First Investors Reports Second Quarter Earnings

HOUSTON, Dec. 8, 2011 /PRNewswire/ -- First Investors Financial Services ("FIFS.OTCQB") today reported net income of $2,102,813, or $0.37 per fully-diluted share, for the three months ended October 31, 2011, and $3,983,920, or $0.70 per fully-diluted share, for the six months ended October 31, 2011.  This compares to $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.  The change in net income for the three and six months ended October 31, 2011, was primarily driven by higher interest revenue and lower provision expense, which offset higher interest expense and lower other income. 

The Company also announced that it completed the second tranche of the previously announced sale of 1,666,667 shares of its common stock to certain accredited investors affiliated with the Company.  Gross proceeds from the sale of the remaining one million shares, which closed on October 25, 2011, totaled $7.5 million.  The proceeds will be used to fund growth in the Company's portfolio of receivables held for investment.  Further, the Company announced that on October 20, 2011, it issued $100 million in term asset-backed notes in a private placement transaction.  The notes consisted of six, sequential pay classes and carried a weighted average yield at issuance of 3.25%.  Initial credit enhancement consists of a cash reserve account equal to 1.5% of the outstanding principal balance of the receivables pool and an initial overcollateralization of 1.75%.  The structure also included a $15 million prefunding tranche which will be used to fund additional loan originations.  The issuance represented the Company's second term securitization in calendar 2011.  Proceeds from the issuance were used to reduce the amount of borrowings outstanding under the Company's warehouse credit facility in order to allow room for growth in the Company's portfolio of receivables held for investment. 

As of October 31, 2011, First Investors' portfolio of receivables held for investment, net increased 12.5% to $374.4 million, as compared to April 30, 2011.  For the six months ended October 31, 2011, the Company reported new origination volume of $119.3 million, which represents an increase of 98.9% over the $60.0 million originated during the six months ended October 31, 2010.  Net interest income increased 21.7% and 23.3% during the three and six months ended October 31, 2011, respectively, when compared to the three and six months ended October 31, 2010.  The increase is due to a combination of a higher average portfolio balance of receivables held for investment during the periods and a wider net interest spread.  The net interest spread was 12.1% and 12.2% for the three and six months ended October 31, 2011, respectively, as compared to 11.4% and 11.1%, respectively, for the three and six months ended October 31, 2010.  The increase in net interest spread reflects a higher interest rate on new receivables originated over the past two years and a stable cost of funds.   

The decrease in revenue from servicing activities for the three and six month periods ended October 31, 2011, reflects the amortization of the Company's third-party managed receivables, the acquisition of a portfolio in October 2010 from a third-party client and the release of servicing rights on a separate, third-party managed portfolio in September 2010 for which the Company recognized a net gain of $735,396.  These reductions were partially offset by a net gain of $646,638 from the sale of its 50 percent residual interest in another third-party portfolio in August 2011 in exchange for the release of servicing rights to the portfolio.  The non-recurring gains in both the current and prior year periods do not include operating expense savings generated as a result of the release of servicing rights.

Total operating expenses as a percentage of the managed portfolio were 6.6% and 6.4% for the three and six months ended October 31, 2011, respectively, as compared to 5.2% and 4.9% for the three and six months ended October 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 current year periods, which lowered the level of operating leverage the Company was able to achieve, and an increase in expenses as a result of an increase in origination volume.  The delinquency rate, based on the outstanding dollar balance of delinquent accounts, decreased from 3.2% at October 31, 2010, to 2.2% at October 31, 2011, while the annualized charge-off rate decreased from 5.8% for the six months ended October 31, 2010 to 3.6% for the six months ended October 31, 2011, reflecting a decrease in repossessions and defaults as well as higher vehicle recovery rates.  The improvements in repossessions and defaults reflect better performance of loans from the 2009 and newer vintages.

Tommy A. Moore, Jr., President and CEO, stated, "We continue to be very pleased with our net earnings for both the three and six month periods ended October 31, 2011.  Our origination volume continues to show solid growth over last year and our credit quality, as evidenced by both our delinquency rate and our annualized net loss rate, is outstanding.  In October, we completed our second term securitization of the year in a very difficult market and completed the second tranche of our equity sale which was announced in May 2011."

First Investors is a specialized consumer finance company engaged in the origination, retention and servicing of automobile finance receivables most of which are 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 operates 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.

SOURCE First Investors Financial Services Group, Inc.