WFS Financial Reports Year-End and Fourth Quarter Results

    Business Editors/Banking Writers/Financial Analysts

    IRVINE, Calif.--(BUSINESS WIRE)--Jan. 25, 2005--WFS Financial Inc (Nasdaq:WFSI) reported that net income for 2004 rose 12% to a record $182 million compared with $162 million last year. Earnings per share rose 12% to a record $4.44 for the 12 months ended Dec. 31, 2004, compared with $3.95 for 2003. Fourth quarter net income increased 53% to $43.7 million for the three months ended Dec. 31, 2004, compared with $28.6 million for the same period a year ago. Earnings per diluted share increased 51% to $1.06 for the three months ended Dec. 31, 2004, compared with $0.70 per diluted share for the same period a year earlier.
    "Our strong net income was primarily the result of a significant improvement in credit performance," said Tom Wolfe, CEO of WFS Financial. "Our emphasis on risk-focused underwriting, our effective auto lending servicing platform and an improving economy all contributed to the improvement in our credit performance even as we achieved 11% year-over-year origination growth."
    Annualized credit loss experience improved 63 basis points to 2.01% of average managed automobile contracts for the fourth quarter compared with 2.64% for the same period a year earlier. For the 12 months ended Dec. 31, 2004, credit loss experience improved 61 basis points to 1.99% compared with 2.60% for 2003. The percentage of outstanding automobile contracts 30 days or more delinquent improved 66 basis points to 2.24% at Dec. 31, 2004, compared, with 2.90% a year ago.
    Provision for credit losses declined to $59.0 million for the three months ended Dec. 31, 2004, compared with $69.6 million for the same period a year earlier as a result of lower chargeoff experience and stronger portfolio characteristics. For the 12 months ended Dec. 31, 2004, the provision for credit losses declined to $192 million compared with $234 million last year. At Dec. 31, 2004, the allowance for credit losses totaled $252 million or 2.6% of loans receivable compared with $240 million or 2.8% at Dec. 31, 2003.
    Automobile contract purchases totaled $1.6 billion for the fourth quarter of 2004, a 17% increase from the same period a year earlier. For the 12 months ended Dec. 31, 2004, automobile contract purchases totaled $6.6 billion, an 11% increase over 2003. The company's portfolio of managed automobile contracts grew to $11.6 billion at Dec. 31, 2004, up from $10.6 billion a year earlier.
    Net interest income grew 7% to $159 million for the fourth quarter compared with $148 million for the same period a year earlier as total average interest-earning assets increased $599 million to $9.9 billion and net interest margin widened 16 basis points to 5.98% on the total portfolio for the fourth quarter compared with the same period a year ago. For the 12 months ended Dec. 31, 2004, net interest income declined 3% to $584 million compared with $602 million for the same period a year earlier as total average interest-earning assets decreased $198 million to $9.4 billion as a result of whole loan sales and net interest margin decreased 9 basis points to 5.88% on the total portfolio for the year compared with the same period a year ago.
    The company issued $1.4 billion of automobile receivable asset-backed securities during the quarter with a weighted average cost of funds of 3.1%. The company continues to be the largest non-captive issuer of automobile asset-backed securities in the United States, having issued a total of $41 billion of such securities in 65 transactions to date.
    Noninterest income was $34.4 million for the three months ended Dec. 31, 2004, compared with $31.8 million for the same period a year earlier. For the 12 months ended Dec. 31, 2004, noninterest income was $155 million compared with $142 million for 2003.
    Noninterest expense totaled $62.7 million or 2.18% of average managed contracts for the fourth quarter compared with $62.7 million or 2.38% of average managed contracts for the same period a year earlier. For the 12 months ended Dec. 31, 2004, noninterest expense totaled $245 million or 2.21% of average managed contracts compared with $241 million or 2.40% of average managed contracts a year ago.
    As previously announced, Westcorp, WFS' ultimate parent, is in the process of converting Western Financial Bank to a California state commercial bank and merging WFS Financial into Western Financial Bank as part of the acquisition of the minority interest in WFS Financial. The conversion is contingent upon approval by the Board of Governors of the Federal Reserve of Westcorp's application to become a bank holding company. The merger also remains subject to approval by the majority of WFS Financial's minority shareholders.

