August 8, 2013

CPS Announces Second Quarter 2013 Earnings

  • Pretax income of $8.5 million
  • Net income of $4.8 million, or $0.15 per diluted share
  • New contract purchases of $204 million
  • Total managed portfolio increases to $1.067 billion from $969 million at March 31, 2013

IRVINE, Calif., Aug. 8, 2013 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq:CPSS) ("CPS" or the "Company") today announced earnings of $4.8 million, or $0.15 per diluted share, for its second quarter ended June 30, 2013. This compares to net income of $1.3 million, or $0.05 per diluted share, in the second quarter of 2012. Earnings for the first six months of 2013 were $8.6 million, or $0.27 per diluted share, as compared to earnings of $1.9 million, or $0.08 per diluted share, for the same period in 2012. The 2012 periods do not include a tax expense.

Revenues for the second quarter of 2013 were $70.5 million, an increase of $26.3 million, or 60%, compared to $44.2 million for the second quarter of 2012. Total operating expenses for the second quarter of 2013 were $61.9 million, an increase of $19.1 million, or 45%, compared to $42.8 million for the 2012 period. Pretax income for the second quarter of 2013 was $8.5 million compared to pretax income of $1.3 million in the second quarter of 2012.

For the six months ended June 30, 2013 total revenues were $125.1 million compared to $88.7 million for the six months ended June 30, 2012, an increase of approximately $36.4 million, or 41%. Total expenses for the six months ended June 30, 2013 were $110.0 million, an increase of $23.2 million, or 27%, compared to $86.8 million for the six months ended June 30, 2012. Pretax income for the six months ended June 30, 2013 was $15.1 million, compared to $1.9 million for the six months ended June 30, 2012.

During the second quarter of 2013, CPS purchased $203.8 million of new contracts compared to $180.1 million during the first quarter of 2013 and $137.9 million during the second quarter of 2012. The Company's managed receivables totaled $1.067 billion as of June 30, 2013, an increase from $968.5 million as of March 31, 2013 and $806.1 million as of June 30, 2012, as follows ($ in millions):

Originating Entity June 30, 2013 March 31, 2013 June 30, 2012
CPS $1,030.5 $917.0 $681.5
Fireside Bank 31.1 43.3 104.0
TFC -- -- 0.6
As Third Party Servicer 5.8 8.2 20.0
Total $1,067.4 $968.5 $806.1

Annualized net charge-offs for the second quarter of 2013 were 4.03% of the average owned portfolio as compared to 3.16% for the 2012 period. Delinquencies greater than 30 days (including repossession inventory) were 5.16% of the total owned portfolio as of June 30, 2013, as compared to 3.81% as of June 30, 2012.

As previously reported, during June CPS closed its second term securitization transaction of 2013 and the ninth transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $205.0 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.34%. The transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance. The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 11.50% of the then-outstanding receivable pool balance.

"The second quarter of 2013 was another good quarter for CPS," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. "Our managed portfolio continues to grow as we purchase new contracts with attractive yields and credit demographics. Asset performance metrics, while higher year-over-year, are well within our expectations as credit trends "normalize" after the very tight lending period following the financial crisis. In addition, we extended the revolving period of our second credit facility in June for two years and added a one-year amortization period thereafter. As a result, both of our credit facilities now have multi-year revolving periods plus amortization periods. These features give us considerably more financial flexibility across a variety of capital markets environments."

Conference Call

CPS announced that it will hold a conference call on Friday, August 9, 2013, at 3:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time.

A replay of the conference call will be available between August 9, 2013 and August 16, 2013, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 30267175. A broadcast of the conference call will also be available live and for 90 days after the call via the Company's web site at www.consumerportfolio.com.

About Consumer Portfolio Services, Inc.

Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems, low incomes or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis primarily through the securitization markets and service the contracts over their lives.

Forward-looking statements in this news release include the Company's recorded revenue, expense and provision for credit losses, because these items are dependent on the Company's estimates of incurred losses. The accuracy of such estimates may be adversely affected by various factors, which include (in addition to risks relating to the economy generally) the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect the Company's ability to service its portfolio; possible increases in the rate of consumer bankruptcy filings, which could adversely affect the Company's rights to collect payments from its portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect the Company's realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. All of such factors also may affect the Company's future financial results, as to which there can be no assurance. Any implication that the results of the most recently completed quarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to the provision for credit losses may affect future performance.

