<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
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 0-26458
WFS FINANCIAL INC
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0291646
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
23 PASTEUR, IRVINE, CALIFORNIA 92618-3816
(Address of principal executive offices)
(714) 727-1000
(Registrant's telephone number, including area code)
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 [ ]
As of October 31, 1997, the registrant had 25,708,611 shares outstanding of
common stock, no par value. The shares of common stock represent the only class
of common stock of the registrant.
The total number of sequentially numbered pages is 22.
<PAGE> 2
WFS FINANCIAL INC AND SUBSIDIARIES
FORM 10-Q
SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition at
September 30, 1997 and December 31, 1996 3
Consolidated Statements of Income for the
Three and Nine Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1997 and 1996 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
Short term investments $ 208,616,541 $ 109,237,133
Contracts receivable (1) 50,797,748 53,287,645
Contracts held for sale (1) 183,445,113 186,302,823
Allowance for credit losses (6,602,841) (7,647,986)
------------- -------------
Contracts receivable, net 227,640,020 231,942,482
Amounts due from trusts 259,098,777 191,469,153
Retained interest in securitized assets 172,335,346 121,597,461
Property, plant and equipment, net 19,407,809 16,904,239
Accrued interest receivable 1,407,368 1,517,682
Other assets 4,433,198 2,903,507
------------- -------------
$ 892,939,059 $ 675,571,657
============= =============
LIABILITIES
Notes payable - parent $ 175,000,000 $ 125,000,000
Amounts held on behalf of trustee 513,867,863 393,449,007
Other liabilities 30,765,288 9,431,124
------------- -------------
719,633,151 527,880,131
SHAREHOLDERS' EQUITY
Common stock, no par value; authorized 50,000,000 shares;
issued and outstanding 25,706,411 shares in 1997 and
25,684,168 shares in 1996 73,469,248 73,123,054
Additional paid-in capital 4,000,000 4,000,000
Retained earnings 95,520,926 70,568,472
Unrealized gain on retained interest in securitized assets,
net of tax 315,734 --
------------- -------------
173,305,908 147,691,526
------------- -------------
$ 892,939,059 $ 675,571,657
============= =============
</TABLE>
(1) Net of unearned discount
- --------
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE> 4
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Interest income $ 17,044,494 $ 16,152,610 $ 47,635,553 $ 46,816,091
Interest expense - parent 2,502,470 1,911,450 6,398,866 7,100,503
------------ ------------ ------------ ------------
Net interest income 14,542,024 14,241,160 41,236,687 39,715,588
Servicing income 29,119,758 29,260,941 110,349,059 79,505,315
Gain on sale of contracts 11,593,764 9,421,196 25,428,762 31,125,381
------------ ------------ ------------ ------------
TOTAL REVENUES 55,255,546 52,923,297 177,014,508 150,346,284
EXPENSES
Provision for credit losses 1,210,890 1,918,481 5,748,269 7,933,103
Operating expenses:
Salaries and employee benefits 25,215,502 17,590,073 75,392,344 50,824,316
Occupancy 3,195,379 1,942,712 9,536,526 5,354,256
Credit and collections 3,568,569 2,082,327 10,217,552 6,210,913
Telephone 1,972,461 1,048,660 5,670,704 2,746,901
Data processing 2,487,862 2,736,656 6,361,333 7,529,428
General and administrative costs paid
to parent 817,593 2,584,169 2,767,958 7,116,703
Other operating expenses 6,046,985 5,203,232 18,255,965 11,918,736
------------ ------------ ------------ ------------
TOTAL OPERATING EXPENSES 43,304,351 33,187,829 128,202,382 91,701,253
------------ ------------ ------------ ------------
TOTAL EXPENSES 44,515,241 35,106,310 133,950,651 99,634,356
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 10,740,305 17,816,987 43,063,857 50,711,928
Income taxes 4,369,507 7,623,793 18,111,403 21,486,089
------------ ------------ ------------ ------------
NET INCOME $ 6,370,798 $ 10,193,194 $ 24,952,454 $ 29,225,839
============ ============ ============ ============
NET INCOME PER COMMON SHARE $ 0.25 $ 0.40 $ 0.97 $ 1.14
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 25,729,858 25,684,168 25,686,491 25,684,168
============ ============ ============ ============
</TABLE>
- --------
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE> 5
WFS FINANCIAL INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
1997 1996
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 24,952,454 $ 29,225,839
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for credit losses 5,748,269 7,933,103
Depreciation 6,946,277 508,659
Amortization of deferred fees (147,696) (190,484)
Amortization of retained interest in securitized assets 33,164,930 50,783,060
Decrease in interest receivable 110,314 627,548
Net change in other assets (1,529,691) 3,986,000
Net change in other liabilities 21,105,530 707,572
Origination of contracts (1,762,339,741) (1,587,231,601)
Proceeds from sale of contracts 1,690,000,000 1,545,000,000
Other change in contracts 71,041,630 81,937,291
--------------- ---------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 89,052,276 133,286,987
INVESTING ACTIVITIES
(Purchase) sale of property, plant and equipment (9,449,847) 884,491
Increase in trust receivable (67,629,624) (60,229,642)
Increase in retained interest in securitized asset (83,358,447) (75,191,092)
--------------- ---------------
NET CASH USED IN INVESTING ACTIVITIES (160,437,918) (134,536,243)
FINANCING ACTIVITIES
Proceeds from issuance of common stock 346,194
Increase in borrowings from parent 50,000,000
Increase in trustee accounts 120,418,856 52,577,470
--------------- ---------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 170,765,050 52,577,470
INCREASE IN CASH AND CASH EQUIVALENTS 99,379,408 51,328,214
Cash and cash equivalents at beginning of period 109,237,133 65,019,858
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 208,616,541 $ 116,348,072
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for:
Interest $ 6,386,236 $ 7,778,744
Income taxes 4,387,943 16,612,259
</TABLE>
- --------
See accompanying notes to unaudited consolidated financial statements.
