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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X Annual Report pursuant to section 13 or 15(d) of the Securities
________ Exchange Act of 1934 for the fiscal year ended December 31, 1998 or
Transition report pursuant to section 13 or 15(d) of the Securities
________ Exchange Act of 1934 for the transition period from ______________
to ___________________.
Commission file number: 333-48141 (no 1934 Act number)
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Exact name of Registrant as specified in its charter:
ARCADIA AUTOMOBILE RECEIVABLES TRUST, 1998-A
State or other jurisdiction of incorporation or organization): Delaware
I.R.S. Employer Identification No.: 41-1743653
Address of principal executive offices:
7825 Washington Avenue So. Minneapolis, Minnnesota 55439-2435
Registrant's telephone number, including area code: (612) 942-9880
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Automobile Receivables-Backed Certificates
Automobile Receivables-Backed Notes
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
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PART I
Item 1. BUSINESS.
The sole business of Arcadia Automobile Receivables Trust, 1998-A (the
"Trust") is to hold the Receivables and to apply the proceeds thereof
to make payments to the Noteholders and to the Certificateholders, as
described in the Trust's Prospectus Supplement (dated March 11, 1998)
to Prospectus dated March 11, 1998, and the related Registration
Statement on Form S-3 (File No. 333-48141).
Item 2. PROPERTIES.
Not applicable.
Item 3. LEGAL PROCEEDINGS.
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
As of December 31, 1998, the Trust had approximately 10 holders of
record of the Notes, computed in accordance with Rule 12g5-1 under
the Securities Exchange Act of 1934, as amended.
Item 6. SELECTED FINANCIAL DATA.
Not applicable.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Not applicable.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Not applicable.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Not applicable.
Item 11. EXECUTIVE COMPENSATION.
Not applicable.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not applicable.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The Report of Independent Auditors, dated as of January 25,
1999, delivered pursuant to Section 3.11 of the Sale and Servicing
Agreement, is filed herewith.
(b) None.
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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.
OLYMPIC AUTOMOBILE RECEIVABLES TRUST, 1998-A
By ARCADIA FINANCIAL LTD., as Servicer with
respect to Arcadia Automobile Receivables Trust,
1998-A
Dated: March 31, 1999 /s/ John A. Witham
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John A. Witham
Executive Vice President
and Chief Financial Officer
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EXHIBIT INDEX
Item
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99.1 The Report of Independent Auditors, dated as of January 25, 1999,
delivered pursuant to Section 3.11 of the Sale and Servicing
Agreement.
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[ERNST & YOUNG LETTERHEAD]
Report of Independent Auditors
Arcadia Financial Ltd.
Board of Directors
We have audited, in accordance with generally accepted auditing standards, the
consolidated balance sheet of Arcadia Financial Ltd. (the "Company") as of
December 31, 1998 and the related consolidated statements of operations and
comprehensive income, shareholders' equity, and cash flows for the year then
ended and have issued our report thereon dated January 25, 1999.
Our audit, referred to in the preceding paragraph, included procedures
applied to the documents and records relating to the servicing of automobile
installment contracts under certain pooling and servicing agreements and sale
and servicing agreements, and procedures applied to the delinquency and loss
statistics relating to the Company's portfolio of automobile installment
contracts. These procedures were determined on the basis of our objective to
issue an opinion on the financial statements referred to above taken as a
whole. Because the procedures referred to in this paragraph and described
below do not constitute an audit of the documents and records relating to the
servicing of automobile installment contracts or the delinquency and loss
statistics relating to the Company's portfolio of automobile installment
contracts, we do not express an opinion on those documents, records or
statistics.
Our procedures were as follows:
DOCUMENTS AND RECORDS RELATING TO THE SERVICING OR AUTOMOBILE INSTALLMENT
CONTRACTS UNDER POOLING AND SERVICING AGREEMENTS AND SALE AND SERVICING
AGREEMENTS.
1. Obtained the Static Pool Analysis and traced items on a test basis to
the Finance Income Receivable valuation.
2. Recalculated the weighted average original term and weighted average
annual percentage rate for existing securitization trusts at
December 31, 1998.
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3. For a sample of 50 automobile installment contracts, we obtained from
the Company the payment history and compared the amount of the most
recent payment to the corresponding amount in the Company's cash
receipt records. Also, we recalculated the allocation of the payment
to principal, interest, and other charges, if applicable. No
exceptions were noted.
4. Obtained the reconciliation of automobile installment contracts
suspense accounts for a five day period subsequent to December 31,
1998 and observed that suspense items cleared in a timely manner.
5. Recalculated the yield earned on automobile installment contracts
based on the average loans held for sale balance during 1998.
Compared the recalculated yield to the weighted average annual
percentage yield of loans held for sale stated in the respective
prospectuses for Arcadia Automobile Receivable Trusts 1998-A,
1998-B, 1998-C, 1997-D, and 1998-E.
6. Determined the reasonableness of the annual service fee income by
obtaining servicer's certificates and recalculating the reported
amounts of service fees.
DELINQUENCY AND LOSS STATISTICS RELATING TO THE COMPANY'S PORTFOLIO OF
AUTOMOBILE INSTALLMENT CONTRACTS.
1. Reviewed the methodology for constructing the cumulative default
curves and compared the cumulative default curves at December 31,
1998 to historical default performance for reasonableness. Validated
the dollar amount of the Company's loss for 30 loans used in
developing the cumulative default curves to the Company's loan
accounting system.
2. Traced the recovery rates from the Detailed Sales Report for 1998
for six months to supporting detailed schedules of repossessed
vehicle recovery amounts.
