Westcorp 8-K Westcorp Reports Record Second Quarter Net Income

Exhibit 99.1
July 21, 2004

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

Westcorp Reports Record Second Quarter Net Income

• Second quarter net income increased 72% to a record $54 million

• Earnings per share increased 30% to a record $1.04 per share

• Second quarter annualized credit losses on contracts improved 60 basis points to 1.73%

• Delinquencies improved 54 basis points year over year to 2.21%

• Contract originations grew 5% to $1.7 billion

Irvine, CA: Westcorp (NYSE:WES) today reported that net income increased 72% to a record $54.4 million for the three months ended June 30, 2004 compared with $31.6 million for the same period a year ago. Earnings per diluted share increased 30% to a record $1.04 for the three months ended June 30, 2004 compared with $0.80 per diluted share for the same period a year earlier. For the six months ended June 30, 2004, net income increased 77% to a record $97.8 million compared with $55.2 million for the same period a year earlier. Earnings per share rose 34% to a record $1.86 for the six months ended June 30, 2004 compared with $1.39 for the same period a year ago.

“Our record earnings performance this quarter continues to be the result of a strong improvement in credit quality and solid contract origination growth,” said Tom Wolfe, President of Westcorp.

Annualized credit loss experience in the second quarter improved 60 basis points to 1.73% of average managed automobile contracts compared with 2.33% for the same period a year earlier. For the six months ended June 30, 2004, credit loss experience improved 60 basis points to 1.99% compared with 2.59% for the same period a year earlier. The percentage of outstanding automobile contracts 30 days or more delinquent improved 54 basis points to 2.21% at June 30, 2004 compared with 2.75% a year ago.

At June 30, 2004, the allowance for credit losses as a percentage of owned automobile contracts increased to $307 million or 2.7% of outstanding contracts compared with $302 million or 2.7% at December 31, 2003. As a result of lower chargeoff experience and stronger portfolio characteristics, the provision for credit losses declined to $51.5 million for the three months ended June 30, 2004, compared with $68.0 million for the same period a year earlier. For the six months ended June 30, 2004, the provision for credit losses declined to $114 million compared with $148 million for the same period a year ago.

Automobile contract purchases totaled $1.7 billion for the second quarter of 2004, a 5% increase from the same period a year earlier. For the six months ended June 30, 2004, automobile contract purchases totaled $3.3 billion, an 11% increase, compared with $2.9 billion a year ago. As a result of higher contract originations, the Company’s portfolio of managed automobile contracts grew to $11.1 billion at June 30, 2004, up from $10.0 billion a year earlier.

Net interest income grew 13% to $197 million for the second quarter compared with $174 million for the same period a year earlier. Net interest margin was 5.02% for the second quarter compared with 5.00% for the same period a year ago. For the six months ended June 30, 2004, net interest income grew 15% to $391 million compared with $340 million for the same period a year earlier. Net interest margin was 5.03% for the six months ended June 30, 2004 compared with 4.99% for the same period a year ago.

The Company continued to increase 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 $261 million or 27% to $1.2 billion at June 30, 2004 compared with a year ago. The weighted average interest cost of deposits (excluding the effects of hedging) declined to 1.20% for the second quarter compared with 1.88% for the same period a year earlier.

The Company issued $1.5 billion of automobile receivable asset-backed securities during the quarter with a weighted average cost of funds of 3.0%. The Company continues to be the largest non-captive issuer of automobile asset-backed securities in the U.S. having issued a total of $38 billion of such securities in 63 transactions to date.

Noninterest income was $27.6 million for the three months ended June 30, 2004 compared with $27.7 million for the same period a year earlier. For the six months ended June 30, 2004, noninterest income was $56.2 million compared with $55.5 million for the same period a year ago.

Noninterest expense increased to $73.5 million or 33% of total revenues for the second quarter compared with $72.7 million or 36% of total revenues for the same period a year earlier. For the six months ended June 30, 2004, noninterest expense increased to $145 million or 32% of total revenues compared with $141 million or 36% of total revenues a year ago. The improvement in noninterest expense to total revenues is primarily the result of lower credit costs and operating efficiencies.

