Edgar Filing: WESTCORP /CA/

Westcorp

As filed with the Securities and Exchange Commission on June 19, 2003

Registration No. 333-106037

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 1

Form S-3

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Westcorp

(Exact name of registrant as specified in its charter)


California		51-0308535
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

23 Pasteur

Irvine, California 92618-3816

(949) 727-1002

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

Ernest S. Rady

Chief Executive Officer

Westcorp

23 Pasteur

Irvine, California 92618-3816

(949) 727-1002

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to:


Andrew E. Katz, Esq. Mitchell Silberberg & Knupp LLP 11377 West Olympic Boulevard Los Angeles, California 90064-1683 (310) 312-2000		Gregg A. Noel, Esq. Skadden, Arps, Slate, Meagher & Flom LLP 300 South Grand Avenue Los Angeles, CA 90071 (213) 687-5000

Approximate date of commencement of proposed sale to the public: As promptly as possible following the declaration of effectiveness of this Registration Statement.

If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. o

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, please check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. o

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 19, 2003

3,800,000 Shares

(WESTCORP LOGO)

Common Stock

We are selling 3,800,000 shares of our common stock in this offering. We will receive all of the net proceeds from the sale of shares of common stock offered hereby.

To the extent that the underwriters sell more than 3,800,000 shares of common stock, the underwriters have the option to purchase up to an additional 570,000 shares from us at the initial price to public less the underwriting discount.

Our common stock is listed on the New York Stock Exchange under the symbol “WES.” The last reported sale price of our common stock on June 18, 2003 was $28.98 per share. Ernest Rady, Chairman of the Board of Directors and Chief Executive Officer of Westcorp, is our controlling shareholder. Mr. Rady currently owns, directly or indirectly, and following the completion of this offering will continue to own, in excess of 60% of our outstanding common stock. Following the completion of this offering our total number of shares outstanding will increase approximately 12%, excluding the effect of the shares issuable under the underwriters’ option to purchase additional shares.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7.

The shares of common stock offered hereby are not savings accounts or deposits and are not insured by the Federal Deposit Insurance Corporation or any other governmental authority or agency.

Underwriting

Price to

Discounts and

Proceeds to

Public

Commissions

Westcorp

Per Share

Total

Delivery of the shares of common stock will be made on or about , 2003.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.


Credit Suisse First Boston Goldman, Sachs & Co.
Bear, Stearns & Co. Inc. JMP Securities

The date of this prospectus is , 2003.

TABLE OF CONTENTS


FORWARD-LOOKING STATEMENTS
INDUSTRY DATA
PROSPECTUS SUMMARY
RISK FACTORS
USE OF PROCEEDS
PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION
CAPITALIZATION
SELECTED FINANCIAL DATA
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS
MANAGEMENT
PRINCIPAL STOCKHOLDERS
DESCRIPTION OF CAPITAL STOCK
UNDERWRITING
LEGAL MATTERS
EXPERTS
WHERE YOU CAN FIND MORE INFORMATION
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNATURES
EXHIBIT INDEX
EXHIBIT 23.1

TABLE OF CONTENTS


	Page

FORWARD-LOOKING STATEMENTS		ii
INDUSTRY DATA		ii
PROSPECTUS SUMMARY		1
RISK FACTORS		7
USE OF PROCEEDS		15
PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION		15
CAPITALIZATION		16
SELECTED FINANCIAL DATA		17
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		20
BUSINESS		47
MANAGEMENT		69
PRINCIPAL STOCKHOLDERS		73
DESCRIPTION OF CAPITAL STOCK		74
UNDERWRITING		75
NOTICE TO CANADIAN RESIDENTS		77
LEGAL MATTERS		78
EXPERTS		78
WHERE YOU CAN FIND MORE INFORMATION		78
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE		79
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information that is different. This document may be used only where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

FORWARD-LOOKING STATEMENTS

This prospectus includes and incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information which are based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies. These statements are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause actual results to differ materially from those expressed in or implied by these forward-looking statements.

These forward-looking statements are identified by their 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. These statements are contained in sections entitled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and other sections of this prospectus and in the documents incorporated by reference in this prospectus.

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 hedging activities;

	•	our financial condition and liquidity, as well as future cash flows and earnings;

	•	competition;

	•	our level of operating expenses;

	•	the effect, interpretation, or application of new or existing laws, regulations and court decisions;

	•	the availability of sources of funding;

	•	the level of chargeoffs on the automobile contracts that we originate; and

	•	significant litigation.

If one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect, our actual results may vary materially from those expected, estimated or projected.

We do not undertake to update our forward-looking statements or risk factors to reflect future events or circumstances.

INDUSTRY DATA

In this prospectus, we rely on and refer to information regarding the automobile lending industry from market research reports, analyst reports and other publicly available information including, without limitation, reports issued or prepared by CNW Marketing/Research. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

PROSPECTUS SUMMARY

This summary highlights certain information found in greater detail elsewhere in this prospectus. It does not contain all the information that may be important to you in making a decision to purchase our common stock. We urge you to read the entire prospectus carefully, including “Risk Factors” and our consolidated financial statements and related notes, before deciding to invest in our common stock. In this prospectus, the “company,” “we,” “us” and “our” refer to Westcorp and its subsidiaries, except where it is otherwise noted. Unless we indicate otherwise, all information in this prospectus assumes the underwriters will not exercise their over-allotment option.

Westcorp

Our Company

We are a diversified financial services holding company that provides automobile lending services through our second-tier subsidiary, WFS Financial Inc, which we refer to as WFS, and retail and commercial banking services through our wholly owned subsidiary, Western Financial Bank, which we refer to as the Bank. The Bank currently owns 84% of the capital stock of WFS. We primarily earn income by originating assets, including automobile contracts, that generate a yield in excess of the cost of the liabilities, including deposits, that fund these assets.

We have grown substantially over the past three years. As of March 31, 2003, we had $13.2 billion in total assets, $9.7 billion in automobile loans and $638 million in common equity, representing a three-year compounded annual growth rate of 36.8%, 19.4% and 18.7%, respectively. For the trailing twelve months ended March 31, 2003 we originated $5.5 billion of automobile contracts and generated $86.4 million of net income and earnings per share of $2.19.

Automobile Lending Operations

We are one of the nation’s largest independent automobile finance companies with over 30 years of experience in the automobile finance industry. We believe the automobile finance industry is the second largest consumer finance industry in the United States with over $895 billion of loan and lease originations during 2002. We originate new and pre-owned automobile installment contracts, otherwise known as contracts, through our relationships with approximately 7,900 franchised and independent automobile dealers nationwide. We originated $1.4 billion of contracts during the first quarter in 2003 and owned a portfolio of $9.7 billion contracts at March 31, 2003.

For the three months ended March 31, 2003, approximately 28% of our contract originations were for the purchase of new automobiles and approximately 72% of our contract originations were for the purchase of pre-owned automobiles. Approximately 82% of our contract originations were what we refer to as prime contracts and approximately 18% of our contract originations were what we refer to as non-prime contracts. Our determination of whether a contract is categorized as prime, non-prime or other is based on a number of factors including the borrower’s credit history and our expectation of credit loss.

We underwrite contracts through a credit approval process that is supported and controlled by a centralized, automated front-end system. This system incorporates proprietary credit scoring models and industry credit scoring models and tools, which enhance our credit analysts’ ability to tailor each contract’s pricing and structure to maximize risk-adjusted returns. We believe that as a result of our sophisticated credit and underwriting systems, we are able to earn attractive risk-adjusted returns on our contracts. For the trailing twelve months ended March 31, 2003, the average net interest spread on our automobile contract originations was 8.39% and the net interest spread on our managed automobile portfolio was 6.76% while net credit losses averaged 2.86% for the same period.

We structure our business to minimize operating costs while providing high quality service to our dealers. Those aspects of our business that require a local market presence are performed on a decentralized basis in our 41 offices. All other operations are centralized. We fund our purchases of

contracts, on an interim basis, with deposits raised through our banking operations, which are insured by the Federal Deposit Insurance Corporation, also known as the FDIC, and other borrowings. For long-term financing, we issue automobile contract asset-backed securities. Since 1985, we have sold or securitized over $31 billion of contracts in 59 public offerings of asset-backed securities, making us the fourth largest issuer of such securities in the nation. We have employed a range of securitization structures and our most recent $1.5 billion issuance of asset-backed securities was structured as a senior/subordinated transaction with a weighted average interest rate of 2.13%.

Banking Operations

The primary focus of our banking operations is to generate diverse, low-cost funds to provide the liquidity needed to fund our acquisition of contracts. The Bank has the ability to raise significant amounts of liquidity by attracting both short-term and long-term deposits from the general public, commercial enterprises and institutions by offering a variety of accounts and rates. These funds are generated through the Bank’s retail and commercial banking divisions. The Bank also may raise funds by obtaining advances from the Federal Home Loan Bank, also known as the FHLB, selling securities under agreements to repurchase and utilizing other borrowings. The Bank’s retail banking division serves the needs of individuals and small businesses by offering a broad range of products through 18 retail branches located throughout Southern California. The Bank’s commercial banking division focuses on medium-sized businesses in Southern California. At March 31, 2003, the total deposits gathered by both the retail and commercial banking divisions were $2.1 billion. Approximately 86% of these accounts were demand deposits, money market accounts and certificate of deposit accounts under $100,000 in principal, which we believe represent a stable and attractive source of funding.

The Bank also invests deposits generated by its retail and commercial banking divisions in mortgage-backed securities. Our investment in mortgage-backed securities, together with the cash balances that we maintain, create a significant liquidity portfolio that provides us with additional funding security.

Our Business Strategy

Our business objective is to maximize long-term profitability by efficiently purchasing and servicing prime and non-prime credit quality automobile contracts that generate strong and consistent risk-adjusted returns. We achieve this objective by employing our business strategy, which includes the following key elements:


	•	produce consistent growth through our strong dealer relationships;

	•	price automobile contracts to maximize risk-adjusted returns by using advanced technology and experienced underwriters;

	•	create operating efficiencies through technology and best practices;

	•	generate low cost liquidity through positive operating cash flows and diverse funding sources; and

	•	record high quality earnings and maintain a conservative, well-capitalized balance sheet.

Our Address

Our principal executive office and mailing address is 23 Pasteur, Irvine, California 92618-3816, and our telephone number is (949) 727-1002. Our Web site address is http://www.westcorpinc.com. The information contained in our Web site does not constitute part of this prospectus.

The Offering


Issuer		Westcorp
Common stock offered		3,800,000 shares
Underwriters’ option to purchase additional shares		570,000 shares
Common stock outstanding after this offering and concurrent placements(1)		43,834,709 shares
Use of proceeds		Substantially all of the proceeds will be used to purchase automobile contracts from WFS or will be contributed or invested in the Bank or WFS. The balance of the proceeds, if any, will be used by us for general corporate purposes.
New York Stock Exchange symbol		WES


(1)	The number of total shares outstanding after this offering is based on the number of shares outstanding as of March 31, 2003, and includes:


	•	700,000 shares of common stock being purchased by Mr. Rady and his affiliates; and

	•	130,000 shares of common stock being purchased by our Employee Stock Ownership Plan and Salary Savings Plan.

The price of the shares being purchased by Mr. Rady and his affiliates and our ESOP will be the price to public as set forth on the cover page to this prospectus. Both placements will close concurrently with this offering. In order to fund the ESOP’s purchase, Westcorp intends to make a cash contribution to the ESOP in an amount equal to the aggregate purchase price.

The number of total shares outstanding after this offering excludes:


	•	606,420 shares of common stock issuable upon exercise of outstanding options under our stock incentive plan, at a weighted average share price of $14.85 per share;

	•	2,173,875 shares available for future issuance under our stock incentive plan; and

	•	570,000 shares issuable under the underwriters’ over-allotment option.

Summary Financial Data

Our summary balance sheet and operating data for the years ended December 31, 2002, 2001 and 2000 have been derived from our audited consolidated financial statements. Certain amounts from the prior year consolidated financial statements have been reclassified to conform to the 2003 presentation. The balance sheet data at March 31, 2003 and 2002 and the operating data for the three months ended March 31, 2003 and 2002 have been derived from our unaudited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all normal recurring adjustments necessary for the fair presentation of financial position and results of operations for those periods.

The summary financial data set forth below should be read in conjunction with our consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included or incorporated by reference elsewhere herein including the impact of changing the structure of our securitizations from sale transactions to secured financings. The financial data is qualified in its entirety by the more detailed financial information contained elsewhere or incorporated by reference herein. Information regarding our compliance with applicable regulatory capital requirements is included in this prospectus under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity — Capital Requirements.”