3. For a sample of ten repossessed automobiles, we vouched vehicle
sales to original documentation (original invoices or actual
proceeds) judgmentally selected from detailed schedules of
repossessed vehicle recovery amounts.
4. Compared to current period's charge-offs, recoveries and allowance
for credit losses (including the amount incorporated in the finance
income receivable) as a percentage of automobile installment
contracts serviced to the Company's historical experience.
5. Assessed the reasonableness of recovery rate assumptions used by the
Company at June 30, 1998 and December 31, 1998 based on the
valuation of the remaining repossessed vehicle inventory as obtained
from external sources.
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6. Assessed the reasonableness of the methodology and criteria for
determining the allowance for credit losses (including the amount
incorporated in the finance income receivable).
The results provided satisfactory evidential matter for the purpose of our
audit of the financial statements, referred to in the introductory paragraph
of this letter, taken as a whole.
We also performed certain agreed-upon procedures applied to the documents and
records relating to the servicing of automobile installment contracts under
certain pooling and servicing agreements, and sale and servicing agreements,
and procedures applied to the delinquency and loss statistics relating to
the Company's portfolio of automobile installment contracts in connection
with agreed-upon procedures related to the securitization of automobile
installment contracts during 1998.
The procedures we performed in connection with the issuance of agreed-upon
procedures letters described in Attachment I were as follows:
DOCUMENTS AND RECORDS RELATING TO THE SERVICING OF AUTOMOBILE INSTALLMENT
CONTRACTS UNDER POOLING AND SERVICING AGREEMENTS AND SALE AND SERVICING
AGREEMENTS.
1. During 1998, we utilized an audit software application to analyze the
following characteristics of loans in the Arcadia Automobile Receivable
Trusts 1998-A, 1998-B, 1998-C, 1998-D, and 1998-E securitization.
a. Recalculated the number of loans, total amount financed, aging of
automobile installment contracts and compared the number and amount
of delinquent loans to the Company's delinquency reports.
b. Recalculated the weighted average interest rates on automobile
contracts for each securitization pool.
We refer to our letters issued in 1998, as detailed in Attachment I,
that describe the additional procedures performed at that time.
2. Relating to automobile installment contracts included in Arcadia
Automobile Receivables Trusts 1998-A, 1998-B, 1998-C, 1998-D, and 1998-E
and/or serving as collateral for warehouse facilities during 1998, we
performed the following:
a. Attempted to verbally confirm the original contract amount and
monthly payment amount with the primary obligor for a sample of
1,084 automobile installment loans (related to automobile
installment contracts included in Arcadia Receivables Trusts 1998-A,
the preliminary receivables in 1998-B and collateral for warehouse
facilities). Following is a summary of the confirmation results:
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- Confirmed without exception - 524 loans or 48%
- Confirmed vehicle purchase, unsure of original contract amount
or monthly payment amount - 63 loans or 6%
- Unable to contact borrower, confirmed propriety of phone number
through discussion with person answering telephone or directory
assistance - 178 loans or 17%
- Unable to contact borrower or confirm propriety of phone number
through directory assistance - 319 loans or 29%
b. Mailed positive confirmation letters in an attempt to confirm the
primary obligor's original contract amount and monthly payment
amount for the primary obligor for a sample of 550 loans that were
booked during the months of February through December 1998.
- Confirmation returned without exception - 356 loans or 65%
- Confirmation returned with an exception - 20 loans or 3%
- Confirmation not returned - 174 loans or 32%
c. For the automobile installment contracts identified in 2.b. above,
where a confirmation was returned with an exception, we investigated
the nature of the exception by vouching most recent payments
received and by comparing the original contract amount and monthly
payment amount to original documents. Three exceptions, relating to
monthly payment amounts, were not resolved. All other exceptions
were resolved.
3. For a sample of 50 automobile installment contracts, we obtained from
the Company the payment history and compared the amount of the most
recent payment to the corresponding amount in the Company's cash receipt
records. Also, we recalculated the allocation of the payment to
principal, interest, and other charges, if applicable. No exceptions
were noted.
4. For a sample of 732 automobile installment contracts included in Arcadia
Automobile Receivables Trusts 1998-A, 1998-B, 1998-C, 1998-D, and
1998-E, as referred to in 2.a. above, we obtained the loan files from
the Company and noted documentation of approval, title and insurance. We
noted 17 automobile installment contracts where there was a discrepancy
between the loan file documentation and the information per the Random
Loan List, 68 automobile installment contracts were not approved by the
appropriate level of management based on the Company's approval matrix,
one automobile installment contract did not have a title or application
for title listing the Company as first lienholder, 17 automobile
installment contracts did not have evidence of physical damage insurance
listing the Company as loss payee and six automobile installment
contracts where the description (new or used) of the financed vehicle
contained in the signed note did not agree with the automobile
description code per the Random Loan List.
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This report is intended solely for the use of specified users listed above
and should not be used by those who have not agreed to the procedures and
taken responsibility for the sufficiency of the procedures for their purposes.
/s/ Ernst & Young LLP
January 25, 1999
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ATTACHMENT I
The following are the agreed-upon procedures letters issued in conjunction
with the securitization of automobile installment contracts by Arcadia
during 1998.
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SECURITIZATION DATED OF LETTERS
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<S> <C>
1998-A March 11, 1998
April 8, 1998
April 22,1998
1998-B June 10, 1998
July 9, 1998
July 17, 1998
1998-C September 11, 1998
October 9, 1998
October 22, 1998
1998-D November 12, 1998
December 1, 1998
1998-E December 11, 1998
January 11, 1999
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