First Investors Reports Fourth Quarter and Fiscal Year Earnings

HOUSTON, July 14 /NEWS.GNOM.ES/ — First Investors Financial Services Group, Inc. (“FIFS”) has reported net earnings of $155,999 or $0.03 per basic common share for the three months ended April 30, 2010, and $735,735 or $0.16 per basic common share for the twelve months ended April 30, 2010.  This compares to net earnings of $593,657 or $0.13 per basic common share for the three months ended April 30, 2009, and $1,942,998 or $0.43 per basic common share for the twelve months ended April 30, 2009.  Adjusting for certain non-recurring items, pro-forma net income for the twelve months ended April 30, 2010 was $485,492 or $0.10 per basic common share, compared to net earnings for the twelve months ended April 30, 2009 of $2,096,511 or $0.46 per basic common share.  Net earnings for the twelve months ended April 30, 2010, were positively affected by 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. Net earnings for the twelve months ended April 30, 2009, were negatively impacted by 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.  These non-recurring items did not impact the three months ended April 30, 2010 and 2009, respectively.  

For the twelve months ended April 30, 2010, the Company benefited from lower interest expense, lower provision for credit losses and higher servicing revenue which were offset by lower interest income and higher operating expenses related to growth in the Company’s managed loan portfolio.  Net interest income decreased 11.4% during the twelve months ended April 30, 2010, due primarily to a 21% decrease in the average portfolio outstanding which was partially offset by 22% decrease in the average debt outstanding and a 115 basis point decrease in the average cost of debt.  Servicing revenue increased 104% as a result of the addition of three new servicing clients during the second half of fiscal year 2009 and one new servicing client during the third quarter of fiscal year 2010.  The increase in servicing revenue more than offset the decrease in income from the direct sale of insurance products associated with the Company’s direct lending channel which was suspended in January 2009.  Other factors which negatively affected fee income were a decline in reinvestment income due to lower reinvestment rates on cash balances and lower average invested balances, and lower finance charges and fees resulting from a decline in the average portfolio of receivables held for investment.  Total operating expenses increased 1.3% for the twelve months ended April 30, 2010, as compared to the twelve months ended April 30, 2009, primarily due to the addition of the serviced portfolios.

As of April 30, 2010, the portfolio of Receivables Held for Investment, net was $339.3 million, a 23.3% decrease over the balance as of April 30, 2009.  For the twelve months ended April 30, 2010, the Company reported new origination volume of $49.5 million, which represents a decrease of 42.9% over the $86.7 million originated during the twelve months ended April 30, 2009.  The delinquency rate by dollars of delinquent accounts decreased from 2.6% as of April 30, 2009, to 2.1% as of April 30, 2010, while the annual net charge-off rate increased from 4.7% to 6.5% over the same period.  The increase in the net charge-off rate due to a combination of higher net charge-offs and a decrease in the average portfolio outstanding.

Tommy A. Moore, Jr., President and CEO, commenting on the results, noted, “As we have reported in previous earnings announcements, our operating results for fiscal year 2010 reflect a continued decline in our interest income as a result our decision to curtail origination growth over the past two years given our concerns surrounding economic conditions.  The origination growth that we began to see late in the third quarter continues to accelerate, though the amortization of our portfolio continues to exceed our origination rate.  Our delinquency rates and net loss rates, particularly during the fourth quarter, showed a significant decrease.  While our focus during fiscal year 2011 will be to increase our origination growth rates in order to generate positive interest revenue growth, we are pleased with the performance of First Investors during a very challenging economic and capital markets environment, and believe that the merits of our diversified and conservative business model have been validated by our ability to remain profitable while significantly deleveraging our balance sheet.”

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

For the

Three Months Ended

Twelve Months Ended

April 30

April 30

2010

2009

2010

2009

Interest Income

$        10,775

$        13,998

$   48,632

$   61,727

Interest Expense

2,021

3,223

9,928

18,063

Net Interest Income

8,754

10,775

38,704

43,664

Provision for Credit Losses

4,714

6,396

23,758

24,573

Net Interest Income after Provision for Credit Losses

4,040

4,379

14,946

19,091

Servicing revenue

1,809

1,982

7,303

3,577

Other finance charges and fees

164

911

3,315

3,848

Insurance products

-

21

-

423

Income from investment

781

79

601

593

Other interest income

5

6

11

371

Total other income

2,759

2,999

11,230

8,812

Total operating expenses

6,475

6,494

25,199

24,870

Income before Provision for Income Taxes

324

884

977

3,033

Provision for income taxes

168

290

241

1,090

Net Earnings

$             156

$             594

$        736

$     1,943

 Basic Net Earnings Per Common Share

$            0.03

$            0.13

$       0.16

$       0.43

 Diluted Net Earnings Per Common Share

$            0.03

$            0.13

$       0.16

$       0.40

Other Operating Data

Average Principal Balance of Receivables

  Held for Investment

$      345,830

$      453,231

$ 381,458

$ 482,583

Total Managed Receivables

537,976

745,735

Originations Volume

20,705

6,963

49,512

86,735

Effective Yield on Receivables

  Held for Investment

12.5%

12.4%

12.8%

12.8%

Average Cost of Debt

2.4%

2.9%

2.7%

3.9%

Weighted Average Number of Basic

   Shares Outstanding (in thousands)

4,678

4,577

4,678

4,502

Weighted Average Number of Diluted

   Shares Outstanding (in thousands)

4,756

4,577

4,692

4,892

April 30,

April 30,

2010

2009

Financial Position

Cash and Short-Term Investments

$          5,415

$          1,149

Restricted Cash

20,302

26,243

Receivables Held for Investment, net

339,344

442,240

Assets Held for Sale

1,477

1,260

Total Assets

372,744

479,022

Total Debt

331,324

438,473

Total Other Liabilities

2,992

3,222

Total Liabilities

334,316

441,695

Total Shareholders’ Equity

38,428

37,327

Shareholders’ Equity per Common Share

8.21

7.98

As of or

As of or

For the Year

For the Year

Ended

Ended

April 30,

April 30,

Credit Quality Data

2010

2009

Receivables Held for Investment:

   30 + days past due

      Number of Loans

2.3%

3.0%

      $ Amount

2.1%

2.6%

   Net Charge-offs as a % of average receivables

6.5%

4.7%

   Net Charge-offs for the period ending

$        24,622

$        22,685

SOURCE First Investors Financial Services Group, Inc.

https://www.fifsg.com

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