		For the Three Months Ended
		March 31,						For the Year Ended December 31,

		2003			2002			2002			2001			2000


		(Dollars in thousands, except per share amounts)
Consolidated Summary of Operations:
Interest income		$	307,502		$	262,196		$	1,142,940		$	962,627		$	583,821
Interest expense			141,212			120,070			530,916			491,944			313,872

	Net interest income		166,290			142,126			612,024			470,683			269,949
Provision for credit losses			79,884			65,698			306,233			196,977			82,133

	Net interest income after provision for credit losses		86,406			76,428			305,791			273,706			187,816
Noninterest income			27,753			17,159			90,430			78,899			177,884
Noninterest expense			68,439			60,859			251,306			244,871			220,973

Income before income tax			45,720			32,728			144,915			107,734			144,727
Income tax			18,226			12,964			52,044			41,675			58,132

	Income before minority interest		27,494			19,764			92,871			66,059			86,595
Minority interest in earnings of subsidiaries			3,945			2,911			13,153			10,369			11,852

Net income		$	23,549		$	16,853		$	79,718		$	55,690		$	74,743

Weighted average number of shares and common share equivalents — diluted			39,452,915			36,980,861			38,922,611			34,485,127			29,525,677
Earnings per common share		$	0.60		$	0.46		$	2.05		$	1.61		$	2.53
Dividends per common share		$	0.12		$	0.11		$	0.47		$	0.44		$	0.30
Dividend payout ratio			20.1	%		24.1	%		22.9	%		27.3	%		11.9	%



				March 31, 2003				December 31,

				Actual		As Adjusted(1)		2002		2001		2000


				(Dollars in thousands)
Consolidated Summary of Financial Condition:
Assets:
	Cash			$	46,999	$	171,508	$	25,211	$	68,607	$	61,543
	Loans:
		Consumer(2)			9,817,459		9,817,459		9,063,755		7,092,959		4,309,317
		Mortgage(3)			269,368		269,368		282,930		373,455		507,431
		Commercial			93,339		93,339		97,216		85,312		107,586
	Mortgage-backed securities				2,790,310		2,790,310		2,649,657		2,092,225		2,230,448
	Investments and time deposits				110,502		110,502		115,771		110,667		102,311
	Other assets				41,484		41,484		176,336		249,172		549,274

			Total assets	$	13,169,461	$	13,293,970	$	12,410,876	$	10,072,397	$	7,867,910

Liabilities:
	Deposits			$	2,084,725	$	2,084,725	$	1,974,984	$	2,329,326	$	2,478,487
	Notes payable on automobile secured financings				9,265,725		9,265,725		8,422,915		5,886,227		3,473,377
	FHLB advances and other borrowings				515,265		515,265		618,766		723,675		616,193
	Amounts held on behalf of trustee								177,642		280,496		494,858
	Subordinated debentures				397,406		397,406		400,561		147,714		189,962
	Other liabilities				162,749		158,982		101,145		85,994		71,221

			Total liabilities		12,425,870		12,422,103		11,696,013		9,453,432		7,324,098
Minority interest in equity of subsidiaries					105,798		105,798		101,666		78,261		56,644
Shareholders’ equity					637,793		766,069		613,197		540,704		487,168

			Total liabilities and shareholders’ equity	$	13,169,461	$	13,293,970	$	12,410,876	$	10,072,397	$	7,867,910



	At or For the
	Three Months Ended
	March 31,						At or For the Year Ended December 31,

	2003			2002			2002			2001			2000


	(Dollars in thousands)
Operating Statistics — Automobile Only:
Automobile contract originations	$	1,352,053		$	1,265,526		$	5,415,734		$	4,863,279		$	4,219,227
Percent of prime automobile contracts originated		82.4	%		79.4	%		80.3	%		75.6	%		68.8	%
Automobile contracts managed at end of period	$	9,650,229		$	8,405,634		$	9,389,974		$	8,152,882		$	6,818,182
Weighted average coupon on originated automobile contacts		10.6	%		11.7	%		11.4	%		12.7	%		14.0	%
Operating expenses as a percentage of average managed automobile contracts		2.5	%		2.5	%		2.4	%		2.7	%		3.1	%
Automobile contracts delinquent 60 days or greater		0.7	%		0.7	%		1.0	%		1.1	%		0.9	%
Net chargeoffs as a percent of the average outstanding managed automobile contracts		2.9	%		2.8	%		2.8	%		2.3	%		1.9	%



			For the Three Months Ended
			March 31,						For the Year Ended December 31,

			2003			2002			2002			2001			2000


			(Dollars in thousands)
Other Selected Financial Data:
Average assets			$	12,932,117		$	10,433,517		$	11,572,027		$	9,280,377		$	6,242,668
Return on average assets				0.73	%		0.65	%		0.69	%		0.60	%		1.20	%
Average shareholders’ equity(4)			$	722,610		$	614,157		$	654,109		$	570,298		$	450,323
Return on average shareholders’ equity(4)				13.04	%		10.98	%		12.19	%		9.77	%		16.60	%
Equity to assets ratio(4)				5.57	%		5.32	%		5.76	%		5.97	%		6.38	%
Book value per share(4)			$	18.71		$	16.98		$	18.23		$	16.80		$	15.72
Originations:
	Consumer loans(2)		$	1,353,928		$	1,266,189		$	5,419,296		$	4,869,970		$	4,232,115
	Mortgage loans(3)			4,314			9,139			23,950			23,001			33,124
	Commercial loans(3)			96,684			61,268			354,439			291,944			266,342

		Total originations	$	1,454,926		$	1,336,596		$	5,797,685		$	5,184,915		$	4,531,581

Interest rate spread				5.02	%		5.57	%		5.29	%		4.99	%		4.37	%


(1)	As adjusted to reflect the offering and the placement of shares with Mr. Rady and his affiliates and our ESOP.

(2)	Net of unearned discounts.

(3)	Net of undisbursed loan proceeds.

(4)	Accumulated other comprehensive income excluded from shareholders’ equity.

RISK FACTORS

This offering involves a high degree of risk. You should carefully consider the risks described below and the other information in this prospectus and the information incorporated by reference before deciding to invest in our common stock. Our business, operating results and financial condition could be adversely affected by any of the following specific risks. The trading price of our common stock could decline due to any of these risks and other industry risks, and you could lose all or part of your investment. In addition to the risks described below, we may encounter risks that are not currently known to us or that we currently deem immaterial, which may also impair our business operations and your investment in our common stock.

Risks Related to the Offering

We have broad discretion in how we use the proceeds from this offering and may use them in ways with which you disagree.

We intend to use substantially all of the proceeds from this offering to finance our growth in automobile contracts and to use the balance of the proceeds, if any, for general corporate purposes. However, our management will have significant flexibility in applying the net proceeds of this offering. The failure of management to use such funds effectively could have a material adverse effect on our financial position, liquidity and results of operations by reducing or eliminating our net income from operations. See “Use of Proceeds.”

Risks Related to Factors Outside Our Control

Adverse economic conditions may impact our profitability.

Delinquencies, defaults, repossessions and credit losses generally increase during periods of economic slowdown, recession or higher unemployment. These periods also may be accompanied by decreased consumer demand for automobiles and declining values of automobiles securing outstanding contracts, which weakens collateral coverage and increases the amount of loss in the event of default. Significant increases in the inventory of pre-owned automobiles during periods of economic recession also may depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. Because a portion of our borrowers are considered non-prime borrowers, the actual rates of delinquencies, defaults, repossessions and credit losses on these contracts are higher than those experienced in the general automobile finance industry for borrowers considered to be prime borrowers and could be more dramatically affected by a general economic downturn. In addition, during an economic slowdown or recession, our servicing costs may increase without a corresponding increase in our servicing fee income. While we seek to manage the higher risk inherent in non-prime contracts through the underwriting criteria and collection methods we employ, we cannot assure you that these criteria or methods will afford adequate protection against these risks. Any sustained period of increased delinquencies, defaults, repossessions, credit losses or servicing costs could adversely affect our financial position, liquidity and results of operations and our ability to enter into future securitizations.

Interest rate fluctuations may impact our profitability.

Our profitability may be directly affected by the level of and fluctuations in interest rates, which affects the gross interest rate spread we earn on our contracts. As interest rates change, our gross interest rate spread on new originations may increase or decrease depending upon the interest rate environment. In addition, the rates charged on the contracts originated or purchased from dealers are limited by statutory maximums, restricting our opportunity to pass on increased interest costs. We believe that our profitability and liquidity could be adversely affected during any period of changing interest rates, possibly to a material degree. We monitor the interest rate environment and employ our hedging strategies designed to mitigate the impact of changes in interest rates. We cannot assure you that our hedging strategies will mitigate the impact of changes in interest rates.

Prepayment of contracts may impact our profitability.

Our contracts may be repaid by borrowers at any time at their option. Early repayment of contracts will limit the amount of earnings we would have otherwise received under those contracts.

Wholesale auction values may impact our profitability.

We sell repossessed automobiles at wholesale auction markets located throughout the United States. Auction proceeds from the sale of repossessed vehicles and other recoveries usually do not cover the outstanding balance of the contracts, and the resulting deficiencies are charged off. Decreased auction proceeds resulting from the depressed prices at which pre-owned automobiles may be sold during periods of economic slowdown or recession will result in higher credit losses for us. Furthermore, depressed wholesale prices for pre-owned automobiles may result from significant liquidations of rental or fleet inventories and from increased volume of trade-ins due to promotional financing programs offered by new vehicle manufacturers. There can be no assurance that our recovery rates will stabilize or improve in the future.

Risks Related to Us

The ownership of our common stock is concentrated, which may result in conflicts of interest and actions that are not in the best interests of other stockholders of the Company.

Ernest S. Rady is the founder, Chairman of the Board of Directors and Chief Executive Officer of Westcorp. Mr. Rady is also the Chairman of the Board of Directors and Chief Executive Officer of the Bank and the Chairman of the Board of Directors of WFS. Immediately after the completion of this offering and the placement of shares with Mr. Rady and his affiliates, Mr. Rady will be the beneficial owner of approximately 62.8% of the outstanding shares of common stock of Westcorp and will be able to exercise significant control over our company. The Westcorp common stock ownership of Mr. Rady enables him to elect all of Westcorp’s directors and effectively control the vote on all matters submitted to a vote of Westcorp, including mergers, sales of all or substantially all of our assets, “going private” transactions, conversions and other corporate restructurings or reorganizations. Because of the significant block of Westcorp common stock controlled by Mr. Rady, decisions may be made that, while in the best interest of Mr. Rady, may not be in the best interest of other stockholders.

We are a holding company with no operations of our own.

The results of our operations and our financial condition are dependent upon the business activities of our two principal consolidated subsidiaries, the Bank and WFS. In addition, our ability to fund our operations and pay dividends on our common stock is dependent upon the earnings from the businesses conducted by our subsidiaries. Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds for our payment obligations, whether by dividends, distributions, loans or other payments. Any distribution of funds to us from our subsidiaries is subject to statutory, regulatory or contractual restrictions, subsidiaries’ earnings and various other business considerations.

A significant portion of our cash flow comes from our second-tier subsidiary WFS. WFS is an 84% owned subsidiary of the Bank. The Bank is subject to limitations upon its ability to pay dividends to us by the terms of the subordinated debentures it has issued and regulations of the Office of Thrift Supervision, also known as the OTS. WFS does not have any obligation to pay amounts to the Bank except pursuant to the senior unsecured intercompany promissory notes issued by WFS to the Bank by which the Bank funds WFS’ operations. In addition, the ability of WFS to repay its obligations to the Bank may be impaired by deficiencies in WFS’ automobile finance operations. Furthermore, any amounts owed to creditors of WFS, which may have priority over any obligations WFS has to the Bank under the senior promissory notes, may impair the Bank’s ability to have funds available for dividend to us.

We have substantial debt that could limit our ability to declare and pay dividends and reduce the effectiveness of our operations.

Through our subsidiaries, we have substantial debt and debt service requirements. As of March 31, 2003, our total debt, as a percentage of total capitalization, was 95%. This substantial level of debt may have important consequences, including:


	•	limiting our ability to borrow additional amounts for origination of automobile contracts, capital expenditures and debt service requirements;

	•	limiting our ability to use operating cash flows in other areas of our business;

	•	increasing our vulnerability to general adverse economic conditions; and

	•	limiting our ability to capitalize on business opportunities and to react to competitive pressures.

We cannot assure you that we will generate sufficient cash flows from operations, or that we will be able to obtain sufficient funding for our operations or to declare and pay dividends on our common stock. In addition, any future indebtedness would further increase our debt leverage and the associated risks.

The availability of our financing sources may depend on factors outside of our control.

We depend on a significant amount of financing to operate our business. Our business strategy utilizes diverse funding sources to fund our operations. These sources include raising both short-term and long-term deposits from the general public, commercial enterprises and institutions by offering a variety of accounts and rates through our retail and commercial banking operations. In addition, we raise funds through the collection of principal and interest from loans, automobile asset-backed securities, commercial paper, advances from the FHLB, repurchase agreements, subordinated debentures and equity offerings. The sources used vary depending on such factors as rates paid, maturities and the impact on capital.

