ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information and Holders
White River’s common stock trades on the NYSE Amex under the symbol RVR. As of March 1, 2012, there were 3,544,825 shares of common stock outstanding and approximately 75 shareholders of record (assuming all remaining unexchanged certificates for shares of UAC common stock are exchanged for certificates representing White River shares). White River’s common stock was held by approximately 940 beneficial owners as of such date.
The following table sets forth the range of the high, low and closing sale prices for White River’s common stock as reported on the NYSE Amex and the quarterly cash dividends per share declared, in each case for the periods indicated:
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High
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Low
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Close
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Dividends
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Fiscal year ended December 31, 2010
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First Quarter
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$
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14.27
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$
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10.99
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$
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13.70
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$
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0.25
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Second Quarter
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15.88
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12.40
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13.64
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0.25
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Third Quarter
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18.28
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13.36
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16.49
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0.25
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Fourth Quarter
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22.80
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15.75
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16.32
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4.25
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Fiscal year ended December 31, 2011
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First Quarter
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$
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19.65
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$
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16.32
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$
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17.17
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$
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0.25
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Second Quarter
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19.60
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17.04
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19.25
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0.25
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Third Quarter
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20.92
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16.90
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19.37
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0.25
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Fourth Quarter
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27.80
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18.51
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20.25
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4.25
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Dividends
The following table summarizes the dividends declared during 2010 and 2011 by White River’s Board of Directors:
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Date Dividend Declared
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Record Date
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Payment Date
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Dividend Type
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Cash Dividend Per Share
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Total Divided Paid (in thousands)
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February 22, 2010
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March 3, 2010
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March 12, 2010
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Quarterly Cash
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$ 0.25
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$ 995.6
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May 6, 2010
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May 17, 2010
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May 28, 2010
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Quarterly Cash
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$ 0.25
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$ 980.7
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August 2, 2010
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August 12, 2010
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August 26, 2010
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Quarterly Cash
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$ 0.25
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$ 938.7
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November 2, 2010
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November 12, 2010
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November 22, 2010
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Quarterly Cash
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$ 0.25
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$ 938.7
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November 30, 2010
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December 9, 2010
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December 21, 2010
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Special Cash
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$ 4.00
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$ 14,967.0
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February 16, 2011
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February 25, 2011
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March 2, 2011
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Quarterly Cash
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$ 0.25
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$ 926.7
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May 5, 2011
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May 16, 2011
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May 31, 2011
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Quarterly Cash
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$ 0.25
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$ 903.2
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August 1, 2011
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August 11, 2011
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August 25, 2011
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Quarterly Cash
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$ 0.25
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$ 903.2
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October 28, 2011
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November 7, 2011
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November 21, 2011
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Quarterly Cash
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$ 0.25
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$ 883.1
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November 28, 2011
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December 8, 2011
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December 22, 2011
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Special Cash
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$ 4.00
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$ 14,137.9
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On February 3, 2012, White River announced that its Board of Directors declared a quarterly cash dividend of 25 cents per share on its common stock to shareholders of record on February 13, 2012. This quarterly dividend was paid on February 24, 2012.
White River intends to continue paying quarterly dividends at a rate of 25 cents per share. However, the continuance of such dividend payments will depend on a number of factors, including White River’s capital levels, financial condition, and results of operations. Our Board of Directors continually reviews and evaluates White River’s cash dividend policy and retains the discretion to declare and pay dividends, subject to applicable legal requirements.
While Coastal Credit is not restricted by its operating agreement from making distributions, its line of credit restricts the payment of cash distributions to 80% of Coastal Credit’s pre-tax income for the prior 12 months unless written approval from its lender is received to exceed such restriction. Coastal Credit’s ability to receive the necessary approval is largely dependent upon its portfolio performance, and Coastal Credit may not be able to obtain the necessary approvals in the future for distributions to White River that would enable White River to pay cash dividends to its shareholders.
Summary of Transfer Restrictions and Related Provisions
General
The following is a summary of the material transfer restrictions set forth in Article 10 of White River’s articles of incorporation. The following summary is not complete. The transfer restrictions apply to transfers of White River’s common stock and any other instrument that would be treated as “stock,” as determined under applicable Treasury Regulations. The transfer restrictions will apply until the earlier of:
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the repeal by the Internal Revenue Service of the NOL carryforward limitations in the Code if White River’s board of directors determines the transfer restrictions are no longer necessary for the preservation of the tax benefits; and
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the beginning of a taxable year of White River to which White River’s board determines that no tax benefits may be carried forward.
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However, White River’s board of directors will have the power to extend the expiration date of the transfer restrictions if it determines in writing that such action is reasonably necessary or desirable to preserve the tax benefits or to accelerate the expiration date if it determines in writing that the continuation of the transfer restrictions is no longer reasonably necessary for the preservation of the tax benefits. This power is vested in White River’s board of directors to ensure that White River retains the power to make, in light of all relevant circumstances, including positions that might be taken by tax authorities and contested by White River, the complex determination whether the tax benefits have been fully used or are otherwise available.
Prohibited Transfers
The transfer restrictions generally prohibit any conveyance, from one person to another, by any means, of legal or beneficial ownership, directly or indirectly, of any class of White River stock including indirect transfers of White River stock, accomplished by transferring interests in other entities that own White River stock, to the extent that the transfer, if effective:
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would create a new “public group” of White River. For example, the transfer of stock by an existing 5-percent shareholder to the public would be deemed to result in the creation of a separate, segregated “public group” that would be a new 5-percent shareholder;
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·
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would give rise to a “prohibited ownership percentage,” which is defined by reference to complex federal tax laws and regulations, but generally means any direct or indirect ownership that would cause any person, including a “public group” as defined in the NOL carryforward limitations, to be considered a 5-percent shareholder of White River. By way of example, if shareholder A owns 4% of White River’s outstanding shares of common stock, and shareholder B attempted to sell 2% of White River’s outstanding shares to shareholder A, the transfer restrictions would prohibit the sale of approximately 1.1% of the shares out of the 2% attempted to be sold; or
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would increase the ownership percentage of any person, including a public group that is already a 5-percent shareholder of White River. Therefore, no shareholder will be permitted to sell any shares to 5-percent holders or their affiliates without board approval.
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White River will be entitled to require, as a condition to the registration of any transfer of stock, that the proposed transferee furnish to White River all information reasonably requested by it with respect to all the direct and indirect legal or beneficial ownership interest in, or options to acquire, stock of the proposed transferee and its affiliates. White River’s Articles and Code of By-laws provide for specific shareholder ownership disclosure procedures as an additional measure available to White River to protect against prohibited transfers.
Exemptive Power of White River’s Board
White River’s board of directors has the power to approve any otherwise prohibited transfer, conditionally or unconditionally, if it determines, in its discretion, that a specific proposed transaction will not jeopardize White River’s full use of the tax benefits. In addition, White River’s board of directors has the power to waive any of the transfer restrictions in any instance where it determines that a waiver would be in the best interests of White River despite the effect of the waiver on the tax benefits.
Consequences of Purported Prohibited Transfer
Unless approved by White River’s board of directors, any attempted transfer in excess of the shares of White River stock that could be transferred without restriction will be void and will not be effective to transfer ownership of such excess shares. Further, the purported acquiror of the excess shares will not be entitled to any rights as a shareholder of White River with respect to the excess shares.
In the case of an attempted transfer that creates a new 5-percent shareholder, increases the ownership of an existing 5-percent shareholder, or causes a person or public group to become a new 5-percent shareholder, White River will have the right to demand that the new 5-percent shareholder or existing 5-percent shareholder, as the case may be, transfer any certificate or other evidence of purported ownership of the prohibited shares within the party’s possession or control, along with any dividends or other distributions received on the prohibited shares from White River, to an agent designated by White River who will be required to sell the prohibited shares in an arm’s-length transaction, in the public market, if possible, but in any event consistent with applicable law. The agent will be required to pay the sale proceeds in excess of the sum of the agent’s expenses plus the purchase price paid by the purported acquiror for the prohibited shares (or the fair market value of the prohibited shares if they were the subject of a gift or inheritance in favor of the purported acquiror), as well as all prohibited distributions, to a tax-exempt charitable organization designated by White River. If the purported acquiror has sold the prohibited shares to an unrelated party in an arm’s-length transaction, the purported acquiror will be deemed to have done so for the agent, who will have the right to allow the purported acquiror to retain a portion of the resale proceeds not exceeding the amount that the agent would have been required to remit to the purported acquiror out of the proceeds of a resale by the agent. Any purported transfer of the prohibited shares by the purported acquiror, other than a transfer that is described in the preceding
sentences of this paragraph and that does not itself violate the transfer restrictions, will not be effective to transfer any ownership of the prohibited shares.
In addition to the powers of White River’s board of directors described above, if the board determines that a purported prohibited transfer or other action in violation of the transfer restrictions has occurred or is proposed, it may take such action as it deems advisable to prevent or refuse to give effect to such purported transfer or other action, including refusing to give effect to the purported transfer or other action on White River’s books or instituting injunctive proceedings.
If any person knowingly violates the transfer restrictions or knowingly causes any entity under such person’s control to do so, such person and, if applicable, the controlled entity will be jointly and severally liable to White River in such amount as will put White River in the same financial position, on an after-tax basis, as it would have been had such violation not occurred.
With respect to any conveyance of White River common stock that does not involve a transfer of “securities” of White River within the meaning of the Indiana Business Corporation Law, but that would create a new 5-percent shareholder, increase the ownership of an existing 5-percent shareholder or create a new public group, the following procedure will apply. The person or group will not be required to dispose of any interest that is not a security of White River, but will be deemed to have disposed of, and will be required to dispose of, sufficient shares, simultaneously with the transfer, to cause the person or group not to be in violation of the transfer restrictions. The shares will be disposed of through the agent under the provisions summarized above, with the maximum amount payable to the prohibited party from the proceeds of sale by the agent being the fair market value of the prohibited shares at the time of the prohibited transfer.
Other Powers of White River’s Board
White River’s board of directors has the power:
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to accelerate or extend the expiration date of the transfer restrictions, modify the definitions of any terms set forth in White River’s articles of incorporation with respect to the transfer restrictions or conform certain provisions to make them consistent with any future changes in federal tax law, in the event of a change in law or regulation or if it otherwise believes such action is in the best interests of White River, provided White River’s board of directors determines in writing that such action is reasonably necessary or desirable to preserve the tax benefits or that continuation of the transfer restrictions is no longer reasonably necessary for the preservation of the tax benefits;
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·
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to adopt by-laws, regulations and procedures, not inconsistent with the transfer restrictions, for purposes of determining whether any acquisition of White River common stock would jeopardize the ability of White River to preserve and use the tax benefits and for the orderly application, administration and implementation of the transfer restrictions; and
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·
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to administer, interpret and make calculations under the transfer restrictions, which power it may delegate in whole or in part to a committee of White River’s board of directors, and which actions shall be final and binding on all parties if made in good faith.
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Disclosure Procedures
The following is a summary of the shareholder disclosure and ownership procedures adopted by White River’s board of directors and set forth in Article III, Section 14 of White River’s Code of By-laws, in accordance with authority and direction granted in Section 6.08 of White River’s Articles of Incorporation. The following is a summary and does not completely restate the provisions of Article III, Section 14 of the Code of By-laws. You should read Article III, Section 14 of the Code of By-laws in its entirety.
The shareholder disclosure and ownership procedures have the following purposes:
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to preserve important characteristics of White River for federal income tax purposes and, in particular, the NOLs;
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to protect White River and its shareholders against undisclosed efforts to assume or influence control of White River, its operations and policies; and
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to facilitate communication among White River and its shareholders.
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The disclosure and ownership procedures apply to all holders and beneficial owners of White River’s outstanding shares of common stock. “Beneficial owner” generally refers to a person to whom the economic value of the shares of common stock ultimately inures and who has the power directly or indirectly to dispose of the shares of common stock.
From the date shares of common stock were first issued by White River until December 31, 2015, every beneficial owner of more than 4.5% of the outstanding shares of common stock within thirty (30) days after the end of each fiscal quarter, shall give written notice to White River stating the name and address of such owner, the number of shares beneficially owned and a description of the manner in which such shares are held. In addition, each such beneficial owner must provide additional ownership information reasonably requested by White River in order to determine the effect, if any, of such beneficial ownership on White River’s federal income tax characteristics (including ownership changes that have occurred or may occur for purposes of Section 382 of the Code), or on control of White River’s outstanding shares, or to ensure compliance with the Code of By-laws.
