Westcorp 8-K Westcorp Reports Record First Quarter Net Income and Increases 2004 Earnings Guidance

Exhibit 99.1
April 13, 2004

Lisa Capps
Investor Relations
Westcorp
Phone: (949) 727-1002
Email: Investor_Relations@WestcorpInc.com

Westcorp Reports Record First Quarter Net Income and Increases 2004 Earnings Guidance

• First quarter net income increased 84% to a record $43 million

• Earnings per share increased 38% to a record $0.83 per share

• First quarter annualized credit losses on contracts improved 59 basis points to 2.27%

• Delinquencies improved 50 basis points year over year to 1.91%

• Contract originations grew 17% to $1.6 billion

• Earnings guidance increased from $3.50 to between $3.90 and $4.00 per share for 2004

Irvine, CA: Westcorp (NYSE:WES) today reported that net income increased 84% to a record $43.4 million for the three months ended March 31, 2004 compared with $23.5 million for the same period a year ago. Earnings per diluted share increased 38% to $0.83 for the three months ended March 31, 2004 compared with $0.60 per diluted share for the same period a year earlier.

“The primary drivers of our record earnings performance this quarter were continued improvement in credit quality and solid contract origination growth,” said Tom Wolfe, President of Westcorp. “Over the last several months, we have begun to see the benefit of our shift to more prime credit quality contracts. With our stronger portfolio profile, we expect these improving credit trends to continue throughout 2004.”

Annualized credit loss experience in the first quarter improved 59 basis points to 2.27% of average managed automobile contracts compared with 2.86% for the same period a year earlier. The percentage of outstanding automobile contracts 30 days or more delinquent improved 50 basis points to 1.91% at March 31, 2004 compared with 2.41% a year ago.

As a result of lower chargeoff experience and stronger portfolio characteristics, the provision for credit losses declined to $62.3 million for the three months ended March 31, 2004, compared with $79.9 million for the same period a year earlier. At March 31, 2004, the allowance for credit losses as a percentage of owned automobile contracts outstanding was 2.7% compared with 2.8% a year earlier.

Automobile contract purchases totaled $1.6 billion for the first quarter of 2004, a 17% increase from the same period a year earlier, growing the Company’s portfolio of managed automobile contracts to $10.9 billion at March 31, 2004, up from $9.7 billion a year earlier. As a result, net interest income grew 17% to $194 million for the first quarter compared with $166 million for the same period a year earlier. Noninterest income also increased to $28.7 million for the three months ended March 31, 2004 compared with $27.8 million for the same period a year earlier. Net interest margin was 5.03% for the first quarter compared with 4.98% for the same period a year ago.

The Company issued $1.5 billion of automobile receivable asset-backed securities during the quarter with a weighted average cost of funds of 2.4%. The Company continues to be the largest non-captive issuer of automobile asset-backed securities in the U.S. having issued a total of $36 billion of such securities in 62 transactions to date.

The Company continued to shift its overall deposit mix in 2004 from certificates of deposit to lower cost demand deposit and money market accounts. Total demand deposit and money market accounts increased $160 million or 17% to $1.1 billion at March 31, 2004 compared with a year ago. The weighted average interest cost of deposits (excluding the effects of hedging) declined to 1.19% for the first quarter compared with 2.08% for the same period a year earlier. During the quarter, the Company opened two new retail banking offices in Tustin and Santa Ana, California.

Noninterest expense of $71.2 million decreased to 32% of total revenues for the first quarter compared with $68.4 million or 35% of total revenues for the same period a year earlier. The improvement in noninterest expense to total revenues is primarily the result of lower credit costs and operating efficiencies.

Minority interest in subsidiaries increased $6.8 million to $10.7 million for the first quarter of 2004 compared with $3.9 million for the same period a year ago. This increase is primarily the result of WFS Financial, an 84% owned subsidiary of Westcorp, selling $1.5 billion of automobile contracts to a 100% owned subsidiary of Westcorp, which produced higher net income at WFS Financial.

Westcorp also announced today updated earnings guidance reflecting higher estimated net income resulting primarily from improving credit quality trends and origination growth. As a result, the Company expects to earn from $3.90 to $4.00 per share in 2004, up from its previous guidance of $3.50 per share.

Earnings Conference Call

Westcorp, along with its subsidiary WFS Financial, will host a conference call for analysts and investors at 9:00 a.m. (PDT) on Wednesday, April 14, 2004. 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.westcorpinc.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.

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. 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, the shift towards a higher concentration of prime credit quality originations and automobile contracts and the Company’s shift of its overall deposit mix. Forward-looking statements also include statements regarding the Company’s ability to profitably grow its business, the Company’s improving capital levels and its expectation to achieve specified earnings per share for 2004.