The availability of these financing sources may depend on factors outside of our control, including regulatory issues such as the capital requirements of the Bank, debt ratings, competition, the market for automobile asset-backed securities and our ability to receive financing from other financial institutions. If we are unable to raise the funds we require at reasonable rates, we will either have to curtail our loan origination activities or incur the effects of increased costs of operation. Reducing our loan origination activities may adversely affect our ability to remain a preferred source of financing for the dealers from whom we purchase automobile contracts. An increase in our costs of operations will have an adverse effect on our financial position, liquidity and results of operations by increasing our interest expense and reducing our net interest income.

We may not be able to generate sufficient operating cash flows to run our automobile finance operations.

Our automobile finance operations require substantial operating cash flows. Operating cash requirements include premiums paid to dealers for acquisition of automobile contracts, expenses incurred in connection with the securitization of automobile contracts, capital expenditures for new technologies and ongoing operating costs. Our primary source of operating cash comes from the excess cash flows received from securitizations and contracts held on the balance sheet. The timing and amount of excess cash flows from contracts varies based on a number of factors, including:


	•	the rates and amounts of loan delinquencies, defaults and net credit losses;

	•	how quickly and at what price repossessed vehicles can be resold;


	•	the ages of the contracts in the portfolio;

	•	levels of voluntary prepayments; and

	•	the terms of our securitizations, which include performance based triggers requiring higher levels of credit enhancements to the extent credit losses or delinquencies exceed certain thresholds. We have exceeded performance thresholds in the past and may do so again in the future.

Any adverse change in these factors could reduce or eliminate excess cash flows to us. Although we currently have positive operating cash flows, we cannot assure you that we will continue to generate positive cash flows in the future, which could have a material adverse effect on our financial position, liquidity and results of operations.

Changes in our securitization program could adversely affect our liquidity and earnings.

Our business depends on our ability to aggregate and sell automobile contracts in the form of asset-backed securities. These sales generate cash proceeds that allow us to repay amounts borrowed and to purchase additional automobile contracts. Changes in our asset-backed securities program could materially adversely affect our earnings or ability to purchase and resell automobile contracts on a timely basis. Such changes could include:


	•	delay in the completion of a planned securitization;

	•	negative market perception of us; or

	•	failure of the automobile contracts we intend to sell to conform to insurance company and rating agency requirements.

If we are unable to effectively securitize our automobile contracts, we may have to reduce or even curtail our automobile contract purchasing activities, which would have a material adverse effect on our financial position, liquidity and results of operations.

We utilize credit enhancements to maintain favorable interest rates and cash requirements for our automobile asset-backed securitizations.

To date, all but three of our outstanding securitizations have used credit enhancement in the form of financial guaranty insurance policies issued by Financial Security Assurance Inc., also known as FSA, with the others using a senior/ subordinated structure to credit enhance the securitization. An inability to credit enhance our securitizations using either approach could have a material adverse effect on our financial position, liquidity and results of operations by increasing the total costs of our securitization activities and thereby reducing our net income or resulting in our failure to meet regulatory limitations.

If we lose access to the cash produced by securitized automobile contracts, we may not be able to obtain comparable financing.

We have access to the cash flows of the automobile contracts sold in each outstanding securitization credit enhanced by FSA (including the cash held in “spread accounts” associated with each securitization) through a series of agreements into which the Bank, WFS, WFS Financial Auto Loans 2, Inc., a special purpose subsidiary of WFS also known as WFAL2, and other parties have entered. We are permitted to use that cash as we determine, including in the ordinary business activities of originating automobile contracts.

In each securitization credit enhanced by FSA, the governing agreements require that all cash flows of the relevant trust and the associated spread account be invested in an eligible investment. In connection with each securitization, the relevant trust has entered into a reinvestment contract, also known as a trust reinvestment contract, which is or qualifies as an eligible investment.

A limited portion of the funds invested in trust reinvestment contracts may be used by WFAL2 and the balance may be used by the Bank. The Bank makes its portion of the invested funds available to WFS through another reinvestment contract, also known as the WFS reinvestment contract. Under the WFS reinvestment contract, WFS receives access to all cash available to the Bank under each trust reinvestment contract. WFS is obligated to repay the Bank as needed by the Bank to meet its obligations under the individual trust reinvestment contracts. The portion of the cash available to WFAL2 under the individual trust reinvestment contracts is used to purchase automobile contracts from WFS according to the terms of sale and servicing agreements entered into with WFS. If the trust reinvestment contracts were no longer deemed an eligible investment, which determination would be made by the rating agencies or FSA, the Bank and WFAL2 would no longer have the ability to use this cash in the ordinary course of business and would need to obtain alternative financing, which may only be available on less attractive terms. If the Bank and WFAL2 were unable to obtain alternative financing, WFS may have to curtail its automobile contract purchasing activities, which would have a material adverse effect on our financial position, liquidity and results of operations.

A loss of contractual servicing rights could have a material effect on our business.

As servicer of all our securitized automobile contracts, WFS is entitled to receive contractual servicing fees. Contractual servicing fees are earned at a rate of 1.25% per annum on the outstanding balance of automobile contracts securitized. FSA, as insurer with respect to those currently outstanding securitizations as to which it has provided credit enhancement, can terminate WFS’ right to act as servicer for those transactions upon the occurrence of events defined in the sale and servicing agreements for securitized automobile contracts, such as our bankruptcy or material breach of warranties or covenants contained in the sale and servicing agreement. Any loss of such servicing rights could have a material adverse effect on our financial position, liquidity and results of operations by reducing our net income upon the elimination of that contractual servicing income.

We expect our operating results to continue to fluctuate, which may adversely impact our business.

Our results of operations have fluctuated in the past and are expected to fluctuate in the future. Factors that could affect our quarterly earnings include:


	•	variations in the volume of automobile contracts originated, which historically tend to be lower in the first and fourth quarters of the year;

	•	interest rate spreads;

	•	the effectiveness of our hedging strategies;

	•	credit losses, which historically tend to be higher in the first and fourth quarters of the year; and

	•	operating costs.

Competition in the industry may adversely impact our ability to maintain our business at the current level of operations.

The automobile finance business is highly competitive. We compete with captive automobile finance companies owned by major automobile manufacturers, banks, credit unions, savings associations and independent consumer finance companies. Many of these competitors have greater financial and marketing resources than we have. Additionally, from time to time the captive finance companies provide financing on terms significantly more favorable to automobile purchasers than we can offer. For example, captive finance companies can offer special low or no interest loan programs as incentives to purchasers of selected models of automobiles manufactured by their respective parent manufacturers.

Many of our competitors also have longstanding relationships with automobile dealers and may offer dealers or their customers other forms of financing, including dealer floor plan financing and leasing, which we currently do not provide. Providers of automobile financing have traditionally competed on the basis of

interest rates charged, the quality of credit accepted, the flexibility of loan terms offered and the quality of service provided to dealers and customers. In seeking to establish WFS as one of the principal financing sources of the dealers we serve, we compete predominately on the basis of our high level of dealer service and strong dealer relationships and by offering flexible contract terms to automobile purchasers.

Competition in the retail banking business comes primarily from commercial banks, credit unions, savings and loan associations, mutual funds and issuers of securities. Many of the nation’s largest savings and loan associations and other depository institutions have locations in Southern California. We compete for deposits primarily on the basis of interest rates paid and the quality of service provided to our customers.

Our business is subject to litigation.

We are subject to various putative class actions alleging claims under the Equal Credit Opportunity Act or similar state laws, including under the California Business and Professions Code and the California Unruh Civil Rights Act. Although we are vigorously defending these actions, we cannot assure you that the outcome of these proceedings will not have a material adverse effect upon our financial condition, results of operations and cash flows. See “Business — Legal Proceedings.”

Risks Related to Regulatory Factors

Regulatory requirements may restrict our ability to do business.

The Bank is subject to inspection and regulation by the OTS pursuant to the Home Owners Loan Act, as amended, also known as HOLA. The OTS is the primary federal banking agency responsible for its supervision and regulation. HOLA limits the amount of our consumer loans, commercial loans and investment in service corporations. The Bank is precluded from holding consumer loans, including automobile contracts, on its consolidated balance sheet, in an aggregate principal balance in excess of 30% of its total consolidated assets. The limitation is increased to 35% of consolidated assets if all of the consumer loans in excess of the 30% limit are obtained by the Bank and its operating subsidiaries directly from consumers. The Bank is precluded from holding commercial loans, including loans to our service corporations, on its consolidated balance sheet, in an aggregate principal balance in excess of 10% of its total consolidated assets. Commercial loans secured by real estate and small business loans with $2.0 million or less in outstanding principal are not included in the calculation of the percentage of commercial loans. Interests in consumer loans held by the Bank’s service corporations are not included in the limits on such assets described above. The Bank is precluded from investing more than 2.0% of its consolidated assets in service corporations, although it may invest an additional 1% in service corporations devoted to community service activities as specified in the regulations. Retained earnings or losses from the operations of our service corporations are not included in the calculation of our investment in service corporations. In addition, other regulatory actions taken by the OTS could have a negative impact on the price of our common stock.

Our securitization activities are structured to enable the Bank to remove securitized automobile contracts from the HOLA consumer loan limitation calculation. Changes in the OTS’s interpretation of HOLA as it affects our securitization activities could cause us to change the manner in which we securitize automobile contracts or to limit our acquisition of such contracts, thereby negatively impacting the price of our common stock. Furthermore, if we are unable to continue to securitize the automobile contracts we purchase, this regulatory limitation may force us to limit our acquisition of new automobile contracts, thereby adversely affecting our ability to remain a preferred source of financing for the dealers from whom we purchase automobile contracts, or cause us to fail the regulatory limitations. Any such limitations may also have a material adverse effect on our financial position, liquidity and results of operations.

The OTS has the power to enforce HOLA and its regulations by a variety of actions ranging from a memorandum of understanding to cease and desist proceedings under the Federal Deposit Insurance Act. As such, the OTS has broad powers to, among other things, require us to change our business practices,

hold additional capital and change management. Such action could have a material adverse impact on our business and may impact our securities prices, including our common stock, and access to the capital markets.

OTS guidance regarding subprime lending may affect the Bank’s capital requirements.

The OTS, along with other federal banking regulatory agencies, has adopted guidance pertaining to subprime lending programs. Pursuant to the guidance, lending programs which provide credit to borrowers whose credit histories reflect specified negative characteristics, such as recent bankruptcies or payment delinquencies, are deemed to be subprime lending programs for regulatory purposes. Many of the contracts that we originate possess one or more of the factors identified in the guidance as indicative of a subprime loan for this purpose. Pursuant to the guidance, examiners may require that an institution with a lending program deemed to be subprime hold additional capital that ranges from one and one-half to three times the normal capital required for similar loans made to borrowers who are not deemed to be subprime borrowers.

Because many of the automobile contracts we originate possess one or more of the factors identified in the guidance as indicative of a subprime loan, we maintain our capital levels higher than would otherwise be required by regulations. Maintaining higher capital levels may slow our growth, require us to raise additional capital or sell assets, all of which could negatively impact our earnings. We cannot predict to what extent the Bank may be required to hold additional capital with respect to those automobile contracts we hold as to which the borrowers are deemed by the OTS to be subprime borrowers.

Other regulatory requirements may affect our ability to do business.

Our operations are subject to regulation, supervision and licensing under various federal, state and local statutes, ordinances and regulations.

In most states in which we operate, a consumer credit regulatory agency regulates and enforces laws relating to consumer lenders and sales finance agencies such as WFS. These rules and regulations generally provide for licensing of sales finance agencies, limitations on the amount, duration and charges, including interest rates, for various categories of loans, requirements as to the form and content of finance contracts and other documentation, and restrictions on collection practices and creditors’ rights. So long as WFS is an operating subsidiary of the Bank, licensing and certain other of these requirements are not applicable to WFS due to federal preemption.

We are also subject to extensive federal regulation, including the Truth in Lending Act, the Equal Credit Opportunity Act and the Fair Credit Reporting Act. These laws require us to provide certain disclosures to prospective borrowers and protect against discriminatory lending practices and unfair credit practices. The principal disclosures required under the Truth in Lending Act include the terms of repayment, the total finance charge and the annual percentage rate charged on each loan. The Equal Credit Opportunity Act prohibits creditors from discriminating against loan applicants on the basis of race, color, sex, age or marital status. Pursuant to Regulation B promulgated under the Equal Credit Opportunity Act, creditors are required to make certain disclosures regarding consumer rights and advise consumers whose credit applications are not approved of the reasons for the rejection. In addition, the credit scoring system we use must comply with the requirements for such a system as set forth in the Equal Credit Opportunity Act and Regulation B. The Fair Credit Reporting Act requires us to provide certain information to consumers whose credit applications are not approved on the basis of a report obtained from a consumer reporting agency. Additionally, we are subject to the Gramm-Leach-Bliley Act, which requires us to maintain privacy with respect to certain consumer data in our possession and to periodically communicate with consumers on privacy matters. We are also subject to the Soldiers’ and Sailors’ Civil Relief Act, and similar state laws, which requires us to reduce the interest rate charged on each loan to customers who have subsequently joined the military.