The disclosure procedures also require each person who is a beneficial owner of shares and, to the extent permitted by law, each person (including the shareholder of record) holding shares for a beneficial owner or as nominee to provide or confirm to White River such information relating to a beneficial owner’s present and past beneficial ownership of shares or changes in that ownership to the extent the information is in the person’s possession or can be acquired without unreasonable expense. White River may request this information, in good faith, in order to determine the effect, if any, on White River’s federal income tax characteristics (including ownership changes that have occurred or may occur for purposes of Section 382 of the Code) or on control of White River’s outstanding shares, or to determine compliance with requirements of any taxing authority or governmental authority, or to determine compliance with White River’s Articles of Incorporation or Code of By-laws.
The procedures do not require information to be reported that a beneficial owner has previously reported to White River or that has been previously reported on the beneficial owner’s behalf. If there has been no change in information previously reported, a person does not need to report it again unless White River requests confirmation. The procedures also will not require the disclosure of the names of the beneficial owners of a private trust created in good faith and not for the purpose of circumventing the White River Articles of Incorporation or Code of By-laws.
Disclosure Compliance
To ensure compliance with the disclosure procedures, the following sanctions are available to White River:
Distributions Withheld.
White River shall withhold payment of any dividend or distribution otherwise payable in respect of shares (or property or securities into which such shares may be converted or for which they may be exchanged in a merger or share exchange transaction) if the beneficial owner of the shares has failed, or White River reasonably believes it has failed, to comply with these disclosure procedures. Such distributions or property shall be payable only at such time as the subject beneficial owner has complied with the disclosure procedures. However, if the distribution is to be made with respect to subscription rights or similar time-sensitive rights that required action or exercise by the beneficial owner before a time that has passed or elapsed, such rights shall be deemed expired and the beneficial owner shall be deemed to have elected to forfeit such rights.
Vote Disregarded.
White River shall disregard the affirmative vote on any action by shareholders on any matter, whether at a meeting or by written consent, purported to be cast in respect of shares if the holder or beneficial owner of the shares has failed, or White River reasonably believes it has failed, to comply with these disclosure procedures, unless such vote is cast in a manner consistent with a recommendation of the board of directors in respect of such matter. These shares will still be counted, however, in determining the presence of a quorum if the shares are represented in person or by proxy at a meeting of shareholders.
Remedial Transfer.
If a beneficial owner fails to comply with the disclosure procedures, and White River delivers a compliance demand notice to the nominee or holder of record of the shares, then at or before the close of business on the date ten (10) business days following delivery of the notice, the nominee or holder of record shall effect the disposition of beneficial ownership by the non-compliant beneficial owner of the shares and deliver a “Disposition Certificate” to White River. The Disposition Certificate certifies to White River that the interest of the non-compliant beneficial owner has been effectively transferred and that everything required to be disclosed has been disclosed. If the disposition of shares is not effected or a Disposition Certificate is not timely delivered, then White River may require the nominee or record holder of such shares to whom the compliance demand notice was delivered to effect a remedial transfer whereby the affected shares would be sold by an independent agent.
Additional Remedies.
The board of directors of White River is also authorized to take any other action it deems necessary or advisable to protect White River and the interests of its shareholders, including actions to protect and preserve White River’s status under Section 382 of the Code. This action may include a decision to exclude any shareholder the board reasonably believes has failed to comply with the disclosure procedures from any offering of White River securities that is otherwise made available to shareholders.
Anti-Takeover Effect of Transfer Restrictions and Disclosure Procedures
The transfer restrictions:
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may have the effect of impeding the attempt of a person or entity to acquire a significant or controlling interest in White River;
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may render it more difficult to effect a merger or similar transaction even if such transaction is favored by a majority of the independent shareholders of White River; and
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may serve to entrench management.
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In addition to the transfer restrictions and disclosure procedures, White River will be subject to certain other provisions of White River’s articles of incorporation, to which we are currently subject, that may have the effect of discouraging a takeover or similar transaction, including the authority, vested in White River’s board of directors, to issue up to three million shares of preferred stock and to fix the preferences and rights thereof.
The purpose of the transfer restrictions and disclosure procedures is to help preserve the tax benefits rather than to have an anti-takeover effect, which is an incidental result.
Purchase of Equity Securities by White River and Affiliated Purchasers
On November 11, 2009, the Board of Directors reauthorized White River’s previously announced share repurchase program. Under this program, White River was authorized to repurchase up to 500,000 shares of its outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. White River has repurchased all 500,000 shares of its outstanding common stock under the program for $7.7 million. Information pertaining to the shares repurchased during 2011 under this program is as follows:
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Period
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Total Number of Shares Purchased
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Average Price Paid per Share
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
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Maximum Number of Shares that May Yet be Purchased Under the Program
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January 1, 2011 - March 31, 2011
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100,479
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$
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18.50
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100,479
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17,571
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April 1, 2011 - June 30, 2011
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—
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$
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—
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—
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17,571
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July 1, 2011 - September 30, 2011
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17,571
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$
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18.73
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17,571
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—
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October 1, 2011 - December 31, 2011
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—
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$
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—
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—
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—
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118,050
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$
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18.53
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118,050
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On August 11, 2011, White River announced that its Board of Directors approved a new program to repurchase, from time to time and subject to market conditions, up to 250,000 shares of White River’s outstanding common stock, on the open market or in privately negotiated transactions. As of December 31, 2011, White River has repurchased 62,829 shares of its outstanding common stock under the program for $1.2 million. Information pertaining to the shares repurchased during 2011 under this program is as follows:
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Period
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Total Number of Shares Purchased
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Average Price Paid per Share
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
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Maximum Number of Shares that May Yet be Purchased Under the Program
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January 1, 2011 - March 31, 2011
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—
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$
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—
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—
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|
|
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—
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April 1, 2011 - June 30, 2011
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—
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$
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—
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—
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—
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July 1, 2011 - September 30, 2011
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62,829
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$
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19.40
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62,829
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187,171
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October 1, 2011 - December 31, 2011
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—
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$
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—
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—
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187,171
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|
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|
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62,829
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$
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19.40
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62,829
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White River did not repurchase any shares under this program during any month in the fourth quarter of 2011.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This section is intended to provide an understanding of the financial performance of White River through a discussion of the factors affecting White River’s financial condition at December 31, 2011 and 2010, and White River’s consolidated results of operations for the years ended December 31, 2011 and 2010. This section should be read in conjunction with White River’s consolidated financial statements and notes to the consolidated financial statements that appear elsewhere in this document. In addition to the historical information contained herein, the following discussion contains forward-looking statements that involve risks and uncertainties. See “Discussion of Forward-Looking Statements.”
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. White River believes that the following represents the material critical accounting policies used in the preparation of its consolidated financial statements. Actual results could differ significantly from estimates.
Allowance for Loan Losses – Finance Receivables
Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover probable credit losses inherent in finance receivables.
The allowance for loan losses is established systematically by management based on the determination of the amount of probable credit losses inherent in the finance receivables as of the reporting date. Coastal Credit reviews charge off experience factors, delinquency reports, historical collection rates and other information in order to make the necessary judgments as to credit losses inherent in the portfolio as of the reporting date. Assumptions regarding probable credit losses are reviewed quarterly and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumptions increase, there could be an increase in the amount of allowance for loan losses required, which could decrease the net carrying value of finance receivables and increase the provision for loan losses recorded on the consolidated statements of operations. Coastal Credit believes that the existing allowance for loan losses is sufficient to absorb probable finance receivable losses.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax basis and net operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The ultimate realization of the deferred tax asset depends on White River’s ability to generate sufficient taxable income in the future and its ability to avoid an ownership change for tax purposes. The valuation allowance has been derived pursuant to the provisions of ASC Topic No. 740,
Income Taxes
, and reduces the total deferred tax asset to an amount that will “more likely than not” be realized (see Note 8 to the consolidated financial statements). As of December 31, 2011, there was no liability recorded for unrecognized tax benefits.
New Accounting Pronouncements
In June 2011, the Financial Accounting Standards Board (“FASB”) issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 will supersede some of the guidance in Accounting Standards Codification Topic 220. The main provisions of this ASU provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements: (i) a single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income; (ii) in a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option in current GAAP that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated. This ASU is effective beginning with the first quarter of 2012 and will have no material impact on the White River consolidated financial statements.
In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No 2011-05”. ASU 2011-12 delayed the effective date of certain requirements of ASU 2011-05 related to the presentation of reclassifications of items out of accumulated other comprehensive income.
Results of Operations
The Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010
Net income was $9.5 million, or $2.64 per diluted share, for the year ended December 31, 2011, compared to $7.1 million, or $1.84 per diluted share, for the year ended December 31, 2010. The increase in net income from the prior year is primarily due to an increase in interest on receivables of $2.4 million and a decrease of $2.4 million in provision for loan losses during 2011. This increase in net income was partially offset by an increase in total other expenses and income tax expense of $1.1 million and $0.8 million, respectively.
Discussion of Results
The following table presents consolidating financial information for White River for the periods indicated ($ in thousands):
|
|
For The Year Ended December 31, 2011
|
|
Coastal Credit
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
35,189
|
|
|
$
|
2
|
|
|
$
|
35,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,852
|
)
|
|
|
(43
|
)
|
|
|
(1,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
33,337
|
|
|
|
(41
|
)
|
|
|
33,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
(3,988
|
)
|
|
|
(6
|
)
|
|
|
(3,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (deficit) after provision for loan losses
|
|
|
29,349
|
|
|
|
(47
|
)
|
|
|
29,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER REVENUES (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
(8,648
|
)
|
|
|
(748
|
)
|
|
|
(9,396
|
)
|
|
|
Operating expenses
|
|
|
(3,257
|
)
|
|
|
(1,632
|
)
|
|
|
(4,889
|
)
|
|
|
Change in fair market valuation of creditor liabilities
|
|
|
—
|
|
|
|
43
|
|
|
|
43
|
|
|
|
Other income (expense)
|
|
|
(383
|
)
|
|
|
1
|
|
|
|
(382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(12,288
|
)
|
|
|
(2,336
|
)
|
|
|
(14,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
17,061
|
|
|
$
|
(2,383
|
)
|
|
$
|
14,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Year Ended December 31, 2010
|
|
Coastal Credit
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
32,808
|
|
|
$
|
17
|
|
|
$
|
32,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,318
|
)
|
|
|
(174
|
)
|
|
|
(1,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
31,490
|
|
|
|
(157
|
)
|
|
|
31,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery (provision) for loan losses
|
|
|
(6,426
|
)
|
|
|
72
|
|
|
|
(6,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (deficit) after recovery (provision) for loan losses
|
|
|
25,064
|
|
|
|
(85
|
)
|
|
|
24,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER REVENUES (EXPENSES):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
(8,290
|
)
|
|
|
(707
|
)
|
|
|
(8,997
|
)
|
|
|
Operating expenses
|
|
|
(3,164
|
)
|
|
|
(1,443
|
)
|
|
|
(4,607
|
)
|
|
|
Change in fair market valuation of creditor liabilities
|
|
|
—
|
|
|
|
179
|
|
|
|
179
|
|
|
|
Gain from deficiency account sale
|
|
|
—
|
|
|
|
37
|
|
|
|
37
|
|
|
|
Other income (expense)
|
|
|
(200
|
)
|
|
|
23
|
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(11,654
|
)
|
|
|
(1,911
|
)
|
|
|
(13,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
13,410
|
|
|
$
|
(1,996
|
)
|
|
$
|
11,414
|
|
The Year Ended December 31, 2011 Compared to the Year Ended December 31, 2010 - Consolidated
Interest on receivables increased 7.2% to $35.2 million compared to $32.8 million for the years ended December 31, 2011 and 2010, respectively. This increase is a result of an increase in the Coastal Credit average finance receivable, net of unearned finance charge income and discounts and fees to $113.3 million during the year ended December 31, 2011 as compared to $100.9 million during the year ended December 31, 2010.
Interest expense was $1.9 million for the year ended December 31, 2011 compared to $1.5 million for the year ended December 31, 2010. The average line of credit was $62.3 million and $42.2 million for the years ended December 31, 2011 and 2010, respectively.
Provision for loan losses was $4.0 million compared to $6.4 million for the years ended December 31, 2011 and 2010, respectively. Provision for loan losses is charged to income to bring Coastal Credit’s allowance for loan losses to a level which management considers adequate to absorb probable credit losses inherent in the portfolio of finance receivables.
Salaries and benefits increased to $9.4 million for the year ended December 31, 2011 compared to $9.0 million for the year ended December 31, 2010. This increase was primarily a result of performance based awards in addition to an increase in the number of employees at Coastal Credit during 2011.
Other operating expenses increased to $4.9 million for the year ended December 31, 2011 compared to $4.6 million for the year ended December 31, 2010. Coastal Credit operating expenses remained relatively unchanged between these periods. Corporate and Other operating expenses increased $0.2 million between these periods.