    Earnings Conference Call

    WFS Financial, along with its parent, Westcorp, will host a conference call for analysts and investors at 7:30 a.m. (PST) on Wednesday, Jan. 26, 2005. As part of this conference call, the company's management will discuss earnings results for the quarter. For a live Internet broadcast of this conference call, please go to the company's Web site at http://www.wfsfinancial.com to register, download, and install any necessary audio software. For those who cannot listen to the live broadcast, a replay will be available shortly after the call.
    Westcorp is a financial services holding company whose principal subsidiaries are WFS Financial Inc and Western Financial Bank. Westcorp is a publicly owned company whose common stock is traded on the New York Stock Exchange under the symbol WES. Information about Westcorp can be found at its Web site at http://www.westcorpinc.com.
    Westcorp, through its subsidiary, WFS Financial, is one of the nation's largest independent automobile finance companies. WFS Financial specializes in originating, securitizing, and servicing new and pre-owned prime and non-prime credit quality automobile contracts through its nationwide relationships with automobile dealers. WFS Financial is a publicly owned company whose common stock is traded on the Nasdaq under the symbol WFSI. Information about WFS Financial can be found at its Web site at http://www.wfsfinancial.com.
    Westcorp, through its subsidiary, Western Financial Bank, operates 20 retail bank branches and provides commercial banking services in Southern California. Information on the products and services offered by the bank can be found at its Web site at http://www.wfb.com.

    This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended. Forward-looking statements are identified by the use of terms and phrases such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "predict," "project," "will," and similar terms and phrases, including references to assumptions. Forward-looking statements in this press release relate to analyses and other information, which are based on forecasts of future results and estimates of amounts not yet determinable.
    In addition, these statements relate to the company's future prospects, developments and business strategies and include information regarding the company's improved credit quality trends and higher automobile origination growth. In particular, there can be no assurances that improved credit quality trends or origination growth identified in this press release will continue in future periods.
    These statements are subject to uncertainties and factors relating to the company's operations and business environment, all of which are difficult to predict and many of which are beyond its control that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements.
    The following factors are among those that may cause actual results to differ materially from the forward-looking statements: changes in general economic and business conditions; interest rate fluctuations, including the effect of hedging activities; the company's financial condition and liquidity, as well as future cash flow and earnings and the level of operating expenses; competition; the effect, interpretation, or application of new or existing laws, regulations, court decisions and significant litigation; and the level of chargeoffs on the automobile contracts that the company originates.
    A further list of these risks, uncertainties and other matters can be found in the company's filings with the Securities and Exchange Commission. If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, the company's actual results may vary materially from those expected, estimated or projected. The information contained in this press release is as of Jan. 25, 2005. The company assumes no obligation to update any forward-looking statements to reflect future events or circumstances.

WFS FINANCIAL INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

For the For the Three Months Ended Twelve Months Ended Dec. 31, Dec. 31, 2004 2003 2004 2003 (Dollars in thousands, except per share amounts) Interest income: Loans, including fees $235,126 $232,369 $888,231 $982,946 Other 3,686 2,574 11,904 10,058 TOTAL INTEREST INCOME 238,812 234,943 900,135 993,004 Interest expense: Notes payable on automobile secured financing 70,786 76,681 274,541 349,359 Other 9,432 10,309 41,783 42,042 TOTAL INTEREST EXPENSE 80,218 86,990 316,324 391,401 NET INTEREST INCOME 158,594 147,953 583,811 601,603 Provision for credit losses 58,961 69,578 192,315 233,800 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 99,633 78,375 391,496 367,803 Noninterest income: Automobile servicing 33,125 30,952 137,593 119,015 Gain on sale of contracts 13,792 18,725 Other 1,261 860 3,395 4,758 TOTAL NONINTEREST INCOME 34,386 31,812 154,780 142,498 Noninterest expense: Salaries and employee benefits 40,652 38,321 159,571 149,829 Credit and collections 8,758 8,933 32,812 35,448 Data processing 5,043 3,837 16,498 16,659 Occupancy 2,944 3,343 11,423 13,383 Other 5,266 8,280 25,080 26,075 TOTAL NONINTEREST EXPENSE 62,663 62,714 245,384 241,394 INCOME BEFORE INCOME TAX 71,356 47,473 300,892 268,907 Income tax 27,673 18,836 118,651 106,519 NET INCOME $43,683 $28,637 $182,241 $162,388

Earnings per common share: Basic $1.06 $0.70 $4.44 $3.96 Diluted $1.06 $0.70 $4.44 $3.95

Weighted average number of common shares outstanding: Basic 41,038,003 41,032,393 41,036,408 41,026,067 Diluted 41,081,156 41,078,684 41,079,337 41,069,263

