First Investors Reports A 27% Increase In First Quarter Earnings

HOUSTON, Sept. 14, 2012 /PRNewswire/ -- First Investors Financial Services Group, Inc. ("FIFS.OTQB") has reported net income of $2,383,991, or $0.35 per fully-diluted share, for the three months ended July 31, 2012, compared to $1,881,107, or $0.34 per fully-diluted share, for the three months ended July 31, 2011.  The increase in net income is primarily attributable to an increase in interest income as a result of growth in the average portfolio outstanding.  The increase was partially offset by higher interest expense, higher provision for credit losses and lower servicing revenue.   The increase in fully-diluted earnings per share was less than the increase in net income due to a 22.3% increase in the weighted average fully-diluted common shares outstanding during the three months ended July 31, 2012.  This increase reflects the issuance of additional common shares in May, 2011 and October, 2011 and an increase in the dilutive impact of stock options as a result of the increase in the Company's average share price between the three months ended July 31, 2011 and the three months ended July 31, 2012.  

As of July 31, 2012, First Investors' portfolio of receivables held for investment, net was $483.3 million compared to $352.2 million at July 31, 2011.  For the three months ended July 31, 2012, the Company reported $109.5 million in new loan originations compared to $56.7 million for the three months ended July 31, 2011.  As a result of the increase in new loan originations, the average outstanding balance for the portfolio of receivables held for investment increased 32.1% during the three months ended July 31, 2012, compared to July 31, 2011. 

Net interest income for the three months ended July 31, 2012 increased 22.7%, compared to the three months ended July 31, 2011.  The increase was primarily due to the increase in the average portfolio of receivables held for investment.  This increase was partially offset by a decrease in interest income from receivables acquired for investment and a higher weighted average cost of funds.  The effective yield on the Company's portfolio of receivables held for investment was flat at 14.8%, while the Company's weighted average cost of funds increased from 2.5% for the three months ended July 31, 2011, to 3.1% for the three months ended July 31, 2012.   The increase in the cost of funds is primarily the result of the Company's decision to lock in interest rates on a large percentage of its senior debt through the periodic issuance of asset-backed notes.  For the three months ended July 31, 2012, provision for credit losses increased 19.4% primarily due to an increase in the outstanding balance of the portfolio of receivables held for investment and a slight increase in net charge-offs. The decrease in revenue from servicing activities for the three months ended July 31, 2012 reflects the amortization or release of essentially all of the Company's entire third-party managed receivables portfolio. 

Total operating expenses increased 15.3% during the three months ended July 31, 2012, compared to the three months ended July 31, 2011, primarily as a result of additional headcount and an increase in expenses related to the increase in new loan origination volume, including printing and postage expense associated with the Company's direct lending business, and an increase in travel expenses associated with the expansion in the Company's sales force.  The dollar delinquency rate decreased from 2.4% to 2.1%, while the annualized charge-off rate decreased from 3.6% to 2.9% for the three months ended July 31, 2012, compared to the three months ended July 31, 2011, due to growth in the Company's portfolio of receivables held for investment which offset higher net charge-offs.  The total amount of net charge-offs increased from $3.1 million for the three months ended July 31, 2011 to $3.3 million for the three months ended July 31, 2012.

The Company also announced on August 16, 2012, that it issued $175 million in term asset-backed notes in a private placement transaction.  The notes consisted of five sequential pay classes that carry a weighted average coupon rate at issuance of 1.64%.  Initial credit enhancement consists of a cash reserve account equal to 1.5% of the outstanding principal balance of the initial receivables pool and an initial overcollateralization of 1%, which will increase to a target of 3% through cash collections.  The issuance represented the Company's fourth term securitization since January 2011.  Proceeds from the issuance were used to reduce the amount of borrowings outstanding under the Company's warehouse credit facility in order to allow room for growth in the Company's portfolio of receivables held for investment. 

Tommy A. Moore, Jr., President and CEO, commenting on the results noted, "We are extremely pleased with the results of our first fiscal quarter ended July 31, 2012.  We continue to benefit from strong origination and portfolio growth in both our indirect and direct channels, while maintaining pricing power and underwriting discipline despite the low interest rate environment.  Our credit quality, particularly our net charge-off rate, continues to be strong despite the seasonal issues that we typically see this time of the year.  For the remainder of the year, we will continue to focus on expanding our market presence and dealer base in our indirect channel, and will continue to drive growth in our direct channel through market expansion and increased mail volume."

First Investors is a consumer finance company engaged in originating and holding for investment automobile finance receivables and promissory notes originated from franchised automobile dealers or through a refinancing transaction with the vehicle owner.  The Company specializes in lending to consumers with impaired credit profiles.  The Company also purchases receivables through portfolio acquisitions or from third party originators and performs third-party loan servicing for unaffiliated clients.  The Company is headquartered in Houston, Texas.  Copies of this press release and other information on the Company, including its historical financial statements, are also available on the Company's web site at www.fifsg.com.

The statements contained in this release, which are not historical statements of fact, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Any such forward-looking statements involve a number of risks and uncertainties.  The actual results of future events could differ materially from those stated in any forward-looking statements herein.

SOURCE First Investors Financial Services Group, Inc.