5
<PAGE> 6
WFS FINANCIAL INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The unaudited consolidated financial statements included herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and footnotes
thereto for the year ended December 31, 1996 included in the WFS Financial Inc
("WFS" or the "Company") Form 10-K.
Certain amounts from the 1996 consolidated financial statement amounts have been
reclassified to conform to the 1997 presentation.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per Share", which
is required to be adopted on December 31, 1997. Earlier application of SFAS 128
is not permitted. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact of SFAS 128 on
the calculation of primary earnings per share and fully diluted earnings per
share is not expected to be material.
The Company has entered into or committed to two year Treasury securities
forward agreements as hedges against market value changes in designated portions
of its contract portfolios. Recognition of unrealized gains or losses is
deferred until the sale of contracts. When the related loans are sold, the
deferred gains or losses from these contracts are recognized in the consolidated
statement of income as a component of net gains or losses on sales of contracts.
NOTE B - NET CONTRACTS RECEIVABLE
Net contracts receivable consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
Consumer:
Indirect contracts $ 242,852,715 $ 252,598,389
Direct contracts 13,979,584 15,117,565
Less unearned discounts 27,636,171 33,768,190
------------- -------------
229,196,128 233,947,764
Allowance for credit losses (6,602,841) (7,647,986)
Dealer participation, net of deferred contract fees 5,046,733 5,642,704
------------- -------------
Net contracts receivable $ 227,640,020 $ 231,942,482
============= =============
</TABLE>
6
<PAGE> 7
WFS FINANCIAL INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table presents the changes in amounts deferred and carried as
adjustments to the contract balance including contract fees and dealer
participation.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 6,204,622 $ 6,692,271 $ 5,642,704 $ 7,401,146
New deferrals 15,871,631 15,883,766 49,187,792 46,857,971
Amortization (1,030,388) (1,126,737) (3,197,077) (3,475,936)
Sales (15,999,132) (15,014,993) (46,586,686) (44,348,874)
------------ ------------ ------------ ------------
Balance at end of period $ 5,046,733 $ 6,434,307 $ 5,046,733 $ 6,434,307
============ ============ ============ ============
</TABLE>
WFS uses two-year Treasury securities forward agreements to minimize its
exposure to interest rate risk. The fair value of these instruments may vary
with changes in interest rates. At September 30, 1997, WFS had forward
agreements with a notional face amount outstanding of $70 million. The fair
value of these forward agreements was a loss of $11 thousand.
Contracts serviced by WFS for the benefit of others totaled approximately $3.4
billion at September 30, 1997 and $2.8 billion at December 31, 1996.
NOTE C - ALLOWANCE FOR CREDIT LOSSES
Changes in the allowance for credit losses for owned contracts were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance at beginning of period $ 7,512,675 $ 8,575,489 $ 7,647,986 $ 7,794,974
Provision for credit losses 1,210,890 1,918,481 5,748,269 7,933,103
Charged off contracts (3,138,259) (3,292,373) (9,946,738) (11,321,779)
Recoveries 1,017,535 1,186,685 3,153,324 3,981,984
------------ ------------ ------------ ------------
Balance at end of period $ 6,602,841 $ 8,388,282 $ 6,602,841 $ 8,388,282
============ ============ ============ ============
</TABLE>
NOTE D- SECURITIZED ASSETS
SFAS 125 requires that following a transfer of financial assets, an entity is to
recognize the assets it controls and the liabilities it has incurred, and
derecognize assets for which control has been surrendered and liabilities that
have been extinguished. For securitization transactions, SFAS 125 defines two
separate financial assets retained at the time of securitization, a retained
interest in securitized
7
<PAGE> 8
WFS FINANCIAL INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
assets, which represents the excess spread created from securitization, and a
servicing rights asset which represents the benefit derived from retaining the
rights to service the contracts securitized. Previous accounting guidance did
not separately distinguish these rights.
Retained interests in securitized assets ("RISA") capitalized upon
securitization of contracts represent the present value of the estimated future
earnings to be received by WFS from the excess spread created in securitization
transactions. Excess spread is calculated by taking the difference between the
coupon rate of the contracts sold and the certificate rate paid to the investors
less contractually specified servicing and guarantor fees.
Prepayment and credit loss assumptions are utilized to project future earnings
and are based upon historical experience. Credit losses are estimated using a
cumulative loss rate estimated by management to reduce the likelihood of asset
impairment. All assumptions used are evaluated each quarter and adjusted, if
appropriate, to reflect actual performance of the contracts.
