HOUSTON, Sept. 7 /PRNewswire-FirstCall/ -- First Investors Financial Services (OTC Bulletin Board:FIFS) has reported net income of $736,404 or $0.17 per share for the three months ended July 31, 2006 as compared to $924,864 or $0.21 per share for the three months ended July 31, 2005. The decrease in net income is primarily attributable to lower net interest spreads associated with the increase in market interest rates and higher operating expenses associated with an increase in the average balance of receivables held for investment. In addition, the Company experienced an increase in its provision expense due to an increase in the volume of receivables held for investment though its annualized net charge-off rate declined from 2.5% in the prior three month period to 2.2% in the current three month period.
As of July 31, 2006, First Investors' portfolio of receivables held for investment, net was $412.7 million compared to $377.4 million at April 30, 2006. For the three months ended July 31, 2006, the Company reported $78.8 million in new loan originations compared to $80.0 million for the three months ended July 31, 2005. Additionally the average outstanding balance for the portfolio of receivables held for investment increased 44% during the three months ended July 31, 2006 as compared to July 31, 2005.
Net interest income for the three months ended July 31, 2006, increased 28.6% compared to the three months ended July 31, 2005. The increase was primarily due to the increase in the average portfolio of receivables held for investment which was partially offset by a 90 basis point increase in the Company's cost of funds. Effective yields were flat for the three months ended July 31, 2006 compared to the three months ended July 31, 2005 at 12.7%. Net interest spread decreased from 8.3% for the three months ended July 31, 2005, to 7.4% for the three months ended July 31, 2006. The increase in cost of funds is primarily related to increases in short term market interest rates.
Total operating expenses as a percentage of managed receivables increased from an annualized 3.9% for the three months ended July 31, 2005 to an annualized 4.3% for the three months ended July 31, 2006, due to higher loan origination costs associated with the increasing origination volume. The dollar delinquency rate declined from 0.60% to 0.30%, and the annualized charge-off rate decreased from 2.5% to 2.2% for the three months ended July 31, 2006 as compared to the three months ended July 31, 2005, reflecting lower default rates on repossessions and higher recoveries.
Subsequent to quarter end, the Company recognized a $668,712 gain associated with a reduction in reserve for uncertain tax positions related to prior period tax returns which will positively impact net income for the second fiscal quarter ending October 31, 2006 and increase book value per share by $0.15 per share based upon the number of shares outstanding as of July 31, 2006.
Tommy A. Moore, Jr., President and CEO, stated that, "We continue to be very pleased with our financial results, origination volume and the credit quality of our portfolio. Our net interest spreads have been compressed recently due to the increase in market interest rates and it has been difficult to increase portfolio yields in a rising rate environment. Despite this, our portfolio growth and low charge-off rates have allowed us to generate solid growth in net interest income after provision expense. We expect to generate record origination volumes over the course of this fiscal year and continue to be pleased with our delinquency rates and overall credit quality."
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 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 Three Months Ended July 31 2006 2005 Interest Income $12,330 $8,498 Interest Expense 5,206 2,960 Net Interest Income 7,124 5,538 Provision for Credit Losses 2,518 1,651 Income after Provision for Credit Losses 4,606 3,887 Servicing Revenue 364 578 Other finance charges and fees 735 508 Insurance products 213 291 Income from investment 67 126 Other interest income 405 250 Other income --- 144 Unrealized Loss on Interest Rate Derivative Positions --- (3) Total other income 1,784 1,894 Total Costs and Expenses 5,168 4,324 Income before Provision for Income Taxes 1,222 1,457 Provision for Income Taxes 486 532 Net Income $736 $925 Basic Net Income Per Common Share $0.17 $0.21 Diluted Net Income Per Common Share $0.15 $0.21 Other Operating Data Average Principal Balance of Receivables Held for Investment $387,367 $268,242 Average Managed Receivables 484,174 449,239 Originations Volume 78,821 79,964 Effective Yield on Receivables Held for Investment 12.7% 12.7% Average Cost of Debt 5.3% 4.4% Weighted Average Number of Shares Outstanding (in thousands) 4,457 4,412 July 31, April 30, 2006 2006 Financial Position Cash and Short-Term Investments $2,835 $3,380 Restricted Cash $32,264 25,538 Receivables Held for Investment, Net 412,694 377,399 Assets Held for Sale 924 960 Total Assets 460,974 419,288 Total Debt 425,627 382,618 Total Other Liabilities 6,341 8,549 Total Liabilities 431,968 391,167 Total Shareholders' Equity 29,006 28,121 Shareholders' Equity per Common Share 6.48 6.31 As of or As of or For the Three For the Three Months Ended Months Ended July 31, July 31, Credit Quality Data 2006 2005 Receivables Held for Investment: 30 + days past due Number of Loans 0.5% 1.1% $ Amount 0.3% 0.6% Net Charge-offs as a % of average receivables 2.2% 2.5% Net Charge-offs for the period ending $2,155 $1,707
Source: First Investors Financial Services Group, Inc.