Olympic Financial Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: OLM)") else Response.Write("(NYSE: OLM)") end if %>
7825 Washington Avenue South
Minneapolis, MN 55439-2435
(612) 942-9880

UNION CITY, Ca., August 27, 1996/FOOLWIRE/ --- Olympic Financial held a conference call for analysts to discuss their press release regarding the potential offer they received to by Olympic and the changes in the executive office at the company.

THE COMPANY'S PREPARED REMARKS

They received an indication from a substantially larger company that they have an interest in exploring the possibility of acquiring Olympic Financial.

In response to this indication, Olympic hired Donaldson, Lufkin & Jenrette to help them assess their strategic alternatives as to the future of Olympic. The Board believes there is merit in considering the potential sale of the company. They feel it is their duty to explore the alternatives available to the company and to maximize shareholder value. As further developments take place, the company will comment further. They expect a firm offer will be presented to the Board in the next several weeks and fully believe that other firms may take an active interest in looking at the company and its future potential.

In connection with the potential sale of the business, Jeff Mack (Olympic's founder who served as Chairman, President, and CEO) determined that it was in his best interest to resign his position and he also is no longer on the Board of Directors. Philosophical differences regarding the future direction of Olympic caused the change in authority.

Vice Chairman Scott Anderson and CFO John Witham, along with other members of the senior management team have affirmed their decision and support the Board's actions. They will work collectively as a team to do what they feel is in the best interests of the shareholders.

As the new Chairman of the Executive Committee, Warren Kantor said that it is his responsibility to reiterate the soundness and the strength of the company and address issues of concern to investors. According to Kantor, a number of questions were raised on the July 23rd Q2 conference call that he believed deserve some clarification. For the 6 months ending June 30th, Olympic reported income of $26 million, up from $10 million in 1995. Loan service jumped 100% to $3 billion from $1.5 billion a year earlier with originations of $1.3 billion for the six-month period. Delinquencies are 1.96% as of June 30th and write-offs stood at 84 basis points for the 6 months.

A number of participants on the call following the discussion further questioned the loans made to new customers who purchased the cars Olympic repossessed. At June 30th, Olympic had $66 million in loans which financed repossessed automobiles. At the end of July they had $69 million of such loans. These loans have delinquencies at twice the level of their Classic II loans. That program was instituted in 1994 and ceased early in 1996 as Olympic refined and introduced their new Classic strategy. Classic II delinquencies were approximately 6%. The delinquencies on the loans to buyers of the repossessed cars at June 30th was 13% and losses were running at 3%. Since these loans are written with yields to Olympic of 16-18%, even after a 3% loss and cost of delinquency expense, they still make money for the company.

The company's reason for discussing these statistics is to put to rest the analysts' focus about this minor part of Olympic's business. With $66 million of these loans on hand and loss rates of 3% or $3 million a year or $3.8 million for the remaining life of the portfolio, the company feels it is clearly immaterial to their reserves of $67 million as stated in the June 30th financial statements. Many analysts describe the general reserve over and above the current assumption of losses which are based on their static pool analysis of having $25 million in excess as part of the $67 million. The company feels that obviously the amount of the $25 million is far in excess of any amount they could possibly need in connection with the repossessed loan portfolio.

The company initiated a tightening of the underwriters' standards for these loans (made to buyers of repossessed cars) in April of 1996. They are comfortable that the losses and delinquencies will mitigate over time with this underwriting standard tightening. These loans represent just 2% of Olympic's total portfolio. Their total book-to-business is incredibly strong on 98% of their loans. They are comfortable with analyst estimates for Q3 and FY 1996. Olympic is a strong and vibrant company with an excellent future. They are comfortable that they do not have an asset quality problem and do not need to be making any type of financial statement adjustment related to reserves.

QUESTION & ANSWER SESSION

The first question asked the company to expound a little bit on what they termed "philosophical differences" indicating that it is pretty rare for a Board to get rid of its founder while its earnings seem to be doing so well. The analyst wanted to know what exactly the philosophical differences were about and did they focus on the sale of the company.

The company responded that Jeff Mack resigned and that basically there was a difference of opinion with the Board. The company is basically growing very fast, there was this indication of an interest, and there was a difference of opinion. When pressed if the "difference of opinion" was that Mack didn't want to sell the company, Kantor responded that the analyst would have to ask Mack that question and that it wasn't something the company was going to comment on.