Future earnings are discounted at a rate management believes to be
representative of the market at the time of securitization. The balance of the
RISA is amortized against actual excess spread income earned on a monthly basis
over the expected repayment life of the underlying contracts. RISAs are
classified in a manner similar to available for sale securities and as such are
marked to market each quarter. Market value changes are calculated by
discounting the excess spread using a current market discount rate. Any changes
in the market value of the RISA is reported as a separate component of
shareholders' equity as an unrealized gain or loss, net of applicable taxes.
WFS retains the rights to service all contracts it securitizes. Consumer
servicing rights assets ("CSRA") which can be capitalized upon securitization,
represent the present value of the estimated future earnings to be received from
servicing securitized contracts. These earnings are calculated by estimating
future servicing revenues, including contractually specified servicing fee, late
charges, other ancillary income, and float benefit and netting them against the
actual cost to service contracts. WFS has not capitalized any servicing rights
as of September 30, 1997.
The following table presents the activity of the RISA.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1997
------------- -------------
<S> <C> <C>
Beginning balance $ 159,487,367 $ 121,597,461
Additions 31,976,865 83,358,447
Amortization (19,734,161) (33,164,930)
Change in unrealized gain/(loss) on retained interest in securitized assets 605,275 544,368
------------- -------------
Ending balance $ 172,335,346 $ 172,335,346
============= =============
</TABLE>
8
<PAGE> 9
WFS FINANCIAL INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In initially valuing the RISA, WFS established an off balance sheet allowance
for expected future credit losses. The allowance is based upon historical
experience and management's estimate of future performance regarding credit
losses and includes an unallocated amount to reduce the likelihood of impairment
of the RISA. The amount is reviewed periodically and adjustments are made if
actual experience or other factors indicate that future performance may differ
from management's prior expectations.
The following table presents the estimated future undiscounted retained interest
earnings to be received from securitizations. Estimated future undiscounted RISA
earnings are calculated by taking the difference between the coupon rate of the
contracts sold and the certificate rate paid to the investors, less the
contractually specified servicing fee of 1.0% and guarantor fees, after giving
effect to estimated prepayments and assuming no losses. To arrive at the RISA,
this amount is reduced by the off balance sheet allowance established for
potential future losses and by discounting to present value. Prior to the
adoption of SFAS 125, WFS reduced excess spread by the actual cost to service
contracts instead of the contractually specified servicing fee. The actual cost
to service contracts is now included in the computation of the CSRA.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
---------------
<S> <C>
Estimated net undiscounted RISA earnings $ 429,432,501
Off balance sheet allowance for losses (240,280,454)
Discount to present value (16,816,701)
---------------
Retained interest in securitized assets $ 172,335,346
===============
Outstanding balance of contracts sold through securitizations $ 3,359,466,584
Off balance sheet allowance for losses as a percent of contracts sold
through securitizations 7.15%
</TABLE>
WFS believes that the off balance sheet allowance for losses is currently
adequate to absorb potential losses in the sold portfolio. Had SFAS 125 been in
effect at December 31, 1996, the off balance sheet allowance for losses as a
percent of contracts sold through securitizations would have been 8.03%.
NOTE E - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at:
9
<PAGE> 10
WFS FINANCIAL INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
Land $ 1,666,932
Computers and software 27,970,714 $22,432,667
Furniture, fixtures and leasehold improvements 4,541,098 2,951,804
Equipment 2,378,321 2,082,573
Automobiles 212,294 209,399
----------- -----------
36,769,359 27,676,443
Less accumulated depreciation 17,361,550 10,772,204
----------- -----------
$19,407,809 $16,904,239
=========== ===========
</TABLE>
Depreciation expense was $6,946,277 and $508,659 for the nine months ended
September 30, 1997 and 1996, respectively. The increase in depreciation expense
was due to the purchase of property, plant and equipment at December 31, 1996.
See "Operating Expenses" in Management's Discussion and Analysis of Financial
Condition and Results of Operations.
NOTE F - INTERCOMPANY AGREEMENTS
WFS receives advances in the form of a warehouse line of credit ("Line of
Credit"), a senior note payable ("Senior Note") and an additional note payable
("Promissory Note") from its parent, Western Financial Bank (the "Bank") to fund
its operations.
The Line of Credit agreement permits WFS to draw up to $400 million to be used
in its operations. The interest rate was 5.66% and 5.51% for the nine months
ended September 30, 1997 and 1996, respectively. Interest payments are
calculated based on the average amount outstanding. At September 30, 1997, WFS
did not have any draws outstanding on the Line of Credit.
WFS also borrowed $125 million from the Bank under the terms of the Senior Note,
which is still outstanding. Interest is calculated at the rate of 7.25% per
annum.
Additionally, WFS borrowed $50 million from the Bank under the terms of the
Promissory Note dated August 1, 1997. The Promissory Note provides for principal
payments in two equal annual installments of $25 million per year, commencing on
July 31, 2001. Interest payments on the Promissory Note are due quarterly, in
arrears, calculated at the rate of 9.42% per annum. Pursuant to the terms of the
Promissory Note, WFS may not incur any other indebtedness which is senior to the
obligations evidenced by the Promissory Note except for (i) indebtedness under
the Senior Note (ii) indebtedness collateralized or secured under the Line of
Credit and (iii) indebtedness for similar types of warehouse lines of credit.
