Union Acceptance Corporation Reports Net Earnings for
the Third Quarter of Fiscal 1998
INDIANAPOLIS--(BUSINESS WIRE)--April 28, 1998--Union Acceptance Corporation
(NASDAQ:UACA - news) today reported net earnings of $1.8 million, or $0.14 per share, for the
third quarter ended March 31, 1998, down from $6.3 million, or $0.48 per share, reported in the
comparable quarter of last year. Fiscal 1998 year-to-date earnings totaled $4.2 million, or $.32 per
share, compared to $18.4 million, or $1.39 per share, for the same period of fiscal 1997.
Revenues for the third quarter of fiscal 1998 totaled $11.8 million, compared to $18.2 million in the
same quarter of last year. Loan acquisitions for the third quarter totaled $220.3 million, compared
to $279.8 million acquired in the same quarter of last year. The Company securitized $228.9 million
during the current quarter resulting in a gain on sale of $4.4 million.
As a result of strategic efforts made by the Company, UAC has seen steady improvement in
delinquency and credit losses over the last two quarters. Delinquency on the prime automobile
portfolio was 3.34% at March 31, 1998, a decrease from 3.94% at December 31, 1997, and an
increase from 2.99% at March 31, 1997. Prime credit losses totaled 2.61% for the quarter ended
March 31, 1998, a decrease from 2.89% and 3.18% for the quarters ended December 31, 1997,
and March 31, 1997, respectively. Recovery rates increased to 39.42% for the current quarter, up
from 38.11% for the quarter ended December 31, 1997, and 39.30% for the quarter ended March
31, 1997.
Strategic efforts made by the Company include implementing tighter credit standards in March
1997, forming specialized collection teams to concentrate on specific groups of accounts, increasing
collection efforts on charged-off accounts and more diligently monitoring the repossession and
remarketing processes. UAC continues to look for ways to improve recovery rates and plans to
begin retailing a small portion of its repossessed vehicles at a property in Indianapolis beginning in
the fourth quarter of fiscal 1998.
A decline in delinquency and credit losses of those loans originated and securitized in 1995 has also
contributed to the improved delinquency and credit losses for the portfolio. In the past, these pools
have had higher credit losses and delinquency than anticipated and have had continued higher credit
losses in the latter months of the pool life rather than reflecting a typical loss life cycle which should
peak between the 12th and 18th month. Over the last six months, those loans originated and
securitized in 1995 have become a smaller proportion of the total portfolio's credit losses and
delinquency as the dollar amount of credit losses and delinquency in those pools has been
decreasing.
The following tables set forth delinquency and credit loss experience related to the prime auto
portfolio:
Delinquency Experience
______________________
At At At
March 31, 1998 December 31, 1997 March 31, 1997
______________ _________________ ______________
(Dollars in thousands)
Number of Number of Number of
Loans Amount Loans Amount Loans Amount
____ ______ _____ ______ _____ ______
Servicing
portfolio 181,026 $1,929,151 179,962 $1,920,930 171,234 $1,836,305
Delinquencies
30-59 days 3,426 35,449 3,954 41,778 2,484 27,527
60-89 days 1,923 21,818 2,274 25,933 1,561 18,894
90 days or
more 623 7,088 688 8,048 705 8,414
_______ __________ _______ __________ ______ __________
Total
delinquencies 5,972 64,355 6,916 75,759 4,750 54,835
Delinquency as
a percentage of
servicing
portfolio 3.30% 3.34% 3.84% 3.94% 2.77% 2.99%
Credit Loss Experience
Three Months Ended Nine Months Ended
____________________________ ________________________
(Dollars in thousands)
Mar 31, Dec 31, Mar 31, Mar 31, Mar 31,
1998 1997 1997 1998 1997
_______ _______ _______ _______ _______
Average
servicing
portfolio $1,924,930 $1,916,778 $1,835,023 $1,907,770 $1,727,725
Gross
charge-offs 20,767 22,373 24,027 66,197 48,923
Recoveries 8,186 8,527 9,443 24,848 19,089
__________ __________ __________ __________ __________
Net
charge-offs 12,581 13,846 14,584 41,349 29,834
Gross charge-offs
as a percentage
of average
servicing
portfolio (1) 4.32% 4.67% 5.24% 4.63% 3.78%
Recoveries as a
percentage of
gross
charge-offs 39.42% 38.11% 39.30% 37.54% 39.02%
Net charge-offs as
a percentage
of average
servicing
portfolio (1) 2.61% 2.89% 3.18% 2.89% 2.30%
____________________________________________________________________
(1) Annualized
Selected Third Quarter Results:
The Company's total servicing portfolio was $2.0 billion at March 31, 1998, 5.1% higher than the
$1.9 billion at March 31, 1997.