Income tax expense was $5.1 million for the year ended December 31, 2011 compared to $4.3 million for the year ended December 31, 2010. The expense is based on the estimated effective tax rates for 2011 and 2010, respectively. Upon completion of its 2010 federal and state income tax returns in September 2011, White River determined that its estimated statutory tax rate, used to tax effect its temporary differences, had changed based on the 2010 state apportionment results. Such new apportionments were the result of changes in volumes of business in various states which resulted in an increase in the estimated state tax effective rate which increased the overall statutory rates applied to White River’s temporary differences. This change in the effective rate resulted in an increase to the net deferred tax asset of approximately $176,000 which reduced income tax expense for the year ended December 31, 2011.
Financial Condition as of December 31, 2011 and 2010
Finance Receivables, Net
Finance receivables, net increased 18.6% to $114.7 million at December 31, 2011 as compared to $96.7 million at December 31, 2010. The finance receivables, net reflect the balances at Coastal Credit. The increase is a result of Coastal Credit’s growth initiatives and the exploitation of market opportunities. In this regard, White River and Coastal Credit, in connection with their managements’ periodic analysis of strategic options, from time to time review opportunities to purchase larger finance receivable portfolios from other financial institutions and finance companies, in addition to Coastal Credit’s ordinary course purchases of receivable contracts from franchised and independent dealers.
A significant number of contracts acquired by Coastal Credit are contracts made with borrowers who are in the United States military. As of December 31, 2011, 55.4% of the Coastal Credit receivables were with borrowers who are in the United States military as compared to 47.7% as of December 31, 2010. Coastal Credit believes that having in the portfolio a significant percentage of contracts for which the borrowers are United States military personnel contributes to lower payment delinquency and greater collection personnel efficiencies. Coastal Credit requests that all borrowers who are in the military use the military allotment system to make payments on their contracts. Under this allotment system, the borrower authorizes the military to make a payroll deduction for the amount of the borrower’s monthly contract payment and to direct this deduction payment to Coastal Credit on behalf of the borrower. Delinquency of payments on contracts paid by allotment historically has been less than delinquency of payments on contracts not paid by allotment. As a result, the collection effort associated with the military contracts requires substantially less time, allowing Coastal Credit’s collection staff to focus on non-military contracts.
Accrued Interest Payable
Accrued interest payable was $0.2 million at December 31, 2011 compared to $0.1 million at December 31, 2010.
Liquidity and Capital Resources for the Years Ended December 31, 2011 and 2010
Net cash provided by operating activities was $18.4 million for the year ended December 31, 2011 compared to $18.5 million for the year ended December 31, 2010.
Net cash used in investing activities was $22.2 million for the year ended December 31, 2011 compared to $14.5 million for the year ended December 31, 2010. This change was primarily the result of the increase in finance receivables acquired by Coastal Credit during 2011 compared to 2010.
Net cash provided by financing activities was $3.8 million for the year ended December 31, 2011 compared to net cash used in financing activities of $7.5 million for the year ended December 31, 2010. Net cash flows provided by financing activities for the year ended December 31, 2011 primarily resulted from the $25.0 million net increase in the line of credit. This activity was partially offset by the $3.4 million repurchase of White River common stock and $17.8 million of cash dividends paid. Net cash flows used in financing activities for the year ended December 31, 2010 primarily resulted from the $4.8 million repurchase of White River common stock and $18.7 million of cash dividends paid. This 2010 activity was partially offset by the net increase in the line of credit of $16.0 million.
At December 31, 2011, White River and its subsidiaries had cash and cash equivalents of $3.2 million compared to $3.3 million at December 31, 2010.
Coastal Credit has a revolving credit facility from a lending institution with a maximum borrowing limit at December 31, 2011 of $100.0 million. The original maturity date on the line of credit was December 31, 2011, but pursuant to a Fourth Amendment to Finance Agreement executed on November 9, 2011 between Coastal Credit and its line of credit lender, which became effective January 1, 2012, the maturity date has been extended for three years to December 31, 2014. The interest rate is the 1 month London Interbank Offered Rate (“LIBOR”) plus 2.60%. As of December 31, 2011, Coastal Credit had $81.0 million of indebtedness outstanding under this facility as compared to $56.0 million as of December 31, 2010. Coastal Credit increased its draws on the line of credit to purchase finance receivables and to fund White River’s stock repurchase programs and dividend payments during 2011. Total availability under the line of credit at December 31, 2011 was $100.0 million based upon the level of eligible collateral, with $19.0 million available in excess of the amount utilized at December 31, 2011. The credit facility is secured by substantially all of the assets of Coastal Credit. In addition, White River has provided an unconditional corporate guaranty. Coastal Credit must maintain specified financial ratios within guidelines established by the lender. Interest is paid monthly at a variable rate, based on meeting certain financial criteria. The average rate during each of the months of December, 2011 and 2010 was LIBOR plus 2.60% which equated to 2.87% and 2.86%, respectively. There is an annual commitment fee of 1/8 of 1% on the average daily unused commitment. Pursuant to the Fourth Amendment, effective January 1, 2012, this annual commitment fee remained at 1/8 of 1% but will increase to 1/2 of 1% if the average unused portion of the commitment for such calendar month is less than or equal to 50% of the commitment. In the event of a significant pay down or an earlier retirement of the revolver commitment, Coastal Credit would sustain certain prepayment penalties. This facility limits distributions Coastal Credit may make to White River to 80% of Coastal Credit’s pre-tax net income.
White River’s sources of liquidity, as the parent company, are limited and consist of cash on hand and distributions by Coastal Credit (subject to restrictions under Coastal Credit’s credit facility).
On November 11, 2009, the Board of Directors reauthorized White River’s previously announced share repurchase program. Under this program, White River was authorized to repurchase up to 500,000 shares of its outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. As of December 31, 2011, White River has repurchased all 500,000 shares of its outstanding common stock under the program for $7.7 million.
On August 11, 2011, White River announced that its Board of Directors approved a new program to repurchase, from time to time and subject to market conditions, up to 250,000 shares of White River’s outstanding common stock, on the open market or in privately negotiated transactions. As of December 31, 2011, White River has repurchased 62,829 shares of its outstanding common stock under the program for $1.2 million.
The following table summarizes the dividends declared during 2010 and 2011 by White River’s Board of Directors:
|
|
Date Dividend Declared
|
|
Record Date
|
|
Payment Date
|
|
Dividend Type
|
|
Cash Dividend Per Share
|
|
Total Divided Paid (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 22, 2010
|
|
March 3, 2010
|
|
March 12, 2010
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 995.6
|
|
|
|
May 6, 2010
|
|
May 17, 2010
|
|
May 28, 2010
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 980.7
|
|
|
|
August 2, 2010
|
|
August 12, 2010
|
|
August 26, 2010
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 938.7
|
|
|
|
November 2, 2010
|
|
November 12, 2010
|
|
November 22, 2010
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 938.7
|
|
|
|
November 30, 2010
|
|
December 9, 2010
|
|
December 21, 2010
|
|
Special Cash
|
|
$ 4.00
|
|
$ 14,967.0
|
|
|
|
February 16, 2011
|
|
February 25, 2011
|
|
March 2, 2011
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 926.7
|
|
|
|
May 5, 2011
|
|
May 16, 2011
|
|
May 31, 2011
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 903.2
|
|
|
|
August 1, 2011
|
|
August 11, 2011
|
|
August 25, 2011
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 903.2
|
|
|
|
October 28, 2011
|
|
November 7, 2011
|
|
November 21, 2011
|
|
Quarterly Cash
|
|
$ 0.25
|
|
$ 883.1
|
|
|
|
November 28, 2011
|
|
December 8, 2011
|
|
December 22, 2011
|
|
Special Cash
|
|
$ 4.00
|
|
$ 14,137.9
|
|
On February 3, 2012, White River announced that its Board of Directors declared a quarterly cash dividend of 25 cents per share on its common stock to shareholders of record on February 13, 2012. This quarterly dividend was paid on February 24, 2012.
Asset Quality
Set forth below is certain information concerning the credit loss experiences on the fixed rate retail automobile receivables of White River. There can be no assurance that future net credit loss experience on the receivables will be comparable to that set forth below. See “Discussion of Forward-Looking Statements.”
Finance Receivables – Coastal Credit
Delinquency experience of finance receivables at Coastal Credit, including unearned interest ($ in thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables - gross balance
|
|
$
|
137,277
|
|
|
|
|
|
$
|
119,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 days
|
|
$
|
1,317
|
|
|
|
1.0
|
%
|
|
$
|
1,209
|
|
|
|
1.0
|
%
|
|
|
60-89 days
|
|
|
689
|
|
|
|
0.5
|
%
|
|
|
538
|
|
|
|
0.4
|
%
|
|
|
90+ days
|
|
|
697
|
|
|
|
0.5
|
%
|
|
|
354
|
|
|
|
0.3
|
%
|
|
|
Total delinquencies
|
|
$
|
2,703
|
|
|
|
2.0
|
%
|
|
$
|
2,101
|
|
|
|
1.8
|
%
|
As a result of the nature of the customers in Coastal Credit’s portfolio, Coastal Credit considers the establishment of an adequate allowance for loan losses to be critical to its financial results. Coastal Credit has an allowance for loan losses that is calculated independent of the aggregate acquisition discounts and fees on finance receivables. Coastal Credit’s allowance for loan losses is based upon the historical rate at which (1) current loans, (2) contracts in a 30, 60 and 90+ day delinquency state and (3) loans ineligible for its borrowing line, have defaulted. These historical rates are evaluated and revised on a quarterly basis for current conditions. See “Discussion of Forward-Looking Statements.”
Allowance for loan losses of finance receivables ($ in thousands):
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
8,153
|
|
|
$
|
8,085
|
|
|
|
Charge-offs
|
|
|
(6,964
|
)
|
|
|
(8,488
|
)
|
|
|
Recoveries
|
|
|
2,526
|
|
|
|
2,130
|
|
|
|
Provision for loan losses
|
|
|
3,988
|
|
|
|
6,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
7,703
|
|
|
$
|
8,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables, net of unearned finance charges
|
|
$
|
135,514
|
|
|
$
|
117,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of finance receivables, net of unearned finance charges
|
|
|
5.68
|
%
|
|
|
6.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a percent of finance receivables, net of unearned finance charges
|
|
|
3.27
|
%
|
|
|
5.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of net charge-offs
|
|
|
173.57
|
%
|
|
|
128.23
|
%
|
Market Developments
As the financial and credit markets continue to struggle to recover from the 2007-2009 recession and financial crisis, some auto finance companies have experienced improved funding opportunities and increased originations, while others continue to experience limited sources of liquidity. We believe White River is well positioned to continue operations and grow the company responsibly based on the following factors:
|
·
|
Coastal Credit is not dependent on the securitization market for financing.
|
|
·
|
At December 31, 2011, there was $19.0 million available, in excess of the amount utilized, from the line of credit.
|
|
·
|
A Fourth Amendment to Finance Agreement executed on November 9, 2011 between Coastal Credit and its line of credit lender, which became effective January 1, 2012, extended the maturity date of Coastal Credit’s line of credit three years to December 31, 2014.
|
|
·
|
White River is well capitalized with an equity to asset ratio of 46.2% as of December 31, 2011.
|
While there is never any guarantee White River will not be faced with the constrained financing scenarios seen by other auto finance companies during and since the recession, we believe White River is well positioned in this uncertain economic environment, and we expect to be able to fund normal business operations and meet our general liquidity needs for the next 12 months through access to the line of credit, cash flows from operations, and our other funding sources.
In addition, on July 21, 2010, President Obama signed into law the Dodd-Frank Act, which significantly changed the regulation of financial institutions and the financial services industry. Many provisions of the Dodd-Frank Act went into effect on July 21, 2011. The Dodd-Frank Act includes provisions affecting large and small financial industry participants alike, including several provisions that will profoundly affect how certain companies providing consumer financial products and services, such as Coastal Credit, will be regulated in the future. Among other things, the Dodd-Frank Act established the CFPB as an independent entity within the Federal Reserve, which has the authority to promulgate consumer protection regulations applicable to all entities offering consumer financial services or products, including non-bank commercial companies in the business of extending credit and servicing consumer loans. The Dodd-Frank Act contains numerous other provisions affecting financial industry participants of all types, many of which may have an impact on the operating environment of the Company in substantial and unpredictable ways. Consequently, the Dodd-Frank Act is likely to affect our cost of doing business, it may limit or expand our permissible activities, and it may affect the competitive balance within our industry and market areas. The nature and extent of future legislative and regulatory changes affecting financial institutions and non-bank commercial companies, including as a result of the Dodd-Frank Act, is very unpredictable at this time. The Company’s management continues to actively monitor the implementation of the Dodd-Frank Act and the regulations promulgated thereunder and assess its probable impact on the business, financial condition, and results of operations of the Company. However, the ultimate effect of the Dodd-Frank Act on the financial services industry in general, and the Company in particular, continues to be uncertain.