WFS also invests its excess cash at the Bank under an Investment Agreement. The
Bank pays WFS an interest rate equal to the federal composite commercial paper
rate on this excess cash. The weighted average interest rate was 5.57% and 5.42%
for the nine months ended September 30, 1997 and 1996, respectively. At
September 30, 1997, WFS held $202 million of excess cash with the Bank under the
Investment Agreement.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The primary sources of revenue for WFS are servicing income and net interest
income. Servicing income is primarily generated following the securitization of
installment sales contracts and installment loans (collectively "contracts")
originated by WFS and consists of: (i) contractual servicing fees, (ii) retained
interest income and (iii) fee income such as late charges and documentation fees
which are earned regardless of whether or not a securitization has occurred.
Contractual servicing is the servicing fee contractually due from a trust for
servicing contracts which have been securitized. Retained interest income is the
earnings derived from the excess spread which is equal to the difference between
the stated interest rate on the contracts securitized and the interest rate on
the securitizations, adjusted for credit losses, administrative expenses and
contractual servicing fees. Late charges, deferment fees, documentation fees and
other fees are also collected on contracts serviced and are retained by WFS. Net
interest income is the difference between the interest earned on contracts not
yet sold in securitization transactions and the interest paid on the liabilities
used to fund such contracts.
In addition to servicing income and net interest income, gain on sale of
contracts is also a source of revenue. WFS computes a gain on sale with respect
to contracts securitized based on the present value of the estimated future
retained interest earnings to be received from such contracts using a market
discount rate. In order to determine the gain on sale, WFS also considers
prepaid dealer commissions, issuance costs and the effect of hedging activities.
RISA is capitalized upon securitization of contracts and represents the present
value of the estimated future earnings to be received by WFS from the excess
spread created in securitization transactions and is amortized against servicing
income over the life of the contracts.
WFS originated $597 million and $1.8 billion of contracts for the three and nine
months ended September 30, 1997 compared to $559 million and $1.6 billion of
contracts for the same periods in 1996. This represents a 7% and 11% increase in
production for the respective periods. WFS securitized $600 million and $1.7
billion of contracts for the three and nine months ended September 30, 1997
compared with $535 million and $1.5 billion for the same periods in 1996.
The following table sets forth the loan origination, sale and principal
reduction activity of WFS for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Beginning balance $ 261,219,593 $ 268,362,419 $ 233,947,764 $ 316,430,020
Originations 596,745,331 559,230,911 1,762,339,741 1,587,231,601
Sales 600,000,000 535,000,000 1,690,000,000 1,545,000,000
Principal reductions (1) 28,768,696 22,051,472 77,091,277 88,119,763
-------------- -------------- -------------- --------------
Ending balance $ 229,196,228 $ 270,541,858 $ 229,196,228 $ 270,541,858
============== ============== ============== ==============
</TABLE>
(1) Includes scheduled payments, prepayments and charge offs.
11
<PAGE> 12
RESULTS OF OPERATIONS
SERVICING INCOME
Total servicing income was $29.1 million and $110 million for the three and nine
months ended September 30, 1997 compared to $29.3 million and $79.5 million for
the same periods in 1996. WFS' serviced portfolio, including contracts held on
balance sheet, increased to $3.6 billion at September 30, 1997 from $3.0 billion
at December 31, 1996.
Retained interest income represents excess spread earned on securitized loans
less any losses not absorbed by the off balance sheet allowance for losses.
Changes in the amount of prepayments may also affect the amount and timing of
retained interest income. Retained interest income is dependent upon the average
excess spread on the contracts sold and the size of the serviced portfolio.
Retained interest income declined in the third quarter of 1997 compared with the
same quarter a year earlier due to increased losses which impacted the amount of
income realized. Contractual servicing income is earned at a rate of 1% per
annum on the outstanding balance of contracts securitized. Other fee income,
consisting primarily of documentation fees, late charges and deferment fees also
increased as a direct result of the increase in the number of contracts
originated and outstanding. Increased competition may also affect the amount of
other fee income that WFS may earn when originating or servicing contracts.
Servicing income consists of the following components:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Retained interest income $ 11,594,521 $ 14,461,972 $ 59,934,872 $ 39,171,356
Contractual servicing income 7,953,029 6,498,338 22,457,557 17,520,965
Other fee income 9,572,208 8,300,631 27,956,629 22,812,994
------------ ------------ ------------ ------------
Total servicing income $ 29,119,758 $ 29,260,941 $110,349,058 $ 79,505,315
============ ============ ============ ============
</TABLE>
NET INTEREST INCOME
Net interest income is the difference between the rate earned on contracts held
on balance sheet and the interest costs associated with WFS' borrowings. Net
interest income totaled $14.5 million and $41.2 million for the three and nine
months ended September 30, 1997 compared to $14.2 million and $39.7 million for
the same periods in 1996. The increase for the nine months ended September 30,
1997 compared to the same period in 1996 is due to an increase in the average
interest earning assets. The following table shows the average rate earned on
contracts and the average rate paid on borrowings, consisting primarily of
advances from the Bank, together with the corresponding net interest rate spread
for the periods indicated.