The analyst responded and asked "Why not? You're a public company and your founder just resigned. It seems to me that you owe your shareholders a bit more of an explanation other than 'philosophical differences'." The company responded that they have a company that is growing at basically 100%. It is doing very well. On the other hand, when you are growing 100% there are always going to be bumps along the road. In connection with potential acquirers talking to them, the Board has taken into consideration such things as a possible recession that might occur some time in the future. As such, they think it is wise to affiliate with a larger company that has financial strength, capital, and funding to help Olympic deal with the rapid growth and basically there was a philosophical difference with the Chairman and he decided to resign.

The analyst responded that he didn't understand this answer, in that the company had just stated that their reserves were more than adequate and seemed to now be saying that they are looking for someone to help them out with capital. The company responded that they didn't say they were looking for someone to help them out with capital, they said they are growing very quickly and, to the extent that there is a recession sometime in the future, they are not an investment-grade company, they continue to need cash, they have a negative cash flow, and while they are producing very good profitability they think that with the marketplace being what it is -- they have a niche they have developed in which they lead the pack -- they are originating loans at $1 billion run rate with yields of 16-18%. That is going to require an enormous increase in infrastructure as they go forward to deal with the collection efforts, the systems, etc. Therefore, if someone is willing to pay them a very good price and it also helps them deal with potential things in the future related to negative cash flow and other types of things that might be on the horizon as it relates to recession, they think it is appropriate to consider anyone who is able to help them deal with that. Jeff Mack decided to resign, basically, with a difference of opinion with the Board.

The company was asked if the offer was a situation where a big finance company buys a small finance company and the paradigm remains relatively unchanged or does Olympic see the paradigm changing to the point where they see themselves merging with a large car retailer and undergoing a dramatic redefinition of the business. The company responded that there is significant change going on in the financial services world as far as how consumers are taking care of their financial needs. Olympic said they are certainly open to what type of company might have an interest in them, whether it is a large bank holding company, a large financial company, even a captive of someone else. Olympic believes that they are so good at what they are doing and are so profitable, that they are probably going to wind up being a standalone operation even if someone acquires them because they have the unique skills that probably whoever might buy them does not have. In connection with conversations with potential buyers, the interested parties have indicated that they would probably allow Olympic to be a standalone operation because Olympic has the people who know how to originate the product, service it, and securitize it. And, since Olympic is the largest company in the US doing what they do, Olympic feels that it is very unlikely that they would get folded into someone because they're not sure that a "someone" like that exists.

The company was asked to elaborate on the timetable in terms of when the initial offer was made, did Olympic seek the offer or did the company come to them, and is there another offer on the table or something pending beyond the first offer. The company responded that the interested company came to Olympic last week. Olympic expects that there will be other companies that will have an interest and have already received phone calls yesterday expressing interest, since they announced the statement that they were in receipt of a potential offer. At this point there are multiple indications of interest. They do not have a firm offer at this point. They expect to have a firm offer within a few weeks. They think that within a month, at the most two months, they will have gone through some type of due diligence process and will probably have worked out some type of agreement with whoever the acquirer is, and will make an announcement at that point if, in fact, the offer is at a level that they consider to be good for the stockholders, customers, and employees.

The company was asked how big a priority is cash or stock, i.e. the liquidity of the offer. The company responded that the Board doesn't have an opinion one way or the other. Whatever is in the best interest of the stockholders in that case, they will consider. Obviously a stock transaction that is tax free could be what is offered and is probably the most likely considering the level of goodwill that will be generated if there was a cash offer. If it is a large financial institution that winds up making the offer Olympic accepts, they might not want the goodwill and, therefore, there would be a high probability in that case that it would be stock. Olympic would then look at the stock from the standpoint of the currency that they think is good for the stockholders -- as far as it being an investment-grade company that has good prospects and liquidity in the marketplace for people to liquidate their stock, etc.

The company was asked to comment on valuation methodology and, specifically, if they saw suitors looking at valuing the company based on just a pure multiple of earnings or is asset growth the key valuable portion of the company. Olympic said that they are not in discussions with anyone pertaining to that, but it seems logical to them in connection with the transactions that they have seen that it is going to be a combination of the two. Olympic certainly had a very high growth rate related to assets, earnings, etc. and obviously that is going to impact the P/E. They think that if people look at what the other comparables are that have occurred in the last year or so in the auto finance field, there are a wide range of P/Es, from the mid-teens to the mid-30s. They said that they will have to wait and see what it is that their investment bankers and the potential acquirers believe to be their asset quality, growth rates, and future prospects.