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 Thursday, July 22, 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. 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 or origination growth 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 July 21, 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				For the Six Months Ended
	June 30,				June 30,
	2004		2003		2004		2003
	(Dollars in thousands, except share and per share amounts)
Interest income:
Loans, including fees	$	285,893	$	286,862	$	572,193	$	568,150
Mortgage-backed securities		22,150		21,241		46,838		46,015
Investment securities		1,122		661		2,180		1,390
Other		1,818		798		3,431		1,870
TOTAL INTEREST INCOME		310,983		309,562		624,642		617,425
Interest expense:
Deposits		13,884		17,017		27,191		34,574
Notes payable on automobile secured financing		88,591		106,174		182,809		217,334
Other		11,542		12,446		23,435		25,301
TOTAL INTEREST EXPENSE		114,017		135,637		233,435		277,209
NET INTEREST INCOME		196,966		173,925		391,207		340,216
Provision for credit losses		51,539		68,036		113,834		147,921
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES		145,427		105,889		277,373		192,295
Noninterest income:
Automobile lending		25,067		22,397		50,815		44,294
Mortgage banking		249		642		484		853
Insurance income		1,690		2,006		3,514		2,935
Other		548		2,686		1,431		7,401
TOTAL NONINTEREST INCOME		27,554		27,731		56,244		55,483
Noninterest expense:
Salaries and associate benefits		45,369		41,479		87,453		80,934
Credit and collections		7,710		8,803		16,302		18,349
Data processing		4,082		4,864		8,261		9,432
Occupancy		3,851		3,903		7,727		7,743
Telephone		1,139		1,235		2,300		2,583
Other		11,302		12,373		22,627		22,055
TOTAL NONINTEREST EXPENSE		73,453		72,657		144,670		141,096
INCOME BEFORE INCOME TAX		99,528		60,963		188,947		106,682
Income tax		39,725		23,975		75,039		42,200
INCOME BEFORE MINORITY INTEREST		59,803		36,988		113,908		64,482
Minority interest in earnings of subsidiaries		5,388		5,385		16,129		9,330
NET INCOME	$	54,415	$	31,603	$	97,779	$	55,152
Net income per common share:
Basic	$	1.05	$	0.81	$	1.89	$	1.41
Diluted	$	1.04	$	0.80	$	1.86	$	1.39
Weighted average number of common shares outstanding:
Basic		51,823,013		39,212,193		51,780,338		39,207,548
Diluted		52,483,220		39,676,670		52,531,365		39,572,086
Dividends declared	$	0.14	$	0.13	$	0.28	$	0.25

WESTCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	(Unaudited)
	June 30, 2004			December 31, 2003
	(Dollars in thousands)
ASSETS
Cash	$	76,760		$	50,073
Interest bearing deposits with other financial institutions		7,981			41,009
Other short-term investments		143,000			291,000
Cash and due from banks		227,741			382,082
Restricted cash		372,587			245,399
Investment securities available for sale		133,090			117,749
Mortgage-backed securities available for sale		2,679,674			2,701,797
Loans receivable		11,572,628			11,138,483
Allowance for credit losses		(307,293	)		(301,602	)
Loans receivable, net		11,265,335			10,836,881
Premises and equipment, net		77,175			81,814
Accrued interest receivable		76,401			80,957
Other assets		167,109			169,241
TOTAL ASSETS	$	14,999,112		$	14,615,920
LIABILITIES
Deposits	$	2,009,963		$	1,972,856
Notes payable on automobile secured financing		10,434,553			10,254,641
Securities sold under agreements to repurchase					222,489
Federal Home Loan Bank advances		591,582			328,644
Subordinated debentures		373,581			394,854
Other liabilities		211,994			188,517
TOTAL LIABILITIES		13,621,673			13,362,001
Minority interest		151,802			131,434
SHAREHOLDERS’ EQUITY
Common stock (par value $1.00 per share; authorized 65,000,000 shares; issued and outstanding 51,833,196 shares at June 30, 2004 and 51,698,398 shares at December 31, 2003)		51,833			51,698
Paid-in capital		713,237			710,001
Retained earnings		511,328			427,527
Accumulated other comprehensive loss, net of tax		(50,761	)		(66,741	)
TOTAL SHAREHOLDERS’ EQUITY		1,225,637			1,122,485
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	14,999,112		$	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
	June 30,
	2004							2003
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
					(Dollars in thousands)
Interest earning assets:
Total investments:
Mortgage-backed securities	$	2,574,744	$	22,150		3.44	%	$	2,541,878	$	21,241		3.34	%
Other short-term investments		663,896		1,809		1.10			262,229		780		1.20
Investment securities		129,367		1,122		3.47			59,601		661		4.43
Interest earning deposits with others		5,530		9		0.64			8,100		18		0.89
Total investments		3,373,537		25,090		2.97			2,871,808		22,700		3.16
Total loans: (1)
Consumer loans		11,133,553		281,775		10.18			10,009,466		282,001		11.30
Mortgage loans		210,156		2,623		4.99			256,201		3,519		5.49
Commercial loans		103,042		1,440		5.53			106,387		1,242		4.62
Construction loans		5,268		55		4.09			8,418		100		4.68
Total loans		11,452,019		285,893		10.04			10,380,472		286,862		11.08
						��
Total interest earning assets	$	14,825,556		310,983		8.43	%	$	13,252,280		309,562		9.37	%
Interest bearing liabilities:
Deposits	$	2,089,287		13,884		2.67	%	$	2,011,243		17,017		3.39	%
Securities sold under agreements to repurchase									204,184		1,111		2.15
FHLB advances and other borrowings		676,914		2,053		1.09			391,019		1,456		1.47
Notes payable on automobile secured financing		10,247,231		88,591		3.46			9,406,809		106,174		4.51
Subordinated debentures		381,199		9,489		9.96			396,610		9,879		9.96
Total interest bearing liabilities	$	13,394,631		114,017		3.41	%	$	12,409,865		135,637		4.37	%
Net interest income and interest rate spread			$	196,966		5.02	%			$	173,925		5.00	%
Net yield on average interest earning assets						5.35	%						5.28	%

