First Investors Reports Increased First Quarter Earnings
HOUSTON, Sept. 10 -- First Investors Financial Services has reported net income of $220,079 or $0.04 per share for the first quarter ended July 31, 2003 of the 2004 fiscal year. This compares to the $143,693 or $0.03 per share reported for the three months ended July 31, 2002. The Company benefited from increased interest income associated with growth in its portfolio of receivables held for investment, an increase in unrealized gains on interest rate derivatives, slightly higher effective yields and increased servicing revenue associated with the previously announced addition of an additional $300 million in managed assets during March. These benefits offset an increase in provision expense during the quarter associated with higher net charge-offs. First Investors' earnings per share also benefited from reduction in the number of average shares outstanding related to 21,000 shares of stock repurchased by the Company in July at an average price of $4.03 per share.
For the quarter, First Investors' portfolio of receivables held for investment, net increased to $232.2 million as compared to $229.0 million at April 30, 2003. For the quarter, the Company reported $28.1 million in new loan originations compared to $23.5 million in the prior year period. Net interest income increased 7.5% over the prior period as growth in the Company's receivables portfolio was enhanced by an increase in net interest spread to 10.7% in the current quarter compared to 10.0% in the prior year period due to declining market interest rates which lowered the Company's average cost of debt and offset a decline in effective yields. Total operating expenses increased 36.8% period over period as a result of a 185% increase in the managed portfolio which totaled $618.4 million as of July 31, 2003. The dollar delinquency rate declined from 3.7% to 3.4%. The annualized charge-off rate increased from 4.5% to 5.9% over the same periods reflecting continued economic weakness which has increased repossession rate and charge-off rates and lowered recovery rates from the sale of repossessed collateral.
Tommy A. Moore, Jr., President and CEO, stated that, "We continue to experience excellent delinquency rates despite the challenging economic environment though our net charge-offs have increased year-over-year. We believe this divergence is largely related to the continued softness in the employment market which has negatively impacted a portion of our customer base and used car prices and recovery rates which continue to run below historical levels. Despite these results for the total portfolio, we are very pleased with the performance of our loans originated over the past two years which we believe validated our decision to tighten underwriting guidelines well ahead of the recession. As market conditions improve and new loan originations comprise a larger percentage of our portfolio, we expect to see these improvements in our operating results."
First Investors is a specialized consumer finance company engaged in the purchase and retention of automobile finance receivables originated from franchised automobile dealers and directly through consumers from the sale of new and late-model used vehicles. The Company is headquartered in Houston, Texas and operates in 27 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
Three Months Ended
July 31,
2003 2002
Interest Income $ 8,070 $ 8,511
Interest Expense 2,018 2,882
Net Interest Income 6,052 5,629
Provision for Credit Losses 3,391 2,368
Income after Provision for Credit
Losses 2,661 3,261
Late fee and Other Income 690 332
Servicing Income 1,259 ---
Unrealized Loss on Interest Rate
Derivative Positions 142 (37)
Total Operating Expenses 4,415 3,228
Income (Loss) before Provision for
Income Taxes and Minority Interest 337 328
Provision for Income Taxes (Benefits) 126 82
Minority Interest (9) 102
Net Income (Loss) $ 220 $ 144
Basic and Diluted
Net Income (Loss) Per Common Share $ 0.04 $ 0.03
Other Operating Data
Average Principal Balance of
Receivables Held for Investment $227,982 $212,177
Total Managed Receivables 618,429 216,816
Originations Volume 28,106 23,525
Effective Yield on Receivables
Held for Investment 14.2% 15.4%
Average Cost of Debt 3.5% 5.4%
Weighted Average Number of
Shares Outstanding (in thousands) 5,071 5,340
July 31, July 31,
2003 2002
Financial Position
Cash and Short-Term Investments $ 21,336 $ 24,681
Receivables Held for Investment, Net 232,181 213,412
Receivables Acquired for Investment,
Net 2,182 6,827
Assets Held for Sale 1,320 1,311
Total Assets 274,181 263,989
Total Debt 240,839 228,132
Minority Interest 540 1,037
Total Shareholders' Equity 26,853 25,681
Shareholders' Equity per Common Share 5.36 5.11
As of or As of or
For the Three For the Three
Months Ended Months Ended
July 31, July 31,
Credit Quality Data 2003 2002
Receivables Held for Investment:
30 + days past due Number of Loans 4.4% 3.7%
$ Amount 3.4% 3.7%
Net Charge-offs as a % of average
receivables 5.9% 4.5%
Net Charge-offs for the period
ending $ 3,628 $ 2,774