Kantor said that he believed the Classic program the company has been doing for two years is something that Olympic is leading the country in, as it relates to focusing on that customer who deserves better than a 22% interest rate but has some type of problem and, therefore, needs to pay more than 12%. Olympic's program offers 16-18% for those customers that basically have a 1.5% loss rate and they think there is a huge marketplace for. This market is basically made up of very good credit quality people who, for whatever reason, have had some type of event happen to them that causes them to have a problem for a short period of time and then they go back to paying their bills regularly. These customers experience events -- they get laid off from work, get sick, or some other event happens -- but they really are very good customers with long track records but have a problem getting a bank loan. That is who Olympic is targeting them and they believe it is a very large market. They are originating loans in the Classic program at a $1 billion run rate, they are finding that the static pool analysis is excellent, they have reviewed it with both credit enhancers and rating agencies who agree that the statistics are very good.

One analyst said that the company indicated that they need cash for infrastructure and wondered if this was an acceleration of infrastructure or is it that the level of investment that's been done to-date has been inadequate. The company responded that, with the acceptance of the Classic program, that has surprised the company positively in terms of how well it has been accepted in the marketplace and the company has significantly accelerated the investment in its infrastructure as it pertains to systems, service centers -- the company is about to open 4 regional service centers in the next 30-60 days which is requiring a large amount of capital investment. From a systems standpoint, they are just trying to get more information into the hands of the people at the local level who are making decisions in a local market as far as profitability of individual loans. So they are spending a lot of money there. As relates to cash, the company has a very large amount of cash, there are no cash needs currently. They probably will not need to raise any cash this year. The company has approximately $200 million of excess cash and will be doing a securitization probably in September and at that point will have $1 billion in cash.

As relates to the acceleration of growth, what really is happening there is that as the company has adopted its new strategy in March of this year, they are focusing more on Classic and less on Premier -- the Classic program basically runs a delinquency rate of three times what the Premier is and the losses are basically twice as much, but they are charging 500 basis points more for that loan. As they go from 20% of their portfolio that's Premier with a 1% delinquency to 50% of their portfolio that has a 3% delinquency rate, they feel they are going to wind up having an increase as far as collectors, systems, space -- that's literally going to require 200-250% more people. If you add in a growth rate of 40% or so in receivables that the company has been doing, all of a sudden you end up with growth rate need over the next few years of literally 400 to 500% as it relates to people, systems, and space. That is an acceleration of growth from where the company has been due to the switch in strategy, which is extremely profitable but in fact is going to put a strain on staying ahead, from putting in the infrastructure.

To the extent that they are acquired by a "parent" company that has people or access to systems that could assist them (and certainly whoever it would be would have access to additional capital) so the company would not have to focus on such things as raising capital, etc. that would be a good option. But really it comes down to that the infrastructure is growing very quickly.

The next question related to repossessed cars and asked what the inventory of repossessed cars is and what the trend has been relative to repossessed cars over the last couple quarters. The company responded that they have $30 million of repossessed inventory. That level is continuing to grow. However, they have a very active program whereby they expect that by sometime later this year that inventory will actually start to shrink. They have signed up various dealers who are in the process of fixing up retail lots to sell large amounts of cars that Olympic would consign to them and they would sell. They have every expectations this inventory level, while it might go up in the next month or two, will start to trend down as they get into the fourth quarter. That inventory is carried at values that they are comfortable with when they look at what the inventory is written down to. When they repossess the car and they look at what the car has in fact been sold for they find that they have recoveries over and above the amounts that they are carrying in the inventory. The recoveries have been very significant -- they have been 30% of what the charge-offs were -- an indication that they are able to sell the cars for more than they are writing them down to.

The next question was whether the Board would be willing to accept an offer which is below the 52-week high for the stock and if the company doesn't have a firm offer in hand right now, was it Jeff Mack's resignation that really drove the timing of this announcement. The company said that no, it was really the other way around. They got an indication from a potential buyer and that was the instigation of it, it was not the other way around, they obviously happened at the same time. Related to the price, they obviously are going to evaluate all of the offers that come in. They believe that the price of $30 per share which was a year ago, in today's marketplace, they don't consider to necessarily be a high price. The earnings are literally 60% higher today than they were a year ago and therefore the price back then, at 30x the 1995 earnings and 22x the expected earnings, now the earnings are materially higher. The analysts have average estimates out for $1.70 this year and average $2.10-$2.20 next year -- so the stock is much cheaper than the high price of a year ago.