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

	For the Six Months Ended
	June 30,
	2004							2003
	Average				Yield/			Average				Yield/
	Balance		Interest		Rate			Balance		Interest		Rate
					(Dollars in thousands)
Interest earning assets:
Total investments:
Mortgage-backed securities	$	2,584,929	$	46,838		3.62	%	$	2,513,539	$	46,015		3.66	%
Other short-term investments		627,153		3,413		1.09			275,104		1,827		1.34
Investment securities		127,272		2,180		3.43			57,230		1,390		4.86
Interest earning deposits with others		5,775		18		0.63			9,173		43		0.94
Total investments		3,345,129		52,449		3.14			2,855,046		49,275		3.45
Total loans: (1)
Consumer loans		11,021,138		563,816		10.29			9,853,159		558,132		11.42
Mortgage loans		219,768		5,527		5.03			264,072		7,339		5.56
Commercial loans		101,165		2,743		5.36			108,309		2,529		4.64
Construction loans		4,753		107		4.43			6,862		150		4.36
Total loans		11,346,824		572,193		10.14			10,232,402		568,150		11.20
Total interest earning assets	$	14,691,953		624,642		8.55	%	$	13,087,448		617,425		9.51	%
Interest bearing liabilities:
Deposits	$	1,998,031		27,191		2.74	%	$	1,987,392		34,574		3.51	%
Securities sold under agreements to repurchase		16,885		94		1.10			226,157		2,400		2.11
FHLB advances and other borrowings		672,198		4,067		1.09			408,804		3,085		1.53
Notes payable on automobile secured financing		10,205,685		182,809		3.58			9,254,688		217,334		4.70
Subordinated debentures		387,434		19,274		9.95			397,711		19,816		9.96
Total interest bearing liabilities	$	13,280,233		233,435		3.52	%	$	12,274,752		277,209		4.52	%
Net interest income and interest Rate spread			$	391,207		5.03	%			$	340,216		4.99	%
Net yield on average interest earning assets						5.37	%						5.27	%

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

WESTCORP AND SUBSIDIARIES
OTHER FINANCIAL DATA AND STATISTICAL SUMMARY

	Q2 2004			Q1 2004			Q4 2003			Q3 2003			Q2 2003
	(Dollars in thousands, except per share amounts)
Earnings:
Net interest income	$	196,966		$	194,240		$	192,503		$	180,863		$	173,925
Provision for credit losses		51,539			62,294			72,936			73,150			68,036
Noninterest income		27,554			28,690			26,840			27,833			27,731
Noninterest expense		73,453			71,217			73,947			66,745			72,657
Income before taxes		99,528			89,419			72,460			68,801			60,963
Income taxes		39,725			35,313			28,731			27,343			23,975
Net income		54,415			43,365			39,118			29,335			31,603
Equity:
Earning per share — basic	$	1.05		$	0.84		$	0.82		$	0.65		$	0.81
Earning per share — diluted	$	1.04		$	0.83		$	0.80		$	0.64		$	0.80
Dividend per share	$	0.14		$	0.14		$	0.13		$	0.13		$	0.13
Book value per share (period end) (1)	$	24.63		$	23.71		$	23.00		$	20.89		$	19.39
Stock price per share (period end)	$	45.45		$	44.07		$	36.55		$	34.95		$	28.00
Total equity to assets (2)		9.52	%		9.30	%		9.04	%		7.54	%		6.38	%
Return on average equity (1)		17.36	%		14.37	%		14.77	%		12.92	%		16.96	%
Average shares outstanding — diluted		52,483,220			52,493,432			48,662,953			45,786,913			39,676,670
Loan Portfolio:
Automobile contracts purchased	$	1,666,842		$	1,585,173		$	1,356,505		$	1,683,402		$	1,586,616
Automobile contracts managed (period end)	$	11,113,148		$	10,850,314		$	10,596,665		$	10,475,948		$	10,049,966
Number of accounts managed (period end)		853,193			840,566			826,122			818,125			796,688
Average automobile contracts managed	$	10,946,273		$	10,726,048		$	10,549,972		$	10,284,067		$	9,839,661
Return on average automobile contracts (3)		1.99	%		1.62	%		1.48	%		1.14	%		1.28	%
Credit Quality:
Delinquency rate (30+ days)		2.21	%		1.91	%		2.90	%		2.70	%		2.75	%
Repossessions to total contracts		0.06	%		0.06	%		0.10	%		0.11	%		0.09	%
Net chargeoffs (annualized)		1.73	%		2.27	%		2.64	%		2.58	%		2.33	%
Allowance to loans receivable		2.66	%		2.67	%		2.71	%		2.71	%		2.75	%
Operations:
Total assets	$	14,999,112		$	14,745,384		$	14,615,920		$	14,238,588		$	13,665,109
Noninterest expense to total revenues		32.72	%		31.95	%		33.71	%		31.98	%		36.03	%