The dealers that originate automobile contracts we purchase also must comply with both state and federal credit and trade practice statutes and regulations. Failure of the dealers to comply with these

statutes and regulations could result in consumers having rights of rescission and other remedies that could have an adverse effect on us.

We believe that we maintain all material licenses and permits required for our current operations and are in substantial compliance with all applicable local, state and federal regulations. There can be no assurance, however, that we will be able to maintain all requisite licenses and permits, and the failure to satisfy those and other regulatory requirements could have a material adverse effect on our operations. Further, the adoption of additional, or the revision of existing, rules and regulations could have a material adverse effect on our business.

We are subject to routine periodic examinations by the OTS on a variety of financial and regulatory matters. The Bank is currently under review by the OTS as part of its annual safety and soundness examination.

USE OF PROCEEDS

We expect to receive approximately $104.2 million in net proceeds, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, from the sale of shares of our common stock in this offering based on the sale of 3,800,000 shares at an assumed public offering price of $28.98 per share, which was the closing price of our common stock on the New York Stock Exchange on June 18, 2003. If the underwriters exercise in full their option to purchase an additional 570,000 shares of our common stock, we expect our additional net proceeds to be approximately $15.7 million. In addition, we expect to receive an additional $20.3 million in net proceeds from the concurrent placement of our common stock to Mr. Rady and his affiliates (assuming a purchase price of $28.98 per share, which was the closing price of our common stock on the NYSE on June 18, 2003). Substantially all of the proceeds from this offering and the concurrent placements of common stock will be used to purchase automobile contracts from WFS or will be contributed or invested in the Bank or WFS. The balance of the proceeds, if any, will be used by us for general corporate purposes.

PRICE RANGE OF COMMON STOCK AND DIVIDEND INFORMATION

The common stock of our company has been publicly traded since August 8, 1986 on the NYSE under the symbol WES. The following table sets forth the high and low sale prices by quarter in 2003, 2002 and 2001, as reported by the NYSE, and the dividends declared on the common stock during those quarters.



		Westcorp Common Stock

						Cash
						Dividends
		High		Low		Declared

Calendar 2001
	First Quarter	$	18.66	$	14.68	$	0.11
	Second Quarter		23.70		16.45		0.11
	Third Quarter		23.41		16.00		0.11
	Fourth Quarter		19.45		16.05		0.11
Calendar 2002
	First Quarter		22.55		15.70		0.12
	Second Quarter		31.95		22.50		0.12
	Third Quarter		31.41		18.10		0.12
	Fourth Quarter		21.63		16.92		0.12
Calendar 2003
	First Quarter		23.25		18.30		0.13
	Second Quarter (through June 18, 2003)		30.14		18.55		0.13

The closing price of our common stock on the NYSE on June 18, 2003 was $28.98 per share. There were approximately 1,912 stockholders of our common stock at March 11, 2003. The number of stockholders was determined by the number of record holders, including the number of individual participants, in security position listings.

There are no contractual restrictions on the payment of dividends by Westcorp. However, the Bank is restricted by its outstanding subordinated debentures as to the amount of funds that can be transferred to us in the form of dividends. On March 31, 2003, under the most restrictive of these terms, the maximum dividend that the Bank could have paid was $104 million.

Any future determination as to the payment of dividends on our common stock will be restricted by these limitations, will be at the discretion of our board of directors and will depend on our results of operations, financial condition, capital requirements and other factors deemed relevant by the board of directors, including the General Corporation Law of the State of California, which provides that dividends are only payable out of surplus or current net profits.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2003 on an actual basis and on an as adjusted basis to reflect (a) the sale of the 3,800,000 shares of common stock offered hereby, (b) the sale of 700,000 shares of common stock to Mr. Rady and his affiliates and (c) the sale of 130,000 shares of common stock to our Employee Stock Ownership Plan and Salary Savings Plan, in each case, at an assumed public offering price of $28.98 per share, which was the closing price of our common stock on the NYSE on June 18, 2003, and application of the net proceeds therefrom as described under “Use of Proceeds.”



		March 31, 2003

		Actual			As Adjusted


		(Dollars in thousands)
Cash and cash equivalents		$	93,202		$	217,711


Deposits		$	2,084,725		$	2,084,725
Notes payable(1)			9,780,990			9,780,990

	Total deposits and notes payable		11,865,715			11,865,715
Subordinated debentures			397,406			397,406

	Total debt		12,263,121			12,263,121
Shareholders’ equity:
	Common stock, par value $1.00 per share; authorized 65,000,000 shares; issued and outstanding 39,204,709 shares, actual; issued and outstanding 43,834,709 shares, as adjusted		39,205			43,835
Paid-in capital			350,122			473,768
Retained earnings			344,374			344,374
Accumulated other comprehensive loss, net of tax			(95,908	)		(95,908	)

	Total shareholders’ equity		637,793			766,069

	Total capitalization	$	12,900,914		$	13,029,190


(1)	Includes secured financings of automobile contracts, FHLB advances and other borrowings.

SELECTED FINANCIAL DATA

Our selected balance sheet and operating data for the years ended December 31, 2002, 2001 and 2000 have been derived from our audited consolidated financial statements. Certain amounts from the prior year consolidated financial statements have been reclassified to conform to the 2003 presentation. The selected balance sheet data at March 31, 2003 and 2002 and the operating data for the three months ended March 31, 2003 and 2002 have been derived from our unaudited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all normal recurring adjustments necessary for the fair presentation of financial position and results of operations for those periods.

The selected financial data set forth below should be read in conjunction with our consolidated financial statements and related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included or incorporated by reference elsewhere herein including the impact of changing the structure of our securitizations from sale transactions to secured financings. The financial data is qualified in its entirety by the more detailed financial information contained elsewhere or incorporated by reference herein. Information regarding our compliance with applicable regulatory capital requirements is included in this prospectus under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Capital Resources and Liquidity — Capital Requirements.”



		For the
		Three Months Ended
		March 31,						For the Year Ended December 31,

		2003			2002			2002			2001			2000			1999			1998


		(Dollars in thousands, except per share amounts)
Consolidated Summary of Operations:
Interest income		$	307,502		$	262,196		$	1,142,940		$	962,627		$	583,821		$	297,616		$	272,166
Interest expense			141,212			120,070			530,916			491,944			313,872			152,788			161,713

	Net interest income		166,290			142,126			612,024			470,683			269,949			144,828			110,453
Provision for credit losses			79,884			65,698			306,233			196,977			82,133			38,400			18,960

	Net interest income after provision for credit losses		86,406			76,428			305,791			273,706			187,816			106,428			91,493
Noninterest income			27,753			17,159			90,430			78,899			177,884			212,138			128,654
Noninterest expense(1)			68,439			60,859			251,306			244,871			220,973			217,958			248,390

Income (loss) before income tax (benefit)			45,720			32,728			144,915			107,734			144,727			100,608			(28,243	)
Income tax (benefit)			18,226			12,964			52,044			41,675			58,132			41,460			(11,330	)

Income (loss) before minority interest			27,494			19,764			92,871			66,059			86,595			59,148			(16,913	)
Minority interest in earnings (loss) of subsidiaries			3,945			2,911			13,153			10,369			11,852			6,522			(2,216	)

Net income (loss)		$	23,549		$	16,853		$	79,718		$	55,690		$	74,743		$	52,626		$	(14,697	)

Weighted average number of shares and common share equivalents — diluted			39,452,915			36,980,861			38,922,611			34,485,127			29,525,677			26,505,128			26,305,117
Earnings per common share — diluted		$	0.60		$	0.46		$	2.05		$	1.61		$	2.53		$	1.99		$	(0.56	)
Dividends per common share		$	0.12		$	0.11		$	0.47		$	0.44		$	0.30		$	0.20		$	0.25
Dividend payout ratio			20.1	%		24.1	%		22.9	%		27.3	%		11.9	%		10.1	%		N/A



				March 31,				December 31,

				2003		2002		2002		2001		2000		1999		1998


				(Dollars in thousands)
Consolidated Summary of Financial Condition:
Assets:
	Cash			$	46,999	$	53,963	$	25,211	$	68,607	$	61,543	$	33,645	$	114,375
	Loans:
		Consumer(2)			9,817,459		7,542,070		9,063,755		7,092,959		4,309,317		1,516,669		933,010
		Mortgage(3)			269,368		354,110		282,930		373,455		507,431		598,302		1,006,933
		Commercial			93,339		79,972		97,216		85,312		107,586		66,927		52,940
	Mortgage-backed securities				2,790,310		2,182,105		2,649,657		2,092,225		2,230,448		1,431,376		980,044
	Investments and time deposits				110,502		383,244		115,771		110,667		102,311		171,143		131,417
	Other assets				41,484		217,069		176,336		249,172		549,274		680,712		614,101

			Total assets	$	13,169,461	$	10,812,533	$	12,410,876	$	10,072,397	$	7,867,910	$	4,498,774	$	3,832,820

Liabilities:
	Deposits			$	2,084,725	$	2,252,441	$	1,974,984	$	2,329,326	$	2,478,487	$	2,212,309	$	2,178,735
	Notes payable on automobile secured financing				9,265,725		7,211,910		8,422,915		5,886,227		3,473,377		461,104
	FHLB advances and other borrowings				515,265		147,946		618,766		723,675		616,193		498,901		440,924
	Amounts held on behalf of trustee						262,214		177,642		280,496		494,858		687,274		528,092
	Subordinated debentures				397,406		147,850		400,561		147,714		189,962		199,298		239,856
	Other liabilities				162,749		83,075		101,145		85,994		71,221		59,140		94,311

			Total liabilities		12,425,870		10,105,436		11,696,013		9,453,432		7,324,098		4,118,026		3,481,918
Minority interest in equity of subsidiaries					105,798		95,423		101,666		78,261		56,644		28,030		21,857
Shareholders’ equity					637,793		611,674		613,197		540,704		487,168		352,718		329,045

			Total liabilities and shareholders’ equity	$	13,169,461	$	10,812,533	$	12,410,876	$	10,072,397	$	7,867,910	$	4,498,774	$	3,832,820



	At or For the
	Three Months Ended
	March 31,						At or For the Year Ended December 31,

	2003			2002			2002			2001			2000			1999			1998


	(Dollars in thousands)
Operating Statistics — Automobile Only:
Automobile contract originations	$	1,352,053		$	1,265,526		$	5,415,734		$	4,863,279		$	4,219,227		$	3,340,146		$	2,670,696
Percent of prime automobile contracts originated		82.4	%		79.4	%		80.3	%		75.6	%		68.8	%		69.3	%		67.7	%
Automobile contracts managed at end of period	$	9,650,229		$	8,405,634		$	9,389,974		$	8,152,882		$	6,818,182		$	5,354,385		$	4,367,099
Weighted average coupon on originated automobile contacts		10.6	%		11.7	%		11.4	%		12.7	%		14.0	%		13.6	%		13.4	%
Operating expenses as a percentage of average managed automobile contracts		2.5	%		2.5	%		2.4	%		2.7	%		3.1	%		3.6	%		4.5	%
Automobile contracts delinquent 60 days or greater		0.7	%		0.7	%		1.0	%		1.1	%		0.9	%		0.8	%		1.1	%
Net chargeoffs as a percent of the average outstanding managed automobile contracts		2.9	%		2.8	%		2.8	%		2.3	%		1.9	%		2.1	%		3.4	%



			For the
			Three Months Ended
			March 31,						For the Year Ended December 31,

			2003			2002			2002			2001			2000			1999			1998


			(Dollars in thousands)
Other Selected Financial Data:
Average assets			$	12,932,117		$	10,433,517		$	11,572,027		$	9,280,377		$	6,242,668		$	3,952,360		$	3,859,202
Return on average assets				0.73	%		0.65	%		0.69	%		0.60	%		1.20	%		1.33	%		(0.38	)%
Average shareholders’ equity(4)			$	722,610		$	614,157		$	654,109		$	570,298		$	450,323		$	351,162		$	327,687
Return on average shareholders’ equity(4)				13.04	%		10.98	%		12.19	%		9.77	%		16.60	%		14.99	%		(4.49	)%
Equity to asset ratio(4)				5.57	%		5.32	%		5.76	%		5.97	%		6.38	%		8.32	%		8.49	%
Book value per share(4)			$	18.71		$	16.98		$	18.23		$	16.80		$	15.72		$	14.06		$	12.29
Originations:
	Consumer loans(2)		$	1,353,928		$	1,266,189		$	5,419,296		$	4,869,970		$	4,232,115		$	3,355,732		$	2,680,341
	Mortgage loans(3)			4,314			9,139			23,950			23,001			33,124			276,936			2,754,398
	Commercial loans(3)			96,684			61,268			354,439			291,944			266,342			237,316			124,259

		Total originations	$	1,454,926		$	1,336,596		$	5,797,685		$	5,184,915		$	4,531,581		$	3,869,984		$	5,558,998

Interest rate spread				5.02	%		5.57	%		5.29	%		4.99	%		4.37	%		3.59	%		2.83	%


(1)	Includes $18.0 million in restructuring charges in 1998.

(2)	Net of unearned discounts.