Discussion of Forward-Looking Statements
The preceding Management’s Discussion and Analysis contains forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995. Forward-looking statements are also made elsewhere in this report. White River publishes other forward-looking statements from time to time. Statements that are not historical in nature, including those containing words such as “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” and similar expressions, are intended to identify forward-looking statements. We caution you to be aware of the speculative nature of “forward-looking statements.” Although these statements reflect White River’s good faith belief based on current expectations, estimates and projections about (among other things) the industry and the markets in which White River operates, they are not guarantees of future performance. Whether actual results will conform to management’s expectations and predictions is subject to a number of known and unknown risks and uncertainties, including:
|
·
|
the risks and uncertainties discussed in this Annual Report on Form 10-K;
|
|
·
|
general economic, market, or business conditions;
|
|
·
|
changes in economic variables, such as the availability of business and consumer credit, conditions in the housing market, energy costs, the number and size of personal bankruptcy filings, the rate of unemployment and the levels of consumer confidence and consumer debt;
|
|
·
|
changes in interest rates, the cost of funds, and demand for White River’s financial services;
|
|
·
|
the level and volatility of equity prices, commodity prices, currency values, investments, and other market fluctuations and other market indices;
|
|
·
|
changes in White River’s competitive position;
|
|
·
|
White River’s ability to manage growth;
|
|
·
|
the opportunities that may be presented to and pursued by White River;
|
|
·
|
competitive actions by other companies;
|
|
·
|
changes in laws or regulations, including the impact of current, pending and future legislation and regulations, including the impact of the Dodd-Frank Act and legislation regarding U.S. fiscal policy;
|
|
·
|
changes in the policies of federal or state regulators and agencies; and
|
|
·
|
other circumstances, many of which are beyond White River’s control.
|
Consequently, all of White River’s forward-looking statements are qualified by these cautionary statements. White River may not realize the results anticipated by management or, even if White River substantially realizes the results management anticipates, the results may not have the consequences to, or effects on, White River or its business or operations that management expects. Such differences may be material. Except as required by applicable laws, White River does not intend to publish updates or revisions of any forward-looking statements management makes to reflect new information, future events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
White River Capital, Inc.
We have audited the accompanying consolidated balance sheets of White River Capital, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstance, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of White River Capital, Inc. and subsidiaries as of December 31, 2011 and 2010 and the results of their operations and their cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ McGladrey & Pullen LLP
Raleigh, North Carolina
March 9, 2012
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
|
|
|
December 31, 2011
|
|
|
December 31, 2010
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
3,244
|
|
|
$
|
3,287
|
|
|
Finance receivables—net
|
|
|
114,716
|
|
|
|
96,723
|
|
|
Deferred tax assets—net
|
|
|
36,489
|
|
|
|
40,914
|
|
|
Other assets
|
|
|
861
|
|
|
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
155,310
|
|
|
$
|
141,608
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Line of credit
|
|
$
|
81,000
|
|
|
$
|
56,000
|
|
|
Accrued interest
|
|
|
183
|
|
|
|
130
|
|
|
Other payables and accrued expenses
|
|
|
2,398
|
|
|
|
2,449
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
83,581
|
|
|
|
58,579
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
|
Preferred Stock, without par value, authorized 3,000,000 shares; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
Common Stock, without par value, authorized 20,000,000 shares; 3,534,480 and 3,706,759 issued and outstanding at December 31, 2011 and December 31, 2010, respectively
|
|
|
174,328
|
|
|
|
177,403
|
|
|
Accumulated deficit
|
|
|
(102,599
|
)
|
|
|
(94,374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders’ equity
|
|
|
71,729
|
|
|
|
83,029
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
$
|
155,310
|
|
|
$
|
141,608
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share amounts)
|
|
|
Years Ended December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
INTEREST:
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
35,191
|
|
|
$
|
32,825
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,895
|
)
|
|
|
(1,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
33,296
|
|
|
|
31,333
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
(3,994
|
)
|
|
|
(6,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin after provision for loan losses
|
|
|
29,302
|
|
|
|
24,979
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER REVENUES (EXPENSES):
|
|
|
|
|
|
|
|
|
|
Salaries and benefits
|
|
|
(9,396
|
)
|
|
|
(8,997
|
)
|
|
Other operating expenses
|
|
|
(4,889
|
)
|
|
|
(4,607
|
)
|
|
Change in fair market valuation of creditor notes payable
|
|
|
43
|
|
|
|
179
|
|
|
Gain from deficiency account sale
|
|
|
—
|
|
|
|
37
|
|
|
Other expense
|
|
|
(382
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(14,624
|
)
|
|
|
(13,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
14,678
|
|
|
|
11,414
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
(5,149
|
)
|
|
|
(4,335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
9,529
|
|
|
$
|
7,079
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE (BASIC)
|
|
$
|
2.64
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME PER COMMON SHARE (DILUTED)
|
|
$
|
2.64
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
3,605,675
|
|
|
|
3,838,894
|
|
|
|
|
|
|
|
|
|
|
|
|
DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
|
|
|
3,611,322
|
|
|
|
3,839,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to consolidated financial statements.
|
|
|
|
|
|
|
|
|
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2011 AND 2010
(Dollars in thousands)
|
|
|
Number of Common Shares Outstanding
|
|
|
Common Stock
|
|
|
Accumulated Other Comprehensive Income
|
|
|
Accumulated Deficit
|
|
|
Total Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—January 1, 2010
|
|
|
3,997,506
|
|
|
$
|
181,845
|
|
|
$
|
3
|
|
|
$
|
(82,732
|
)
|
|
$
|
99,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,079
|
|
|
|
7,079
|
|
|
Net unrealized loss on beneficial interest in Master Trust
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
(4
|
)
|
|
Tax effect of other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,721
|
)
|
|
|
(18,721
|
)
|
|
Common stock repurchased
|
|
|
(314,950
|
)
|
|
|
(4,750
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
24,203
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—December 31, 2010
|
|
|
3,706,759
|
|
|
|
177,403
|
|
|
|
—
|
|
|
|
(94,374
|
)
|
|
|
83,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,529
|
|
|
|
9,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock cash dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,754
|
)
|
|
|
(17,754
|
)
|
|
Common stock repurchased
|
|
|
(180,879
|
)
|
|
|
(3,410
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,410
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense
|
|
|
8,600
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE—December 31, 2011
|
|
|
3,534,480
|
|
|
$
|
174,328
|
|
|
$
|
—
|
|
|
$
|
(102,599
|
)
|
|
$
|
71,729
|
|
See notes to consolidated financial statements.
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
|
|
|
Years Ended December 31,
|
|
|
|
|
2011
|
|
|
2010
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net income
|
|
$
|
9,529
|
|
|
$
|
7,079
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Accretion of other comprehensive income
|
|
|
—
|
|
|
|
(5
|
)
|
|
Accretion of securitization discount
|
|
|
—
|
|
|
|
(1
|
)
|
|
Provision for loan losses
|
|
|
3,994
|
|
|
|
6,354
|
|
|
Amortization and depreciation
|
|
|
348
|
|
|
|
379
|
|
|
Amortization of discount and interest accrued on creditor notes payable
|
|
|
43
|
|
|
|
172
|
|
|
Gain (loss) from disposition of equipment
|
|
|
(3
|
)
|
|
|
7
|
|
|
Deferred income taxes
|
|
|
4,425
|
|
|
|
3,800
|
|
|
Change in fair value of creditor notes payable
|
|
|
(43
|
)
|
|
|
(179
|
)
|
|
Stock based compensation expense
|
|
|
335
|
|
|
|
308
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accrued interest receivable and other assets
|
|
|
(263
|
)
|
|
|
(156
|
)
|
|
Other payables and accrued expenses
|
|
|
2
|
|
|
|
745
|
|
|
Net cash provided by operating activities
|
|
|
18,367
|
|
|
|
18,503
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase of finance receivables
|
|
|
(82,967
|
)
|
|
|
(67,178
|
)
|
|
Collections on finance receivables
|
|
|
60,986
|
|
|
|
52,581
|
|
|
Principal collections and recoveries on receivables held for investment
|
|
|
(6
|
)
|
|
|
133
|
|
|
Capital expenditures
|
|
|
(259
|
)
|
|
|
(78
|
)
|
|
Net cash used in investing activities
|
|
|
(22,246
|
)
|
|
|
(14,542
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Common stock repurchased
|
|
|
(3,410
|
)
|
|
|
(4,750
|
)
|
|
Common stock cash dividend
|
|
|
(17,754
|
)
|
|
|
(18,721
|
)
|
|
Net borrowing on line of credit
|
|
|
25,000
|
|
|
|
16,000
|
|
|
Net cash provided by (used in) financing activities
|
|
|
3,836
|
|
|
|
(7,471
|
)
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH AND CASH EQUIVALENTS
|
|
|
(43
|
)
|
|
|
(3,510
|
)
|
|
CASH AND CASH EQUIVALENTS—Beginning of year
|
|
|
3,287
|
|
|
|
6,797
|
|
|
CASH AND CASH EQUIVALENTS—End of period
|
|
$
|
3,244
|
|
|
$
|
3,287
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Income tax paid
|
|
$
|
722
|
|
|
$
|
394
|
|
|
Interest paid
|
|
$
|
1,799
|
|
|
$
|
1,297
|
|
See notes to consolidated financial statements.
WHITE RIVER CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2011 AND 2010
White River Capital, Inc. (“White River” or the “Company”) is a holding company for specialized indirect auto finance businesses, with one principal operating subsidiary, Coastal Credit LLC (“Coastal Credit”). Coastal Credit based in Virginia Beach, Virginia, is a specialized subprime auto finance company engaged in acquiring subprime auto receivables from both franchised and independent automobile dealers which have entered into contracts with purchasers of typically used, but some new, cars and light trucks. Coastal Credit then services the receivables it acquires. Coastal Credit operates in 27 states through 15 offices.
Union Acceptance Company LLC (“UAC”), a now inactive subsidiary of White River, was a specialized auto finance company operating under a confirmed Second Amended and Restated Plan of Reorganization under Chapter 11 of the U.S. Bankruptcy Code (the “Plan”), under which UAC must pay net proceeds from its residual interest in its receivables portfolios and other bankruptcy estate assets to creditors holding notes and claims under the Plan. On January 5, 2007, the U.S. Bankruptcy Court for the Southern District of Indiana issued a final decree and closed UAC’s Chapter 11 bankruptcy case. In April 2011, as a result of the marshalling of UAC’s remaining assets pursuant to its dissolution and winding-up, White River, UAC, and the remaining unsecured creditor of UAC entered into an agreement in which the parties acknowledged and agreed there were no further assets of UAC available to satisfy the remaining unpaid principal and accrued interest on the notes held by such creditor. Pursuant to this agreement, the creditor further acknowledged and agreed that it received all payments from UAC under the notes to which it was entitled, and the notes held by the creditor were thereby cancelled.
In connection with UAC’s Plan of Reorganization and distributions and as a result of White River’s acquisition of UAC’s general unsecured claims and Subordinated Notes, UAC’s creditor notes payable ($ in thousands) were as follows at December 31, 2010:
|
|
|
|
December 31, 2010
|
|
|
|
|
|
Carrying Value
|
|
|
Contractual Remaining Owned by Debt Not White River
|
|
|
Total Contractual Remaining Debt
|
|
|
|
Restructured debt:
|
|
|
|
|
|
|
|
|
|
|
|
Class 2A general unsecured claims
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10
|
|
|
|
Restructured senior notes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Restructured subordinated notes
|
|
|
—
|
|
|
|
1,541
|
|
|
|
14,176
|
|
|
|
Senior accrual notes
|
|
|
—
|
|
|
|
—
|
|
|
|
4,106
|
|
|
|
Subordinated accrual notes
|
|
|
—
|
|
|
|
431
|
|
|
|
3,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total creditor notes payable
|
|
$
|
—
|
|
|
$
|
1,972
|
|
|
$
|
22,256
|
|
UAC History
UAC had historically operated as a specialized finance company, engaged in (1) acquiring receivables in the form of retail installment sales contracts and installment loan agreements for the purchase of automobiles primarily from automobile dealerships and used car superstores (the “Receivables Acquisitions”) and (2) the servicing of such receivables by collecting payments due,
remitting those payments to appropriate entities and collecting delinquent and defaulted accounts (“Servicing”).
On October 31, 2002, UAC filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Indiana, Indianapolis Division (the “Court”). This proceeding did not include UAC’s wholly owned subsidiaries. On November 7, 2002, UAC announced it would discontinue receivable acquisitions because it was not able to establish timely arrangements for further acquisition funding. UAC continued to manage its business as a debtor-in-possession as it prepared for reorganization under bankruptcy law.
