First Investors Reports Third Quarter Operating Results
HOUSTON, March 10 /PRNewswire-FirstCall/ -- First Investors Financial Services Group, Inc. has reported net income of $12,354, or $0.00 per basic share for the three months ended January 31, 2010, and $579,736, or $0.12 per basic share for the nine months ended January 31, 2010. This compares to net income of $114,611, or $0.03 per basic share and net income of $1,349,341, or $0.30 per basic share reported for the three and nine months ended January 31, 2009. 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. The results for the three and nine months ended January 31, 2009, include a non-cash after tax charge of $153,513 associated with the restructuring of the Company's warehouse credit facilities and the retirement of a $5 million senior subordinated note in December 2008. Adjusting for these non-recurring items, the Company incurred a net loss of $237,889, or ($0.05) per basic share, and net income of $329,492, or $.07 per basic share, for the three and nine months ended January 31, 2010. This compares to adjusted net income of $472,908, or $0.11 per basic share, and $972,780, or $0.22 per basic share, for the three and nine months ended January 31, 2009.
During the three and nine months ended January 31, 2010, the Company benefited from higher servicing revenue which was offset by lower interest income, an increase in operating expenses related to growth in the Company's managed loan portfolio and, for the nine month period, an increase in the provision for loan losses. Net interest income decreased 17.3% during the three months ended January 31, 2010, due to a 23.6% decrease in the average outstanding balance of the portfolio of receivables held for investment and a 0.3% decrease in the effective yield. This was partially offset by a 1.2% decrease in the cost of debt. The average cost of funds decreased from 3.9% during the three months ended January 31, 2009, to 2.7% for the three months ended January 31, 2010. Net interest income for the nine months ended January 31, 2010, decreased 8.9%, as the average receivables outstanding declined 20.3% and the effective yield declined by 0.1%. This was partially offset by a decrease of 1.4% in the cost of debt. The average cost of funds decreased from 4.1% for the nine months ended January 31, 2009, to 2.8% for the nine months ended January 31, 2010. Total operating expenses decreased 10.1% for the three months ended January 31, 2010, primarily as a result of lower interest expense on the Company's residual funding facilities and subordinated debt, and lower mail and postage costs associated with the Company's decision to curtail its direct lending business during the fourth quarter of its 2009 fiscal year. This was partially offset by an increase in servicing costs due to an increase in the average managed portfolio. Total operating expenses increased 1.9% for the nine months ended January 31, 2010, primarily due to an increase in expenses related to the Company's servicing additional third party portfolios. This was partially offset by a decrease in interest expense on the Company's residual funding facilities and subordinated debt, and lower mail and postage costs associated with the Company's decision to curtail its direct business during the fourth quarter of its 2009 fiscal year. Total operating costs as a percentage of the average managed portfolio were 4.0% and 3.8% for the three and nine months ended January 31, 2010, compared to 4.1 and 4.0% for the three and nine months ended January 31, 2009. As of January 31, 2010, the portfolio of receivables held for investment, net was $357.6 million, a 19.1% decrease over the balance as of April 30, 2009. For the nine months ended January 31, 2010, the Company reported new origination volume of $28.8 million, which represents a decrease of 63.9% over the $79.8 million originated during the nine months ended January 31, 2009. The delinquency rate by dollars of delinquent accounts increased from 2.5% as of January 31, 2009, to 2.7% as of January 31, 2010, while the annualized net charge-off rate increased from 4.4% for the nine months ended January 31, 2009, to 6.5% for the nine months ended January 31, 2010.
The Company also announced that on March 1, 2010, it completed the renewal of its warehouse facilities to May 1, 2011. Under the terms of the renewal, the Company reduced its outstanding committed lines of credit from $426 million to $350 million and consolidated two warehouse facilities to a single $350 million facility. Despite the reduction in the commitment amount, the Company had $20 million in availability under the line of credit and expects that to increase in the short term, as portfolio amortization is expected to exceed new loan originations. The Company also announced that it renewed its residual funding facility to December 31, 2010 and agreed to fully amortize the outstanding balance of the facility, which was $10.3 million as of March 1, 2010, by the maturity date. No changes were made to pricing or to the required enhancement levels for either the warehouse line or the residual facility. In connection with the renewal of its credit facilities, the Company issued warrants to its lender covering 100,000 shares of common stock at an exercise price of $3.625 per share with an expiration date of March 1, 2015.
