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Non-Tech : Wescorp and WFSI -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (1)	2/12/1998 3:52:00 PM
From: Mark Oliver	Read Replies (1) \| Respond to of 56

Hi Paul, always thought of starting a thread on WFSI, but never thought there would be any interest. I've followed the company for several years and they seem to be a very thinly traded, but profitable company. Buying on dips seems to be very rewarding. Thanks for pointing out the announcement. It looks positive, but I think that some of the people being layed off may choose to sell their shares. Since I've seen WES move 1/4 on 500 shares traded for the day, I can imagine any selling pressure could bring the stock down. On the other hand, the restructuring looks on the surface to be a good move. It will save a lot of money. The question is, why close the offices, or why ever open them, if they weren't neccessary. I wonder. They had been working hard to expand their number of offices to grow business and now they don't need these offices any more? I'm living in Australia, but I will return to the US Feb 28th. I'll want to call them and ask some questions. You might do the same if you are interested. Was very good to see the big rise in Mortgages and the lowering loan loss. So, here's the report. Westcorp Announces Restructuring Program and First Quarter 1998 Charge Also Reports 1997 Fourth Quarter and Twelve Month Results IRVINE, Calif.--(BUSINESS WIRE)--Feb. 10, 1998--Westcorp (NYSE:WES - news), the financial services holding company whose principal subsidiaries are WFS Financial Inc (Nasdaq:WFSI - news) and Western Financial Bank, Tuesday announced a restructuring plan for WFSI which combines its western region Dealer Center and Branch Divisions into a single operation. The new Western Division will provide focused, full spectrum lending to enhance dealer relationships while achieving improved operational efficiencies. The plan is expected to reduce operating expenses by utilizing recently installed technologies, consolidating offices and reducing staff and, once fully implemented, is designed to save up to $12.0 million annually in expense savings. WFSI will, during the next 60 to 90 days, consolidate 15 prime-lending dealer centers and 44 non-prime lending branch offices in the western United States into 12 regional business centers and 15 satellite offices. Each location will buy the full spectrum of prime and non-prime credit. As a result, approximately 150 positions, or 20% of the workforce in the west, will be eliminated. James Dowlan, senior executive vice president and currently the head of the Dealer Center Division, will lead the combined Western Division. ''We will be combining the best people and practices from our prime and non-prime operations to create a stronger operation that will provide each of our dealers a single point of contact for their full spectrum lending needs,'' said Joy Schaefer, WFSI president and chief executive officer. ''We have been piloting full spectrum operations in other locations and see this as an effective strategy to increase production while significantly reducing operating costs. With this restructuring, all of our offices will now offer the full spectrum of prime and non-prime lending programs to all of their dealers through a single sales and marketing approach.'' ''It is expected that this restructuring will result in a one-time pre-tax accounting charge for the first quarter ended March 31, 1998 of approximately $9.0 million or $0.20 per diluted share,'' Lee Whatcott, chief financial officer said. ''Our goal is to improve profitability and enhance shareholder value through a more cost effective operating structure and greater loan volumes.'' Net income for the fourth quarter ended Dec. 31, 1997 was $10.1 million, or $0.38 per diluted share, compared with $7.8 million, or $0.30 per diluted share, for the same period a year earlier. For 1997, net income totaled $36.8 million, or $1.40 per diluted share, compared with $31.8 million, or $1.21 per diluted share, in 1996. The 1996 annual results included the effect of the one-time pretax charge of $12.0 million for the special assessment to recapitalize the Savings Association Insurance Fund. Excluding this one-time charge, net income for the year ended Dec. 31, 1996 would have been $38.6 million, or $1.47 per diluted share. Originations of automobile contracts in the fourth quarter totaled $523 million, down from $534 million for the fourth quarter a year ago. For the year, originations were $2.3 billion compared with $2.1 billion for 1996. WFSI's portfolio of serviced contracts reached $3.7 billion at Dec. 31, 1997, up from $3.0 billion at Dec. 31, 1996. Mortgage loan originations by Western Financial Bank during the fourth quarter totaled $658 million, a 62% increase over the $407 million originated in the fourth quarter of 1996. Originations for the year ended Dec. 31, 1997 totaled $2.3 billion compared with $1.3 billion during 1996. ''Our mortgage production reflects a strong economy and our success in expanding our wholesale mortgage markets,'' said Don Kasle, president and chief executive officer of the Bank. The Company's earnings level continues to be directly impacted by slower growth in automobile loan volume and asset quality weakness. Loss experience for the fourth quarter of 1997 was 3.4% of serviced automobile contracts compared with 3.3% a year earlier. For the year, loss experience was 3.0% compared with 2.3% for 1996. Off-balance sheet allowance for losses as a percent of contracts sold through securitizations was 6.9% at Dec. 31, 1997 compared with 8.0% at Dec. 31, 1996. Nonperforming assets totaled $26.1 million at Dec. 31, 1997 compared with $33.0 million at Dec. 31, 1996. Loans past due 60 days or more were 0.9% of total loans at Dec. 31, 1997 and 1.1% at the end of last year while the allowance for loan losses totaled $33.8 million or 1.8% of total loans at Dec. 31, 1997 compared with $40.2 million or 2.3% at Dec. 31, 1996. Components of net income included the following: Net interest income totaled $25.8 million and $109 million for the quarter and year ended Dec. 31, 1997, respectively, compared with $27.0 million and $103 million for the respective periods a year earlier resulting from an increase in mortgage-backed securities and real estate loans. Noninterest income totaled $57.2 million in the fourth quarter of 1997 compared with $48.2 million a year earlier primarily due to the sale of $283 million of mortgage backed securities which resulted in a one-time gain of $6.3 million. For the year, noninterest income totaled $218 million compared with $181 million in 1996, reflecting growth in Westcorp's automobile and real estate portfolios. Noninterest expense totaled $59.9 million, up from $55.5 million in the fourth quarter of 1996 and totaled $241 million compared with $204 million for the respective twelve month periods of 1997 and 1996. ''This restructuring will significantly improve our cost structure, positioning us to be more competitive in today's dynamic marketplace,'' Schaefer said. WFSI is an indirect automobile finance company specializing in the purchase, securitization and servicing of prime and non-prime credit quality contracts. WFSI currently purchases contracts in California and 36 other states. Western Financial Bank is a diversified financial services company providing a wide array of products and services, including mortgage and commercial banking. The Bank has offices in eight states, including 26 retail banking offices in California. At December 31, 1997, the Bank serviced $6.4 billion of mortgage loans. This news release contains forward-looking statements including, but not limited to, estimates of the impact of restructuring as well as future loan volumes, losses and operating costs in future periods that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, including that the systems changes and initiatives that the Company is undertaking do not achieve their intended results. Additional risks that may affect the Company's future performance are detailed under the caption ''Forward-looking Statements'' in the Business section of the Company's annual report on Form 10-K and quarterly reports on Form 10-Q as filed with the Securities and Exchange Commission.