12
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------- ---------------
1997 1996 1997 1996
----- ----- ----- -----
<S> <C> <C> <C> <C>
Yield on interest earning assets 13.76% 15.43% 14.09% 14.77%
Cost of borrowings 8.67 6.03 7.80 6.25
----- ----- ----- -----
Net interest rate spread 5.09% 9.40% 6.29% 8.52%
===== ===== ===== =====
</TABLE>
As WFS securitizes its on balance sheet contracts, revenue previously recognized
as net interest income will, upon such securitization, be recognized as
servicing income. Prior to securitizing contracts, WFS earns interest income on
its contracts, pays interest expense to fund the contracts and absorbs any
credit losses. After securitization, the net earnings are recorded as servicing
income. To protect against changes in interest rates, WFS hedges contracts prior
to their securitization with two-year treasury forward agreements. Gains or
losses on these forward agreements are deferred and included as part of the
basis of the underlying contracts and recognized when the contracts are
securitized.
WFS' borrowings from the Bank consist of a $125 million unsecured Senior Note
with a fixed interest rate of 7.25% and maturing in 2003, a $50 million
Promissory Note with a fixed interest rate of 9.42% and maturing in 2002, and a
Line of Credit agreement at a variable rate of interest based upon the Federal
composite commercial paper rate. WFS is not aware of any facts which would
preclude it from continuing to borrow from the Bank.
GAIN ON SALE OF CONTRACTS
WFS recorded a gain on sale of contracts of $11.6 million and $25.4 million for
the three and nine months ended September 30, 1997 compared to $9.4 million and
$31.1 million for the same periods of 1996. The decrease in the overall gain on
sale reported in 1997 is primarily the result of a narrowing interest rate
spread for contracts sold which was slightly offset by the increase in contracts
sold. The increase in the gain on sale for the third quarter of 1997 compared
with the same quarter a year earlier is primarily the result of wider interest
rate spreads and an increase in contracts sold during the respective periods.
Contracts sold during the third quarter of 1997 totaled $600 million compared to
$535 million during the same period of 1996. Gross interest rate spread is
affected by product mix, general market conditions and overall market interest
rates. The risks inherent in interest rate fluctuation are substantially reduced
through hedging activities.
PROVISION FOR CREDIT LOSSES
The Company maintains an allowance for credit losses to cover anticipated losses
for contracts held on balance sheet. The allowance for credit losses is
increased by charging the provision for credit losses and decreased by actual
losses on the contracts held on balance sheet or by the reduction of the amount
of contracts held on balance sheet. The level of the allowance is based
principally on the outstanding balance of contracts held on balance sheet,
pending sales of contracts and historical loss trends. When WFS sells contracts
in a securitization transaction, it reduces its allowance for credit losses and
factors potential losses into its calculation of gain on sale. WFS believes that
the allowance for credit losses is currently adequate to absorb potential losses
in the on balance sheet portfolio. The provision for credit losses totalled $1.2
million and $5.7 million for the three and nine months ended September 30, 1997
compared to $1.9 million and $7.9 million for the same periods in 1996. The
decline for the nine months ended September 30, 1997, compared to the same
period last year, is the result of a decline in the on balance sheet contract
loss experience. The allowance for loan losses as a percent of total on balance
sheet contracts decreased to 2.9% from 3.3% a year earlier.
13
<PAGE> 14
OPERATING EXPENSES
Total operating expenses were $43.3 million and $128 million for the three and
nine months ended September 30, 1997 compared to $33.2 million and $91.7 million
for the same periods in 1996. Except where otherwise noted, the increase in
total operating expenses is primarily attributable to an increase in the number
of contracts serviced, automation and centralization programs and expansion into
additional states. At September 30, 1997, WFS purchased contracts in 36 states
from 143 office locations compared to 27 states and 125 offices at September 30,
1996.
Salaries and employee benefits expense increased to $25.2 million and $75.4
million for the three and nine months ended September 30, 1997 compared to $17.6
million and $50.8 million for the same periods in 1996. This increase is mainly
attributable to the increase in the number of employees due to the Company's
expansion. Occupancy expense increased to $3.2 million and $9.5 million for the
three and nine months ended September 30, 1997 compared to $1.9 million and $5.4
million for the same periods in 1996.
The general and administrative costs paid to parent are based upon the actual
costs incurred and estimates of actual usage. WFS believes that these costs
approximate the cost to perform these services on its own behalf or acquire them
from third parties. WFS has the option, under management agreements, to procure
these services on its own should it be more economically beneficial for WFS to
do so. On January 1, 1997, various administrative departments of Westcorp, the
holding company parent of the Bank, were transferred to the Bank and WFS as part
of a restructuring plan to provide greater focus and specialization within each
company. As part of this plan, WFS retained all administrative operations except
for payroll, human resources and certain treasury functions. Because of this
transfer, items that had previously been reported as general and administrative
costs paid to parent and data processing are now included in other operating
expense line items. This transfer did not have a material effect on the
financial results of WFS. In 1997, the general and administrative costs paid to
parent were $0.8 million and $2.8 million for the three and nine months ended
September 30, 1997 compared to $2.6 million and $7.1 million for the same
periods in 1996. Data processing expense was $2.5 million and $6.4 million for
the three and nine months ended September 30, 1997 compared to $2.7 million and
$7.5 million for the same periods in 1996.
