First Investors Reports Second Quarter Earnings

Dec 09, 2010, 14:30 ET from First Investors Financial Services Group, Inc.

HOUSTON, Dec. 9, 2010 /PRNewswire-FirstCall/ -- First Investors Financial Services today reported net income of $1,005,324, or $0.21 per fully-diluted share, for the three months ended October 31, 2010, and $1,281,379, or $0.26 per fully-diluted share, for the six months ended October 31, 2010.  This compares to $44,732, or $0.01 per fully-diluted share, for the three months ended October 31, 2009, and $567,381, or $0.12 per fully-diluted share, for the six months ended October 31, 2009.  The change in net income for the three and six months ended October 31, 2010, was primarily driven by lower provision expense, which offset lower net interest income and lower other income.  The results for the three and six months ended October 31, 2010 were positively impacted by a one-time exit fee received by the Company in September 2010 in exchange for its agreement to release servicing rights on a portfolio back to the third-party client which had elected to re-establish a servicing platform.  The net impact of this agreement positively impacted net income by approximately $404,000 or $0.08 per fully-diluted share for the three and six months ended October 31, 2010.  

The Company also reported that it acquired in October 2010, a portfolio consisting of $39.1 million in active loans and $35.8 million in charged-off loans for a total purchase price of $36.0 million.  A subsidiary of the Company had served as the loan servicer since December 2008.  The acquisition was funded through a combination of equity and borrowings under the Company's senior credit facility and the issuance of subordinated notes.  

As of October 31, 2010, First Investors' portfolio of receivables held for investment, net decreased 4.3% to $324.6 million, as compared to April 30, 2010.  For the six months ended October 31, 2010, the Company reported new origination volume of $60.0 million, which represents an increase of 296% over the $15.2 million originated during the prior year period.  Net interest income decreased 3.8% and 9.1% during the three and six months ended October 31, 2010, respectively, when compared to the prior year periods.  The decrease is due to a lower average portfolio balance of receivables held for investment during the periods, which was partially offset by a wider net interest spread.  The net interest spread was 11.4% and 11.1% for the three and six months ended October 31, 2010, respectively, as compared to 10.1% for each of the prior year periods.  The increase in net interest spread reflects a higher interest rate on new receivables originated over the past 18 months and a lower cost of debt as a result of lower market interest rates.  Total operating expenses as a percentage of the managed portfolio were 5.2% and 4.9% for the three and six months ended October 31, 2010, respectively, as compared to 3.6% and 3.8% for the prior year periods, respectively.  The increase in operating expenses as a percentage of the managed portfolio reflects the decline in the average managed portfolio during the current year periods, which lowered the level of operating leverage the Company was able to achieve. Additionally, the Company's decision to re-enter the direct lending market in August 2010 caused an increase in postage and printing expenses.  The delinquency rate, based on the outstanding dollar balance of delinquent accounts, increased from 2.7% at October 31, 2009, to 3.2% at October 31, 2010, while the annualized charge-off rate decreased from 6.3% for the six months ended October 31, 2009 to 5.8% for the six months ended October 31, 2010, resulting from a decrease in repossessions and defaults which reflects better performance of loans from the 2009 and newer vintages.

Tommy A. Moore, Jr., President and CEO, stated, "We are pleased with the operating results for the quarter.  Our decision to re-enter the direct lending market in August provided a lift in our origination volume, and we expect to see continued improvement in year-over-year volume which will translate into growth in our portfolio of receivables held for investment".

First Investors is a specialized consumer finance company engaged in the origination and retention of automobile finance receivables originated indirectly from franchised automobile dealers and directly from consumers.  The receivables are generated in connection with either the purchase or refinancing of new and late-model used vehicles.  The Company is headquartered in Houston, Texas and is licensed to conduct its lending activities in 37 states.

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.

First Investors Financial Services Group, Inc.

Condensed Consolidated Statements of Operations and Selected Data (Unaudited)

Dollars in thousands, except per share data














For the


For the




Three Months Ended


Six Months Ended




October 31,


October 31,




2010


2009


2010


2009











Interest Income



$            11,586


$            12,651


$   22,678


$   26,188

Interest Expense



1,901


2,582


3,848


5,473

Net Interest Income



9,685


10,069


18,830


20,715

Provision for Credit Losses



4,539


6,569


9,515


12,702

Net Interest Income after Provision for Credit Losses



5,146


3,500


9,315


8,013

Servicing revenue



751


1,692


2,113


3,540

Other finance charges and fees



1,578


860


2,312


1,700

Income from investments



66


87


166


155

Other interest income



3


-


7


-

Total other income



2,398


2,639


4,598


5,395

Total operating expenses



6,008


6,074


11,961


12,497

Income before Provision for Income Taxes



1,536


65


1,952


911

Provision for income taxes



531


20


671


344

Net Earnings



$              1,005


$                   45


$     1,281


$        567





















 Basic Net Earnings Per Common Share



$                0.21


$                0.01


$       0.27


$       0.12

 Diluted Net Earnings Per Common Share



$                0.21


$                0.01


$       0.26


$       0.12











Other Operating Data




















Average Principal Balance of Receivables










  Held for Investment



$          324,577


$          391,522


$ 328,128


$ 406,568

Total Managed Receivables







420,297


626,576

Originations Volume



31,653


8,311


59,990


15,159

Effective Yield on Receivables










  Held for Investment



13.7%


12.9%


13.5%


12.9%

Average Cost of Debt



2.3%


2.8%


2.4%


2.8%

Weighted Average Number of Basic










   Shares Outstanding (in thousands)



4,678


4,678


4,678


4,678

Weighted Average Number of Diluted










   Shares Outstanding (in thousands)



4,876


4,678


4,874


4,701





October 31,


April 30,



2010


2010

Financial Position










Cash and Short-Term Investments


$              2,795


$              5,415

Restricted Cash


22,134


20,302

Receivables Held for Investment, net


324,633


339,344

Receivables Acquired for Investment


34,726


-

Assets Held for Sale


1,223


1,477

Total Assets


390,587


372,744

Total Debt


347,225


331,324

Total Other Liabilities


3,573


2,992

Total Liabilities


350,798


334,316

Total Shareholders' Equity


39,789


38,428

Shareholders' Equity per Common Share


8.51


8.21

Shareholders' Equity per Dilutive Common Share


7.76


7.96










As of or


As of or



For the Six


For the Six



Months Ended


Months Ended



Oct 31,


Oct 31,

Credit Quality Data


2010


2009






Receivables Held for Investment:





   30 + days past due





      Number of Loans


3.6%


3.0%

      $ Amount


3.2%


2.7%

   Net Charge-offs as a % of average receivables


5.8%


6.3%

   Net Charge-offs for the period ending


$              9,486


$            12,855



SOURCE First Investors Financial Services Group, Inc.