WFS FINANCIAL INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Unaudited) Dec. 31, Dec. 31, 2004 2003 (Dollars in thousands) ASSETS Cash $87,963 $79,314 Other short-term investments - parent 763,921 Cash and due from banks 87,963 843,235 Restricted cash 363,783 245,399 Contracts receivable 9,563,057 8,716,268 Allowance for credit losses (252,465) (239,697) Contracts receivable, net 9,310,592 8,476,571 Accrued interest receivable 55,126 55,275 Premises and equipment, net 30,820 29,206 Other 100,934 119,074 TOTAL ASSETS $9,949,218 $9,768,760

LIABILITIES Lines of credit - parent $52,731 $21,811 Notes payable on automobile secured financing 8,105,275 8,157,601 Notes payable - parent 461,010 400,820 Amounts held on behalf of trustee 194,913 243,072 Other 104,812 126,587 TOTAL LIABILITIES 8,918,741 8,949,891

SHAREHOLDERS' EQUITY Common stock (no par value; authorized 50,000,000 shares; issued and outstanding 41,038,003 shares in 2004 and 41,033,901 shares in 2003) 338,328 338,291 Paid-in capital 6,324 6,280 Retained earnings 689,429 507,188 Accumulated other comprehensive loss, net of tax (3,604) (32,890) TOTAL SHAREHOLDERS' EQUITY 1,030,477 818,869 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $9,949,218 $9,768,760

The following table presents information relative to the average balances and interest rates on an owned basis for the periods indicated:

For the Three Months Ended Dec. 31, 2004 Average Interest Yield/ Balance Rate (Dollars in thousands) Interest-earning assets: Contracts receivable (a) $9,199,131 $235,126 10.17% Investment securities 748,814 3,686 1.96 Total interest-earning assets $9,947,945 238,812 9.55%

Interest-bearing liabilities: Lines of credit -- parent $86,450 875 4.02% Notes payable -- parent 300,000 7,688 10.25 Notes payable on automobile secured financing 8,356,948 70,786 3.39 Other 253,535 869 1.36 Total interest-bearing liabilities $8,996,933 80,218 3.57% Net interest income and interest rate spread $158,594 5.98% Net yield on average interest-earning assets 6.38%

For the Three Months Ended Dec. 31, 2003 Average Interest Yield/ Balance Rate (Dollars in thousands) Interest-earning assets: Contracts receivable (a) $8,416,748 $232,369 10.95% Investment securities 931,902 2,574 1.10 Total interest-earning assets $9,348,650 234,943 9.97%

Interest-bearing liabilities: Lines of credit -- parent $22,941 126 2.18% Notes payable -- parent 400,820 9,924 9.90 Notes payable on automobile secured financing 7,698,384 76,681 3.98 Other 267,555 259 0.39 Total interest-bearing liabilities $8,389,700 86,990 4.15% Net interest income and interest rate spread $147,953 5.82% Net yield on average interest-earning assets 6.33%

For the Twelve Months Ended Dec. 31, 2004 Average Interest Yield/ Balance Rate (Dollars in thousands) Interest-earning assets: Contracts receivable (a) $8,494,542 $888,231 10.46% Investment securities 867,372 11,904 1.37 Total interest-earning assets $9,361,914 900,135 9.61%

Interest-bearing liabilities: Lines of credit -- parent $54,188 1,831 3.38% Notes payable -- parent 356,213 35,739 10.03 Notes payable on automobile secured financing 7,759,865 274,541 3.54 Other 299,221 4,213 1.41 Total interest-bearing liabilities $8,469,487 316,324 3.73% Net interest income and interest rate spread $583,811 5.88% Net yield on average interest-earning assets 6.24%

For the Twelve Months Ended Dec. 31, 2003 Average Interest Yield/ Balance Rate (Dollars in thousands) Interest-earning assets: Contracts receivable (a) $8,721,637 $982,946 11.27% Investment securities 838,285 10,058 1.20 Total interest-earning assets $9,559,922 993,004 10.39%

Interest-bearing liabilities: Lines of credit -- parent $43,532 993 2.28% Notes payable -- parent 402,947 39,888 9.90 Notes payable on automobile secured financing 8,215,265 349,359 4.25 Other 189,555 1,161 0.61 Total interest-bearing liabilities $8,851,299 391,401 4.42% Net interest income and interest rate spread $601,603 5.97% Net yield on average interest-earning assets 6.29%

(a) For the purpose of these computations, nonaccruing contracts are included in the average amounts outstanding.