On September 1, 2010, UAC voluntarily dissolved by filing a certificate of dissolution with the Indiana Secretary of State, and will continue to only carry on business appropriate to wind up and liquidate its business and affairs in accordance with Indiana law. UAC expects to conclude its winding up process by the third quarter of 2012, at which time UAC’s existence as a business entity will cease. UAC no longer materially contributes to the assets, liabilities, or results of operations of White River on a consolidated basis.
Acquisition of Coastal Credit, LLC
White River acquired 100% of the interests in Coastal Credit on August 31, 2005. Coastal Credit is a specialized subprime auto finance company engaged primarily in (1) acquiring retail installment sales contracts from both franchised and independent automobile dealers which have entered into contracts with purchasers of used and, to a much lesser extent, new cars and light trucks, and (2) servicing the contract portfolio. Coastal Credit commenced operations in Virginia in 1987 and was restructured as a limited liability company under the laws of the Commonwealth of Virginia in 1997. It conducts business in 27 states – Alaska, California, Colorado, Delaware, Florida, Georgia, Hawaii, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia and Washington – through its 15 branch locations.
|
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
The consolidated financial statements include the accounts of White River and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America and with the general practices of those in the consumer finance industry. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the valuation of deferred tax assets and the allowance for loan losses.
New Accounting Pronouncements
— In January 2010, the Financial Accounting Standards Board (“FASB”) issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires new disclosures on the transfers of assets and liabilities between Level 1 (quoted prices in an active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective with the reporting period beginning January 1, 2010, except for the disclosure on the roll forward activities for Level 3 fair value measurements, which became effective with fiscal years beginning after December 15, 2010 and for
interim periods within those fiscal years. Other than requiring additional disclosures, adoption of this new guidance did not have a material impact on our consolidated financial statements.
In July 2010 new authoritative accounting guidance under ASC Topic No. 310,
Receivables
(“ASC 310”), amended prior guidance to provide a greater level of disaggregated information about the credit quality of loans and leases and the Allowance for Loan and Lease Losses (the “Allowance”). The new authoritative guidance also requires additional disclosures related to credit quality indicators, past due information, and information related to loans modified in a troubled debt restructuring. The new authoritative guidance amends only the disclosure requirements for loans and leases and the allowance. White River adopted the period end disclosures provisions of the new authoritative guidance under ASC 310 in the reporting period ending December 31, 2010. Adoption of the new guidance did not have an impact on the consolidated financial statements. In January, 2011, the disclosures regarding Troubled Debt Restructuring activity was temporarily deferred and were effective for reporting periods after January 1, 2011, and will have no impact on the White River consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income.” ASU 2011-05 will supersede some of the guidance in Accounting Standards Codification Topic 220. The main provisions of this ASU provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one or two consecutive financial statements: (i) a single statement must present the components of net income and total net income, the components of other comprehensive income and total other comprehensive income, and a total for comprehensive income; (ii) in a two-statement approach, an entity must present the components of net income and total net income in the first statement. That statement must be immediately followed by a financial statement that presents the components of other comprehensive income, a total for other comprehensive income, and a total for comprehensive income. The option in current GAAP that permits the presentation of other comprehensive income in the statement of changes in equity has been eliminated. This ASU is effective beginning with the first quarter of 2012 and will have no material impact on the White River consolidated financial statements.
In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU No 2011-05”. ASU 2011-12 delayed the effective date of certain requirements of ASU 2011-05 related to the presentation of reclassifications of items out of accumulated other comprehensive income.
Cash and Cash Equivalents
—White River considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.
Finance Receivables—net
—Finance receivables are recorded at cost, net of unearned finance charges, discounts and an allowance for credit losses. Coastal Credit purchases finance contracts from auto dealers without recourse, and accordingly, the dealer usually has no liability to Coastal Credit if the consumer defaults on the contract. This is the sole class of finance receivables and there is no off-balance sheet credit exposure related to these receivables.
Allowance for Loan Losses – Finance Receivables
—Provisions for loan losses are charged to operations in amounts sufficient to maintain the allowance for loan losses at a level considered adequate to cover credit losses inherent in finance receivables.
The allowance for loan losses is established systematically by management based on the determination of the amount of credit losses inherent in the finance receivables as of the reporting date. All finance receivables of the Company are collectively evaluated for impairment. The Company reviews charge off experience factors, delinquency reports, historical collection rates and other information in order to make the necessary judgments as to credit losses inherent in the portfolio as of the reporting date.
The Company measures its credit exposure by determining credit risk profiles based on payment activity and contractual delinquency. In addition to contractually delinquent accounts, the Company also evaluates historical loss performance of other accounts in their final stages of collection, in the aggregate, in determining the allowance for loan losses. These accounts amounted to $0.9 million at both December 31, 2011 and 2010. Assumptions regarding probable credit losses are reviewed quarterly and may be impacted by actual performance of finance receivables and changes in any of the factors discussed above. Should the credit loss assumptions increase, there could be an increase in the amount of allowance for loan losses required, which could decrease the net carrying value of finance receivables and increase the provision for loan losses recorded on the consolidated statements of operations. The Company believes that the existing allowance for loan losses is sufficient to absorb probable finance receivable losses.
Charge off Policy – Finance Receivables
—Coastal Credit’s policy is to charge off finance receivables against the allowance for loan losses in the month in which the installment contract becomes 60 days delinquent under recency terms and 180 days delinquent under contractual terms, if the vehicle has not been repossessed. If the vehicle has been repossessed, the receivable is charged off in the month the repossessed automobile is disposed of at public auction unless cash collections on the receivable are foreseeable in the near future. Receivables that are deemed uncollectible prior to the maximum charge off period are charged off immediately.
Income Recognition – Finance Receivables
–Interest on receivables is recognized for financial reporting purposes using the interest method. Initial fees earned on add-on products such as collateral protection insurance, credit life insurance, road service plans and warranty products are recorded in income using the interest method. Late charges and deferment charges on contracts are recorded in income as collected. Cash received from loans that have previously been charged off is applied directly to the allowance for loan losses in the consolidated balance sheets. Discounts and fees, which consist primarily of non-refundable dealer acquisition discounts, are amortized over the term of the related finance receivables using the interest method and are removed from the consolidated balance sheets when the related finance receivables are charged off or paid in full. As a result of the Company’s charge-off policy, most accounts are charged off rather than being placed in nonaccrual status and thus any impact to the consolidated financial statements is immaterial.
Property, Equipment, and Leasehold Improvements—net
—Property, equipment, and leasehold improvements are recorded at cost and included in other assets. Depreciation is determined primarily on straight-line methods over the estimated useful lives of the respective assets, ranging from 3 to 10 years.
Other Income
—Other income represents refunds of dealer rebates, monies collected on previously charged-off receivables, and other miscellaneous income.
Income Taxes
—Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, their respective tax basis and net operating loss and tax credit carryfowards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The ultimate realization of the deferred tax asset depends on White River’s ability to generate sufficient taxable income in the future and its ability to avoid an ownership change for tax purposes. The valuation allowance has been derived pursuant to the provisions of ASC Topic No. 740,
Income Taxes
, and reduces the total deferred tax asset to an amount that will “more likely than not” be realized.
Segment Information
— White River is the holding company for Coastal Credit and UAC which are specialized auto finance companies. These subsidiaries are distinct legal entities and managed separately. Corporate and Other is the holding company and includes debt and interest expense related to the acquisition of Coastal Credit, professional fees related to holding activities of White River and the elimination of all inter-segment amounts, which generally relate to the holding activities of White River. UAC no longer materially contributes to the assets, liabilities, or results of operations of White River on a consolidated basis and is included in Corporate and Other.
Stock-Based Compensation
—Stock-based compensation cost is based upon the grant-date fair value of share-based awards. White River recognizes compensation expense for awards with only service conditions on a straight-line basis over the requisite service period for the entire award.
Concentration of Credit Risk
—
The Company maintains demand deposits with financial institutions, the balances of which from time to time exceed the federally insured amount.
The Company’s portfolio of finance receivables is with consumers living in various states across the United States as outlined above. Consequently, such consumers’ ability to honor their installment contracts may be affected by economic conditions in these areas. The Company has access to any collateral supporting these receivables through repossession. The Company’s finance receivables are collateralized by automobiles.
|
3. FINANCE RECEIVABLES – NET
|
Coastal Credit
Coastal Credit’s typical borrower has a credit history that may fail to meet the lending standards of most banks, credit unions and captive automobile finance companies. Substantially all of Coastal Credit’s automobile contracts involve loans made to individuals with limited or impaired credit histories. Coastal Credit believes that its borrower credit profile is similar to that of its direct competitors in the subprime automobile finance business. Coastal Credit also believes that it’s underwriting criteria and branch network management system coupled with close senior management supervision enhances its risk management and collection functions.
In deciding whether to acquire a particular contract, Coastal Credit considers various factors, including:
|
·
|
the applicant’s length of residence;
|
|
·
|
the applicant’s current and prior job status;
|
|
·
|
the applicant’s history in making other installment loan payments;
|
|
·
|
the applicant’s payment record on previous automobile loans;
|
|
·
|
the applicant’s current income and discretionary spending ability;
|
|
·
|
the applicant’s credit history;
|
|
·
|
the value of the automobile in relation to the purchase price;
|
|
·
|
the term of the contract;
|
|
·
|
the automobile make and mileage; and
|
|
·
|
Coastal Credit’s prior experience with contracts acquired from the dealer.
|
Borrowers under the contracts typically make down payments, in the form of cash or trade-in, ranging from 5% to 20% of the sale price of the vehicle financed. The balance of the purchase price of the vehicle plus taxes, title fees and, if applicable, premiums are generally financed over a period of 36 to 54 months.
Coastal Credit Finance receivables – net outstanding were as follows ($ in thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables, gross
|
|
$
|
137,277
|
|
|
$
|
119,788
|
|
|
|
Unearned finance charge income
|
|
|
(1,763
|
)
|
|
|
(1,951
|
)
|
|
|
Finance receivables, net of unearned finance charge income
|
|
|
135,514
|
|
|
|
117,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accretable unearned acquisition discounts and fees
|
|
|
(13,095
|
)
|
|
|
(12,961
|
)
|
|
|
Finance receivables, net of unearned finance charge income and discounts and fees
|
|
|
122,419
|
|
|
|
104,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(7,703
|
)
|
|
|
(8,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables - net
|
|
$
|
114,716
|
|
|
$
|
96,723
|
|
Activity in the Coastal Credit allowance for loan losses on finance receivables is as follows ($ in thousands):
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
8,153
|
|
|
$
|
8,085
|
|
|
|
Charge-offs
|
|
|
(6,964
|
)
|
|
|
(8,488
|
)
|
|
|
Recoveries
|
|
|
2,526
|
|
|
|
2,130
|
|
|
|
Provision for loan losses
|
|
|
3,988
|
|
|
|
6,426
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at the end of the period
|
|
$
|
7,703
|
|
|
$
|
8,153
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables, net of unearned finance charges
|
|
$
|
135,514
|
|
|
$
|
117,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of finance receivables, net of unearned finance charges
|
|
|
5.68
|
%
|
|
|
6.92
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs as a percent of finance receivables, net of unearned finance charges
|
|
|
3.27
|
%
|
|
|
5.40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses as a percent of net charge-offs
|
|
|
173.57
|
%
|
|
|
128.23
|
%
|
The following is an assessment of the credit quality of the finance receivables. Delinquency experience of finance receivables at Coastal Credit, including unearned interest under contractual terms ($ in thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance receivables - gross balance
|
|
$
|
137,277
|
|
|
|
|
|
$
|
119,788
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Delinquencies:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30-59 days
|
|
$
|
1,317
|
|
|
|
1.0
|
%
|
|
$
|
1,209
|
|
|
|
1.0
|
%
|
|
|
60-89 days
|
|
|
689
|
|
|
|
0.5
|
%
|
|
|
538
|
|
|
|
0.4
|
%
|
|
|
90+ days
|
|
|
697
|
|
|
|
0.5
|
%
|
|
|
354
|
|
|
|
0.3
|
%
|
|
|
Total delinquencies
|
|
$
|
2,703
|
|
|
|
2.0
|
%
|
|
$
|
2,101
|
|
|
|
1.8
|
%
|
Other assets are as follows ($ in thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
358
|
|
|
$
|
337
|
|
|
|
Property, equipment and leasehold improvements, net
|
|
|
456
|
|
|
|
335
|
|
|
|
Other
|
|
|
47
|
|
|
|
12
|
|
|
|
Total other assets
|
|
$
|
861
|
|
|
$
|
684
|
|
The line of credit is utilized by Coastal Credit to finance the purchase of finance receivables. $81.0 million and $56.0 million of the line of credit were utilized at December 31, 2011 and 2010, respectively. This line of credit was $100 million at December 31, 2011 and 2010. The original maturity date on the line of credit was December 31, 2011, but pursuant to a Fourth Amendment to Finance Agreement executed on November 9, 2011 between Coastal Credit and its line of credit lender, which became effective January 1, 2012, the maturity date has been extended for three years to December 31, 2014. The interest rate is the 1 month London Interbank Offered Rate (“LIBOR”) plus 2.60%. The availability of the line of credit allows Coastal Credit to borrow up to 84% of the aggregate balance of outstanding eligible receivables net of unearned interest, commissions and discounts. Eligible receivables exclude the following: (i) receivables for which a payment is 90 or more days past due on a contractual basis; (ii) receivables which have been deferred more than two times during the same calendar year, or more than six times over the contract term; (iii) receivables subject to repossession or bankruptcy proceedings or the account debtor with respect to which is a debtor under the Bankruptcy Code; (iv) receivables from officers, employees or shareholders of the borrower or any affiliate; (v) interest only accounts; (vi) receivables missing titles after 120 days from their origination date; and (vii) receivables which, in the lender’s reasonable discretion, do not constitute acceptable collateral. Total available under the line of credit was $100.0 million and $87.6 million based upon the level of eligible collateral with $19.0 million and $31.6 million available in excess of the amount utilized at December 31, 2011 and 2010, respectively.
