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, 2002
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 33-13646
Westcorp
| CALIFORNIA | 51-0308535 | |
|
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
23 Pasteur, Irvine, California 92618-3816
(949) 727-1002
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, 2002, the registrant had 39,199,724 outstanding shares of common stock, $1.00 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 38.
WESTCORP AND SUBSIDIARIES
FORM 10-Q
September 30, 2002
TABLE OF CONTENTS
______________
| Page No. | ||||||||
| PART I. | FINANCIAL INFORMATION |
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| Item 1. | Financial Statements |
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Consolidated Statements of Financial Condition at
September 30, 2002 and December 31, 2001 |
3 | |||||||
Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 2002 and 2001 |
4 | |||||||
Consolidated Statements of Changes in Shareholders’ Equity for
the Periods Ended September 30, 2002 and December 31, 2001 |
5 | |||||||
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 2002 and 2001 |
6 | |||||||
Notes to Consolidated Financial Statements |
7 | |||||||
| Item 2. | Management’s Discussion and Analysis of Financial |
12 | ||||||
Condition and Results of Operations |
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| Item 3. | Quantitative and Qualitative Disclosure about Market Risk |
31 | ||||||
| Item 4. | Controls and Procedures |
33 | ||||||
| PART II. | OTHER INFORMATION |
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| Item 1. | Legal Proceedings |
35 | ||||||
| Item 2. | Changes in Securities and Use of Proceeds |
35 | ||||||
| Item 3. | Defaults Upon Senior Securities |
35 | ||||||
| Item 4. | Submission of Matters to a Vote of Security Holders |
35 | ||||||
| Item 5. | Other Information |
35 | ||||||
| Item 6. | Exhibits and Reports on Form 8-K |
35 | ||||||
| SIGNATURES | 36 | |||||||
| CERTIFICATIONS | 37 | |||||||
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
| September 30, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (Dollars in thousands) | ||||||||||
ASSETS |
||||||||||
Cash and cash equivalents |
$ | 289,793 | $ | 104,327 | ||||||
Investment securities available for sale |
11,299 | 10,511 | ||||||||
Mortgage-backed securities available for sale |
2,489,300 | 2,092,225 | ||||||||
Loans receivable |
9,145,593 | 7,533,150 | ||||||||
Allowance for credit losses |
(235,709 | ) | (171,432 | ) | ||||||
Loans receivable, net |
8,909,884 | 7,361,718 | ||||||||
Amounts due from trusts |
116,149 | 136,131 | ||||||||
Retained interest in securitized assets |
4,027 | 37,392 | ||||||||
Premises and equipment, net |
78,612 | 79,258 | ||||||||
Other assets |
281,650 | 250,835 | ||||||||
TOTAL ASSETS |
$ | 12,180,714 | $ | 10,072,397 | ||||||
LIABILITIES |
||||||||||
Deposits |
$ | 1,871,791 | $ | 2,329,326 | ||||||
Notes payable on automobile secured financing |
8,015,546 | 5,886,227 | ||||||||
Securities sold under agreements to repurchase |
323,755 | 155,190 | ||||||||
Federal Home Loan Bank advances |
445,810 | 543,417 | ||||||||
Amounts held on behalf of trustee |
213,283 | 280,496 | ||||||||
Subordinated debentures |
428,899 | 147,714 | ||||||||
Other borrowings |
8,296 | 25,068 | ||||||||
Other liabilities |
188,411 | 85,994 | ||||||||
TOTAL LIABILITIES |
11,495,791 | 9,453,432 | ||||||||
Minority interest |
98,214 | 78,261 | ||||||||
SHAREHOLDERS’ EQUITY |
||||||||||
Common stock (par value $1.00 per share;
authorized 65,000,000 shares; issued and
outstanding 39,192,789 shares in September 2002
and 35,802,491 in December 2001) |
39,193 | 35,802 | ||||||||
Paid-in capital |
349,356 | 301,955 | ||||||||
Retained earnings |
310,749 | 263,853 | ||||||||
Accumulated other comprehensive loss, net of tax |
(112,589 | ) | (60,906 | ) | ||||||
TOTAL SHAREHOLDERS’ EQUITY |
586,709 | 540,704 | ||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 12,180,714 | $ | 10,072,397 | ||||||
3
See accompanying notes to consolidated financial statements.