The allowance for estimated credit losses on securitized loans totaled $68.9 million, or 3.71%, at
March 31, 1998, compared to 3.88% at December 31, 1997, and 3.00% at March 31, 1997.
Interest on loans was $7.1 million for the quarter ended March 31, 1998, compared to $7.7 million
for the same quarter of last year. The net interest margin after provision for March 31, 1998, was
($85,000), a decrease over the net interest margin after provision of $2.0 million for the same
period of last year. The decrease in the net interest margin is due to three factors. First, the held for
sale portfolio had a lower interest rate yield and a lower average principal balance on the prime held
for sale portfolio during the quarter ended March 31, 1998, compared to the quarter ended March
31, 1997. Second, interest expense on long-term debt was higher in the current quarter compared
to the same quarter of last year related to the issuance of the $65.0 million in Senior Notes during
March 1997. Third, the provision for credit losses on loans held for sale was increased in response
to the trend of increasing credit losses and delinquencies experienced prior to the second quarter of
this fiscal year.
Gain on sale of loans totaled $4.4 million for the quarter ended March 31, 1998, compared to $8.3
million for the same quarter of last year. The decrease was due to lower loan acquisitions resulting in
a smaller securitization during the third quarter of fiscal 1998 compared to the third quarter
securitization of fiscal 1997 and a higher estimate for credit losses during the current quarter as a
result of higher historical credit losses. The loans sold in the securitization for the period ended
March 31, 1998, were $228.9 million compared to $293.3 million for the same quarter of last year.
The gross and net spreads on this quarter's securitization of 6.81% and 5.27%, compared to
6.96% and 5.43%, respectively, were lower relative to the securitization in the same quarter of last
year.
Servicing fees for the quarter ended March 31, 1998, were $6.4 million, a 6.1% decrease over
$6.9 million for the same quarter of last year. The decrease is primarily a result of rebates received
in excess of our estimate which reduced the excess servicing asset rather than being recorded as a
component of servicing fees. The change in recording excess rebates was made during the fourth
quarter of fiscal 1997. The decrease of servicing fees related to excess rebates is offset by an
increase in servicing fees due to a higher securitized servicing portfolio at March 31, 1998,
compared to March 31, 1997.
Operating expenses were $8.8 million for the third quarter of fiscal 1998, compared to $7.5 million
for the third quarter of fiscal 1997. Operating expenses as a percentage of the average servicing
portfolio decreased to 1.76% for the quarter ended March 31, 1998 from 1.81% for the quarter
ended December 31, 1997, and increased from 1.58% for the quarter ended March 31,1997.
Corporate Description
UAC is one of the nation's largest independent, indirect automobile finance companies. The
Company's primary business is acquiring, securitizing and servicing prime retail installment sales
contracts (primarily automobiles). These contracts are originated by dealerships affiliated with major
domestic and foreign automobile manufacturers. The Company is focused on the upper-end of the
credit quality spectrum. Union Acceptance Corporation commenced business in 1986 and currently
acquires loans from over 3,400 manufacturer-franchised dealerships in 31 states. By using
state-of-the-art technology in a highly centralized underwriting and servicing environment, Union
Acceptance Corporation enjoys one of the lowest cost operating structures in the independent
prime automobile finance industry.
Forward Looking Information
This news release contains forward-looking statements regarding matters such as delinquency and
credit loss trends, recoveries of repossessed vehicles, and other issues. Readers are cautioned that
actual results may differ materially from such forward-looking statements. Forward-looking
statements involve risks and uncertainties including, but not limited to, the relative unpredictability of
changes in delinquency and credit loss rates, changes in loan acquisition volume, general economic
conditions that affect consumer loan performance and consumer borrowing practices and other
important factors detailed in the Company's annual report on Form 10-K for the fiscal year ended
June 30, 1997, which was filed with the Securities and Exchange Commission.