To: Paul Senior who wrote (1)	2/12/1998 3:56:00 PM
From: Mark Oliver	Respond to of 56

Here's the Financials in fixed font: WESTCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (Dollars in thousands) Dec. 31, 1997 1996 ASSETS Cash, investments and time deposits $ 322,600 $ 314,193 Mortgage-backed securities 941,448 849,548 Loans: Consumer (1) 288,988 284,858 Real Estate (2) 1,538,888 1,438,892 Commercial 41,668 7,867 Allowance for loan losses (33,834) (40,211) Amounts due from trusts 295,123 191,469 Retained interests in securitized assets 181,177 121,597 Real estate owned, net 6,336 11,279 Other assets 146,471 155,553 $3,728,865 $3,335,045 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits $2,000,896 $1,873,942 Securities sold under agreements to repurchase 287,071 287,412 FHLB advances and other borrowings 276,851 281,945 Non interest-bearing liabilities 576,101 468,899 3,140,919 2,912,198 Subordinated debentures 239,195 104,917 Shareholders' equity 348,751 317,930 $3,728,865 $3,335,045 (1) Net of unearned discount and includes loans held for sale. (2) Net of undisbursed loan proceeds and includes loans held for sale. -0- WESTCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in thousands, except share amounts) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, 1997 1996 1997 1996 Interest income: Loans, including fees $ 47,011 $ 43,890 $187,489 $171,328 Mortgage-backed securities 16,996 15,809 68,055 57,471 Investment securities 1,753 1,941 7,376 7,621 Other 2,384 1,589 7,612 5,968 TOTAL INTEREST INCOME 68,144 63,229 270,532 242,388 Interest expense: Deposits 27,078 24,948 107,078 99,091 Federal Home Loan Bank advances and other borrowings 11,202 7,376 36,616 24,612 Securities sold under agreements to repurchase 4,100 3,930 17,376 15,491 TOTAL INTEREST EXPENSE 42,380 36,254 161,070 139,194 NET INTEREST INCOME 25,764 26,975 109,462 103,194 Provision for loan losses 3,655 3,420 12,851 13,571 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 22,109 23,555 96,611 89,623 Noninterest income: Automobile lending 41,092 41,901 176,192 153,099 Mortgage banking 6,190 3,676 24,540 18,046 Investment and mortgage-backed securities gains (losses) 5,923 410 8,026 (1,620) Insurance income 2,018 2,284 6,454 12,905 Real estate operations 850 (172) 811 (2,428) Rental operations (233) (166) (1,182) (378) Miscellaneous 1,392 231 3,197 1,640 TOTAL NONINTEREST INCOME 57,232 48,164 218,038 181,264 Noninterest expense: Salaries and employee benefits 31,414 31,599 137,741 110,494 Occupancy 4,241 3,310 15,851 11,030 Insurance (1) 526 786 1,760 16,382 Miscellaneous 23,708 19,788 86,102 65,740 TOTAL NONINTEREST EXPENSE 59,889 55,483 241,454 203,646 INCOME BEFORE INCOME TAXES 19,452 16,236 73,195 67,241 Income taxes 8,632 6,694 31,287 28,095 INCOME BEFORE MINORITY INTEREST 10,820 9,542 41,908 39,146 Minority interest in earnings of subsidiaries 741 1,746 5,120 7,349 NET INCOME $ 10,079 $ 7,796 $ 36,788 $ 31,797 Net income per common share and common share equivalents -- diluted $ 0.38 $ 0.30 $ 1.40 $ 1.21 Cash dividends declared per common share and common share equivalents -- diluted $ 0.10 $ 0.10 $ 0.40 $ 0.39 Weighted average number of common shares and common share equivalents -- diluted 26,465,578 26,369,503 26,351,144 26,199,537 (1) Includes the $12.0 million