First Investors Reports Third Quarter Operating Results

Mar 11, 2011, 11:00 ET from First Investors Financial Services Group, Inc.

HOUSTON, March 11, 2011 /PRNewswire/ -- First Investors Financial Services Group, Inc. (Pink Sheets: FIFS) reported today net income of $741,717, or $0.16 per basic share, for the three months ended January 31, 2011, and $2,023,096, or $0.43 per basic share, for the nine months ended January 31, 2011.  This compares to net income of $12,354, or $0.00, per basic share and net income of $579,736, or $0.12, per basic share reported for the three and nine months ended January 31, 2010.   The results for the nine months ended January 31, 2011 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 $365,696, or $0.08 per fully-diluted share, for the nine months ended January 31, 2011.   The results for the three and nine months ended January 31, 2010, include a $250,243 gain, after taxes, associated with the reduction of an uncertain tax position and the reversal of certain accruals for interest and penalties related to this position.

As of January 31, 2011, First Investors' portfolio of receivables held for investment, net decreased 2.6% to $330.6 million, as compared to April 30, 2010.  For the three and nine months ended January 31, 2011, the Company reported new origination volume of $41.9 million and $101.9 million, respectively which represents an increase of 207% and 254%, respectively over the $13.6 million and $28.8 million originated during the three and nine months ended January 31, 2010, respectively.   Net interest income increased 13.6% during the three months ended January 31, 2011 and decreased 2.1% during the nine months ended January 31, 2011, when compared to the three and nine months ended January 31, 2010.  The increase during the three months ended January 31, 2011, reflects an increase in the net interest spread and additional net interest income earned from the receivables portfolio acquired by the Company in October 2010.  The decrease during the nine months ended January 31, 2011, is due to a lower average portfolio balance of receivables held for investment, which was partially offset by a wider net interest spread and additional net interest income earned from the receivables portfolio acquired in October 2010.  The net interest spread was 11.8% and 11.4% for the three and nine months ended January 31, 2011, respectively, as compared to 10.1% for the three and nine months ended January 31, 2010.  Total operating expenses as a percentage of the managed portfolio were 5.7% and 5.1% for the three and nine months ended January 31, 2011, respectively, as compared to 4.0% and 3.8% for the three and nine months ended January 31, 2010, respectively.  The increase in operating expenses as a percentage of the managed portfolio reflects the decline in the average managed portfolio during the three and nine months ended January 31, 2011, 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, was 2.7% at January 31, 2011, unchanged from January 31, 2010, while the annualized charge-off rate decreased from 6.5% for the nine months ended January 31, 2010 to 5.7% for the nine months ended January 31, 2011, resulting from a decrease in repossessions and defaults which reflects better performance of loans from the 2009 and newer vintages.

The Company also announced that on January 27, 2011, it issued $150 million in term asset-backed notes in a private placement transaction.  The notes consisted of six, sequential pay classes and carried a weighted average coupon at issuance of 2%.  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 0%.  The issuance represented the Company's first term securitization since 2006 and was the first time it had utilized a senior/subordinated structure to obtain the desired credit ratings.  Proceeds from the issuance were used to reduce the amount of borrowings outstanding under the Company's warehouse credit facility to allow room for growth in the Company's portfolio of receivables held for investment.  

Tommy A. Moore, Jr., President and CEO, stated, "We are very pleased with the operating results for the three and nine month months ended January 31, 2011.  Our origination growth rates are starting to improve both in our indirect and direct lending segments.  We continue to see year-over-year improvements in credit quality, particularly annualized net losses, while loan pricing remains favorable.  The completion of the term note issuance in January significantly increases our available warehouse capacity, and we are pleased with the execution we were able to achieve, both in terms of pricing and enhancement levels, particularly since we had not issued term notes since 2006."

First Investors is a specialized consumer finance company engaged in the origination and retention of automobile finance receivables originated from franchised automobile dealers and directly through consumers from the sale or refinance of new and late-model used vehicles.  The Company is headquartered in Houston, Texas and licensed or exempt from license 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

Nine Months Ended

January 31

January 31

2011

2010

2011

2010

Interest Income

$            12,754

$            11,668

$   35,433

$   37,857

Interest Expense

2,260

2,433

6,109

7,906

Net Interest Income

10,494

9,235

29,324

29,951

Provision for Credit Losses

4,579

6,342

14,094

19,045

Net Interest Income after Provision for Credit Losses

5,915

2,893

15,230

10,906

Servicing revenue

398

1,954

2,511

5,494

Other finance charges and fees

741

834

3,054

2,534

Income from investment

41

284

207

438

Other interest income

3

5

10

5

Total other income

1,183

3,077

5,782

8,471

Total operating expenses

5,944

6,228

17,905

18,724

Income before Provision for Income Taxes

1,154

(258)

3,107

653

Provision for income taxes

412

(270)

1,084

73

Net Earnings

$                 742

$                   12

$     2,023

$        580

 Basic Net Earnings Per Common Share

$                0.16

$                    -

$       0.43

$       0.12

 Diluted Net Earnings Per Common Share

$                0.15

$                    -

$       0.42

$       0.12

Other Operating Data

Average Principal Balance of Receivables

  Held for Investment

$          326,475

$          365,512

$ 327,969

$ 393,074

Total Managed Receivables

$ 411,600

$ 601,114

Originations Volume

$            41,933

$            13,648

$ 101,923

$   28,787

Effective Yield on Receivables

  Held for Investment

14.1%

12.8%

13.8%

12.9%

Average Cost of Debt

2.3%

2.7%

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)

4,859

4,678

4,869

4,706

January 31

April 30,

2011

2010

Financial Position

Cash and Short-Term Investments

$            10,119

$              5,415

Restricted Cash

23,322

20,302

Receivables Held for Investment, net

330,562

339,344

Receivables Acquired for Investment

29,324

-

Assets Held for Sale

1,354

1,477

Total Assets

401,627

372,744

Total Debt

356,394

331,324

Total Other Liabilities

4,673

2,992

Total Liabilities

361,067

334,316

Total Shareholders' Equity

40,560

38,428

Shareholders' Equity per Common Share

8.67

8.21

Shareholders' Equity per Dilutive Common Share

8.08

7.96

As of or

As of or

For the Nine

For the Nine

Months Ended

Months Ended

Jan 31

Jan 31

Credit Quality Data

2011

2010

Receivables Held for Investment:

   30 + days past due

      Number of Loans

3.2%

2.9%

      $ Amount

2.7%

2.7%

   Net Charge-offs as a % of average receivables

5.7%

6.5%

   Net Charge-offs for the period ending

$            14,065

$            19,165

SOURCE First Investors Financial Services Group, Inc.