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. In particular, there can be no assurances that improved credit quality trends, automobile origination growth, improved credit loss experience or other operational improvements identified in this press release will continue in future periods.

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 April 13, 2004. The Company assumes no obligation to update any forward-looking statements to reflect future events or circumstances.

WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

	For the Three Months Ended
	March 31,
	2004		2003
	(Dollars in thousands, except share
	and per share amounts)
Interest income:
Loans, including fees	$	286,300	$	281,288
Mortgage-backed securities		24,688		24,773
Investment securities		1,058		729
Other		1,613		1,073
TOTAL INTEREST INCOME		313,659		307,863
Interest expense:
Deposits		13,307		17,556
Notes payable on automobile secured financing		94,218		111,160
Other		11,894		12,857
TOTAL INTEREST EXPENSE		119,419		141,573
NET INTEREST INCOME		194,240		166,290
Provision for credit losses		62,294		79,884
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		131,946		86,406
Noninterest income:
Automobile lending		25,748		21,897
Mortgage banking		235		210
Insurance income		1,824		929
Other		883		4,717
TOTAL NONINTEREST INCOME		28,690		27,753
Noninterest expense:
Salaries and associate benefits		42,084		39,455
Credit and collections		8,592		9,546
Data processing		4,179		4,568
Occupancy		3,877		3,840
Telephone		1,161		1,349
Other		11,324		9,681
TOTAL NONINTEREST EXPENSE		71,217		68,439
INCOME BEFORE INCOME TAX		89,419		45,720
Income tax		35,313		18,226
INCOME BEFORE MINORITY INTEREST		54,106		27,494
Minority interest in earnings of subsidiaries		10,741		3,945
NET INCOME	$	43,365	$	23,549
Net income per common share:
Basic	$	0.84	$	0.60
Diluted	$	0.83	$	0.60
Weighted average number of common shares outstanding:
Basic		51,737,663		39,202,850
Diluted		52,493,432		39,452,915
Dividends declared	$	0.14	$	0.13

WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	March 31, 2004			December 31, 2003
	(Dollars in thousands)
ASSETS
Cash	$	40,734		$	50,073
Interest bearing deposits with other financial institutions		14,718			41,009
Other short-term investments		153,000			291,000
Cash and due from banks		208,452			382,082
Restricted cash		339,881			245,399
Investment securities available for sale		141,638			117,749
Mortgage-backed securities available for sale		2,686,505			2,701,797
Loans receivable		11,369,266			11,138,483
Allowance for credit losses		(303,062	)		(301,602	)
Loans receivable, net		11,066,204			10,836,881
Premises and equipment, net		81,146			81,814
Accrued interest receivable		76,623			80,957
Other assets		144,935			169,241
TOTAL ASSETS	$	14,745,384		$	14,615,920
LIABILITIES
Deposits	$	2,025,539		$	1,972,856
Notes payable on automobile secured financing		10,248,497			10,254,641
Securities sold under agreements to repurchase					222,489
Federal Home Loan Bank advances		572,613			328,644
Subordinated debentures		393,217			394,854
Other liabilities		205,475			188,517
TOTAL LIABILITIES		13,445,341			13,362,001
Minority interest		142,865			131,434
SHAREHOLDERS’ EQUITY
Common stock (par value $1.00 per share; authorized 65,000,000 shares; issued and outstanding 51,798,704 shares at December 31, 2003 and 51,698,398 shares at December 31, 2002)		51,799			51,698
Paid-in capital		711,933			710,001
Retained earnings		464,169			427,527
Accumulated other comprehensive loss, net of tax		(70,723	)		(66,741	)
TOTAL SHAREHOLDERS’ EQUITY		1,157,178			1,122,485
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,745,384		$	14,615,920

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
	March 31,
	2004							2003
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
	(Dollars in thousands)
Interest earning assets:
Total investments:
Mortgage-backed securities	$	2,595,115	$	24,688		3.81	%	$	2,485,200	$	24,773		3.99	%
Other short-term investments		590,409		1,604		1.09			287,978		1,048		1.48
Investment securities		125,177		1,058		3.38			54,860		729		5.32
Interest earning deposits with others		6,020		9		0.62			10,245		25		0.98
Total investments		3,316,721		27,359		3.30			2,838,283		26,575		3.75
Total loans: (1)
Consumer loans		10,908,723		282,041		10.40			9,696,850		276,131		11.55
Mortgage loans		229,379		2,904		5.06			271,943		3,819		5.62
Commercial loans		99,288		1,303		5.19			110,230		1,287		4.67
Construction loans		4,239		52		4.85			5,307		51		3.83
Total loans		11,241,629		286,300		10.24			10,084,330		281,288		11.31
Total interest earning assets	$	14,558,350		313,659		8.66	%	$	12,922,613		307,863		9.65	%
Interest bearing liabilities:
Deposits	$	1,906,775		13,307		2.81	%	$	1,963,276		17,556		3.63	%
Securities sold under agreements to repurchase		33,400		94		1.11			248,374		1,289		2.08
FHLB advances and other borrowings		667,482		2,014		1.20			426,590		1,631		1.53
Notes payable on automobile secured financing		10,170,858		94,218		3.71			9,100,877		111,160		4.89
Subordinated debentures		393,670		9,786		9.94			398,812		9,937		9.97
Total interest bearing liabilities	$	13,172,185		119,419		3.63	%	$	12,137,929		141,573		4.67	%
Net interest income and interest rate spread			$	194,240		5.03	%			$	166,290		4.98	%
Net yield on average interest earning assets						5.34	%						5.15	%