(3)	Net of undisbursed loan proceeds.

(4)	Accumulated other comprehensive income (loss) excluded from shareholders’ equity.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes thereto and other information included or incorporated by reference herein.

Overview

Our primary sources of revenue are net interest income and noninterest income. Net interest income is the difference between the income earned on interest earning assets and the interest paid on interest bearing liabilities. We generate interest income from our loan portfolio, which consists of consumer, mortgage and commercial loans, from investments in mortgage-backed securities and from other short-term investments. We fund our loan portfolio and investments with deposits, advances from the FHLB, securities sold under agreements to repurchase, securitizations, other borrowings and equity.

Noninterest income is primarily made up of revenues generated from the sale and servicing of contracts and real estate loans. The primary components of noninterest income include late charges and other collection related fee income on managed contracts, retained interest income or expense, gain on sale of contracts and real estate loans, and contractual servicing income on contracts in securitization transactions treated as sales for accounting purposes. Since March 2000, we have structured our securitizations as secured financings and no longer record non-cash gain on sale at the time of each securitization or record subsequent contractual servicing and retained interest income, the valuation of which is based upon subjective assumptions. Rather, the earnings of the contracts in the trust and the related financing costs are reflected over the life of the underlying pool of contracts as net interest income. In addition, our provision for credit losses has increased as we hold securitized loans on our balance sheet.

Our decision to account for our securitizations as secured financings rather than as sales was based upon a business philosophy that focuses on presenting high quality, cash-based earnings and maintaining a conservative, well-capitalized balance sheet. We believe that a presentation in which assets and liabilities remain on the balance sheet for securitization transactions treated as secured financings provides a better understanding of our business and the inherent risks associated with our securitizations. Since March 2000, in order to account for some of our securitizations as secured financings rather than as sales, those securitizations include a provision that provides us with the right to repurchase contracts at any time. The percentage of contracts that we may repurchase was increased from 10% to 20% as of March 2000. Other securitization transactions since March, 2000 allow the trust to invest in and sell other financial assets. We believe that our decision to make these accounting changes has created a transitional period during which our earnings have been adversely impacted as we built our on balance sheet portfolio of loans. This change affects the comparability of our financial statements from 2000 through the first quarter of 2003.

Effective January 1, 2003, we regained control over assets of the trusts for all of our pre-March 2000 outstanding securitization transactions previously treated as sales for accounting purposes. We regained control of these assets when each trust was given the ability to invest in financial assets not related to the securitization of contracts. In accordance with paragraph 55 of Statement of Financial Accounting Standards No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, also known as SFAS No. 140, and Emerging Issues Task Force 02-9, Accounting for Changes that Result in a Transferor Regaining Control of Financial Assets Sold, we recorded $525 million of automobile contracts and the related notes payable on automobile secured financings on our Consolidated Statements of Financial Condition and have eliminated all remaining amounts due from trusts and amounts held on behalf of trustee. We will no longer recognize retained interest income or expense or contractual servicing income on our Consolidated Statements of Income. Rather, we will recognize interest income on automobile contracts held in these trusts and record interest expense on notes payable on automobile secured financings. These loans were considered in the overall evaluation of the adequacy of our allowance for credit losses. See “— Financial Condition — Asset Quality.”

During the first quarter of 2003, delinquent accounts greater than 120 days past due that were subject to Chapter 13 bankruptcy proceedings were reclassified to contracts receivable and the related reserves

were reclassified to the allowance for credit losses on the Consolidated Statements of Financial Condition. Previously, such amounts were reported as nonperforming assets and were included in other assets on the Statement of Financial Condition. The prior year amounts have been reclassified accordingly. These contracts were considered in the overall evaluation of the adequacy of our allowance for credit losses.

Critical Accounting Policies

Management believes critical accounting policies are important to the portrayal of our financial condition and results of operations. Critical accounting policies require difficult and complex judgments because they rely on estimates about the effect of matters that are inherently uncertain due to the impact of changing market conditions. The following is a summary of accounting policies we consider critical.


	*Securitization Transactions*

Contracts sold by us to our special purpose entity subsidiaries in connection with a securitization transaction are treated as having been sold for bankruptcy purposes and as secured financings under Generally Accepted Accounting Principles, also known as GAAP. For GAAP purposes, the contracts are retained on the balance sheet with the securities issued to finance the contracts recorded as notes payable on automobile secured financing. We record interest income on the securitized contracts and interest expense on the notes issued through the securitization transactions.

As servicer of these contracts, we may hold and remit funds collected from the borrowers on behalf of the trustee pursuant to reinvestment contracts that we have entered into or we may send funds to a trustee to be held until the distribution dates, depending on the terms of our securitizations. For securitization transactions that were treated as sales, these amounts were reported as amounts held on behalf of trustee on our Consolidated Statements of Financial Condition.


	*Allowance for Credit Losses*

Management determines the amount of the allowance for credit losses based on a review of various quantitative and qualitative analyses. Quantitative analyses include the review of chargeoff trends by loan program and loan type on an owned and managed basis, analysis of cumulative losses on both a managed and sold basis and evaluation of credit loss experience by credit tier and geographic location. Other quantitative analyses include the evaluation of the size of any particular asset group, the concentration of any credit tier, the level of nonperformance and the percentage of delinquency.

Qualitative analyses include trends in chargeoffs over various time periods and at various statistical midpoints and high points, the severity of depreciated values of repossessions or foreclosures, trends in the number of days repossessions are held in inventory, trends in the number of loan modifications, trends in delinquency roll rates, trends in deficiency balance collections both internally and from collection agencies, trends in custom scores and the effectiveness of our custom scores and trends in the economy generally or in specific geographic locations. Despite these analyses, we recognize that establishing allowance for credit losses is not an exact science and can be highly judgmental in nature.

The analysis of the adequacy of the allowance for credit losses is not only dependent upon effective quantitative and qualitative analyses, but also effective loan review and asset classification. We classify our assets in accordance with regulatory guidance. Our multifamily and commercial loan portfolios are evaluated individually while our single family and consumer portfolios are evaluated in pools. We classify our loan portfolios into five categories: Pass, Special Mention, Substandard, Doubtful and Loss. Based upon our asset classifications, we establish general and specific valuation allowances.

General valuation allowances are determined by applying various factors to loan balances that are classified as Pass, Special Mention, Substandard or Doubtful. Specific valuation allowances represent loan amounts that are classified as Loss. Some assets may be split into more than one asset classification due to fair value or net realizable value calculations. This approach allows for enhanced analysis as it highlights the need for more allowance than would be generally allocated if held in one classification.

All contracts that are 60 to 90 days delinquent are automatically classified as Special Mention. Real estate loans that are manifesting a weakness in performance are classified as Special Mention. Any contract that is 90 or more days delinquent is automatically classified as Substandard. Real estate loans that are manifesting a significant weakness in performance are also classified as Substandard. Any multifamily loan that is impaired is classified as Substandard. Any contract where the borrower has filed for bankruptcy or where the vehicle has been repossessed by us and is subject to a redemption period is classified as Substandard, with the difference between the wholesale book value and loan balance classified as Loss.

The allowance for credit losses is increased by charging the provision for credit losses and decreased by actual losses on the loans or by reversing the allowance for credit losses through the provision for credit losses when the amount of loans held on balance sheet is reduced through securitization transactions treated as sales.

Derivatives and Hedging Activities

Deposits and Securities Sold Under Agreements to Repurchase

We may enter into cash flow hedges that will protect against potential changes in interest rates affecting interest payments on future deposits gathered by us and future securities sold under agreements to repurchase. The fair value of the interest rate swap agreements is included in deposits and securities sold under agreements to repurchase, respectively, and any change in the fair value is reported as accumulated other comprehensive income (loss), net of tax, on our Consolidated Statements of Financial Condition. Related interest income or expense is settled on a quarterly basis and is recorded in accumulated other comprehensive income (loss) and reclassified into earnings in the period during which cash flows on the hedged items affect income.

Notes Payable on Automobile Secured Financing

The contracts originated and held by us are fixed rate and, accordingly, we have exposure to changes in interest rates. To protect against potential changes in interest rates affecting interest payments on future securitization transactions, we may enter into various hedge agreements prior to closing the transaction. The market value of these hedge agreements is designed to respond inversely to changes in interest rates. Because of this inverse relationship, we can effectively lock in a gross interest rate spread at the time of entering into the hedge transaction. Gains and losses on these agreements are recorded in accumulated other comprehensive income (loss), net of tax, on our Consolidated Statements of Financial Condition. Any ineffective portion is recognized in interest expense during that period if the hedge is greater than 100% effective. Upon completion of the securitization transaction, the gains or losses are recognized in full as an adjustment to the gain or loss on the sale of the contracts if the securitization transaction is treated as a sale or amortized on a level yield basis over the duration of the notes issued if the transaction is treated as a secured financing.

If we issue certain variable rate notes payable in connection with our securitization activities, we also may enter into interest rate swap agreements in order to hedge our variable interest rate exposure on future interest payments. The fair value of the interest rate swap agreements is included in notes payable on automobile secured financing, and any change in the fair value is reported as accumulated other comprehensive income (loss), net of tax, on our Consolidated Statements of Financial Condition. Any ineffective portion is recorded in interest expense during that period if the hedge is greater than 100% effective. Related interest income or expense is settled on a quarterly basis and recognized as an adjustment to interest expense in our Consolidated Statements of Income.

We also enter into interest rate swap agreements or other derivatives that we choose not to designate as hedges or that do not qualify for hedge accounting under Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, also known as SFAS No. 133. These derivatives pertain to variable rate notes issued in conjunction with the securitization of our contracts. Any change in the market value of such derivatives is recorded to noninterest income each month. Any income or expense recognized on such derivatives is recognized as miscellaneous noninterest income or expense.

Results of Operations

Net Interest Income

Net interest income is affected by the difference between the rate earned on our interest earning assets and the rate paid on our interest bearing liabilities (interest rate spread) and the relative amounts of our interest earning assets and interest bearing liabilities. For the three months ended March 31, 2003 and 2002, net interest income totaled $166 million and $142 million, respectively. The increase in net interest income was the result of us holding more automobile contracts on the balance sheet even as overall net interest margins declined. Net interest income totaled $612 million, $471 million and $270 million for the years ended December 31, 2002, 2001 and 2000, respectively. The increase in net interest income for each of the past three years is primarily the result of us holding a greater percentage of contracts on balance sheet as we utilized our own liquidity sources and completed public securitizations.

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



				For the Three Months Ended March 31,


				2003							2002

				Average				Yield/			Average				Yield/
				Balance		Interest		Rate			Balance		Interest		Rate


				(Dollars in thousands)
Interest earning assets:
	Total investments:
		Mortgage-backed securities		$	2,485,200	$	24,773		3.99	%	$	2,110,468	$	27,982		5.30	%
		Other short-term investments			238,695		1,323		2.25			140,380		1,159		3.35
		Investment securities			9,957		93		3.75			10,619		118		4.45
		Interest earning deposits with others			10,245		25		0.98			5,806		25		1.69

			Total investments		2,744,097		26,214		3.82			2,267,273		29,284		5.17
	Total loans:
		Consumer loans			9,696,850		276,131		11.55			7,171,640		225,450		12.75
		Mortgage loans(1)			271,943		3,819		5.62			351,960		5,803		6.59
		Commercial loans			115,537		1,338		4.63			100,716		1,659		6.59

			Total loans		10,084,330		281,288		11.31			7,624,316		232,912		12.38

			Total interest earning assets		12,828,427		307,502		9.71			9,891,589		262,196		10.73
Noninterest earning assets:
	Amounts due from trusts											131,741
	Retained interest in securitized assets											34,978
	Premises, equipment and real estate owned				77,748							79,018
	Other assets				394,248							572,655
	Less: allowance for credit losses				273,730							181,888

			Total	$	13,026,693						$	10,528,093

Interest bearing liabilities:
	Deposits			$	1,963,276	$	17,556		3.63		$	2,343,538	$	21,010		3.64
	Securities sold under agreements to repurchase				248,374		1,289		2.08			146,908		1,045		2.84
	FHLB advances and other borrowings				426,590		1,631		1.55			470,646		2,500		2.15
	Notes payable on automobile secured financing				9,017,784		110,799		4.91			6,221,646		92,018		5.92
	Subordinated debentures				398,812		9,937		9.97			147,760		3,497		9.47

			Total interest bearing liabilities		12,054,836		141,212		4.69			9,330,498		120,070		5.16
Noninterest bearing liabilities:
	Amounts held on behalf of trustee											329,249
	Other liabilities				347,845							302,900
	Shareholders’ equity				624,012							565,446

			Total	$	13,026,693						$	10,528,093

Net interest income and interest rate spread						$	166,290		5.02	%			$	142,126		5.57	%

Net yield on average interest earning assets									5.19	%						5.75	%



				For the Year Ended December 31,


				2002							2001							2000

				Average				Yield/			Average				Yield/			Average				Yield/
				Balance		Interest		Rate			Balance		Interest		Rate			Balance		Interest		Rate