WFS FINANCIAL AND SUBSIDIARIES OTHER FINANCIAL DATA AND STATISTICAL SUMMARY Q4 2004 Q3 2004 Q2 2004 (Dollars in thousands, except per share amounts) Earnings: Net interest income $158,594 $148,775 $136,000 Provision for credit losses 58,961 59,957 53,421 Noninterest income 34,386 36,517 34,732 Noninterest expense 62,663 62,174 61,630 Income before taxes 71,356 63,161 55,681 Income taxes 27,673 25,057 22,135 Net income $43,683 $38,104 $33,546

Equity: Earning per share - basic $1.06 $0.93 $0.82 Earning per share - diluted $1.06 $0.93 $0.82 Book value per share (period end) (a) $25.20 $24.13 $23.20 Stock price per share (period end) $50.56 $46.55 $49.51 Total equity to assets (a) 10.39% 10.28% 10.30% Return on average equity (a) 17.27% 15.69% 14.33% Average shares outstanding - diluted 41,081,156 41,080,978 41,079,727 Loan Portfolio: Automobile contracts purchased $1,583,787 $1,799,106 $1,666,842 Automobile contracts managed (period end) $11,560,890 $11,440,353 $11,113,148 Number of accounts managed (period end) 876,695 869,038 853,193 Average automobile contracts managed $11,512,626 $11,268,695 $10,946,273 Credit Quality: Delinquency rate (30+ days) 2.24% 2.24% 2.21% Repossessions to total contracts 0.07% 0.06% 0.06% Net chargeoffs (annualized) 2.01% 1.95% 1.73% Allowance to automobile contracts 2.64% 2.64% 2.67% Operations: Total assets $9,949,218 $9,631,069 $9,245,683 Noninterest expense to average contracts 2.18% 2.21% 2.25%

Q1 2004 Q4 2003 (Dollars in thousands, except per share amounts) Earnings: Net interest income $140,442 $147,953 Provision for credit losses 19,976 69,578 Noninterest income 49,144 31,812 Noninterest expense 58,916 62,714 Income before taxes 110,694 47,473 Income taxes 43,786 18,836 Net income $66,908 $28,637

Equity: Earning per share - basic $1.63 $0.70 Earning per share - diluted $1.63 $0.70 Book value per share (period end) (a) $22.39 $20.76 Stock price per share (period end) $43.32 $42.46 Total equity to assets (a) 10.62% 8.72% Return on average equity (a) 30.21% 13.69% Average shares outstanding - diluted 41,078,787 41,078,684 Loan Portfolio: Automobile contracts purchased $1,585,173 $1,356,505 Automobile contracts managed (period end) $10,850,314 $10,596,665 Number of accounts managed (period end) 840,566 826,122 Average automobile contracts managed $10,726,048 $10,549,972 Credit Quality: Delinquency rate (30+ days) 1.91% 2.90% Repossessions to total contracts 0.06% 0.10% Net chargeoffs (annualized) 2.27% 2.64% Allowance to automobile contracts 2.70% 2.75% Operations: Total assets $8,653,690 $9,768,760 Noninterest expense to average contracts 2.20% 2.38%

(a) Excludes other comprehensive income.

WFS FINANCIAL INC AND SUBSIDIARIES CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED) AT Dec. 31, 2004

The following table sets forth the cumulative static pool losses by month for all outstanding public securitized pools:

Period (a) 2001-A 2001-B (c) 2001-C 2002-1 2002-2 2002-3 2002-4 2003-1 1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2 0.03% 0.03% 0.04% 0.01% 0.00% 0.02% 0.02% 0.01% 3 0.09% 0.10% 0.09% 0.06% 0.03% 0.06% 0.07% 0.04% 4 0.20% 0.21% 0.20% 0.15% 0.10% 0.14% 0.16% 0.11% 5 0.33% 0.33% 0.35% 0.29% 0.18% 0.27% 0.26% 0.18% 6 0.50% 0.50% 0.49% 0.43% 0.32% 0.44% 0.38% 0.29% 7 0.70% 0.69% 0.65% 0.60% 0.49% 0.57% 0.50% 0.41% 8 0.84% 0.87% 0.81% 0.84% 0.66% 0.70% 0.61% 0.53% 9 1.04% 1.05% 0.95% 1.06% 0.82% 0.82% 0.78% 0.66% 10 1.24% 1.22% 1.07% 1.28% 0.96% 0.96% 0.94% 0.80% 11 1.45% 1.36% 1.20% 1.48% 1.10% 1.10% 1.08% 0.93% 12 1.67% 1.53% 1.37% 1.67% 1.26% 1.24% 1.28% 1.06% 13 1.90% 1.67% 1.55% 1.82% 1.39% 1.38% 1.43% 1.21% 14 2.09% 1.81% 1.74% 1.99% 1.51% 1.53% 1.59% 1.31% 15 2.25% 2.00% 1.97% 2.14% 1.68% 1.70% 1.77% 1.40% 16 2.41% 2.19% 2.16% 2.27% 1.83% 1.88% 1.92% 1.50% 17 2.54% 2.37% 2.36% 2.45% 1.99% 2.03% 2.05% 1.60% 18 2.73% 2.60% 2.59% 2.62% 2.16% 2.15% 2.16% 1.70% 19 2.93% 2.80% 2.78% 2.80% 2.31% 2.28% 2.25% 1.85% 20 3.11% 3.01% 2.95% 2.99% 2.46% 2.41% 2.37% 1.99% 21 3.34% 3.19% 3.14% 3.15% 2.60% 2.52% 2.49% 2.14% 22 3.54% 3.34% 3.29% 3.31% 2.72% 2.62% 2.62% 2.27% 23 3.72% 3.49% 3.41% 3.45% 2.86% 2.74% 2.73% 2.37% 24 3.92% 3.62% 3.57% 3.58% 2.95% 2.83% 2.84% 25 4.10% 3.75% 3.73% 3.69% 3.03% 2.96% 2.95% 26 4.23% 3.87% 3.88% 3.80% 3.13% 3.08% 3.06% 27 4.36% 4.00% 4.04% 3.92% 3.22% 3.21% 28 4.47% 4.15% 4.20% 4.02% 3.33% 3.31% 29 4.56% 4.28% 4.35% 4.12% 3.41% 3.41% 30 4.67% 4.40% 4.46% 4.22% 3.50% 31 4.81% 4.52% 4.57% 4.30% 3.58% 32 4.92% 4.64% 4.69% 4.39% 3.66% 33 5.04% 4.73% 4.77% 4.49% 34 5.13% 4.83% 4.85% 4.56% 35 5.24% 4.93% 4.92% 36 5.31% 4.99% 5.01% 37 5.39% 5.05% 5.09% 38 5.45% 5.11% 5.16% 39 5.50% 5.17% 5.22% 40 5.56% 5.24% 5.27% 41 5.61% 5.29% 5.32% 42 5.66% 5.33% 43 5.70% 5.39% 44 5.75% 5.43% 45 5.81% 46 5.84% 47 5.87% Prime Mix (b) 68% 71% 71% 76% 70% 87% 85% 80%

Period (a) 2003-3 2004-1 2003-2 (c) 2003-4 (c) 2004-2 2004-3 2004-4 1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 2 0.00% 0.00% 0.01% 0.00% 0.00% 0.02% 0.00% 3 0.02% 0.02% 0.03% 0.02% 0.03% 0.06% 0.04% 4 0.06% 0.06% 0.08% 0.06% 0.07% 0.13% 5 0.14% 0.13% 0.14% 0.11% 0.15% 0.21% 6 0.25% 0.23% 0.21% 0.19% 0.24% 7 0.36% 0.32% 0.28% 0.27% 0.33% 8 0.48% 0.40% 0.35% 0.34% 0.41% 9 0.59% 0.47% 0.44% 0.42% 10 0.70% 0.55% 0.54% 0.52% 11 0.80% 0.62% 0.61% 0.59% 12 0.89% 0.71% 0.73% 13 0.98% 0.80% 0.83% 14 1.08% 0.88% 0.93% 15 1.20% 0.97% 16 1.31% 1.07% 17 1.41% 1.16% 18 1.53% 19 1.66% 20 1.76% 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 Prime Mix (b) 80% 82% 84% 82% 82% 81% 78%

(a) Represents the number of months since inception of the securitization. (b) Represents the original percentage of prime automobile contracts securitized within each pool. (c) Represents loans sold to Westcorp in whole loan sales and subsequently securitized by Westcorp. WFS manages these contracts pursuant to an agreement with Westcorp and the securitization trust.

--30--SP/np*

CONTACT: WFS Financial, Irvine Lisa Capps (Investors), 949-727-1002 Investor_Relations@WFSFinancial.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: BANKING AUTOMOTIVE EARNINGS CONFERENCE CALLS SOURCE: WFS Financial Inc

Copyright Business Wire 2005