Western Financial Group announces Q2 results

NET INCOME INCREASED BY 37% AND EARNINGS PER SHARE UP BY 13%

HIGH RIVER, AB, Aug. 12 /CNW/ - (TSX - WES) - Western Financial Group ("the Company") announced today its operating and financial results for the three and six months ended June 30, 2010.

     <<     Financial      Highlights     (unaudited)     (in $ thousands         Three Months ended              Six Months ended      except for per                    June 30                       June 30      share amounts)    2010      2009 % Change       2010      2009 % Change     ------------------------------------------- -----------------------------     The Network     Commissions and      other customer      revenue      $  31,249 $  23,109    35.2%  $  53,668 $  40,631    32.1%     Operating      expenses        20,373    14,882    36.9%     38,834    28,813    34.8%     ------------------------------------------- -----------------------------      Operating      income       $  10,876 $   8,227    32.2%  $  14,834 $  11,818    25.5%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Bank West     Interest and      investment      income       $   6,961 $   6,685     4.1%  $  13,571 $  12,224    11.0%     Interest      expense -      customer      deposits         3,176     3,778   -15.9%      6,153     7,432   -17.2%     ------------------------------------------- -----------------------------     Net interest and      investment      income           3,785     2,907    30.2%      7,418     4,792    54.8%     Provisions for      credit losses      748       517    44.7%        924       806    14.6%     Operating      expenses         2,447     2,625    -6.8%      4,764     4,724     0.8%     ------------------------------------------- -----------------------------      Operating      income      (loss)       $     590 $    (235)  350.9%  $   1,730 $    (738)  334.5%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Western Life     Premium and      investment      income       $  13,608 $  10,841    25.5%  $  24,411 $  18,791    29.9%     Policyholder      benefits         6,910     5,199    32.9%     12,637     8,832    43.1%     Operating      expenses         4,766     3,995    19.3%      8,643     7,373    17.2%     ------------------------------------------- -----------------------------      Operating      income       $   1,932 $   1,647    17.3%  $   3,131 $   2,586    21.1%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Western Financial      Insurance     Premium and      investment      income       $   9,189 $       -        -  $  18,221 $       -        -     Policyholder      benefits         4,790         -        -      8,732         -        -     Operating      expenses         3,278         -        -      6,328         -        -     ------------------------------------------- -----------------------------      Operating      income       $   1,121 $       -        -  $   3,161 $       -        -     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Corporate and      all other     Other      revenues     $     295 $     243    21.3%  $     709 $     612    15.8%     Operating      expenses         3,173     2,602    21.9%      5,647     4,752    18.8%     ------------------------------------------- -----------------------------      Operating      loss         $  (2,878)$  (2,359)   22.0%  $  (4,938)$  (4,140)   19.3%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------     Total      operating      income       $  11,641 $   7,280    59.9%  $  17,918 $   9,526    88.1%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Net income    $   5,742 $   4,925    16.6%  $   8,013 $   5,839    37.2%     Preferred      dividends       (1,797)   (1,002)   79.3%     (3,629)   (2,005)   81.0%     ------------------------------------------- -----------------------------      Earnings (loss)      available to      common      shareholders $   3,945 $   3,923     0.6%  $   4,384 $   3,834    14.3%     ------------------------------------------- -----------------------------     ------------------------------------------- -----------------------------      Earnings per      share       - basic ($)      0.08 $    0.08                0.09 $    0.08       - diluted ($)    0.08 $    0.07                0.09 $    0.07            --------------------------------------------------------------         2010 KEY OBJECTIVES         --------------------------------------------------------------         Network Same Store Sales                          4%-7% growth         Network Operating Margin                                   28%         Bank West Specific Provisions                   75 bps or less         Western Financial Insurance Loss Ratio             55% or less         Western Life Loss Ratio                            45% or less         Overall 2010 Net Income                   $18.5 to $20 million         --------------------------------------------------------------     >> 

Western Financial Group today announced its second quarter 2010 financial numbers which show net income increased by 37%, with Earnings Per Share up by 13% over the same period in 2009. All Business Units showed positive results year over year, with Bank West reporting its second profitable quarter in a row and record profits for the year to date.