				(Dollars in thousands)
Interest earning assets:
	Total investments:
		Mortgage-backed securities		$	2,202,950	$	113,327		5.14	%	$	2,245,861	$	133,539		5.95	%	$	1,870,908	$	128,231		6.85	%
		Other short-term investments			338,485		7,635		2.26			159,599		7,468		4.68			246,908		15,609		6.32
		Investment securities			5,105		318		6.22			7,194		433		6.02			10,216		535		5.24
		Interest earning deposits with others			30,044		343		1.14			2,628		74		2.80			2,069		110		5.32

			Total investments		2,576,584		121,623		4.72			2,415,282		141,514		5.86			2,130,101		144,485		6.78
	Total loans:
		Consumer loans			8,012,003		993,417		12.40			5,746,413		779,256		13.56			2,672,690		386,182		14.45
		Mortgage loans(1)			329,693		22,865		6.94			441,804		34,536		7.82			551,498		44,225		8.02
		Commercial loans			90,642		5,035		5.55			99,904		7,321		7.33			97,586		8,929		9.15

			Total loans		8,432,338		1,021,317		12.11			6,288,121		821,113		13.06			3,321,774		439,336		13.23

			Total interest earning assets		11,008,922		1,142,940		10.38			8,703,403		962,627		11.06			5,451,875		583,821		10.71
Noninterest earning assets:
	Amounts due from trusts				121,627							227,890							413,653
	Retained interest in securitized assets				15,888							74,509							141,724
	Premises, equipment and real estate owned				80,277							82,277							84,627
	Other assets				553,654							318,674							227,095
	Less: allowance for credit losses				208,341							126,376							76,306

			Total	$	11,572,027						$	9,280,377						$	6,242,668

Interest bearing liabilities:
	Deposits			$	2,196,261		80,015		3.64		$	2,319,466		114,831		4.95		$	2,380,155		133,610		5.61
	Securities sold under agreements to repurchase				222,154		5,543		2.50			155,387		7,014		4.51			449,778		27,950		6.21
	FHLB advances and other borrowings				244,284		5,281		2.16			443,337		20,424		4.61			270,043		16,694		6.18
	Notes payable on automobile secured financing				7,426,265		406,851		5.48			5,018,456		333,768		6.65			1,655,936		118,421		7.15
	Subordinated debentures				331,990		33,226		10.01			170,531		15,907		9.33			192,025		17,197		8.96

			Total interest bearing liabilities		10,420,954		530,916		5.09			8,107,177		491,944		6.07			4,947,937		313,872		6.34
Noninterest bearing liabilities:
	Amounts held on behalf of trustee				240,667							365,376							693,810
	Other liabilities				394,863							278,325							169,435
	Shareholders’ equity				515,543							529,499							431,486

			Total	$	11,572,027						$	9,280,377						$	6,242,668

Net interest income and interest rate spread						$	612,024		5.29	%			$	470,683		4.99	%			$	269,949		4.37	%

Net yield on average interest earning assets									5.56	%						5.41	%						4.95	%


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

The total interest rate spread decreased 55 basis points for the three months ended March 31, 2003 compared with the three months ended March 31, 2002 due to a decrease of 102 basis points in the yield on interest earning assets while the cost of funds decreased by only 47 basis points. The decrease in yield on interest earning assets is due primarily to our shift to originating a higher percentage of prime credit quality contracts and an overall lower interest rate environment. The decline in the cost of funds was moderated by the increase in the amount of subordinated debentures held by us in the first quarter of 2003 as compared with the same period a year earlier.

The total interest rate spread increased 30 basis points for 2002 compared with 2001 due to a decrease of 68 basis points in the yield on interest earning assets combined with a decrease in the cost of funds of 98 basis points. The decrease in the yield on interest earning assets is due primarily to originating a higher percentage of prime credit quality contracts and a lower interest rate environment. The decrease in the cost of funds in 2002 and 2001 is due primarily to a lower interest rate environment. The increase in yield on interest earning assets for 2001 compared with 2000 was due primarily to a higher percentage of contracts held on the balance sheet. The decrease in the cost of funds in 2001 compared with 2000 was due to a lower interest rate environment.

The following table sets forth the changes in net interest income attributable to changes in volume (change in average portfolio volume multiplied by prior period average rate) and changes in rates (change in weighted average interest rate multiplied by prior period average portfolio balance):



			For the Three Months Ended
			March 31, 2003
			Compared to Three Months Ended
			March 31, 2002(1)

			Volume			Rate			Total


			(Dollars in thousands)
Interest income:
	Mortgage-backed securities		$	21,774		$	(24,983	)	$	(3,209	)
	Other short-term investments			2,214			(2,050	)		164
	Investment securities			(79	)		54			(25	)
	Interest earning deposits with others			53			(53	)
Total loans:
	Consumer loans			175,808			(125,127	)		50,681
	Mortgage loans			13,740			(15,724	)		(1,984	)
	Commercial loans			1,201			(1,522	)		(321	)

		Total interest earning assets	$	214,711		$	(169,405	)	$	45,306

Interest expense:
	Deposits		$	(3,397	)	$	(57	)	$	(3,454	)
	Securities sold under agreements to repurchase			398			(154	)		244
	FHLB advances and other borrowings			(218	)		(651	)		(869	)
	Notes payable on automobile secured financings			30,273			(11,492	)		18,781
	Subordinated debentures			6,246			194			6,440

		Total interest bearing liabilities	$	33,302		$	(12,160	)	$	21,142

Net change in net interest income									$	24,164



			2002 Compared to 2001(1)									2001 Compared to 2000(1)

			Volume			Rate			Total			Volume			Rate			Total


			(Dollars in thousands)
Interest income:
	Mortgage-backed securities		$	(2,488	)	$	(17,724	)	$	(20,212	)	$	23,547		$	(18,239	)	$	5,308
	Other short-term investments			5,400			(5,233	)		167			(4,696	)		(3,445	)		(8,141	)
	Investment securities			(129	)		14			(115	)		(174	)		72			(102	)
	Interest earning deposits with others			339			(70	)		269			25			(61	)		(36	)
Total loans:
	Consumer loans			285,525			(71,364	)		214,161			418,248			(25,174	)		393,074
	Mortgage loans			(8,085	)		(3,586	)		(11,671	)		(8,610	)		(1,079	)		(9,689	)
	Commercial loans			(631	)		(1,655	)		(2,286	)		206			(1,814	)		(1,608	)

		Total interest earning assets	$	279,931		$	(99,618	)	$	180,313		$	428,546		$	(49,740	)	$	378,806

Interest expense:
	Deposits		$	(5,820	)	$	(28,996	)	$	(34,816	)	$	(3,496	)	$	(15,283	)	$	(18,779	)
	Securities sold under agreements to repurchase			2,344			(3,815	)		(1,471	)		(9,702	)		(11,234	)		(20,936	)
	FHLB advances and other borrowings			(6,935	)		(8,208	)		(15,143	)		8,748			(5,018	)		3,730
	Notes payable on automobile secured financings			139,398			(66,315	)		73,083			224,186			(8,839	)		215,347
	Subordinated debentures			16,081			1,238			17,319			(1,980	)		690			(1,290	)

		Total interest bearing liabilities	$	145,068		$	(106,096	)	$	38,972		$	217,756		$	(39,684	)	$	178,072

Net change in net interest income									$	141,341								$	200,734


(1)	In the analysis of interest changes due to volume and rate, the changes due to the volume/rate variance (the combined effect of change in weighted average interest rate and change in average portfolio balance) have been allocated proportionately based on the absolute value of the volume and rate variances. If there was no balance in the previous year, the total change was allocated to volume.

Provision for Credit Losses

We maintain an allowance for credit losses to cover probable losses that can be reasonably estimated for the loans held on the balance sheet. The allowance for credit losses is increased by charging the provision for credit losses and decreased by actual losses on the loans or reversing the allowance for credit losses through the provision for credit losses when the amount of loans held on balance sheet is reduced through securitization transactions treated as sales. The level of allowance is based principally on the outstanding balance of loans held on balance sheet and historical loss trends. We believe that the allowance for credit losses is currently adequate to absorb probable losses in our owned loan portfolio that can be reasonably estimated.

For the three months ended March 31, 2003, the provision for credit losses totaled $79.9 million compared with $65.7 million for the same period a year earlier. For the three months ended March 31, 2003 and 2002, net chargeoffs were $68.2 million and $47.5 million, respectively. The increase in the provision for credit losses for the three months ended March 31, 2003 as compared with the same period a year earlier was a result of our loans held on balance sheet increasing by approximately $736 million or 7.8% from December 31, 2002 as well as an increase in chargeoffs due to the slowdown in the economy.

For the three months ended March 31, 2003, we recorded $11.7 million in provisions for credit losses in excess of chargeoffs as a result of the growth of our automobile contract portfolio. The provision for credit losses was $306 million, $197 million and $82.1 million for the years ended December 31, 2002, 2001 and 2000, respectively. Net chargeoffs were $215 million, $123 million and $42.3 million for the same respective periods. The increase in provision for credit losses for each of the past three years was the result of a higher level of contracts held on balance sheet as well as higher chargeoffs.

Noninterest Income

Automobile Lending Income

Since the first quarter of 2000, we have not completed a securitization that has been accounted for as a sale. For transactions treated as sales prior to April 2000, we recorded a non-cash gain equal to the present value of the estimated future cash flows from the portfolio of contracts sold less the write-off of dealer participation balances and the effect of hedging activities. For these securitizations, net interest earned on the contracts sold are recognized over the life of the transactions as contractual servicing income and retained interest income or expense.

The components of automobile lending income were as follows:



		For the Three Months					For the Year Ended
		Ended March 31,					December 31,

		2003		2002			2002			2001			2000


		(Dollars in thousands)
Fee income		$	20,949	$	19,784		$	78,723		$	67,579		$	57,786
Contractual servicing income					3,539			10,735			23,018			41,767
Retained interest (expense) income, net of RISA amortization(1)					(11,649	)		(29,490	)		(27,839	)		51,429
Gain on sale of contracts														7,719

	Total automobile lending income	$	20,949	$	11,674		$	59,968		$	62,758		$	158,701


(1)	RISA means retained interest in securitized assets.

Automobile lending income decreased primarily as a result of us no longer issuing asset-backed securities that are treated as sales for accounting purposes. This change is reflected in higher retained interest expense and decreases in contractual servicing income.

Fee income consists primarily of documentation fees, late charges and deferment fees on our managed portfolio, including contracts securitized in transactions accounted for as sales and secured financings, as well as contracts not securitized. The increase in fee income is due to the growth in our average managed contract portfolio to $9.7 billion for the three months ended March 31, 2003 compared with $8.8 billion, $7.6 billion and $6.1 billion for the years ended December 31, 2002, 2001 and 2000, respectively.

According to the terms of each securitization, we earn contractual servicing income at a rate of 1.25% per annum on the outstanding balance of the contracts securitized. There was no contractual servicing income for the three months ended March 31, 2003 compared to $3.5 million for the same period in 2002. Contractual servicing income totaled $10.7 million $23.0 million and $41.8 million for the years ended December 31, 2002, 2001 and 2000, respectively. The decline was due to our transition to treating our securitizations as secured financings rather than as sales as well as our regaining control over the assets of the trusts for all our outstanding securitization transactions previously treated as sales for accounting purposes.

There was no retained interest expense for the three months ended March 31, 2003 as a result of our reconsolidating all remaining off balance sheet trusts. This compares with retained interest expense of $11.6 million for the same period in 2002. Retained interest expense was $29.5 million and $27.8 million and retained interest income was $51.4 million for the years ended December 31, 2002, 2001 and 2000, respectively. For accounting purposes, this expense or income is recognized only on contracts sold through securitizations treated as sales. Retained interest expense or income is dependent upon the average excess spread on the contracts sold, credit losses, the size of the sold portfolio and the amount of amortization of the RISA. The retained interest expense recognized in 2002 is the result of higher chargeoffs on our sold portfolio as well as revised estimates of future chargeoffs due to continued slowing in the economy. There were no chargeoffs on the sold portfolio for the three months ended March 31, 2003 compared with $9.7 million for the three months ended March 31, 2002. Net chargeoffs on the sold portfolio decreased to

$30.4 million for the year ended December 31, 2002 from $50.4 million and $75.5 million for the years ended December 31, 2001 and 2000, respectively. The outstanding sold portfolio had a weighted average gross interest rate spread of 6.70% for the three months ended March 31, 2003, compared with 6.71%, 6.97% and 7.38% for the years ended December 31, 2002, 2001 and 2000, respectively. The average balance of the sold portfolio was $1.1 billion for the three months ended March 31, 2003 and $840 million, $1.8 billion and $3.4 billion for the years ended December 31, 2002, 2001 and 2000, respectively.