The credit facility is secured by substantially all assets of Coastal Credit. In addition, White River has provided an unconditional corporate guaranty. Coastal Credit must maintain specified financial ratios within guidelines established by the lender and was in compliance with these ratios at December 31, 2011 and 2010. Interest is paid monthly at a variable rate, based on meeting certain financial criteria. The average rate during the month of December, 2011 and 2010 was 2.87% and 2.86%, respectively. Pursuant to the Fourth Amendment, effective January 1, 2012, this annual commitment fee remained at 1/8 of 1% but will increase to 1/2 of 1% if the average unused portion of the commitment for such calendar month is less than or equal to 50% of the commitment. In the event of a significant pay down or an earlier retirement of the revolver commitment, Coastal Credit would sustain certain prepayment penalties. This facility limits distributions Coastal Credit may make to White River to 80% of Coastal Credit’s pre-tax net income. The consolidated balance sheet includes approximately $26.2 million and $35.0 million of net assets of Coastal Credit at December 31, 2011 and 2010, respectively, which subject to limitations under the credit facility, would generally be available to fund the operations and investments of Coastal Credit, but would not be available to White River for general corporate purposes.
|
6. SELECT OBLIGATIONS SCHEDULE
|
The following table represents expected payments on select obligations ($ in thousands):
|
|
Contractual Obligations
|
|
Total
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations
|
|
$
|
81,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
81,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Operating lease obligations
|
|
|
798
|
|
|
|
495
|
|
|
|
167
|
|
|
|
70
|
|
|
|
40
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
81,798
|
|
|
$
|
495
|
|
|
$
|
167
|
|
|
$
|
81,070
|
|
|
$
|
40
|
|
|
$
|
27
|
|
|
7. RELATED PARTY TRANSACTIONS
|
UAC’s administration of the Plan was supervised by Castle Creek Capital LLC (“Castle Creek”) during 2010. John M. Eggemeyer, III, White River’s Chairman of the Board and Chief Executive Officer, is a controlling principal of Castle Creek. For these Plan administration services, UAC compensated Castle Creek at a rate of $14,583 per month. Castle Creek was paid $175,000 during 2010.
This compensation was discontinued for 2011.
Coastal Credit leases its corporate offices in Virginia Beach, Virginia and one of its branch offices in Jacksonville (Orange Park), Florida, from the McKnight Family Partnerships, L.P., an entity controlled by Mr. McKnight, the President of Coastal Credit and a director of White River. The Virginia Beach lease has a three-year term, and provides for rent payments of $14,356 per month. The Virginia Beach lease will expire in September 2012. The Orange Park lease has a three-year term, and provides for rent payments of $10,141 per month. The Orange Park lease will expire in April 2013.
Coastal Credit and Mr. McKnight are parties to a letter agreement with respect to use of an aircraft owned by McKnight L.L.C., an entity controlled by Mr. McKnight. The aircraft is a Beechcraft King Air™ B200 twin engine turbo prop. The agreement provides that Coastal Credit will pay McKnight L.L.C. $14,000 per month to defray expenses associated with ownership of the aircraft in consideration for Mr. McKnight’s willingness to make the aircraft available for business use by key employees of Coastal Credit. Coastal Credit is required to pay additional amounts in any month in which its aircraft usage exceeds prescribed amounts. Six months prior written notice is required to withhold availability of the monthly payment or the plane. During 2011 and 2010, approximately $170,000 was paid for this purpose each year.
On November 8, 2005, White River entered into an expense sharing agreement with Castle Creek and Castle Creek Advisors LLC (collectively, “Castle Creek Entities”). The Castle Creek Entities provide various facilities, equipment and services to White River for a fee that represents an allocation of actual Castle Creek Entities expenses proportionate to facilities, equipment and services provided to White River. This agreement was effective from September 1, 2005 and shall continue until terminated by either party upon 30 days’ prior written notice. During 2011 and 2010, approximately $22,800 was paid each year for this purpose.
UAC incurred net operating losses for federal income tax purposes for the years ended June 30, 2003, 2004 and 2005. White River will carry forward these tax losses to future periods. Net operating loss carryforwards for federal income tax purposes were $68.7 million and $83.1 million as of December 31, 2011 and 2010, respectively. These tax losses will expire during 2023 and 2024.
White River had no liability recorded for unrecognized tax benefits at December 31, 2011 or 2010.
White River recognizes interest and penalties, if any, on tax assessments or tax refunds in the financial statements as a component of income tax expense.
White River and its subsidiaries are subject to taxation by the United States and by various state jurisdictions. With some exceptions, White River’s consolidated tax returns for its 2007 tax year and forward remain open to examination by tax authorities. Also, net operating losses carried forward from prior years remain open to examination by tax authorities.
Upon completion of its 2010 federal and state income tax returns in September 2011, White River determined that its estimated statutory tax rate, used to tax effect its temporary differences, had changed based on the 2010 state apportionment results. Such new apportionments were the result of changes in volumes of business in various states which resulted in an increase in the estimated state tax effective rate which increased the overall statutory rates applied to White River’s temporary differences. This change in the effective rate resulted in an increase to the net deferred tax asset of approximately $176,000 which reduced income tax expense for the year ended December 31, 2011.
The composition of income tax expense is as follows for the years ended December 31 ($ in thousands):
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Current tax expense
|
|
$
|
724
|
|
|
$
|
419
|
|
|
|
Deferred tax expense
|
|
|
4,425
|
|
|
|
3,916
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
$
|
5,149
|
|
|
$
|
4,335
|
|
The effective income tax rate differs from the statutory federal corporate tax rate as follows for the years ended December 31:
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
State income taxes
|
|
|
3.5
|
|
|
|
1.5
|
|
|
|
Valuation allowance and other
|
|
|
(3.4
|
)
|
|
|
1.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective rate
|
|
|
35.1
|
%
|
|
|
38.0
|
%
|
The composition of deferred income taxes is as follows as of December 31 ($ in thousands):
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$
|
25,822
|
|
|
$
|
30,845
|
|
|
|
AMT credit carryforward
|
|
|
996
|
|
|
|
1,295
|
|
|
|
Basis difference in goodwill
|
|
|
7,300
|
|
|
|
7,639
|
|
|
|
Allowance for loan losses
|
|
|
2,940
|
|
|
|
2,951
|
|
|
|
Other
|
|
|
341
|
|
|
|
208
|
|
|
|
Total deferred tax assets
|
|
|
37,399
|
|
|
|
42,938
|
|
|
|
Valuation allowance
|
|
|
(674
|
)
|
|
|
(877
|
)
|
|
|
|
|
|
36,725
|
|
|
|
42,061
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
Basis difference in creditor notes payable
|
|
|
—
|
|
|
|
827
|
|
|
|
Straight line vs. actuarial discount earned
|
|
|
228
|
|
|
|
211
|
|
|
|
Other
|
|
|
8
|
|
|
|
109
|
|
|
|
Total deferred tax liabilities
|
|
|
236
|
|
|
|
1,147
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
36,489
|
|
|
$
|
40,914
|
|
|
9. STOCK-BASED COMPENSATION
|
On October 26, 2005, the board of directors of White River adopted the White River Capital, Inc. Directors Stock Compensation Plan. The plan provides for the payment of a portion of regular fees to certain members of the board of directors in the form of shares of White River common stock. The terms of the plan include the reservation of 100,000 shares of White River common stock for issuance under the plan. The cost that has been charged against income for this plan was approximately $120,000 during both the years ended December 31, 2011 and 2010. The total income tax benefit recognized in the income statement for this share-based compensation arrangement was approximately $46,000 and $44,000 for the years ended December 31, 2011 and 2010, respectively. White River issued 6,600 and 10,583 shares during 2011 and 2010, respectively, representing the prior year’s compensation under this plan. As of December 31, 2011, approximately 55,000 shares had been issued under this plan resulting in approximately 45,000 shares available to be issued.
On May 18, 2009, White River entered into a new employment agreement with William McKnight, President and Chief Executive Officer of Coastal Credit. Mr. McKnight’s employment agreement was amended on May 10, 2011, pursuant to which the term of his employment was extended by two years to January 1, 2014, and his annual base salary was increased to $450,000 effective January 1, 2012. This employment agreement includes a long-term incentive award providing for the payment, in cash, of the value of 100,000 shares of White River stock, vesting in three annual increments of 33,333.33 shares on January 1, 2010, 2011 and 2012. This long-term incentive award was extended pursuant to the May 10, 2011 amendment in that an additional 33,333.33 shares will vest annually and payable only in cash on January 1, 2013 and 2014.This award is accounted for as a liability award. The value of payment is determined based on the mean of the trading value of White River shares for 20 trading days prior to the vesting date. Compensation expense related to this award approximated $692,000 and $569,000 for the years ended December 31, 2011 and 2010, respectively, and is included in salaries and benefits expense in the accompanying consolidated statements of operations. The total income tax benefit recognized in the income statement for this share-based compensation arrangement was approximately $266,400 and $207,700 for the years ended December 31, 2011 and 2010, respectively.
On May 5, 2006, White River shareholders approved the White River Capital, Inc. 2005 Stock Incentive Plan. The purpose of this plan is to offer certain employees, non-employee directors, and consultants the opportunity to acquire a proprietary interest in White River. The plan provides for the grant of options, restricted stock awards and performance stock awards. All vesting terms are less than 10 years. The total number of options and stock awards that may be awarded under the plan may not exceed 250,000. As of December 31, 2011, White River awarded restricted stock awards totaling 197,545 shares and 82,020 of these shares have vested and have been issued and 35,080 shares have been forfeited. The total fair value of the vested stock awards at the time of vesting was approximately $43,700 and $217,000 for the years ended December 31, 2011 and 2010, respectively. Forfeited shares are available for the purposes of the plan. White River has not issued stock options as of December 31, 2011. The following is a summary of the status of White River’s non-vested restricted stock awards and changes during the years ended December 31, 2011 and 2010:
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
Restricted Stock Awards
|
|
Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
Shares
|
|
|
Weighted Average Grant Date Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning nonvested awards
|
|
|
2,000
|
|
|
$
|
6.45
|
|
|
|
4,400
|
|
|
$
|
7.96
|
|
|
|
Granted
|
|
|
80,445
|
|
|
|
19.71
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Vested
|
|
|
(2,000
|
)
|
|
|
6.45
|
|
|
|
(2,400
|
)
|
|
|
9.23
|
|
|
|
Forfeited
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
Ending nonvested awards
|
|
|
80,445
|
|
|
$
|
19.71
|
|
|
|
2,000
|
|
|
$
|
6.45
|
|
On October 26, 2011, White River entered into a Stock Award Agreement (the “Agreement”) under White River’s 2005 Stock Incentive Plan (the “Plan”) with John M. Eggemeyer, III, the Chairman of the Board and Chief Executive Officer of White River. Pursuant to the Agreement, White River granted to Mr. Eggemeyer 50,000 shares of common stock, without par value, of White River (the “Shares”) as a performance stock award. The Shares will vest in one installment, in full, on the date White River’s audited financial statements for the fiscal year ended December 31, 2013 are completed and attested to by White River’s independent registered public accounting firm (the “Determination Date”) if all of the following performance goals have been achieved: (i) White River’s net income per fully-diluted common share (“EPS”) for the fiscal year ended December 31, 2011, as shown on White River’s audited financial statements for such fiscal year, is $3.00; (ii) White River’s EPS for the fiscal year ended December 31, 2012, as shown on White River’s audited financial statements for such fiscal year is $3.30; and (iii) White River’s EPS for the fiscal year ended December 31, 2013, as shown on White River’s audited financial statements for such fiscal year, is $3.75.