one-time assessment to recapitalize the Savings Association Insurance Fund in the third quarter of 1996. -0- WESTCORP AND SUBSIDIARIES OTHER SELECTED FINANCIAL DATA (UNAUDITED) (Dollars in thousands) Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, 1997 1996 1997 1996 LOAN ORIGINATIONS Consumer $ 538,169 $ 536,088 $2,337,353 $2,128,152 Real estate 658,485 407,387 2,328,586 1,289,120 Commercial 46,765 8,632 74,325 8,632 Total $1,243,419 $ 952,107 $4,740,264 $3,425,904 INTEREST RATE SPREAD -- OWNED LOANS Yield on interest-earning assets 8.29% 8.73% 8.49% 8.63% Cost of interest-bearing liabilities 5.90% 5.78% 5.83% 5.77% Interest spread 2.39% 2.95% 2.66% 2.86% OWNED LOAN LOSS EXPERIENCE Consumer 2.72% 3.44% 2.71% 2.96% Real estate 0.27% 0.38% 0.44% 0.25% Total 0.83% 1.00% 0.93% 0.77% -0- Dec. 31, Dec. 31, 1997 1996 SERVICING PORTFOLIO (1) Consumer $3,750,285 $3,048,678 Real estate 6,400,586 5,918,497 Commercial 48,048 7,867 Total $10,198,919 $8,975,042 -0- Dec. 31, 1997 Dec. 31, 1996 Amount % Amount % OWNED LOAN DELINQUENCY 60+ Consumer $ 3,160 1.1% $ 2,524 0.9% Real estate 14,152 0.9% 17,022 1.2% Total $ 17,312 0.9% $ 19,546 1.1% (1) At end of period, net of unearned discount and includes loans held for sale. ------------------------------------------------------------------------ Contact: Pondel, Parsons & Wilkinson Cecilia A. Wilkinson, 310/207-9300 or Westcorp Lee A. Whatcott, 714/727-1629

To: Paul Senior who wrote (1)	3/5/1998 1:26:00 AM
From: Jeff Lawlor	Read Replies (2) \| Respond to of 56

Hi Paul, Thought I would respond to you on this thread regarding your WES suggestion. Based on just a cursory look at WES, I think it is fairly promising. Here are my positives and negatives: + 1. 77% growth in mortgage loans from 96 to 97. 62% growth in 4Q97 over 4Q96. + 2. Continued strength in economy and housing market should continue growth pattern through most of 1998. +/- 3. Restructuring program put in for 1Q98 will cut 20% of workforce and significantly reduce expenses. (This is a problem area for WES. Their ROE and NPM are low in comparison to other reasonably priced equivalents). Reduction in expenses coupled with continued growth in top-line should boost returns in second half of 1998. + 4. Decent dividend yield. + 5. Equity-to-Assets ratio of 9.4%. Peter Lynch recommends 7.5 or greater. + 6. Commercial is 2.2% of loan volume. The lower the better. + 7. Real Estate Owned is less than 0.5% and has been dropping. + 8. Undervalued with P/B and P/E low in comparison to industry. +/- 9. Loan losses were higher in 1997, however, trend is slowing. + 10. 60 Day Delq are declining. - 11. Spread declined significantly in Q4. Must watch this trend. - 12. Low returns with ROE ~ 10% and NPM ~ 7.5%. WES needs to improve their returns before we will see any increase in shareholder value and they seem to be addressing this with restructuring program in 1Q98. Top-line growth is promising with strong housing market projected through most of 1998. I am definitely keeping my eye on this one. However, I would like to see the 10-K before taking a significant position. Sub-prime auto lending will always keep me concerned about this one. WES has to ensure that they don't get caught up in the growth game by sacrificing asset quality. All IMHO, Jeff p.s. Thanks for the tip.