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

WESTCORP AND SUBSIDIARIES
OTHER FINANCIAL DATA AND STATISTICAL SUMMARY

	Q1 2004			Q4 2003			Q3 2003			Q2 2003			Q1 2003
	(Dollars in thousands, except per share amounts and number of accounts)
Earnings:
Net interest income	$	194,240		$	192,503		$	180,863		$	173,925		$	166,290
Provision for credit losses		62,294			72,936			73,150			68,036			79,884
Noninterest income		28,690			26,840			27,833			27,731			27,753
Noninterest expense		71,217			73,947			66,745			72,657			68,439
Income before taxes		89,419			72,460			68,801			60,963			45,720
Income taxes		35,313			28,731			27,343			23,975			18,226
Net income	$	43,365		$	39,118		$	29,335		$	31,603		$	23,549
Equity:
Earning per share — basic	$	0.84		$	0.82		$	0.65		$	0.81		$	0.60
Earning per share — diluted	$	0.83		$	0.80		$	0.64		$	0.80		$	0.60
Dividend per share	$	0.14		$	0.13		$	0.13		$	0.13		$	0.13
Book value per share (period end) (1)	$	23.71		$	23.00		$	20.89		$	19.39		$	18.71
Stock price per share (period end)	$	44.07		$	36.55		$	34.95		$	28.00		$	18.57
Total equity to assets (2)		9.30	%		9.04	%		7.54	%		6.38	%		6.30	%
Return on average equity (1)		14.37	%		14.77	%		12.92	%		16.96	%		13.05	%
Average shares outstanding — diluted		52,493,432			48,662,953			45,786,913			39,676,670			39,452,915
Loan Portfolio:
Automobile contracts purchased	$	1,585,173		$	1,356,505		$	1,683,402		$	1,586,616		$	1,352,053
Automobile contracts managed (period end)	$	10,850,314		$	10,596,665		$	10,475,948		$	10,049,966		$	9,650,229
Number of accounts managed (period end)		840,566			826,122			818,125			796,688			775,090
Average automobile contracts managed	$	10,726,048		$	10,549,972		$	10,284,067		$	9,839,661		$	9,533,314
Return on average automobile contracts (3)		1.62	%		1.48	%		1.14	%		1.28	%		0.99	%
Credit Quality:
Delinquency rate (30+ days)		1.91	%		2.90	%		2.70	%		2.75	%		2.41	%
Repossessions to total contracts		0.06	%		0.10	%		0.11	%		0.09	%		0.11	%
Net chargeoffs (annualized)		2.27	%		2.64	%		2.58	%		2.33	%		2.86	%
Allowance to automobile contracts		2.67	%		2.71	%		2.71	%		2.75	%		2.76	%
Operations:
Total assets	$	14,745,384		$	14,615,920		$	14,238,588		$	13,665,109		$	13,314,876
Noninterest expense to total revenues		31.95	%		33.71	%		31.98	%		36.03	%		35.27	%

(1)	Excludes other comprehensive income
(2)	Excludes other comprehensive income and includes minority interest
(3)	Net income (annualized) divided by average automobile contracts managed