The following table sets forth our contract sales and securitizations and related gain on sales:



			For the Three Months				For the Year Ended
			Ended March 31,				December 31,

			2003		2002		2002		2001		2000			1999			1998


			(Dollars in thousands)
Contract sales and secured financings:
	Secured financings		$	1,343,250	$	2,575,000	$	6,925,000	$	4,220,000	$	3,930,000		$	500,000
	Sales to securitization trusts											660,000			2,500,000		$	1,885,000

		Total secured financings and sales	$	1,343,250	$	2,575,000	$	6,925,000	$	4,220,000	$	4,590,000		$	3,000,000		$	1,885,000

Gain on sale of contracts(1)											$	7,719		$	51,345		$	25,622
Hedge gain (loss) on sale of contracts(2)												5,300			7,419			(8,396	)
Gain on sale of contracts as a percent of total revenues												1.72	%		14.47	%		10.72	%


(1)	Net of the write-off of outstanding dealer participation balances and the effect of hedging activities.

(2)	Included in gain on sale of automobile contracts.

The following table lists each of our public securitizations:


						Remaining									Gross
				Remaining		Balance as a			Original			Original			Interest
Issue		Original		Balance at		Percent of			Weighted			Weighted Average			Rate
Number	Close Date	Balance		March 31, 2003(2)		Original Balance			Average APR			Securitization Rate			Spread(1)


(Dollars in thousands)
1985-A	December, 1985	$	110,000		Paid in full					18.50	%		8.38	%		10.12	%
1986-A	November, 1986		191,930		Paid in full					14.20			6.63			7.57
1987-A	March, 1987		125,000		Paid in full					12.42			6.75			5.67
1987-B	July, 1987		110,000		Paid in full					12.68			7.80			4.88
1988-A	February, 1988		155,000		Paid in full					13.67			7.75			5.92
1988-B	May, 1988		100,000		Paid in full					14.01			8.50			5.51
1988-C	July, 1988		100,000		Paid in full					15.41			8.50			6.91
1988-D	October, 1988		105,000		Paid in full					14.95			8.85			6.10
1989-A	March, 1989		75,000		Paid in full					15.88			10.45			5.43
1989-B	June, 1989		100,000		Paid in full					15.96			9.15			6.81
1990-A	August, 1990		150,000		Paid in full					16.05			8.35			7.70
1990-1	November, 1990		150,000		Paid in full					15.56			8.50			7.06
1991-1	April, 1991		200,000		Paid in full					16.06			7.70			8.36
1991-2	May, 1991		200,000		Paid in full					15.75			7.30			8.45
1991-3	August, 1991		175,000		Paid in full					15.69			6.75			8.94
1991-4	December, 1991		150,000		Paid in full					15.53			5.63			9.90
1992-1	March, 1992		150,000		Paid in full					14.49			5.85			8.64
1992-2	June, 1992		165,000		Paid in full					14.94			5.50			9.44
1992-3	September, 1992		135,000		Paid in full					14.45			4.70			9.75
1993-1	March, 1993		250,000		Paid in full					13.90			4.45			9.45
1993-2	June, 1993		175,000		Paid in full					13.77			4.70			9.07
1993-3	September, 1993		187,500		Paid in full					13.97			4.25			9.72
1993-4	December, 1993		165,000		Paid in full					12.90			4.60			8.30
1994-1	March, 1994		200,000		Paid in full					13.67			5.10			8.57
1994-2	May, 1994		230,000		Paid in full					14.04			6.38			7.66
1994-3	August, 1994		200,000		Paid in full					14.59			6.65			7.94
1994-4	October, 1994		212,000		Paid in full					15.58			7.10			8.48
1995-1	January, 1995		190,000		Paid in full					15.71			8.05			7.66
1995-2	March, 1995		190,000		Paid in full					16.36			7.10			9.26
1995-3	June, 1995		300,000		Paid in full					15.05			6.05			9.00
1995-4	September, 1995		375,000		Paid in full					15.04			6.20			8.84
1995-5	December, 1995		425,000		Paid in full					15.35			5.88			9.47
1996-A	March, 1996		485,000		Paid in full					15.46			6.13			9.33
1996-B	June, 1996		525,000		Paid in full					15.74			6.75			8.99
1996-C	September, 1996		535,000		Paid in full					15.83			6.60			9.23
1996-D	December, 1996		545,000		Paid in full					15.43			6.17			9.26
1997-A	March, 1997		500,000		Paid in full					15.33			6.60			8.73
1997-B	June, 1997		590,000		Paid in full					15.36			6.37			8.99
1997-C	September, 1997		600,000		Paid in full					15.43			6.17			9.26
1997-D	December, 1997		500,000		Paid in full					15.19			6.34			8.85
1998-A	March, 1998		525,000		Paid in full					14.72			6.01			8.71
1998-B	June, 1998		660,000		Paid in full					14.68			6.06			8.62
1998-C	November, 1998		700,000	$	37,041		5.29	%		14.42			5.81			8.61
1999-A	January, 1999		1,000,000		73,701		7.37			14.42			5.70			8.72
1999-B	July, 1999		1,000,000		130,953		13.10			14.62			6.36			8.26
1999-C	November, 1999		500,000		90,498		18.10			14.77			7.01			7.76
2000-A	March, 2000		1,200,000		246,618		20.55			14.66			7.28			7.38
2000-B	May, 2000		1,000,000		230,130		23.01			14.84			7.78			7.06
2000-C	August, 2000		1,390,000		405,542		29.18			15.04			7.32			7.72
2000-D	November, 2000		1,000,000		359,505		35.95			15.20			6.94			8.26
2001-A	January, 2001		1,000,000		396,633		39.66			14.87			5.77			9.10
2001-B	May, 2001		1,370,000		571,107		41.69			14.41			4.23			10.18
2001-C	August, 2001		1,200,000		616,369		51.36			13.90			4.50			9.40
2002-1	March, 2002		1,800,000		1,225,331		68.07			13.50			4.26			9.24
2002-2	May, 2002		1,750,000		1,359,307		77.67			12.51			3.89			8.62
2002-3	August, 2002		1,250,000		1,045,281		83.62			12.30			3.06			9.24
2002-4	November, 2002		1,350,000		1,268,763		93.98			12.18			2.66			9.52
2003-1	February, 2003		1,343,250		1,343,250		100.00			11.79			2.42			9.37
2003-2(3)	May, 2003		1,492,500				N/A			11.57			2.13			9.44

	Total	$	31,557,180	$	9,400,029


(1)	Represents the difference between the original weighted average annual percentage rate, also known as APR, and the estimated weighted average securitization rate on the closing date of the securitization.

(2)	Represents only the note payable amounts outstanding at the period indicated.

(3)	The 2003-2 securitization closed on May 29, 2003.

Other Noninterest Income

Other noninterest income consists primarily of insurance income, mortgage banking income and miscellaneous income. For the three months ended March 31, 2003 and 2002, other noninterest income totaled $6.8 million and $5.5 million, respectively. Other noninterest income totaled $30.5 million, $16.1 million and $19.2 million for the years ended December 31, 2002, 2001 and 2000, respectively. The decline in other noninterest income for the year ended 2001 is due to our decision to exit the mortgage banking business. This decision resulted in the sale of our remaining mortgage banking operations in 1999. The increase in other noninterest income for the year ended December 31, 2002 was due to the sale of deposits and properties in conjunction with the sale of seven Northern California branch offices. The increase in noninterest income for the three months ended March 31, 2003 was due to the sale of properties related to the sale of these branch offices.

Noninterest Expense

For the three months ended March 31, 2003, noninterest expense totaled $68.4 million compared with $60.9 million for the same period in 2002. Noninterest expense as a percent of total revenues improved to 35% for the three months ended March 31, 2003 compared to 38% for the same period a year ago as a result of fully amortizing our retained interest in securitized assets during 2002. Total noninterest expense was $251 million, $245 million and $221 million for the years ended December 31, 2002, 2001 and 2000, respectively. Noninterest expense as a percentage of total revenues improved to 36% in 2002 compared with 45% in 2001 and 49% in 2000, as a result of improved operating efficiencies achieved through the centralization and automation of certain processes as well as the deployment of new technologies.

The efficiencies realized include increasing the conversion ratios on contracts purchased through dealer education, automating the loan application and underwriting system, increasing the percentage of applications received via the Internet, outsourcing the data entry process, centralizing the verification process and implementing proprietary credit scorecards and electronic funds transfers for our dealers. Operating efficiencies also include implementing automated dialers, centralizing and upgrading payment processing and asset recovery processes, upgrading toll-free lines for customer service and interactive voice response technology, implementing direct debit for our borrowers, imaging for record retention and retrieval and implementing a new behavioral scoring collection system.

Income Taxes

We file federal and certain state tax returns as part of a consolidated group that includes Westcorp, the Bank and WFS. We file other state tax returns as a separate entity. Tax liabilities from the consolidated returns are allocated in accordance with a tax sharing agreement based on the relative income or loss of each entity on a stand-alone basis. Our effective tax rate was 40% for both the three months ended March 31, 2003 and 2002. Our effective tax rate was 36%, 39%, and 40% for the years ended December 31, 2002, 2001 and 2000, respectively. The decrease in the effective tax rate for the year ended December 31, 2002 is a result of a one-time benefit of new legislation enacted by the State of California that eliminated the use of the reserve method of accounting for bad debts for large banks and financial corporations for taxable income purposes. In the first year of this change, 50% of the ending reserve amount deducted from taxable income in prior periods will be included in the current year California taxable income. The remaining 50% of the reserve is not required to be recaptured into income, but rather represents a permanent difference between GAAP and California tax accounting. The deferred tax liability related to this permanent difference has been eliminated from our balance sheet and the current year state income tax provision has been reduced accordingly. See “Business — Taxation.”

Financial Condition

Overview

We originated $1.4 billion and $1.3 billion of automobile contracts for the three months ended March 31, 2003 and 2002, respectively. Automobile contract originations totaled $5.4 billion, $4.9 billion and $4.2 billion for the years ended December 31, 2002, 2001 and 2000, respectively. As a result of higher contract originations, our portfolio of managed contracts reached $9.7 billion at March 31, 2003, up from $9.4 billion, $8.2 billion and $6.8 billion at December 31, 2002, 2001 and 2000, respectively.

Total demand deposits and money market accounts at our retail banking division were $549 million at March 31, 2003 compared with $490 million, $812 million and $460 million at December 31, 2002, 2001 and 2000, respectively. Total demand deposit and money market accounts represented 39% of total retail banking deposits at March 31, 2003 compared with 36%, 39% and 23% at December 31, 2002, 2001 and 2000, respectively. The commercial banking division had deposits of $582 million at March 31, 2003 compared with $517 million, $220 million and $445 million at December 31, 2002, 2001 and 2000, respectively.


	*Investment and Other Securities*

Our investment and other securities portfolio consists of short-term securities, including repurchase agreements and overnight investments in federal funds. These short-term securities are maintained primarily for liquidity purposes. Additionally, we own FHLB stock as required by our affiliation with the FHLB System and carry it at cost. The FHLB stock is included in other assets on our Consolidated Statements of Financial Condition. We also hold owner trust certificates and obligations of states and political subdivisions, which are classified as available for sale. The owner trust certificates are recorded at cost, which approximates fair value. The obligations of states and political subdivisions are reported at fair value with unrealized gains and losses reflected as a separate component of shareholders’ equity on our Consolidated Statements of Financial Condition as accumulated other comprehensive income (loss), net of applicable taxes.

The following table summarizes our investment securities at the dates indicated:



		March 31,		December 31,

		2003		2002		2001		2000


		(Dollars in thousands)
Interest bearing deposits with other financial institutions		$	46,203	$	59,004	$	720	$	720
Other short-term investments							35,000		66,500
Investment securities:
	Obligations of states and political subdivisions		1,036		1,046		1,549		1,533
	Owner trust certificates				3,348		4,668		6,517
	FHLB stock		57,263		46,341		64,446		24,367
	Other		6,000		6,031		4,294		2,684

		$	110,502	$	115,770	$	110,677	$	102,321

The following table sets forth the stated maturities of our investment securities at March 31, 2003:


		Up to			One Year to Five			Five Years to			Ten Years	No Stated
		One Year			Years			Ten Years			or More	Maturity


					(Dollars in thousands)
Interest bearing deposits with other financial institutions		$	46,203
Investment securities:
	Obligations of states and political subdivisions				$	521		$	515
	FHLB stock											$	57,263
	Other												6,000

		$	46,203		$	521		$	515			$	63,263

Weighted average interest rate(1)			0.96	%		4.75	%		5.35	%			5.32%


(1)	Calculated based on amortized cost.