Tommy A. Moore, Jr., President and CEO, stated, "Our operating results for the period reflect a continued decline in our interest income as a result of our decision to curtail origination growth over the past two years given our concerns about economic conditions. Though our originations have started to increase as a result of our view that the worst of the economic storm is behind us, it is not yet exceeding our amortization rate so we expect further revenue compression over the next couple of quarters until the crossover occurs. Our credit quality, both in terms of delinquencies and charge-offs, has been stable to improving from a dollar perspective, although the rates have continued to rise as a result of the decline in the portfolio outstanding. We are extremely pleased to have completed the renewal of our credit lines until May 2011 and have made significant progress in reducing our ratio of funded debt to equity from 13.25 as of January 31, 2009 to 9.38 as of January 31, 2010. At the same time, our unrestricted cash position has increased from $420 thousand to $7.2 million during that period. "
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 operates in 28 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
---------- ----------
2010 2009 2010 2009
---- ---- ---- ----
Interest Income $11,668 $15,640 $37,857 $47,729
Interest Expense 2,433 4,476 7,906 14,841
----- ----- ----- ------
Net Interest Income 9,235 11,164 29,951 32,888
Provision for Credit Losses 6,342 6,457 19,045 18,176
----- ----- ------ ------
Net Interest Income
after Provision for
Credit Losses 2,893 4,707 10,906 14,712
Servicing revenue 1,954 1,123 5,494 1,595
Other finance
charges and fees 834 960 2,534 2,936
Insurance products - 95 - 403
Income from investment 284 116 438 514
Other interest income 5 78 5 365
--- --- --- ---
Total other income 3,077 2,372 8,471 5,813
Total operating expenses 6,228 6,930 18,724 18,376
----- ----- ------ ------
Income before
Provision for Income Taxes (258) 149 653 2,149
Provision for income taxes (270) 34 73 800
---- -- -- ---
Net Earnings $12 $115 $580 $1,349
=== ==== ==== ======
Basic Net Earnings
Per Common Share $- $0.03 $0.12 $0.30
=== ===== ===== =====
Diluted Net
Earnings Per
Common Share $- $0.03 $0.12 $0.28
=== ===== ===== =====
Other Operating Data
--------------------
Average Principal
Balance of Receivables
Held for Investment $365,512 $478,667 $393,074 $492,995
Total Managed
Receivables $601,114 $729,857
Originations Volume $13,648 $18,323 $28,787 $79,772
Effective Yield on
Receivables Held for
Investment 12.8% 13.1% 12.9% 12.9%
Average Cost of Debt 2.7% 3.9% 2.8% 4.1%
Weighted Average
Number of Basic
Shares Outstanding
(in thousands) 4,678 4,478 4,678 4,478
Weighted Average
Number of Diluted
Shares Outstanding
(in thousands) 4,678 4,478 4,706 4,769
January 31 April 30
2010 2009
---- ----
Financial Position
------------------
Cash and Short-Term Investments $7,221 $1,149
Restricted Cash 24,635 26,243
Receivables Held for
Investment, net 357,577 442,240
Assets Held for Sale 1,863 1,260
Total Assets 397,994 479,022
Total Debt 356,903 438,473
Total Other Liabilities 3,051 3,222
Total Liabilities 359,954 441,695
Total Shareholders' Equity 38,040 37,327
Shareholders' Equity per
Common Share 8.13 7.98
As of or As of or
For the Nine For the Nine
Months Ended Months Ended
Jan 31 Jan 31
Credit Quality Data 2010 2009
------------------- ---- ----
Receivables Held for Investment:
30 + days past due
Number of Loans 2.9% 3.0%
$ Amount 2.7% 2.5%
Net Charge-offs as a % of
average receivables 6.5% 4.4%
Net Charge-offs for the
period ending $19,165 $16,096
SOURCE First Investors Financial Services Group, Inc.
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