The company was asked a follow-up question on how confident the Board is that any potential offers for the company that the current situation will bring about will have a dollar value on them that is in the range of acceptability in terms of recommending it to shareholders as "in their best interests." The company responded that obviously the marketplace and the buyers know what the high price is. While there hasn't been any specific price discussed, they have let the interested company know that they believe that an acceptable price is going to have to be above the last 52-week high price. They think that is a reasonable valuation -- to be something above that price, if for no other reason than taking analyst estimates of $2.20 for 1997 and multiplying it by the lowest P/E in their industry, you get a price that is higher than the 52-week high. Looking at multiple-to-book, their book value is $10.50. The $30 52-week high price is only 3 times book. A bank that grows at 5% sells at 2-3 times book. They are growing their infrastructure and profitability between 50-100%, so they would think they would sell at a premium to what bank prices are. They are expressing confidence that, with the asset quality as good as it is at Olympic, there should not be any reason why the company should not get a very high price. They expect to have something to announce within a few weeks.

The next question asked for an indication how the current quarter is going. The company replied that their July originations were slightly in excess of their plan. The August originations are basically going on-plan. Last quarter they originated $657 million and their plan is to grow. They think the $700 million range is probably reasonable for the current quarter. The key, in addition to the volume is the continued penetration of Classic. Obviously with Classics having an additional 500 basis point yield over and above Premier, that has a dramatic impact on profitability and they are looking to get Classic volume as compared to Premier volume. It doesn't concern them if the Premier volume does not grow, they want the Classic to grow.

So, they should be much more profitable at a $700 million origination that has the right mix than they could at $800 million that has what they perceive to be a lesser mix. As it relates to credit quality, basically what is going on with the shift to Classic is that they have a slow increase in delinquency and charge-offs over the last 12 months. Delinquencies went from the 133 level up to the 196 level over the first half of the year. They would expect that this increase will probably continue, it might slow down a little from the pace of growth. As far as charge-offs, they went from 70 basis points of loss at the start of the year up to the 87 basis points at the end of 6 months. Again, they expect that to continue to go up as they go into the Classic mix so that it could be in the 90 basis point area, maybe even up to a 1% loss for the year. The majority of it is just due to a shift to Classic, somewhat of a seasoning of the portfolio as the growth of the company slows from 100% down to something from a receivables standpoint slower, like to 50-60%, obviously there is a seasoning and therefore you are in more of a peaking as far as delinquencies and charge-offs. But it is very gradual and certainly Olympic is continuing to increase their reserve level as they have been doing now for literally the better part of a year.

They have not only been reserving on a static pool basis as far as what they need, but have been adding significant reserves over and above what any of the numbers indicate that they need just so they don't have a surprise going on in the future. And it is because of that increase in the general reserve, which is approximately at the $25 million level over and above what they need for any specific problem with the portfolio, that they feel comfortable that they do not have an asset quality problem staring them in the face for this year or even going into next year as far as any type of adjustment. It's completely covered by their reserve. Even on a problem portfolio of $65 million with a delinquency of 13%, 85% of the people are making all the payments. It is still good business and is the upper end of Classic and they feel it still makes sense for them to do it.

They tightened the underwriting standards around April 1st and they can see some preliminary better results even though with only 3 or 4 months worth of underwriting it is too early to tell. But the early static pool numbers look for better performance in the finance repo portfolio after April 1st. The impact of the tightening has been a slight elongation of the marketing period. They have also had to clean out some of those dealerships where they have chosen not to continue with the program and replaced them with good, quality dealers going forward. But getting up to speed is a 60-90 day process. To clear the inventory they are opening twice as many retail establishments with dealers so that with the higher traffic flow, instead of approving 25% of the traffic flow, they only need to approve 15% and get better credit quality.

The company was asked if they are making any changes on the recovery rate on the cars. They responded that this has remained very solid and they still have maintained 86% recovery (that's the cash number, not the inventory number) resulting in a 14-15% net loss rate. So there has been no change in the June numbers reported.

They were asked how much time Kantor would be spending there and what would happen if a suitable price doesn't come through. He answered that he expects to spend the majority of his time there over the next several months. He has repositioned his business so that it is capable of running on its own. He will be at Olympic several days a week helping manage the company and will be on the phone for his other business in Philadelphia.

As far as if the company does not get sold as of a stop point, the Board will go into a search mode for a CEO and they will either hire someone from the outside or select someone from internally. It is not Kantor's intent at this time to be the full-time CEO of the company. He expects that the company most likely will be acquired by someone.

The company was asked how much takeover interest the company has generated over the last couple of years. They indicated that they were not aware of very much takeover interest at all over the last couple of years. They believe it is due to the circumstances of the marketplace in the last year or so as it relates to Classic and maybe the evolution of the industry that there has been more and more interest. There hasn't been very much in the past.