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||
| (Dollars in thousands, except share and per share amounts) | ||||||||||||||||||
Interest income: |
||||||||||||||||||
Loans, including fees |
$ | 265,814 | $ | 218,910 | $ | 748,589 | $ | 590,284 | ||||||||||
Mortgage-backed securities |
30,808 | 32,116 | 86,534 | 104,242 | ||||||||||||||
Other |
2,384 | 2,015 | 6,087 | 6,782 | ||||||||||||||
TOTAL INTEREST INCOME |
299,006 | 253,041 | 841,210 | 701,308 | ||||||||||||||
Interest expense: |
||||||||||||||||||
Deposits |
20,447 | 26,370 | 61,642 | 92,123 | ||||||||||||||
Notes payable on automobile secured financing |
105,911 | 90,464 | 301,083 | 244,482 | ||||||||||||||
Other |
13,618 | 8,564 | 30,431 | 34,871 | ||||||||||||||
TOTAL INTEREST EXPENSE |
139,976 | 125,398 | 393,156 | 371,476 | ||||||||||||||
NET INTEREST INCOME |
159,030 | 127,643 | 448,054 | 329,832 | ||||||||||||||
Provision for credit losses |
80,996 | 60,501 | 209,043 | 127,124 | ||||||||||||||
NET
INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES |
78,034 | 67,142 | 239,011 | 202,708 | ||||||||||||||
Noninterest income: |
||||||||||||||||||
Automobile lending |
15,985 | 3,948 | 43,740 | 54,311 | ||||||||||||||
Other |
10,402 | 4,378 | 20,537 | 10,972 | ||||||||||||||
TOTAL NONINTEREST INCOME |
26,387 | 8,326 | 64,277 | 65,283 | ||||||||||||||
Noninterest expenses: |
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Salaries and associate benefits |
34,684 | 33,804 | 105,738 | 107,412 | ||||||||||||||
Credit and collections |
8,442 | 7,468 | 26,695 | 20,329 | ||||||||||||||
Data processing |
4,485 | 4,176 | 13,625 | 13,612 | ||||||||||||||
Other |
14,596 | 14,432 | 41,783 | 42,809 | ||||||||||||||
TOTAL NONINTEREST EXPENSES |
62,207 | 59,880 | 187,841 | 184,162 | ||||||||||||||
INCOME BEFORE INCOME TAX |
42,214 | 15,588 | 115,447 | 83,829 | ||||||||||||||
Income tax |
16,801 | 6,119 | 44,950 | 32,967 | ||||||||||||||
INCOME BEFORE MINORITY INTEREST |
25,413 | 9,469 | 70,497 | 50,862 | ||||||||||||||
Minority interest in earnings of subsidiaries |
3,740 | 1,255 | 10,263 | 8,036 | ||||||||||||||
NET INCOME |
$ | 21,673 | $ | 8,214 | $ | 60,234 | $ | 42,826 | ||||||||||
Net income per common share |
||||||||||||||||||
Basic |
$ | 0.55 | $ | 0.23 | $ | 1.57 | $ | 1.27 | ||||||||||
Diluted |
$ | 0.55 | $ | 0.23 | $ | 1.55 | $ | 1.26 | ||||||||||
Weighted average number of common shares outstanding: |
||||||||||||||||||
Basic |
39,189,744 | 35,792,418 | 38,382,794 | 33,765,085 | ||||||||||||||
Diluted |
39,506,307 | 36,091,155 | 38,751,631 | 33,987,939 | ||||||||||||||
See accompanying notes to consolidated financial statements.
4
WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
| Accumulated | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Comprehensive | ||||||||||||||||||||||||||
| Common | Paid-in | Retained | Income (Loss), | |||||||||||||||||||||||
| Shares | Stock | Capital | Earnings | Net of Tax | Total | |||||||||||||||||||||
| (Dollars in thousands, except share amounts) | ||||||||||||||||||||||||||
Balance at January 1, 2001 |
31,931,826 | $ | 31,932 | $ | 246,889 | $ | 223,163 | $ | (14,816 | ) | $ | 487,168 | ||||||||||||||
Net income |
55,690 | 55,690 | ||||||||||||||||||||||||
Unrealized gains on securities
available for sale and retained
interest in securitized assets,
net of tax (1) |
12,309 | 12,309 | ||||||||||||||||||||||||
Reclassification adjustment for
losses on securities available for
sale included in net income (2) |
1,050 | 1,050 | ||||||||||||||||||||||||
Unrealized hedge losses on cash
flow hedges, net of tax (3) |
(75,048 | ) | (75,048 | ) | ||||||||||||||||||||||
Reclassification adjustment for
losses on cash flow hedges
included in income (4) |
15,599 | 15,599 | ||||||||||||||||||||||||
Comprehensive income |
9,600 | |||||||||||||||||||||||||
Issuance of subsidiary common stock |
(3,205 | ) | (3,205 | ) | ||||||||||||||||||||||
Issuance of common stock |
3,870,665 | 3,870 | 58,271 | 62,141 | ||||||||||||||||||||||
Cash dividends |
(15,000 | ) | (15,000 | ) | ||||||||||||||||||||||
Balance at December 31, 2001 |
35,802,491 | 35,802 | 301,955 | 263,853 | (60,906 | ) | 540,704 | |||||||||||||||||||
Net income |
60,234 | 60,234 | ||||||||||||||||||||||||
Unrealized gain on securities
available for sale and retained
interest in securitized assets,
net of tax (1) |
26,588 | 26,588 | ||||||||||||||||||||||||
Unrealized hedge losses on cash
flow hedges, net of tax (3) |
(127,864 | ) | (127,864 | ) | ||||||||||||||||||||||
Reclassification adjustment for
losses on cash flow hedges
included in income (4) |
49,593 | 49,593 | ||||||||||||||||||||||||
Comprehensive income |
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