Union Acceptance Corporation
Selected Financial Data
(Dollars in thousands, except share data)
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
___________________________________________________
Income Statement Data
for the Period: 1998 1997 1998 1997
____________________________________________________________________
Interest on loans $ 7,119 $ 7,685 $ 20,243 $ 26,014
Interest on spread
accounts and
restricted cash 1,686 1,654 5,083 4,709
Interest expense (6,990) (6,118) (19,210) (18,793)
______________________ _____________________
Net interest margin 1,815 3,221 6,116 11,930
Provision for
estimated credit losses (1,900) (1,180) (5,175) (3,028)
______________________ _____________________
Net interest margin
after provision (85) 2,041 941 8,902
Gain on sales
of loans, net 4,383 8,283 8,938 22,948
Servicing fees, net 6,445 6,860 19,066 18,944
Other 1,065 1,011 3,070 2,856
______________________ _____________________
Total revenues $ 11,808 $ 18,195 $ 32,015 $ 53,650
______________________ _____________________
Salaries and benefits 4,815 4,065 14,296 11,597
Other 4,007 3,480 12,185 10,927
______________________ _____________________
Total operating
expenses 8,822 7,545 26,481 22,524
Earnings before
provision for
income taxes 2,986 10,650 5,534 31,126
Provision for
income taxes 1,194 4,341 1,292 12,706
______________________ _____________________
______________________ _____________________
Net earnings $ 1,792 $ 6,309 $ 4,242 $ 18,420
______________________ _____________________
______________________ _____________________
____________________________________________________________________
Per Common Share Data:
Earnings (diluted
and basic) $ 0.14 $ 0.48 $ 0.32 $ 1.39
Book Value $ 6.50 $ 7.05
Weighted average
shares outstanding 13,231,482 13,216,788 13,225,047 13,214,554
_____________________________________________________________________
Loan Acquisition Volume:
Prime $ 214,436 $ 269,383 $ 677,825 $ 846,643
Non-prime 5,622 8,670 20,289 33,838
Marine 288 1,794 2,514 3,387
______________________ _____________________
______________________ _____________________
Total $ 220,346 $ 279,847 $ 700,628 $ 883,868
______________________ _____________________
______________________ _____________________
_____________________________________________________________________
Ratios:
Return on average assets 1.52% 5.40% 1.24% 5.39%
Return on average
shareholders' equity 8.20% 26.88% 6.51% 27.74%
Operating expenses as a
percentage of average
servicing portfolio 1.76% 1.58% 1.78% 1.67%
_____________________________________________________________________
Portfolio Performance:
Net credit loss
(Annualized for
the period ended:)
Prime 2.61% 3.18% 2.89% 2.30%
Non-prime 6.70% 4.69% 7.92% 3.95%
Marine 1.83% 0.00% 1.18% 0.00%
______________________ ____________________
Total 2.75% 3.23% 3.06% 2.36%
______________________ ____________________
______________________ ____________________
_____________________________________________________________________
Union Acceptance Corporation
Selected Financial Data
(Dollars in thousands, except share data)
(Unaudited)
Balance Sheet Data at: March 31, 1998 June 30, 1997
____________________________________________________________________
Cash $ 28,025 $ 58,801
Restricted cash 18,331 16,657
Loans, net 153,759 121,381
Excess servicing 106,428 98,841
Spread accounts 70,542 71,744
Other assets 28,718 24,742
____________________________
____________________________
Total assets $ 405,803 $ 392,166
____________________________
____________________________
Amounts due under warehouse facilities $ 57,070 $ 44,455
Long-term debt 221,000 221,000
Accrued interest payable 2,283 5,793
Amounts due to trusts 17,932 16,067
Dealer premiums payable 1,602 1,372
Other payables and accrued expenses 2,835 2,318
Deferred income tax payable 17,124 15,046
____________________________
Total liabilities 319,846 306,051
____________________________
Common stock 58,360 58,270
Net unrealized loss on
excess servicing (4,489) _
Retained earnings 32,086 27,845
____________________________
Total shareholders' equity 85,957 86,115
____________________________
____________________________
Total liabilities and
shareholders' equity $ 405,803 $ 392,166
____________________________
____________________________
____________________________________________________________________
30+ Delinquency at: March 31, December 31, March 31,
1998 1997 1997
_________________________________________________
Prime 3.34% 3.94% 2.99%
Non-prime 7.95% 9.05% 4.18%
Marine 1.43% 1.60% 0.74%
_________________________________________________
Total 3.49% 4.11% 3.03%
_________________________________________________
_________________________________________________
____________________________________________________________________
Reserve Data at:
Reserve on
securitized
loans $ 68,931 $ 70,911 $ 51,749
Securitized
loans serviced $ 1,856,746 $ 1,829,869 $ 1,727,322
Reserve as a
percentage of
securitized loans
serviced 3.71% 3.88% 3.00%
____________________________________________________________________
Managed Loan Data at:
Loans held for sale
Prime $ 107,404 $ 129,956 $ 162,052
Non-prime 34,840 31,522 15,216
Marine 7,563 7,761 3,265
Securitized
Prime 1,821,735 1,790,953 1,674,198
Non-prime 35,011 38,916 53,124
Loans serviced
for others 1,734 2,003 2,600
_____________________________________________________
_____________________________________________________
Total Servicing
Portfolio $ 2,008,287 $ 2,001,111 $ 1,910,455
_____________________________________________________
_____________________________________________________
____________________________________________________________________
Contact:
Union Acceptance Corporation
Rick A. Brown, 317/231-7934
Fax: 317/231-7926
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