First Investors Reports First Quarter Earnings

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.

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