Mortgage-Backed Securities

We invest in mortgage-backed securities, also known as MBS, to generate net interest margin, manage interest rate risk, provide another source of liquidity through repurchase agreements and meet regulatory requirements. See “Business — Supervision and Regulation.” Our MBS portfolio is classified as available for sale. Accordingly, the portfolio is reported at fair value with unrealized gains and losses reflected as a separate component of shareholders’ equity on our Consolidated Statements of Financial Condition as accumulated other comprehensive income (loss), net of applicable taxes. The following table summarizes our MBS portfolio by issuer:



		March 31,		December 31,

		2003		2002		2001		2000


		(Dollars in thousands)
Available for sale securities:
	GNMA certificates	$	2,751,148	$	2,607,457	$	2,036,369	$	2,157,076
	FNMA participation certificates		36,407		39,124		51,894		68,870
	FHLMC participation certificates		807		1,068		1,692		1,938
	Other		1,948		2,008		2,270		2,564

		$	2,790,310	$	2,649,657	$	2,092,225	$	2,230,448

The portfolio has a weighted average yield (including effects of amortization of premiums and discounts) of 3.99% and 5.30% for the three months ended March 31, 2003 and 2002, respectively, and 5.14%, 5.95% and 5.95% for the years ended December 31, 2002, 2001 and 2000, respectively. The weighted average coupon rate was 6.76% at March 31, 2003 compared with 6.96%, 7.48% and 7.32% at December 31, 2002, 2001 and 2000, respectively. Our MBS portfolio had remaining maturities of four years or greater at March 31, 2003 although payments are generally received monthly throughout the life of these securities.

Loan Portfolios

The following table sets forth the composition of our loan portfolio by type of loan, including loans held for sale, as of the dates indicated:



			March 31,					December 31,


			2003					2002					2001					2000

			Amount		%			Amount		%			Amount		%			Amount		%


			(Dollars in thousands)
Consumer loans:
	Automobile contracts		$	9,894,176		97.2	%	$	9,147,937		96.9	%	$	7,192,302		95.2	%	$	4,390.265		89.2	%
	Other			8,400		0.1			7,531		0.1			8,826		0.1			13,456		0.3

				9,902,576		97.3			9,155,468		97.0			7,201,128		95.3			4,403,721		89.5
Less: unearned interest				85,117		0.8			91,713		1.0			108,169		1.4			94,404		1.9

		Total consumer loans		9,817,459		96.5			9,063,755		96.0			7,092,959		93.9			4,309,317		87.6
Mortgage loans:
	Existing properties			263,559		2.6			277,233		2.9			361,115		4.8			498,963		10.1
	Construction			13,188		0.1			14,150		0.1			15,638		0.2			14,784		0.3

				276,747		2.7			291,383		3.1			376,753		5.0			513,747		10.4
Less: undisbursed loan proceeds				7,379		0.1			8,453		0.1			3,298		0.0			6,316		0.1

		Total mortgage loans		269,368		2.6			282,930		3.0			373,455		5.0			507,431		10.3
Commercial loans				93,339		0.9			97,216		1.0			85,312		1.1			107,586		2.1

		Total loans	$	10,180,166		100.0	%	$	9,443,901		100.0	%	$	7,551,726		100.0	%	$	4,924,334		100.0	%

There were no consumer loans serviced for the benefit of others at March 31, 2003 compared with $525 million, $1.2 billion and $2.6 billion at December 31, 2002, 2001 and 2000, respectively.

Mortgage Loan Portfolio

We have from time to time originated mortgage products that we have held on our balance sheet rather than selling through the secondary markets. Other than mortgage loans originated through the commercial banking division on a limited basis, we do not expect to add mortgage loans to our balance sheet.

Commercial Loan Portfolio

We had outstanding commercial loan commitments of $186 million at March 31, 2003 compared with $199 million, $135 million and $114 million at December 31, 2002, 2001 and 2000, respectively. We originated $96.7 million and $61.3 million of commercial loans for the three months ended March 31, 2003 and 2002, respectively. We originated $354 million, $292 million and $266 million of commercial loans during 2002, 2001 and 2000, respectively. Though we continue to focus on expanding our commercial banking operation, it was not a significant source of revenue.

Amounts Due From Trusts

The excess cash flows generated by contracts sold to each of the securitization trusts are deposited into spread accounts in the name of the trustee under the terms of the securitizations treated as sales. In addition, at the time a securitization closes, we advance additional monies to our subsidiary that originated the securitization trust to initially fund these spread accounts. As these spread accounts reach the balances required by the trust, excess amounts are released to us and are used to pay down these amounts. The amounts due from trusts represent initial advances made to spread accounts and excess cash flows that are still under obligation to be held in the spread accounts for securitizations treated as sales. We had no

amounts due from trusts at March 31, 2003 compared with $101 million, $136 million and $357 million at December 31, 2002, 2001 and 2000, respectively. The decrease is the result of our transition to treating our securitizations as secured financings rather than as sales as well as our regaining control over the assets of the trust for all our outstanding securitizations treated as sales for accounting purposes.

Asset Quality

Overview

Nonperforming assets, repossessions, loan delinquency and credit losses are considered by us as key measures of asset quality. Asset quality, in turn, affects our determination of the allowance for credit losses. We also take into consideration general economic conditions in the markets we serve, individual loan reviews and the level of assets relative to reserves in determining the adequacy of the allowance for credit losses.

Automobile Loan Quality

We provide financing in a market where there is a risk of default by borrowers. Chargeoffs directly impact our earnings and cash flows. To minimize the amount of credit losses we incur, we monitor delinquent accounts, promptly repossess and remarket vehicles, and seek to collect on deficiency balances.

At March 31, 2003, the percentage of managed accounts delinquent 30 days or greater was 2.41% compared with 3.50%, 3.72% and 3.18% at December 31, 2002, 2001 and 2000, respectively. We calculate delinquency based on the contractual due date. Net chargeoffs on average managed contracts outstanding were 2.86% and 2.76% for the three months ended March 31, 2003 and 2002, respectively. Net chargeoffs on average managed contracts outstanding were 2.77%, 2.27% and 1.91% for the years ended December 31, 2002, 2001 and 2000, respectively.

The following table sets forth information with respect to the delinquency of our portfolio of contracts managed, which includes automobile contracts that are owned by us and automobile contracts that have been sold but are managed by us:



			March 31,					December 31,


			2003					2002					2001					2000

			Amount		%			Amount		%			Amount		%			Amount		%


			(Dollars in thousands)
Automobile contracts managed			$	9,650,229				$	9,389,974				$	8,152,882				$	6,818,182

Period of delinquency:
	30 — 59 days		$	165,052		1.71	%	$	238,204		2.54	%	$	217,873		2.67	%	$	157,843		2.32	%
	60 days or more			67,065		0.70			90,291		0.96			85,290		1.05			59,166		0.86

		Total automobile contracts delinquent and delinquencies as a percentage of automobile contracts managed	$	232,117		2.41	%	$	328,495		3.50	%	$	303,163		3.72	%	$	217,009		3.18	%

The following table sets forth information with respect to repossessions in our portfolio of managed contracts:



	March 31,						December 31,


	2003						2002						2001						2000

	Number of						Number of						Number of						Number of
	Automobile						Automobile						Automobile						Automobile
	Contracts			Amount			Contracts			Amount			Contracts			Amount			Contracts			Amount


	(Dollars in thousands)
Automobile contracts managed		775,090		$	9,650,229			757,269		$	9,389,974			690,401		$	8,152,882			616,011		$	6,818,182

Repossessed vehicles		1,575		$	10,966			2,375		$	16,433			1,168		$	7,553			946		$	6,199

Repossessed assets as a percentage of number and amount of automobile contracts managed		0.20	%		0.11	%		0.31	%		0.18	%		0.17	%		0.09	%		0.15	%		0.09	%

The following table sets forth information with respect to actual credit loss experience on our portfolio of contracts managed:



	For the Three Months
	Ended March 31,						For the Year Ended December 31,

	2003			2002			2002			2001			2000


	(Dollars in thousands)
Automobile contracts managed at end of period	$	9,650,229		$	8,405,634		$	9,389,974		$	8,152,882		$	6,818,182

Average automobile contracts managed during period	$	9,533,314		$	8,273,297		$	8,845,635		$	7,576,681		$	6,076,814

Gross chargeoffs	$	90,779		$	79,792		$	327,161		$	236,834		$	165,937
Recoveries		22,598			22,633			82,372			64,626			49,697

Net chargeoffs	$	68,181		$	57,159		$	244,789		$	172,208		$	116,240

Net chargeoffs as a percentage of average automobile contracts managed during period		2.86	%		2.76	%		2.77	%		2.27	%		1.91	%

Cumulative static pool losses are another means of analyzing contract quality. The cumulative static pool loss of a securitization is the cumulative amount of losses actually recognized, net of recoveries, as to the contracts securitized, up to and including a given month, divided by the original principal balance of the contracts in that securitization. The following table sets forth the cumulative static pool losses by month for all outstanding securitized pools:

Cumulative Static Pool Loss Curves

At March 31, 2003




Period(1)		1998-C		1999-A		1999-B		1999-C		2000-A		2000-B		2000-C		2000-D		2001-A		2001-B		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%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%		0.00%
	2		0.04		0.04		0.04		0.02		0.03		0.02		0.04		0.04		0.03		0.03		0.04		0.01		0.00		0.02		0.02		0.01
	3		0.11		0.11		0.11		0.10		0.10		0.09		0.13		0.11		0.09		0.10		0.09		0.06		0.03		0.06		0.07
	4		0.23		0.20		0.26		0.25		0.20		0.24		0.27		0.24		0.20		0.21		0.20		0.15		0.10		0.14		0.16
	5		0.39		0.33		0.47		0.40		0.36		0.39		0.46		0.39		0.33		0.33		0.35		0.29		0.18		0.27		0.26
	6		0.50		0.46		0.66		0.56		0.55		0.59		0.65		0.54		0.50		0.50		0.49		0.43		0.32		0.44
	7		0.61		0.62		0.87		0.71		0.71		0.78		0.81		0.74		0.70		0.69		0.65		0.60		0.49		0.57
	8		0.75		0.76		1.00		0.86		0.91		0.99		0.93		0.93		0.84		0.87		0.81		0.84		0.66		0.70
	9		0.86		0.92		1.13		1.01		1.10		1.17		1.07		1.13		1.04		1.05		0.95		1.06		0.82
	10		1.00		1.11		1.24		1.14		1.27		1.33		1.24		1.34		1.24		1.22		1.07		1.28		0.96
	11		1.17		1.30		1.35		1.34		1.45		1.44		1.41		1.50		1.45		1.36		1.20		1.48		1.10
	12		1.32		1.47		1.44		1.52		1.58		1.57		1.62		1.74		1.67		1.53		1.37		1.67
	13		1.48		1.61		1.58		1.74		1.73		1.72		1.86		1.95		1.90		1.67		1.55		1.82
	14		1.66		1.73		1.74		1.94		1.85		1.86		2.04		2.21		2.09		1.81		1.74
	15		1.79		1.81		1.85		2.09		2.00		2.04		2.25		2.48		2.25		2.00		1.97
	16		1.91		1.89		2.03		2.27		2.15		2.24		2.45		2.71		2.41		2.19		2.16
	17		2.01		2.00		2.16		2.39		2.37		2.39		2.68		2.89		2.54		2.37		2.36
	18		2.07		2.10		2.30		2.53		2.52		2.55		2.88		3.08		2.73		2.60		2.59
	19		2.11		2.24		2.42		2.67		2.67		2.73		3.08		3.22		2.93		2.80		2.78
	20		2.17		2.35		2.50		2.81		2.83		2.93		3.23		3.40		3.11		3.01		2.95
	21		2.24		2.46		2.58		2.92		2.99		3.12		3.38		3.59		3.34		3.19
	22		2.34		2.55		2.67		3.10		3.16		3.27		3.54		3.78		3.54		3.34
	23		2.43		2.63		2.77		3.28		3.34		3.38		3.67		3.96		3.72		3.49
	24		2.52		2.71		2.87		3.38		3.49		3.52		3.83		4.18		3.92
	25		2.62		2.77		3.01		3.55		3.63		3.63		4.00		4.41		4.10
	26		2.71		2.82		3.14		3.68		3.75		3.73		4.16		4.58		4.23
	27		2.80		2.89		3.16		3.84		3.86		3.84		4.35		4.79
	28		2.87		2.96		3.29		3.98		3.97		3.97		4.50		4.96
	29		2.90		3.02		3.40		4.14		4.09		4.11		4.64		5.08
	30		2.95		3.09		3.50		4.19		4.21		4.26		4.79
	31		3.00		3.17		3.61		4.30		4.33		4.40		4.92
	32		3.02		3.20		3.68		4.38		4.47		4.50		5.02
	33		3.08		3.27		3.74		4.46		4.59		4.61
	34		3.14		3.35		3.81		4.57		4.68		4.70
	35		3.15		3.41		3.87		4.66		4.79		4.78
	36		3.21		3.47		3.91		4.76		4.86
	37		3.25		3.52		3.97		4.84		4.93
	38		3.30		3.55		4.03		4.96
	39		3.35		3.58		4.09		5.03
	40		3.39		3.61		4.13		5.13
	41		3.39		3.63		4.18		5.20
	42		3.42		3.66		4.23		5.24
	43		3.45		3.68		4.28
	44		3.47		3.72		4.33
	45		3.48		3.75		4.35
	46		3.50		3.79
	47		3.52		3.80
	48		3.56		3.83
	49		3.58		3.85
	50		3.60		3.85
	51		3.62
	52		3.63

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