Other operating expenses include credit and collections costs, telephone and
other miscellaneous expenses. Credit and collections expense increased to $3.6
million and $10.2 million for the three and nine months ended September 30, 1997
compared to $2.1 million and $6.2 million for the same periods in 1996.
Telephone expense totalled $2.0 million and $5.7 million for the three and nine
months ended September 30, 1997 compared to $1.0 million and $2.7 million for
the same periods in 1996. Miscellaneous expenses, which include travel,
marketing, stationery, supplies, postage, legal, professional fees and other
ancillary costs, increased to $6.0 million and $18.3 million for the three and
nine months ended September 30, 1997 compared to $5.2 million and $11.9 million
for the same periods in 1996.
14
<PAGE> 15
INCOME TAXES
WFS files federal and certain state tax returns as part of a consolidated group
that includes the Bank and Westcorp. Other state tax returns are filed by WFS as
a separate entity. Tax liabilities from the consolidated returns are allocated
in accordance with a tax sharing agreement that is based on the relative income
or loss of each entity on a stand-alone basis. The effective tax rates for the
nine months ended September 30, 1997 and 1996 were 42.1% and 42.4%,
respectively.
FINANCIAL CONDITION
CONTRACTS RECEIVABLE AND CONTRACTS HELD FOR SALE
WFS holds a portfolio of contracts on balance sheet for investment that totalled
$50.8 million at September 30, 1997 and $53.3 million at December 31, 1996.
Contracts held for sale totalled $183 million at September 30, 1997 compared to
$186 million at December 31, 1996. The balance in the held for sale portfolio is
largely dependent upon the timing of the origination and securitization of
contracts. WFS completed securitization transactions of $1.7 billion during the
first nine months of 1997. WFS plans to continue to securitize contracts on a
regular basis.
The following tables present information on the volume of contracts secured by
new and used autos for the periods indicated below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------- --------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
New vehicles $ 113,562,717 $ 116,053,005 $ 322,911,161 $ 334,332,906
Used vehicles 483,182,614 443,177,906 1,439,428,580 1,252,898,695
-------------- -------------- -------------- --------------
Total volume $ 596,745,331 $ 559,230,911 $1,762,339,741 $1,587,231,601
============== ============== ============== ==============
</TABLE>
AMOUNTS DUE FROM TRUSTS
The excess cash flow generated by contracts sold to trusts is deposited into
spread accounts by the trustee under the terms of the securitization
transactions. In addition, at the time a securitization transaction closes, WFS
advances additional monies to initially fund these spread accounts. These funds,
as well as the excess spread, are released to WFS after the spread accounts
reach a predetermined funding level. Amounts due from trusts represent funds due
to WFS not yet disbursed from the spread accounts. The amounts due from trusts
at September 30, 1997 were $259 million as compared with $191 million at
year-end 1996. The increase is a result of the increase in total contracts
securitized and outstanding.
15
<PAGE> 16
ASSET QUALITY
WFS has automated and centralized several processes related to asset quality
which continues to be an area of significant focus. WFS utilizes an automated
telephone dialing system ("predictive dialer") to aid in the service and
collection process. The predictive dialer automatically dials the delinquent
obligor and transfers the call to an available collector located at one of the
two regional service centers. If the collection effort does not result in
satisfactory resolution, then the call is forwarded to a collection specialist
located in the appropriate dealer center or branch office.
If satisfactory arrangements are not made to cure the past due account, the
automobile is generally repossessed within 60 to 90 days of the date of
delinquency. WFS writes down the value of the vehicle to fair value and
reclassifies the contract as a repossessed asset. WFS sells substantially all of
its repossessed automobiles through wholesale auto auctions and rarely provides
the financing for repossessions sold. WFS has centralized its remarketing
functions into a single department which is responsible for transportation of
the vehicle to wholesale auction houses, reconditioning and repairs, when
necessary, and tracking vehicles until they are sold. Once the vehicle is sold,
any deficiency balance is charged off.
After chargeoff, WFS will seek to collect on deficiency balances through its
centralized asset recovery center ("ARC"). The ARC will first attempt to collect
directly from the obligor with its in-house collection staff. If efforts are not
successful, the ARC will seek a deficiency judgment through a small claims court
procedure, where available, or an attorney retained by WFS will take more formal
judicial action against customers with deficiency balances in excess of that
which may be brought in small claims court proceedings.
WFS has substantially completed its nationwide expansion plan. In order to
insure consistency throughout the larger organization, WFS has begun the
centralization of its credit risk management functions. This centralized area
will be responsible for setting and monitoring credit policy, through
reunderwriting, for the entire organization and will oversee the development and
implementation of a computerized credit scoring system. This system will aid
underwriters in making contract decisions so that rate, term and loan to value
ratio can be adequately balanced against the assessed credit risk.
The following tables reflect the delinquency, repossession and loss experience.
