Auto Credit Express Blog
July 16, 2008
Consumer Portfolio Services, Inc. Reports 2008 Second Quarter Earnings
Consumer Portfolio Services, a lender in the automotive subprime sector, recently announced earnings for the second quarter of 2008, ending on June 30th. Of particular note to car dealers is the drop in dollar amount of contracts purchased, as well as an increase in the average credit scores of the contracts purchased.
Keeping our dealers informed
In an effort to keep our dealers informed of the current conditions in the subprime auto lending market, Auto Credit Express is publishing the most recent press release from Consumer Portfolio Services.
It is interesting to note that the CPS purchased $176.1 million in contracts during the first quarter of 2007, while purchasing only $79.8 million during the same period in 2008. This represents more than a 50% drop in total business – certainly a reflection of the current climate in automotive subprime. Not only was buying curtailed, but the credit metrics on these contracts were higher than any in the past ten years, reflecting the fact that CPS is not buying as deeply as it once did.
According to CPS, the increased rate in charge-offs – 6.75% in the first half of 2008 versus 4.6% in 2007 reflects the weaker credit metrics of contracts purchased in 2006 and 2007 that are currently into their peak loss periods.
What follows is the full press release:
IRVINE, CA, Jul 15, 2008 (MARKET WIRE via COMTEX News Network) – Consumer Portfolio Services, Inc. (NASDAQ: CPSS) (”CPS” or the “Company”) today announced earnings for its second quarter ended June 30, 2008.
Total revenues for the second quarter of 2008 increased approximately $3.0 million, or 3.1%, to $98.8 million, compared to $95.8 million for the second quarter of 2007. Total operating expenses for the second quarter of 2008 were $96.1 million, an increase of $6.5 million, or 7.3%, as compared to $89.6 million for the 2007 period.
Pretax income for the second quarter of 2008 decreased to $2.7 million, compared to pretax income of $6.2 million for the second quarter of 2007. Net income for the second quarter of 2008 was $1.5 million, or $0.08 per diluted share, compared to net income of $3.5 million, or $0.15 per diluted share, for the year-ago quarter.
For the six months ended June 30, 2008, total revenues increased approximately $19.8 million, or 10.9%, to $202.1 million, compared to $182.3 million for the six months ended June 30, 2007. Total expenses for the six months ended June 30, 2008 were $195.6 million, an increase of $25.0 million, or 14.6%, as compared to $170.6 million for the six months ended June 30, 2007.
Pretax income for the six months ended June 30, 2008 decreased to $6.5 million, compared to pretax income of $11.6 million for the six months ended June 30, 2007. Net income for the six months ended June 30, 2008 was $3.6 million, or $0.18 per diluted share, compared to net income of $6.7 million, or $0.29 per diluted share, for the six months ended June 30, 2007.
During the second quarter of 2008, CPS purchased $79.8 million of contracts from dealers as compared to $176.1 million during the first quarter of 2008 and $346.0 million during the second quarter of 2007. During the first half of 2008, CPS purchased $255.9 million of contracts from dealers as compared to $676.3 million during the first half of 2007. The Company’s managed receivables totaled $1,979.5 million as of June 30, 2008, as compared to $1,900.3 million as of June 30, 2007, as follows ($ in millions):
Originating Entity June 30, 2008 June 30, 2007
—————— ————- ————-
CPS $1,920.1 $1,834.6
TFC 59.0 62.1
MFN 0.0 0.2
SeaWest 0.3 2.1
As Third Party Servicer for 0.1 1.3
SeaWest Financial
— —
Total $1,979.5 $1,900.3
As previously reported, the Company completed its first securitization since September 2007 in April 2008 with the sale of $244.4 million of triple A rated notes. At quarter end and subsequently, CPS raised $25 million in senior secured financing and amended its residual credit facility, which will give the Company the option, if certain conditions are met, to extend the maturity by an additional year to June 2010.
Annualized net charge-offs during the first half of 2008 were 6.75% of the average owned portfolio as compared to 4.60% during the same period in 2007. Delinquencies greater than 30 days (including repossession inventory) were 6.12% of the total owned portfolio as of June 30, 2008, as compared to 4.85% as of June 30, 2007.
“Against the backdrop of the uncertain economy and the turbulent capital markets environment, we are pleased with the second quarter’s resilient financial and operating performance,” said Charles E. Bradley, Jr., Chief Executive Officer. “Over the last nine months, we have accomplished several important objectives that should afford us the operational flexibility to navigate the Company through these challenging times. These items include the financings we completed last week, the slowdown in new contract purchases implemented this year and the increase in pricing for new contract purchases. In addition, the primary credit metrics of our new contract purchases are the best we have seen in over 10 years.”
“Asset performance metrics for the quarter were well within the range of our expectations. While the portfolio delinquency and net charge-off levels have increased vs. last year, our total managed portfolio has declined since the beginning of the year and the slightly weaker 2006 and 2007 vintages have seasoned into their peak loss periods.”
