/00 100 100 100 100
12/15/00 100 100 100 100
01/15/01 100 100 100 100
02/15/01 100 100 100 100
03/15/01 100 100 100 100
04/15/01 100 100 100 100
05/15/01 100 100 100 100
06/15/01 100 100 100 100
07/15/01 100 100 100 93
08/15/01 100 100 100 87
09/15/01 100 100 100 80
10/15/01 100 100 100 74
11/15/01 100 100 98 68
12/15/01 100 100 92 62
01/15/02 100 100 87 56
02/15/02 100 100 81 50
03/15/02 100 100 76 45
04/15/02 100 100 70 40
05/15/02 100 100 65 0
06/15/02 100 100 60 0
07/15/02 100 100 56 0
08/15/02 100 95 51 0
09/15/02 100 90 46 0
10/15/02 100 85 42 0
11/15/02 100 80 38 0
12/15/02 100 75 0 0
01/15/03 100 71 0 0
02/15/03 100 66 0 0
03/15/03 100 61 0 0
04/15/03 100 57 0 0
05/15/03 100 52 0 0
06/15/03 100 48 0 0
07/15/03 96 44 0 0
08/15/03 89 39 0 0
09/15/03 82 0 0 0
10/15/03 74 0 0 0
11/15/03 67 0 0 0
12/15/03 59 0 0 0
1/15/04 51 0 0 0
2/15/04 44 0 0 0
3/15/04 0 0 0 0
- - ------------------------------------------------------------------------------
Weighted Average Life (years)(1) 5.0 4.4 3.6 3.1
</TABLE>
- - --------------------
(1) The weighted average life of a Note is determined by (i) multiplying
the amount of each principal payment on a Note by the number of years from the
date of the issuance of the Note to the related Distribution Date, (ii) adding
the results and (iii) dividing the sum by the related initial principal amount
of the Note.
THIS TABLE HAS BEEN PREPARED BASED ON THE ASSUMPTIONS DESCRIBED ABOVE
(INCLUDING THE ASSUMPTIONS REGARDING THE CHARACTERISTICS AND PERFORMANCE OF
THE RECEIVABLES WHICH WILL DIFFER FROM THE ACTUAL CHARACTERISTICS AND
PERFORMANCE THEREOF) AND SHOULD BE READ IN CONJUNCTION THEREWITH.
-11-