16
<PAGE> 17
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
--------------------------------- ---------------------------------
NUMBER NUMBER
OF OF
CONTRACTS AMOUNT CONTRACTS AMOUNT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Contracts serviced (1) 396,623 $3,588,658,806 341,486 $3,046,584,858
============== ============== ============== ==============
Period of delinquency (2)
31-59 days 4,579 $ 38,948,868 4,511 $ 38,173,395
60-89 days 1,768 15,872,248 1,305 11,469,637
90 days or more 792 7,165,165 567 5,144,451
-------------- -------------- -------------- --------------
Total contracts delinquent 7,139 $ 61,986,281 6,383 $ 54,787,483
============== ============== ============== ==============
Delinquencies as a percentage of
number and amount of contracts
outstanding 1.80% 1.73% 1.87% 1.80%
============== ============== ============== ==============
</TABLE>
(1) Includes delinquency information relating to contracts which are owned
by WFS and contracts which have been sold and securitized but are
serviced by WFS.
(2) The period of delinquency is based on the number of days payments are
contractually past due.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
-------------------------- --------------------------
NUMBER AMOUNT NUMBER AMOUNT
------- -------------- ------- --------------
<S> <C> <C> <C> <C>
SERVICING PORTFOLIO (1) 396,623 $3,588,658,806 341,486 $3,046,584,858
======= ============== ======= ==============
Repossessed Assets 1,165 $ 6,869,074 1,133 $ 6,135,120
======= ============== ======= ==============
Repossessed assets as a percentage
of number and amount of
contracts outstanding 0.29% 0.19% 0.33% 0.20%
======= ============== ======= ==============
</TABLE>
(1) Includes repossession information relating to contracts which are owned
by WFS and contracts which have been sold and securitized but are
serviced by WFS.
17
<PAGE> 18
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Contracts serviced
at end of period (1) $3,588,658,806 $2,864,494,190 $3,588,658,806 $2,864,494,190
============== ============== ============== ==============
Average during period $3,490,019,033 $2,734,349,797 $3,301,773,580 $2,516,773,136
============== ============== ============== ==============
Gross chargeoffs of contracts
during period $ 34,779,738 $ 19,905,395 $ 96,688,101 $ 55,310,985
Recoveries of contracts charged
off in prior periods 8,864,361 6,473,967 25,144,325 18,833,445
-------------- -------------- -------------- --------------
Net chargeoffs $ 25,915,377 $ 13,431,428 $ 71,543,776 $ 36,477,540
============== ============== ============== ==============
Net chargeoffs as a percentage of
contracts outstanding during
period (2) 2.97% 1.96% 2.89% 1.93%
</TABLE>
- -----------------
(1) Includes loan loss information relating to contracts which are owned by
WFS and contracts which have been sold and securitized but are serviced
by WFS, and is net of unearned add-on interest.
(2) Annualized based on net chargeoffs as a percentage of average contracts
outstanding during the three and nine months ended September 30, 1997
and 1996.
Loss experience was impacted by slower loan growth, the transitory effect of
moving post repo collection efforts to the asset recovery and remarketing
centers and higher than expected bankruptcies.
CAPITAL RESOURCES AND LIQUIDITY
WFS requires substantial capital resources to operate its business. The
resources available to WFS include contract securitizations, collections of
principal and interest from contracts and borrowings from its parent. These
sources provide capital to fund expanding purchases of contracts. It is
anticipated that the purchase of contracts will continue to be the major use of
cash for WFS.
The cash flows from operating activities of WFS primarily relates to the
purchase, securitization and principal receipts of contracts. The major
components of cash flows related to operating activities are cash needed to
purchase contracts which totaled $1.7 billion for the nine months ended
September 30, 1997, compared to $1.5 billion for the same period in 1996.
Operating activities also generated cash flows through securitizations and
principal receipts on contracts. WFS securitized $1.7 billion and $1.5 billion
for the nine months ended September 30, 1997 and 1996 respectively.
The cash flows from investing activities of WFS primarily relates to amounts due
from trusts and retained interest in securitized asset accounts. At the time a
securitization transaction closes, WFS is required to advance monies to
initially fund spread accounts. The Company funds these spread accounts by
foregoing receipt of excess cash flow until these accounts exceed predetermined
levels. The amounts due from trusts represent funds due to WFS which have not
yet been disbursed from the spread accounts. Retained interest in securitized
assets represents the present value of the estimated
18
<PAGE> 19
future cash flows to be received by WFS from the excess spread created in
securitizations. Excess spread is calculated by taking the difference between
the coupon rate of the contract sold and the certificate rate paid to investors
less contractually specified servicing and guarantor fees.
The cash flows from financing activities primarily relates to amounts held on
behalf of trustee and borrowings from parent. These cash flows historically have
provided a consistent source of cash for WFS. Pursuant to the reinvestment
contract with the Bank, WFS is able to utilize principal and interest
collections on contracts sold in its day to day operations until payments are
due to the investors. These principal and interest collections represent amounts
held on behalf of trustee. As the Company continues to increase the size of its
servicing portfolio, WFS expects such amounts to increase. Additional financing
sources include a $125 million Senior Note, a $50 million Promissory Note and a
$400 million Line of Credit. The Senior Note is unsecured and has a fixed
interest rate of 7.25% and a final maturity in 2003. The Promissory Note has a
fixed interest rate of 9.42% and a final maturity in 2007. The Line of Credit
had interest rates of 5.66% and 5.51% for the nine months ended September 30,
1997 and 1996, respectively. At September 30, 1997, WFS did not have any draws
outstanding on the Line of Credit.