WESTCORP AND SUBSIDIARIES
CUMULATIVE STATIC POOL LOSS CURVES (UNAUDITED)
At March 31, 2004

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

Period (1)	2000-C			2000-D			2001-A			2001-B			2001-C			2002-1			2002-2			2002-3			2002-4			2003-1			2003-2			2003-3			2003-4			2004-1
1		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
2		0.04	%		0.04	%		0.03	%		0.03	%		0.04	%		0.01	%		0.00	%		0.02	%		0.02	%		0.01	%		0.00	%		0.00	%		0.01	%		0.00	%
3		0.13	%		0.11	%		0.09	%		0.10	%		0.09	%		0.06	%		0.03	%		0.06	%		0.07	%		0.04	%		0.02	%		0.02	%		0.03	%
4		0.27	%		0.24	%		0.20	%		0.21	%		0.20	%		0.15	%		0.10	%		0.14	%		0.16	%		0.11	%		0.06	%		0.06	%		0.08	%
5		0.46	%		0.39	%		0.33	%		0.33	%		0.35	%		0.29	%		0.18	%		0.27	%		0.26	%		0.18	%		0.14	%		0.13	%		0.14	%
6		0.65	%		0.54	%		0.50	%		0.50	%		0.49	%		0.43	%		0.32	%		0.44	%		0.38	%		0.29	%		0.25	%		0.23	%
7		0.81	%		0.74	%		0.70	%		0.69	%		0.65	%		0.60	%		0.49	%		0.57	%		0.50	%		0.41	%		0.36	%		0.32	%
8		0.93	%		0.93	%		0.84	%		0.87	%		0.81	%		0.84	%		0.66	%		0.70	%		0.61	%		0.53	%		0.48	%		0.40	%
9		1.07	%		1.13	%		1.04	%		1.05	%		0.95	%		1.06	%		0.82	%		0.82	%		0.78	%		0.66	%		0.59	%
10		1.24	%		1.34	%		1.24	%		1.22	%		1.07	%		1.28	%		0.96	%		0.96	%		0.94	%		0.80	%		0.70	%
11		1.41	%		1.50	%		1.45	%		1.36	%		1.20	%		1.48	%		1.10	%		1.10	%		1.08	%		0.93	%		0.80	%
12		1.62	%		1.74	%		1.67	%		1.53	%		1.37	%		1.67	%		1.26	%		1.24	%		1.28	%		1.06	%
13		1.86	%		1.95	%		1.90	%		1.67	%		1.55	%		1.82	%		1.39	%		1.38	%		1.43	%		1.21	%
14		2.04	%		2.21	%		2.09	%		1.81	%		1.74	%		1.99	%		1.51	%		1.53	%		1.59	%		1.31	%
15		2.25	%		2.48	%		2.25	%		2.00	%		1.97	%		2.14	%		1.68	%		1.70	%		1.77	%
16		2.45	%		2.71	%		2.41	%		2.19	%		2.16	%		2.27	%		1.83	%		1.88	%		1.92	%
17		2.68	%		2.89	%		2.54	%		2.37	%		2.36	%		2.45	%		1.99	%		2.03	%		2.05	%
18		2.88	%		3.08	%		2.73	%		2.60	%		2.59	%		2.62	%		2.16	%		2.15	%
19		3.08	%		3.22	%		2.93	%		2.80	%		2.78	%		2.80	%		2.31	%		2.28	%
20		3.23	%		3.40	%		3.11	%		3.01	%		2.95	%		2.99	%		2.46	%		2.41	%
21		3.38	%		3.59	%		3.34	%		3.19	%		3.14	%		3.15	%		2.60	%
22		3.54	%		3.78	%		3.54	%		3.34	%		3.29	%		3.31	%		2.72	%
23		3.67	%		3.96	%		3.72	%		3.49	%		3.41	%		3.45	%		2.86	%
24		3.83	%		4.18	%		3.92	%		3.62	%		3.57	%		3.58	%
25		4.00	%		4.41	%		4.10	%		3.75	%		3.73	%		3.69	%
26		4.16	%		4.58	%		4.23	%		3.87	%		3.88	%
27		4.35	%		4.79	%		4.36	%		4.00	%		4.04	%
28		4.50	%		4.96	%		4.47	%		4.15	%		4.20	%
29		4.64	%		5.08	%		4.56	%		4.28	%		4.35	%
30		4.79	%		5.22	%		4.67	%		4.40	%		4.46	%
31		4.92	%		5.34	%		4.81	%		4.52	%		4.57	%
32		5.02	%		5.44	%		4.92	%		4.64	%		4.69	%
33		5.12	%		5.54	%		5.04	%		4.73	%
34		5.22	%		5.66	%		5.13	%		4.83	%
35		5.29	%		5.76	%		5.24	%		4.93	%
36		5.38	%		5.86	%		5.31	%
37		5.47	%		5.97	%		5.39	%
38		5.53	%		6.04	%		5.45	%
39		5.62	%		6.12	%
40		5.68	%		6.19	%
41		5.75	%		6.25	%
42		5.80	%
43		5.84	%
44		5.88	%
45
46
47
48
49
50
51
52
53
54
Prime Mix (2)		68	%		68	%		71	%		71	%		76	%		70	%		87	%		85	%		80	%		80	%		82	%		84	%		82	%		82	%

(1)	Represents the number of months since the inception of the securitization.
(2)	Represents the original percentage of prime automobile contracts securitized within each pool.