"We are pleased with the Company's performance for all our business units in what appears to be a moderate economy in western Canada," said Scott Tannas, President and CEO. "We are making good progress towards achieving our year-end financial objectives. The Bank is now contributing to our overall profitability, and with our recent financing behind us, we are well positioned with a strong balance sheet to take advantage of opportunities in the second half of this year", he said.

The Network

The Network combined margin for the quarter was 28%, with Group Insurance Solutions' margin at 19% and the retail division at 30%. Retail same store sales are at 4.7%, and same store customer count grew by 2.2% on a YTD, annualized basis.

Bank West

The Bank's loan book increased slightly over the quarter, to $378.9 million. Our specific charges for loan losses stand at 27 basis points at 6 months, which on an annualized basis is tracking toward a significant improvement over 2009. The gross non performing loan ratio also continues to improve over prior quarters, standing now at 1.36%

Western Life

Western Life's growth continued with premium income up by 11% year over year, gaining momentum over Q1. Their loss ratio abated significantly in the quarter bringing their year to date ratio to 45%. Cross sales within the Western Financial Group, continue to increase and are now at record levels.

Western Financial Insurance

Western Financial Insurance's premium revenue is up 15% with improved loss ratios year over year of 46% compared to 51%.

Strategic Partnership Portfolio

The Company's partnerships in investment banking, insurance distribution and manufacturing provided positive income for the quarter, with all units tracking toward our 2010 expectations.

Conference Call

Western Financial Group will host a conference call to discuss the Company's second quarter financial results on Tuesday, August 17, 2010 at 9:15 am Mountain time (11:15 am Eastern time). To participate in the live conference call, please dial (888) 231-8191 or (647) 427-7450 (Toronto). A replay of the call will be available from August 17th at 12:45 pm Mountain time until August 31st at 21:59 PM MT. To access the replay please dial either (800) 642-1687 or (416) 849-0833 and enter pass code 90465222. The conference will also be broadcast live over the internet and archived through the Company's website at www.westernfinancialgroup.ca.

Western Financial Group is a leader in providing insurance, financial services and banking services in over 90 communities, to more than 500,000 individuals and businesses in Western Canada through its wholly owned network of offices, its affiliated insurance brokers, Western Life Assurance Company, Bank West and Western Financial Insurance Company.

The Company's Financial Report for the second quarter of 2010 will be filed on SEDAR on or before August 13, 2010.

Forward-looking statements involve numerous assumptions, risks and uncertainties, including the risk that prediction and other forward-looking statements may not prove to be accurate. We caution the reader not to place undue reliance on these disclosures, as a number of important factors could cause actual results to differ materially from the estimates and comments expressed in them. Such factors may include, but are not limited to: changing financial and economic conditions in Canada, particularly in Western Canada; regulatory developments; competition industry trends and availability of capital resources; and our anticipated success in managing our risks. We caution readers that the foregoing list is not exhaustive. Except required by law, we do not undertake to update any forward-looking statements, written or oral, that we may make from time to time regarding our operations and performance.