These financing sources are expected to provide adequate funding of the
Company's operations and the Company believes that its sources of liquidity are
sufficient to meet its short and long term cash requirements.
ASSET/LIABILITY MANAGEMENT
Asset/liability management is the process of measuring and controlling interest
rate risk through matching the maturity and repricing characteristics of
interest earning assets with those of interest bearing liabilities.
The contracts originated and held by WFS are all fixed rate and accordingly WFS
has exposure to changes in interest rates. WFS' prepayment experience on
contracts has not been historically sensitive to changes in interest rates and
WFS therefore believes it is not expected to be exposed to significant
prepayment risk relative to changes in interest rates. As a result of this
approach to interest rate management, combined with the Company's hedging
strategies, WFS does not anticipate that changes in interest rates will
materially affect the Company's results of operations or liquidity, although no
assurance can be given in this regard.
WFS' hedging strategy includes the use of two-year Treasury securities forward
agreements. Generally, these agreements are entered into by WFS in amounts which
correspond to the principal amount of the securitization transactions. The
market value of these forward agreements responds inversely to the market value
changes of the underlying contracts. Because of this inverse relationship, WFS
can effectively lock in its gross interest rate spread at the time of entering
into the hedge transaction. Gains and losses relative to these agreements are
deferred and recognized in full at the time of securitization as an adjustment
to the gain or loss on the sale of the contracts. WFS uses only highly rated
counterparties and further reduces its risk by avoiding any material
concentration with a single counterparty. Credit exposure is limited to those
agreements with a positive fair value and only to the extent of that fair value.
WFS hedges substantially all of its contracts pending securitization.
19
<PAGE> 20
FORWARD-LOOKING STATEMENTS
The preceding Management's Discussion and Analysis of Financial Condition and
Results of Operations section contains certain "forward-looking" statements
within the meaning of the Private Securities Litigation Reform Act of 1995 which
provides a new "safe harbor" for these types of statements. This Quarterly
Report on Form 10-Q contains forward-looking statements which reflect WFS'
current views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties,
including those identified below, which could cause actual results to differ
materially from historical results or those anticipated. The forward- looking
terminology such as "believe," "expect," "anticipate," "intend," "may," "will,"
"should," "estimate," "continue," and/or the negative thereof or other
comparable expressions which indicate future events and trends identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of their dates. WFS
undertakes no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
The following factors could cause actual results to differ materially from
historical results or those anticipated: (1) the level of demand for auto
contracts, which is affected by such external factors as the level of interest
rates, the strength of the various segments of the economy, debt burden held by
the consumer and demographics of WFS' lending markets; (2) continued dealer
relationships; (3) fluctuations between auto interest rates and the cost of
funds; (4) federal and state regulation of WFS' auto lending operations; (5)
competition within the auto lending industry and (6) the availability and cost
of securitization transactions.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WFS is involved as a party to certain legal
proceedings incidental to its business. WFS believes
that the outcome of such proceedings will not have a
material effect upon its business or financial
condition.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
The Board of Directors of WFS has elected Joy Schaefer
to Chief Executive Officer; this is in addition to her
title of Vice Chairman, President and Chief Operating
Officer.
The Board of Directors of WFS adopted a resolution
amending and restating the 1996 Incentive Stock Option
Plan (the "Plan") to provide for an additional 550,000
shares of common stock to be made available for
issuance upon exercise of options granted under the
Plan. The Amended and Restated Plan will be submitted
for the vote of the shareholders at the next annual
meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
None
21
<PAGE> 22
SIGNATURES
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 thereunto duly authorized.
WFS FINANCIAL INC
(Registrant)
Date: November 12, 1997 By:/s/JOY SCHAEFER
--------------------- ---------------------------------------------
Joy Schaefer
Vice Chairman, President, Chief Executive
Officer and Chief Operating Officer
Date: November 12, 1997 By:/s/LEE A. WHATCOTT
--------------------- ---------------------------------------------
Lee A. Whatcott
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
22
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 208,617
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 234,243
<ALLOWANCE> 6,602
<TOTAL-ASSETS> 892,939
<DEPOSITS> 0
<SHORT-TERM> 0
<LIABILITIES-OTHER> 544,633
<LONG-TERM> 175,000
0
0
<COMMON> 73,469
<OTHER-SE> 99,837
<TOTAL-LIABILITIES-AND-EQUITY> 892,939
<INTEREST-LOAN> 47,636
<INTEREST-INVEST> 0
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 47,636
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 6,399
<INTEREST-INCOME-NET> 41,237
<LOAN-LOSSES> 5,748
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 128,202
<INCOME-PRETAX> 43,064
<INCOME-PRE-EXTRAORDINARY> 43,064
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,952
<EPS-PRIMARY> 0.97
<EPS-DILUTED> 0.97
<YIELD-ACTUAL> 12.15
<LOANS-NON> 0
<LOANS-PAST> 560
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,648
<CHARGE-OFFS> 9,947
<RECOVERIES> 3,153
<ALLOWANCE-CLOSE> 6,602
<ALLOWANCE-DOMESTIC> 6,602
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
