First Investors Reports First Quarter Earnings
HOUSTON, Sept. 10 -- First Investors Financial Services Group ("FIFS") has reported net income of $522,649, or $0.11 per share, for the three months ended July 31, 2009, as compared to $1,057,985, or $0.24 per share, for the three months ended July 31, 2008. The decrease in net income is primarily attributable to a decrease in interest income as a result of a decline in the average portfolio outstanding, an increase in provision expense and higher operating expenses which were partially offset by a decrease in interest expense and an increase in servicing revenue for the three months ended July 31, 2009 as compared to July 31, 2008.
As of July 31, 2009, First Investors' portfolio of receivables held for investment, net was $410.0 million compared to $442.2 million at April 30, 2009. For the three months ended July 31, 2009, the Company reported $6.8 million in new loan originations compared to $33.3 million for the three months ended July 31, 2008. As a result of the decline in origination volume for the three months ended July 31, 2009 as compared to July 31, 2008, the average outstanding balance for the portfolio of receivables held for investment decreased 17.0% during the three months ended July 31, 2009 as compared to July 31, 2008.
Net interest income for the three months ended July 31, 2009, decreased 5% compared to the three months ended July 31, 2008. The decrease was due to the decrease in the average portfolio of receivables held for investment which was partially offset by an increase in the effective yield and a lower cost of funds. Effective yields increased from 12.8% for the three months ended July 31, 2008, to 12.9% for the three months ended July 31, 2009. The Company's weighted average cost of funds decreased from 4.0% for the three months ended July 31, 2008, to 2.9% for the three months ended July 31, 2009. The increase in effective yields reflects the Company's efforts to increase the interest rates it charges on its portfolio which was partially offset by higher interest write-offs related to repossessions and a higher level of non-accrual loans. The decrease in the cost of funds reflects lower short-term interest rates which have offset an increase in borrowing spreads. Revenue from servicing activities for the three months ended July 31, 2009 increased 610% as the average portfolio serviced for others increased from $86.7 million to $291.8 million as a result of the previously announced addition of three third-party servicing portfolios during the third and fourth fiscal quarters of the fiscal year ended April 30, 2009.
Total operating expenses as a percentage of average managed receivables decreased from 3.9% for the three months ended July 31, 2008, to 3.6% for the three months ended July 31, 2009. This decrease was primarily due to lower loan origination costs and an increase in the average managed portfolio outstanding as a result of third party servicing contracts entered into during the third and fourth quarters of the fiscal year ended April 30, 2009, which added $373 million in managed loans to the Company's portfolio. The dollar delinquency rate increased from 1.2% to 2.8%, while the annualized charge-off rate increased from 4.4% to 5.8% for the three months ended July 31, 2008, as compared to the three months ended July 31, 2009, reflecting higher default rates on repossessions and higher losses which were partially offset by higher recovery rates. The Company increased its allowance for loan losses from 0.8% of the outstanding portfolio of receivables held for investment as of July 31, 2008 to 1.3% as of July 31, 2009.
Tommy A. Moore, Jr., President and CEO, commenting on the results, noted, "We are pleased with our operating results for the first fiscal quarter of 2010 given what continues to be a very challenging economic environment. As we have discussed in the past, our origination volume remains significantly below the prior year period due to our concern about the economic environment, particularly rising unemployment and its impact on overleveraged consumers. Our credit quality trends continue to hold up well, despite the rising unemployment rate and especially given the aging of our portfolio and the denominator effect created by the decline in the outstanding portfolio. Our credit quality remains equal to or better than the levels we experienced during the 2002-2004 period even though the current environment has been much worse. From a balance sheet perspective, we have continued to deleverage, and our cash flow has increased year over year. As of July 31, 2009 we had approximately $74 million in available borrowing capacity which continues to grow, compared to approximately $42 million as of July 31, 2008. After factoring in our portfolio amortization, we have more than enough credit capacity to originate new loans in the current economic environment. For the remainder of fiscal year 2010, we see further challenges ahead for the consumer, particularly as the unemployment rate continues to rise, though conditions do not seem to be deteriorating much further. We are encouraged by early signs that conditions in the capital markets are improving and continue to feel that we are well positioned not only to weather the current storm, but to prosper as both an originator and loan servicer as economic and capital market conditions improve."
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.
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
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2009 2008
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Interest Income $13,538 $16,211
Interest Expense 2,892 5,004
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Net Interest Income 10,646 11,207
Provision for Credit Losses 6,133 5,560
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Income after Provision for Credit
Losses 4,513 5,647
Servicing Revenue 1,847 260
Other finance charges and fees 841 1,022
Insurance products - 178
Income from investment 68 219
Other interest income - 151
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Total other income 2,756 1,830
Total Costs and Expenses 6,423 5,789
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Income before Provision for Income
Taxes 846 1,688
Provision for Income Taxes 324 630
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Net Income $522 $1,058
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Basic Net Income Per Common
Share $0.11 $0.24
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Diluted Net Income Per Common
Share $0.11 $0.23
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Other Operating Data
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Average Principal Balance of
Receivables
Held for Investment $421,419 $507,496
Average Managed Receivables 713,206 594,171
Originations Volume 6,848 33,230
Effective Yield on Receivables
Held for Investment 12.9% 12.8%
Average Cost of Debt 2.9% 4.0%
Weighted Average Number of
Shares Outstanding (in
thousands) 4,678 4,478
July 31, April 30,
2009 2009
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Financial Position
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Cash and Short-Term Investments $2,555 $1,149
Restricted Cash 26,777 26,243
Receivables Held for
Investment, Net 409,990 442,240
Assets Held for Sale 1,537 1,260
Total Assets 448,337 479,022
Total Debt 407,255 438,473
Total Other Liabilities 3,149 3,222
Total Liabilities 410,404 441,695
Total Shareholders' Equity 37,933 37,327
Shareholders' Equity per Common
Share 8.11 7.98
As of or As of or
For the Three For the Three
Months Ended Months Ended
July 31, July 31,
Credit Quality Data 2009 2008
------------------- ---- ----
Receivables Held for Investment:
30 + days past due
Number of Loans 3.2% 1.4%
$ Amount 2.8% 1.2%
Net Charge-offs as a % of average
receivables (Annualized) 5.8% 4.4%
Net Charge-offs for the period ending $6,133 $5,108