     <<     CONSOLIDATED BALANCE SHEETS     (unaudited)     (in thousands, except for per share      amounts)                                                           As at        As at                                                         June 30  December 31                                               Note         2010         2009     -------------------------------------------------------------------------     ASSETS     Cash and cash equivalents                         $  82,867    $  58,463     Securities - held-for-trading                        65,514       61,373     Securities - available-for-sale             3        36,357       30,901     Mortgages, loans and leases, net of      allowance for credit losses                4       374,252      355,621     Interest rate swaps                                       -           90     Equity investments                                   12,152       11,591     Capital assets                                       22,785       21,630     Goodwill                                    6       160,825      148,205     Intangible assets                                    65,162       66,719     Accounts receivable                                  49,590       51,114     Prepaid expenses                                      8,394        7,231     Future income taxes                                   1,283        1,102     Other assets                                          1,890        2,286     -------------------------------------------------------------------------     Total assets                                      $ 881,071    $ 816,326     -------------------------------------------------------------------------     -------------------------------------------------------------------------      LIABILITIES     Customer deposits                                 $ 337,409    $ 317,953     Actuarial liabilities                                42,483       40,032     Provision for unpaid and unreported claims           16,289       13,919     Debt                                                 76,318       79,771     Interest rate swaps                                     169            -     Due to policyholders                                 19,384       20,392     Accounts payable and accrued liabilities             98,146       82,700     Income taxes payable                                  1,327        1,809     Future income taxes                                  13,376       13,199     -------------------------------------------------------------------------     Total liabilities                                   604,901      569,775     -------------------------------------------------------------------------     -------------------------------------------------------------------------      SHAREHOLDERS' EQUITY     Share capital                               7       233,356      206,905     Other paid in capital                                   268          268     Contributed surplus                                   2,112        2,041     -------------------------------------------------------------------------                                                         235,736      209,214     Accumulated other comprehensive loss        8          (248)        (129)     Retained earnings                                    40,682       37,466     -------------------------------------------------------------------------     Total shareholders' equity                          276,170      246,551     -------------------------------------------------------------------------                                                       $ 881,071    $ 816,326     -------------------------------------------------------------------------     -------------------------------------------------------------------------        CONSOLIDATED STATEMENTS      OF INCOME     (unaudited)     (in thousands, except      for per share      amounts)                         Three months ended June 30  Six months ended June 30                                  2010         2009         2010         2009     -------------------------------------------------------------------------     REVENUE     Commission and other      customer income        $  32,190    $  24,540    $  55,561    $  42,981     Premium income             19,823        9,678       37,843       18,125     Interest income on      customer loans             6,386        5,451       12,560       10,373     Investment income       Change in fair value        of held-for-trading        securities               2,240          758        3,272          627       Realized gain (loss)        on sales of        available-for-sale        assets                      52           (3)          88         (731)       Realized gain (loss)        on sales of        held-for-trading        securities                 (32)          24            7           30       Other net investment        income                     643          430        1,249          853     -------------------------------------------------------------------------                                61,302       40,878      110,580       72,258      EXPENSES       Operating expenses       34,037       24,104       64,216       45,662       Policyholder benefits    11,700        5,199       21,369        8,832       Interest expense -        customer deposits        3,176        3,778        6,153        7,432       Provision for credit        losses                     748          517          924          806     -------------------------------------------------------------------------     Income before the      following:                11,641        7,280       17,918        9,526       Income from equity        investments                449        1,088          592          835       Interest and financing        costs on debt           (1,595)      (1,041)      (3,005)      (1,603)       Amortization of        capital assets            (893)        (736)      (1,692)      (1,427)       Amortization of        intangible        assets                    (779)        (450)      (1,557)        (862)     -------------------------------------------------------------------------     Income before income      taxes                      8,823        6,141       12,256        6,469     Income taxes               (3,081)      (1,216)      (4,243)        (630)     -------------------------------------------------------------------------      NET INCOME FOR THE      PERIOD                 $   5,742    $   4,925    $   8,013    $   5,839     -------------------------------------------------------------------------     -------------------------------------------------------------------------      Preferred share      dividends              $  (1,797)   $  (1,002)   $  (3,629)   $  (2,005)     -------------------------------------------------------------------------     Net income available to      common shareholders    $   3,945    $   3,923    $   4,384    $   3,834      Average number of      common shares             49,507       49,345       49,507       49,345     Average number of      diluted common      shares                    49,548       54,915       49,553       54,920     Earnings per common      share       Basic                 $    0.08    $    0.08    $    0.09    $    0.08     -------------------------------------------------------------------------       Diluted               $    0.08    $    0.07    $    0.09    $    0.07     >>