Notwithstanding the foregoing (but subject to possible earlier forfeiture, as described below), upon the occurrence of a “Vesting Event” (as defined in the Plan), Mr. Eggemeyer will become 100% vested in any outstanding unvested Shares. For purposes of the Plan, “Vesting Event” generally means (i) the occurrence of a change in control of White River, or (ii) the termination of a participant’s service to White River (other than for cause or other reasons or conditions specified in an award agreement as conditions that would prevent a Vesting Event from occurring on or after termination) following the approval by White River’s shareholders of any matter, plan, or transaction which would result in a change in control of White River.
The Agreement provides that the Shares will automatically be forfeited and will not vest upon the first to occur of the following: (i) if, as of the Determination Date, all of the EPS performance goals described above have not been achieved by White River for the periods indicated; or (ii) upon a termination of Mr. Eggemeyer’s employment with White River; or (iii) on the date immediately preceding any Vesting Event, unless, by operation of the change in control giving rise to the Vesting Event, holders of the common stock of White River are or will be entitled to directly receive cash or certain liquid “Qualifying Securities” (as defined in the Agreement) with respect to or in exchange for their White River shares.
The value of restricted awards is determined based on the trading value of White River shares on the grant date. Compensation expense related to these awards approximated $208,500 and $200,900 for the years ended December 31, 2011 and 2010, respectively, and is included in salaries and benefits expense in the accompanying consolidated statements of operations. The total income tax benefit recognized in the income statement for this share-based compensation arrangement was approximately $80,300 and
$73,300 for the years ended December 31, 2011 and 2010, respectively. There was $1.8 million and $0.8 million of total unrecognized compensation cost related to non-vested share-based compensation and long-term incentive award arrangements granted as of December 31, 2011 and 2010, respectively. That cost is expected to be recognized over a weighted-average period of 2.0 years and 1.0 years as of December 31, 2011 and 2010, respectively.
|
10.
|
BUSINESS SEGMENT INFORMATION
|
Set forth in the table below is certain financial information with respect to White River’s reportable segments as discussed in Note 1. All taxes are recorded at Corporate and Other. UAC and Coastal Credit are limited liability companies and are consolidated with White River for tax purposes. As of January 1, 2011, all financial information for UAC is reported in the “Corporate and Other” segment. The tables below are being reported based on this new segment classification ($ in thousands):
|
|
For The Year Ended December 31, 2011
|
|
Coastal Credit
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
35,189
|
|
|
$
|
2
|
|
|
$
|
35,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,852
|
)
|
|
|
(43
|
)
|
|
|
(1,895
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
33,337
|
|
|
|
(41
|
)
|
|
|
33,296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan losses
|
|
|
(3,988
|
)
|
|
|
(6
|
)
|
|
|
(3,994
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (deficit) after provision for loan losses
|
|
|
29,349
|
|
|
|
(47
|
)
|
|
|
29,302
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(12,288
|
)
|
|
|
(2,336
|
)
|
|
|
(14,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
17,061
|
|
|
$
|
(2,383
|
)
|
|
$
|
14,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Year Ended December 31, 2010
|
|
Coastal Credit
|
|
|
Corporate
and Other
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
32,808
|
|
|
$
|
17
|
|
|
$
|
32,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(1,318
|
)
|
|
|
(174
|
)
|
|
|
(1,492
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
|
31,490
|
|
|
|
(157
|
)
|
|
|
31,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery (provision) for loan losses
|
|
|
(6,426
|
)
|
|
|
72
|
|
|
|
(6,354
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin (deficit) after recovery (provision) for loan losses
|
|
|
25,064
|
|
|
|
(85
|
)
|
|
|
24,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expenses
|
|
|
(11,654
|
)
|
|
|
(1,911
|
)
|
|
|
(13,565
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
$
|
13,410
|
|
|
$
|
(1,996
|
)
|
|
$
|
11,414
|
|
The following table presents assets with respect to White River’s reportable segments ($ in thousands) at:
|
|
|
|
December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and other
|
|
$
|
37,253
|
|
|
$
|
41,599
|
|
|
|
Coastal Credit
|
|
|
118,057
|
|
|
|
100,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,310
|
|
|
$
|
141,608
|
|
Basic earnings per share are calculated by dividing the reported net income for the period by the weighted average number of common shares outstanding. The weighted average number of common shares outstanding during a period is weighted for the portion of the period that the shares were outstanding. Diluted earnings per share include the dilutive effect of stock awards. Basic and diluted earnings per share have been computed as follows (dollars in thousands except per share data):
|
|
|
|
Years Ended December 31,
|
|
|
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income in thousands
|
|
$
|
9,529
|
|
|
$
|
7,079
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
3,605,675
|
|
|
|
3,838,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incremental shares from assumed conversions:
|
|
|
|
|
|
|
|
|
|
|
Stock award plans
|
|
|
5,647
|
|
|
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and assumed incremental shares
|
|
|
3,611,322
|
|
|
|
3,839,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.64
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
2.64
|
|
|
$
|
1.84
|
|
|
12. QUARTERLY FINANCIAL DATA (UNAUDITED)
|
The following is a summary of quarterly financial results ($ in thousands, except per share data):
|
|
|
|
First
Quarter
|
|
|
Second
Quarter
|
|
|
Third
Quarter
|
|
|
Fourth
Quarter
|
|
|
|
Fiscal Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
8,370
|
|
|
$
|
8,676
|
|
|
$
|
9,038
|
|
|
$
|
9,107
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
$
|
7,902
|
|
|
$
|
8,230
|
|
|
$
|
8,567
|
|
|
$
|
8,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
(3,611
|
)
|
|
$
|
(3,629
|
)
|
|
$
|
(3,405
|
)
|
|
$
|
(3,979
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
2,095
|
|
|
$
|
2,537
|
|
|
$
|
2,851
|
|
|
$
|
2,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.57
|
|
|
$
|
0.70
|
|
|
$
|
0.79
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.57
|
|
|
$
|
0.70
|
|
|
$
|
0.79
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
|
|
|
3,689,450
|
|
|
|
3,612,880
|
|
|
|
3,588,898
|
|
|
|
3,533,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
3,695,570
|
|
|
|
3,614,984
|
|
|
|
3,592,497
|
|
|
|
3,560,323
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest on receivables
|
|
$
|
7,865
|
|
|
$
|
8,100
|
|
|
$
|
8,383
|
|
|
$
|
8,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest margin
|
|
$
|
7,517
|
|
|
$
|
7,732
|
|
|
$
|
8,001
|
|
|
$
|
8,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense
|
|
$
|
(3,610
|
)
|
|
$
|
(3,072
|
)
|
|
$
|
(3,259
|
)
|
|
$
|
(3,624
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,347
|
|
|
$
|
1,977
|
|
|
$
|
1,791
|
|
|
$
|
1,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.51
|
|
|
$
|
0.48
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.34
|
|
|
$
|
0.51
|
|
|
$
|
0.48
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
|
|
|
3,974,897
|
|
|
|
3,884,603
|
|
|
|
3,756,059
|
|
|
|
3,743,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted average shares
|
|
|
3,976,198
|
|
|
|
3,886,515
|
|
|
|
3,758,098
|
|
|
|
3,744,330
|
|
|
13. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
|
The carrying value of cash and cash equivalents approximates the fair value due to the nature of these accounts.
Finance receivables–net approximates fair value based on the price paid to acquire the loans. The price paid reflects competitive market interest rates and purchase discounts for the Company’s chosen credit grade in the economic environment. This market is highly liquid as the Company acquires individual loans on a daily basis from dealers. In addition, there have been minimal changes in interest rates and purchase discounts related to these types of loans.
The interest rate for the line of credit is a variable rate based on LIBOR. As a result, the carrying value of the line of credit approximates fair value.
Accrued interest is paid monthly. As a result of the short term nature of this activity, the carrying value of the accrued interest approximates fair value.
|
14. COMMITMENTS AND CONTINGENCIES
|
White River and its subsidiaries, as consumer finance companies, are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract, and discriminatory treatment of credit applicants. Some litigation against White River and its subsidiaries could take the form of class action complaints by consumers. As the assignee of finance contracts originated by dealers, White River and its subsidiaries may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages. White River and its subsidiaries believe that it has taken prudent steps to address and mitigate the litigation risks associated with its business activities.
White River and its subsidiaries’ obligations under operating lease agreements were $0.9 million and $1.0 million for the years ended December 31, 2011 and 2010, respectively. The following table represents obligations due for each of the years ended December 31indicated below under current operating lease agreements ($ in thousands):
|
|
Year
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
$
|
495
|
|
|
|
|
2013
|
|
|
167
|
|
|
|
|
2014
|
|
|
70
|
|
|
|
|
2015
|
|
|
40
|
|
|
|
|
2016
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
15. DIVIDENDS AND SHARE REPURCHASE PROGRAM
|
On November 11, 2009, the Board of Directors reauthorized White River’s previously announced share repurchase program. Under this program, White River was authorized to repurchase up to 500,000 shares of its outstanding common stock, from time to time and subject to market conditions, on the open market or in privately negotiated transactions. White River has repurchased all 500,000 shares of its outstanding common stock under the program for $7.7 million. Information pertaining to the shares repurchased during 2011 under this program is as follows:
|
|
Period
|
|
Total Number of Shares Purchased
|
|
|
Average Price
Paid per Share
|
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
|
Maximum Number of Shares that May Yet be Purchased Under the Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 - March 31, 2011
|
|
|
100,479
|
|
|
$
|
18.50
|
|
|
|
100,479
|
|
|
|
17,571
|
|
|
|
April 1, 2011 - June 30, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
17,571
|
|
|
|
July 1, 2011 - September 30, 2011
|
|
|
17,571
|
|
|
$
|
18.73
|
|
|
|
17,571
|
|
|
|
—
|
|
|
|
October 1, 2011 - December 31, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
118,050
|
|
|
$
|
18.53
|
|
|
|
118,050
|
|
|
|
|
|
On August 11, 2011, White River announced that its Board of Directors approved a new program to repurchase, from time to time and subject to market conditions, up to 250,000 shares of White River’s outstanding common stock, on the open market or in privately negotiated transactions. As of December 31, 2011, White River has repurchased 62,829 shares of its outstanding common stock under the program for $1.2 million. Information pertaining to the shares repurchased during 2011 under this program is as follows:
|
|
Period
|
|
Total Number of Shares Purchased
|
|
|
Average Price
Paid per Share
|
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
|
Maximum Number of Shares that May Yet be Purchased Under the Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2011 - March 31, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
April 1, 2011 - June 30, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
July 1, 2011 - September 30, 2011
|
|
|
62,829
|
|
|
$
|
19.40
|
|
|
|
62,829
|
|
|
|
187,171
|
|
|
|
October 1, 2011 - December 31, 2011
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
187,171
|
|
|
|
|
|
|
62,829
|
|
|
$
|
19.40
|
|
|
|
62,829
|
|
|
|
|
|
|
16. SUMMARY OF STOCK TRANSFER RESTRICTIONS AND RELATED PROVISIONS
|
General
The following is a summary of the material transfer restrictions set forth in Article 10 of White River’s articles of incorporation. The following summary is not complete but does describe the significant terms. The transfer restrictions apply to transfers of White River’s common stock and any other instrument that would be treated as “stock,” as determined under applicable Treasury Regulations. The transfer restrictions will apply until the earlier of:
|
·
|
the repeal by the Internal Revenue Service of the NOL carryforward limitations in the Code if White River’s board of directors determines the transfer restrictions are no longer necessary for the preservation of the tax benefits; and
|
|
·
|
the beginning of a taxable year of White River to which White River’s board determines that no tax benefits may be carried forward.
|
However, White River’s board of directors will have the power to extend the expiration date of the transfer restrictions if it determines in writing that such action is reasonably necessary or desirable to preserve the tax benefits or to accelerate the expiration date if it determines in writing that the continuation of the transfer restrictions is no longer reasonably necessary for the preservation of the tax benefits. This power is vested in White River’s board of directors to ensure that White River retains the power to make, in light of all relevant circumstances, including positions that might be taken by tax authorities and contested by White River, the complex determination whether the tax benefits have been fully used or are otherwise available.