(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 JUNE 30, 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			2004-2
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	%		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	%		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	%		0.02	%
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	%		0.06	%
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	%		0.11	%
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	%		0.21	%
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	%		0.28	%
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	%		0.35	%
9		1.07	%		1.13	%		1.04	%		1.05	%		0.95	%		1.06	%		0.82	%		0.82	%		0.78	%		0.66	%		0.59	%		0.47	%
10		1.24	%		1.34	%		1.24	%		1.22	%		1.07	%		1.28	%		0.96	%		0.96	%		0.94	%		0.80	%		0.70	%		0.55	%
11		1.41	%		1.50	%		1.45	%		1.36	%		1.20	%		1.48	%		1.10	%		1.10	%		1.08	%		0.93	%		0.80	%		0.62	%
12		1.62	%		1.74	%		1.67	%		1.53	%		1.37	%		1.67	%		1.26	%		1.24	%		1.28	%		1.06	%		0.89	%
13		1.86	%		1.95	%		1.90	%		1.67	%		1.55	%		1.82	%		1.39	%		1.38	%		1.43	%		1.21	%		0.98	%
14		2.04	%		2.21	%		2.09	%		1.81	%		1.74	%		1.99	%		1.51	%		1.53	%		1.59	%		1.31	%		1.08	%
15		2.25	%		2.48	%		2.25	%		2.00	%		1.97	%		2.14	%		1.68	%		1.70	%		1.77	%		1.40	%
16		2.45	%		2.71	%		2.41	%		2.19	%		2.16	%		2.27	%		1.83	%		1.88	%		1.92	%		1.50	%
17		2.68	%		2.89	%		2.54	%		2.37	%		2.36	%		2.45	%		1.99	%		2.03	%		2.05	%		1.60	%
18		2.88	%		3.08	%		2.73	%		2.60	%		2.59	%		2.62	%		2.16	%		2.15	%		2.16	%
19		3.08	%		3.22	%		2.93	%		2.80	%		2.78	%		2.80	%		2.31	%		2.28	%		2.25	%
20		3.23	%		3.40	%		3.11	%		3.01	%		2.95	%		2.99	%		2.46	%		2.41	%		2.37	%
21		3.38	%		3.59	%		3.34	%		3.19	%		3.14	%		3.15	%		2.60	%		2.52	%
22		3.54	%		3.78	%		3.54	%		3.34	%		3.29	%		3.31	%		2.72	%		2.62	%
23		3.67	%		3.96	%		3.72	%		3.49	%		3.41	%		3.45	%		2.86	%		2.74	%
24		3.83	%		4.18	%		3.92	%		3.62	%		3.57	%		3.58	%		2.95	%
25		4.00	%		4.41	%		4.10	%		3.75	%		3.73	%		3.69	%		3.03	%
26		4.16	%		4.58	%		4.23	%		3.87	%		3.88	%		3.80	%		3.13	%
27		4.35	%		4.79	%		4.36	%		4.00	%		4.04	%		3.92	%
28		4.50	%		4.96	%		4.47	%		4.15	%		4.20	%		4.02	%
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	%		4.77	%
34		5.22	%		5.66	%		5.13	%		4.83	%		4.85	%
35		5.29	%		5.76	%		5.24	%		4.93	%		4.92	%
36		5.38	%		5.86	%		5.31	%		4.99	%
37		5.47	%		5.97	%		5.39	%		5.05	%
38		5.53	%		6.04	%		5.45	%		5.11	%
39		5.62	%		6.12	%		5.50	%
40		5.68	%		6.19	%		5.56	%
41		5.75	%		6.25	%		5.61	%
42		5.80	%		6.28	%
43		5.84	%		6.32	%
44		5.88	%		6.36	%
45		5.90	%
46		5.94	%
47		5.96	%
Prime Mix (2)		68	%		68	%		71	%		71	%		76	%		70	%		87	%		85	%		80	%		80	%		82	%		84	%		82	%		82	%		82	%

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