The company was asked about the retail repo portfolio. They indicated that it was running at a 3% loss rate and a 13% delinquency rate. The analyst commented that on the most recent conference call Olympic was unwilling to give those specific numbers out and, instead, said that the loss rates and delinquency rates for the repo portfolio were similar in nature to the rest of the portfolio. The analyst went on to say that now that the numbers are disclosed, analysts find that the losses are running 4x higher than the rest of the portfolio. The company was asked to justify the two answers that occurred within a month of each other. The company responded that the total portfolio has ranges in the Classic program of anywhere from 2% delinquencies to 13% and with literally only $65 million of the portfolio being at the higher level and the bulk of it being down at the 2% level, that's just the way risk-based pricing of that portfolio is. The company basically concluded that it was immaterial and did not want to disclose it. Basically, they thought there was so much focus on that immaterial amount that they concluded that it made sense to clear the air and disclose the information.

The same analyst pointed out that what the company calls "immaterial," while it kind of sounds immaterial because it's 2.2% or $69 million, is actually 20% of shareholders' equity. The company said that is true, but it is $60-odd million as secured by new cars. The average car is only a couple years old. If they repossess all of the portfolio -- 100% of it -- liquidated it, and took a 15% loss if that is what could be expected, there would be a loss of $9 million on 100%. They set up reserves of $25 million without any specific need. Therefore, stockholders' equity would never be impacted at all since they have adequate reserves to deal with any problem that portfolio might have. They do have stockholders' equity of roughly $350 million and they have the $67 million reserves. They do not expect any impact on stockholders' equity from that $65 million portfolio. They expect that they will make their earnings projections for 1996.

The company was asked if Donaldson, Lufkin, & Jenrette would conduct a proactive search for buyers and then was asked to discuss the industry, especially relating to non-prime, with the comment that the company's targeting loss rates are 1.5% on that business and there are other publicly traded competitors that have targeted, at the bottom, 1.5% all the way up to 6% -- there is a wide range and 1.5% is the bottom, so what does that mean in terms of competition if Olympic is going to look to get those loans at 1.5% losses.

The company said that they expect DLJ would be actively seeking buyers, that's part of their job. As far as what's going on in the industry, they believe that there is indirect automobile lending that basically has interest rates, in the used car market, anywhere from 10-12% up to 22-26%, so that is the range the customer has to deal with. There are also individual finance companies that are buying either at discounts where the quality of the customers is going to be such that the losses are going to be 10% on a cumulative static-pool basis, therefore they buy at a discount of 5%. A year or two ago, before competition, they could buy at a 10% discount with a 10% loss, but that is no longer the case. That is basically the C automobile market.

Then there are D market finance companies that expect to have very high defaults, in the 30-35% range and they basically use a collection model where they withhold 50% of the money. Then there is the B market, where interest rates are running in the 20% range or so and there are some with discounts and some without discounts that pay premiums. But the interest rate basically is coming down as they have more competition.

They see risk-based pricing coming more and more into the marketplace as there are more players. Olympic believes there is a whole group of customers that deserve lower than 20% interest rates. They can qualify for 18%, 16%, 14%, etc. and Olympic has developed proprietary models in order to find these people. In connection with Classic, Olympic is trying to offer the consumer the best rate for the best credit quality. That is the process they have been working on for two years and think they are leading that. While there is more competition that is going to occur in that area, what they are actually seeing happen is that the dealers are learning that they can sell a 4-year-old car instead of a 5-year-old car or a 2-year-old car instead of a 3-year-old car because the customer can get a 17% interest rate instead of a 22% rate.

With the Classic program, the company has to go through 100 applications to find 10 customers. 90% of the people do not qualify. They "condition" about 2.5-3 times that amount ("condition" means that they add conditions to approve the loan that can include additional down payment amounts, proof that a lien or judgement was cleared, etc.). So, they approve 10%, the condition another 20%. Of those, they book 1/3. So, their booked-to-approval ratio is in the 9-10% range. Olympic thinks that the industry is moving more to risk-based pricing. They think those companies that use technology from a pricing standpoint and develop information for the buyers who are dealing with the dealers are going to be the winners.

The company also commented that there seems to be some misinformation in the marketplace regarding Jeff Mack. They have seen some people reporting that he was terminated and others that he resigned. The company wanted to emphasize that he resigned, he was not terminated, he was not fired. If there is anything else out there, it was picked up incorrectly.

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