Prohibited Transfers
The transfer restrictions generally prohibit any conveyance, from one person to another, by any means, of legal or beneficial ownership, directly or indirectly, of any class of White River stock including indirect transfers of White River stock, accomplished by transferring interests in other entities that own White River stock, to the extent that the transfer, if effective:
|
·
|
would create a new “public group” of White River. For example, the transfer of stock by an existing 5-percent shareholder to the public would be deemed to result in the creation of a separate, segregated “public group” that would be a new 5-percent shareholder;
|
|
·
|
would give rise to a “prohibited ownership percentage,” which is defined by reference to complex federal tax laws and regulations, but generally means any direct or indirect ownership that would cause any person, including a “public group” as defined in the NOL carryforward limitations, to be considered a 5-percent shareholder of White River. By way of example, if shareholder A owns 4% of White River’s outstanding shares of common stock, and shareholder B attempted to sell 2% of White River’s outstanding shares to shareholder A, the transfer restrictions would prohibit the sale of approximately 1.1% of the shares out of the 2% attempted to be sold; or
|
|
·
|
would increase the ownership percentage of any person, including a public group that is already a 5-percent shareholder of White River. Therefore, no shareholder will be permitted to sell any shares to 5-percent holders or their affiliates without board approval.
|
Exemptive Power of White River’s Board
White River’s board of directors has the power to approve any otherwise prohibited transfer, conditionally or unconditionally, if it determines, in its discretion, that a specific proposed transaction will not jeopardize White River’s full use of the tax benefits. In addition, White River’s board of directors has the power to waive any of the transfer restrictions in any instance where it determines that a waiver would be in the best interests of White River despite the effect of the waiver on the tax benefits.
Consequences of Purported Prohibited Transfer
Unless approved by White River’s board of directors, any attempted transfer in excess of the shares of White River stock that could be transferred without restriction will be void and will not be effective to transfer ownership of such excess shares. Further, the purported acquirer of the excess shares will not be entitled to any rights as a shareholder of White River with respect to the excess shares.
On February 3, 2012, White River announced that its Board of Directors declared a quarterly cash dividend of 25 cents per share on its common stock to shareholders of record on February 13, 2012. This quarterly dividend was paid on February 24, 2012.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
White River carried out an evaluation, under the supervision of its Chief Executive Officer, President and Chief Financial Officer, of the effectiveness of the design and operation of White River’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15 as of December 31, 2011. Based upon that evaluation, the Chief Executive Officer, President and Chief Financial Officer concluded that, at December 31, 2011, White River’s disclosure controls and procedures are effective in accumulating and communicating to management (including such officers) the information required to be included in White River’s periodic SEC filings.
Management’s Report on Internal Control Over Financial Reporting
Management of White River is responsible for establishing and maintaining adequate internal control over financial reporting. White River’s internal control over financial reporting includes policies and procedures pertaining to White River’s ability to record, process, and report reliable information. White River’s internal control system is designed to provide reasonable assurance to White River’s management and Board of Directors regarding the preparation and fair presentation of White River’s published financial statements.
White River’s management assessed the effectiveness of internal control over financial reporting as of December 31, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on this assessment, White River’s management concluded that, as of December 31, 2011, White River’s internal control over financial reporting is effective based on those criteria.
During White River’s fiscal quarter ended December 31, 2011, there were no changes in White River’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect White River’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Officers
Information contained under the captions “Proposal 1: Election of Directors,” “Executive Officers,” “Executive Compensation” and “Section 16(a) Beneficial Ownership Reporting Compliance” in White River’s proxy statement for the 2012 annual meeting of shareholders (“Proxy Statement”) is incorporated herein by reference.
Code of Ethics
White River has adopted the White River Capital, Inc. Code of Business Conduct and Ethics (“code of ethics”), a code of ethics that applies to the Chief Executive Officer, President and Chief Financial Officer. White River has posted this code of ethics on its website at www.whiterivercap.com, at the “Corporate Governance” tab.
Audit Committee and Audit Committee Financial Expert
The information with respect to White River’s audit committee and its audit committee financial expert contained under the caption “Corporate Governance and Board Committees – Audit Committee” in White River’s Proxy Statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information contained under the captions “Executive Compensation” and “Compensation of Directors” in the Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Security Ownership
Information contained under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated herein by reference.
Securities Authorized for Issuance under Equity Compensation Plans
As of December 31, 2011, the following shares were authorized to be issued under White River’s equity compensation plans
:
|
Equity Compensation Plan Information
|
|
|
Plan Category
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights
|
|
|
Weighted average exercise price of outstanding options, warrants and rights
|
|
|
Number of securities remaining available for future issuance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders
|
|
|
80,445
|
1
|
|
$
|
0.00
|
|
|
|
132,401
|
2
|
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
Total
|
|
|
80,445
|
1
|
|
$
|
0.00
|
|
|
|
132,401
|
2
|
|
1
|
Includes 80,445 shares issuable pursuant to outstanding performance awards under the 2005 Stock Incentive Plan.
|
|
2
|
Includes 87,535 shares issuable pursuant to the 2005 Stock Incentive Plan in the form of stock options, restricted stock awards, or performance stock awards, and 44,866 shares issuable pursuant to the 2005 Directors Stock Compensation Plan.
|
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information contained under the captions “Certain Relationships and Related Party Transactions” and “Corporate Governance and Board Committees – Director Independence” in the Proxy Statement is incorporated herein by reference in response to this Item 13.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Information contained under the caption “Independent Public Accountants” in the Proxy Statement is incorporated herein by reference in response to this Item 14.
ITEM 15. EXHIBITS
1. Financial Statements
The following consolidated financial statements of White River Capital, Inc. and its subsidiaries and independent auditors’ report are included in Part II (Item 8) of this Form 10-K:
|
|
|
|
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
28
|
|
|
|
|
|
|
Consolidated Balance Sheets as of December 31, 2011 and 2010
|
29
|
|
|
|
|
|
|
Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010
|
30
|
|
|
|
|
|
|
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2011 and 2010
|
31
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010
|
32
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
33
|
2. Financial Statement Schedules
Not applicable.
3. Exhibits
The following documents are included or incorporated by reference in this Annual Report on Form 10K:
|
|
3.1(a)
|
Articles of Incorporation of White River Capital, Inc. (incorporated by reference to Exhibit 3.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
|
|
|
3.1(b)
|
Articles of Amendment to White River Capital, Inc.’s Articles of Incorporation, effective May 22, 2009 (incorporated by reference to Exhibit 3.1 of the registrant’s Form 8-K filed May 26, 2009)
|
|
|
3.2
|
Code of By-Laws of White River Capital, Inc. (amended as of July 24, 2009) (incorporated by reference to Exhibit 3.1 of the registrant’s Form 8-K filed July 28, 2009)
|
|
|
4.1
|
Form of common stock certificate of registrant (incorporated by reference to Exhibit 4.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
|
|
|
4.2
|
Article 5 – “Number of Shares,” Article 6 – “Terms of Shares,” Article 10 – “Transfer and Ownership Restrictions,” and Article 11 – “Miscellaneous Provisions” (concerning the applicability of the Indiana Control Share Acquisitions Chapter and the Indiana Business Combinations Chapter) of registrant’s Articles of Incorporation (incorporated by reference to registrant’s Articles of Incorporation filed as Exhibit 3.1 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
|
|
|
4.3
|
Article III – “Shareholder Meetings,” Article VI – “Certificates for Shares,” and Article VII, Section 3 – “Corporate Books and Records” of registrant’s Code of By-Laws (incorporated by reference to registrant’s Code of By-Laws filed as Exhibit 3.1 of the registrant’s Form 8-K filed July 28, 2009)
|
|
|
4.4
|
Second Amended and Restated Plan of Reorganization of Union Acceptance Corporation dated August 8, 2003 (incorporated by reference to Exhibit 4.6 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
|
|
|
4.5
|
Regulation S-K, Item 601(b)(4)(iii) undertaking to furnish debt instruments to the Commission upon request (incorporated by reference to Exhibit 4.9 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
|
|
|
10.1(a)
|
Amended Finance Agreement dated April 16, 2001, between Coastal Credit, LLC and Wells Fargo Financial Preferred Capital, Inc.
|
|
|
10.1(b)
|
First Amendment to Finance Agreement dated March 22, 2004, between Coastal Credit, LLC and Wells Fargo Financial Preferred Capital, Inc.
|
|
|
10.1(c)
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Second Amendment to Finance Agreement, dated August 24, 2005, between Coastal Credit LLC and Wells Fargo Financial Preferred Capital, Inc. (including replacement Promissory Note and White River Capital Inc. Guaranty)
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10.1(d)
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Third Amendment to Finance Agreement, dated January 2, 2007, between Coastal Credit LLC and Wells Fargo Financial Preferred Capital, Inc.
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10.1(e)
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Fourth Amendment to Amended Finance Agreement dated November 9, 2011 between Coastal Credit, L.L.C. and Wells Fargo Preferred Capital, Inc.
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10.2
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Memorandum of Understanding dated February 15, 2005, among registrant, Union Acceptance Corporation and the Plan Committee under Union Acceptance Corporation’s Second Amended and Restated Plan of Reorganization (incorporated by reference to Exhibit 10.2 of registrant’s Registration Statement on Form S-1/S-4 (Reg. No. 333-123909))
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10.3
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Amended and Restated Employment Agreement dated as of January 4, 2012 between Martin J. Szumski and White River Capital, Inc. (incorporated by reference to Exhibit 99.1 of registrant’s Form 8-K filed January 10, 2012)
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10.4(a)
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Employment Agreement dated May 18, 2009 (to be effective as of January 1, 2009), by and among Coastal Credit, LLC, White River Capital, Inc., and William E. McKnight (incorporated by reference to Exhibit 99.1 of registrant’s Form 8-K filed May 22, 2009)
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10.4(b)
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First Amendment to Employment Agreement dated May 10, 2011 by and among Coastal Credit, LLC, White River Capital, Inc., and William E. McKnight, along with Amended and Restated Terms of Long-Term Cash Incentive Award dated May 10, 2011 (incorporated by reference to Exhibit 10.3 of registrant’s Form 10-Q for the period ended March 31, 2011)
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10.5
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Stock Award Agreement dated March 18, 2011 by and between Martin J. Szumski and White River Capital, Inc. (incorporated by reference to Exhibit 99.1 of registrant’s Form 8-K filed March 23, 2011)
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10.6
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Stock Award Agreement dated October 26, 2011 by and between John M. Eggemeyer, III and White River Capital, Inc. (incorporated by reference to Exhibit 99.1 of registrant’s Form 8-K filed November 1, 2011)
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10.7
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White River Capital, Inc. 2005 Stock Incentive Plan (incorporated by reference to Exhibit 4.4 of registrant’s Form S-8 (File No. 333-130187))
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10.8
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Expense Sharing Agreement, dated November 8, 2005, between White River Capital, Inc. and Castle Creek Capital, LLC and Castle Creek Advisors LLC
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10.9
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White River Capital Inc. Directors Stock Compensation Plan, amended as of May 6, 2010 (incorporated by reference to Exhibit 10.1 of registrant’s Form 10-Q for the period ended March 31, 2010)
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10.10
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Stock Repurchase Agreement dated March 14, 2011 by and among White River Capital, Inc., and the Sellers listed therein (incorporated by reference to Exhibit 99.1 of registrant’s Form 8-K filed March 14, 2011)
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21.1
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Subsidiaries of White River Capital, Inc. (incorporated by reference to Exhibit 21.1 of registrant’s Form 10-K for the year ended December 31, 2010)
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23.1
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Consent of McGladrey & Pullen LLP
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31.1
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Certification by Chief Executive Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act
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31.2
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Certification by Chief Financial Officer required by Rule 13a-14(a) or 15d-14(a) of the Exchange Act
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32.1
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Section 1350 Certifications
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101
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The following materials from White River’s Form 10-K for the year ended December 31, 2011, formatted in an XBRL Interactive Data File: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Shareholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements, tagged as blocks of text.*
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*
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Users of the XBRL-related information in Exhibit 101 of this Annual Report on Form 10-K are advised, in accordance with Regulation S-T Rule 406T, that this Interactive Data File is deemed not filed or as a part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. The financial information contained in the XBRL-related documents is unaudited and unreviewed.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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White River Capital, Inc.
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(Registrant)
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March 9, 2012
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By:
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/s/
Martin J. Szumski
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Martin J. Szumski
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Chief Financial Officer
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(Signing on behalf of the registrant as Principal Financial Officer)
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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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Signature
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Date
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/s/
John M. Eggemeyer, III
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Chairman and Chief Executive Officer, Director (Principal Executive Officer)
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March 9, 2012
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John M. Eggemeyer, III
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/s/
Martin J. Szumski
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Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
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March 9, 2012
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Martin J. Szumski
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/s/
Thomas C. Heagy
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Director
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March 9, 2012
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Thomas C. Heagy
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/s/
William E. McKnight
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Director
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March 9, 2012
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William E. McKnight
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/s/
Daniel W. Porter
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Director
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March 9, 2012
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Daniel W. Porter
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/s/
John W. Rose
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Director
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March 9, 2012
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John W. Rose
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/s/
Richard D. Waterfield
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Director
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March 9, 2012
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Richard D. Waterfield
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