Consumer Portfolio Services, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
         
   Three months ended   Six month ended 
   June 30,   June 30, 
  2013 2012 2013 2012
Revenues:        
Interest income  $ 55,797  $ 41,546  $ 106,964  $ 82,157
Servicing fees  876  595  1,784  1,396
Other income  2,862  2,010  5,380  5,116
Gain on cancellation of debt  10,947  --  10,947  
   70,482  44,151  125,075  88,669
Expenses:        
Employee costs  11,527 8,277  20,476  17,148
General and administrative  4,518  3,577  8,272  8,075
Interest  14,601  19,827  30,947  42,136
Provision for credit losses  17,371  7,711  32,519  12,547
Provision for contingent liabilities  9,650  --  9,650  --
Other expenses  4,269  3,418  8,137  6,911
   61,936  42,810  110,001  86,817
Income before income taxes  8,546  1,341  15,074  1,852
Income tax expense  3,721  --  6,464  --
Net income   $ 4,825  $ 1,341  $ 8,610  $ 1,852
         
Earnings per share:        
Basic  $ 0.23  $ 0.07  $ 0.42  $ 0.10
Diluted  $ 0.15  $ 0.05  $ 0.27  $ 0.08
         
         
Number of shares used in computing earnings per share:        
Basic 20,989  19,305 20,534  19,360
Diluted 31,788  24,636 31,709  23,283
         
         
Condensed Consolidated Balance Sheets    
(In thousands)    
(Unaudited)    
         
         
  June 30, December 31,    
  2013 2012    
Assets:        
Cash and cash equivalents  $ 18,584  $ 12,966    
Restricted cash and equivalents 122,864 104,445    
Total cash and cash equivalents 141,448 117,411    
         
Finance receivables 971,914 764,343    
Allowance for finance credit losses (32,101) (19,594)    
Finance receivables, net 939,813 744,749    
         
Finance receivables measured at fair value 30,319 59,668    
Residual interest in securitizations 2,246 4,824    
Deferred tax assets, net 69,971 75,640    
Other assets 41,243 35,328    
   $ 1,225,040  $ 1,037,620    
         
Liabilities and Shareholders' Equity:        
Accounts payable and accrued expenses  $ 29,672  $ 17,785    
Warehouse lines of credit 17,144 21,731    
Residual interest financing 33,773 13,773    
Debt secured by receivables measured at fair value 25,622 57,107    
Securitization trust debt 983,887 792,497    
Senior secured debt, related party 39,368 50,135    
Subordinated renewable notes 22,569 23,281    
  1,152,035 976,309    
         
Shareholders' equity 73,005 61,311    
   $ 1,225,040  $ 1,037,620    
               
               
Operating and Performance Data ($ in millions)              
                 
                 
                 
   At and for the     At and for the   
   Three months ended     Six months ended   
   June 30,     June 30,   
  2013   2012   2013   2012  
                 
Contracts purchased  $ 203.78    $ 137.90    $ 383.90    $ 257.80  
Contracts securitized  209.64    140.41    370.90    285.20  
                 
Total managed portfolio  $ 1,067.42    $ 806.14    $ 1,067.42    $ 806.14  
Average managed portfolio  1,034.57    795.31    989.31    789.26  
                 
Allowance for finance credit losses as % of fin. receivables 3.30%   2.28%          
                 
Aggregate allowance as % of fin. receivables (1) 4.02%   2.89%          
                 
Delinquencies                
31+ Days 3.82%   2.64%          
Repossession Inventory 1.34%   1.17%          
Total Delinquencies and Repo. Inventory 5.16%   3.81%          
                 
Annualized net charge-offs as % of average owned portfolio 4.03%   3.16%   4.12%   3.53%  
                 
Recovery rates (2) 48.6%   49.1%   48.8%   48.6%  
                 
   For the   For the 
   Three months ended   Six months ended 
   June 30,   June 30, 
  2013 2012 2013 2012
  $ (3) % (4) $ (3) % (4) $ (3) % (4) $ (3) % (4)
Interest income  $ 55.80 21.6%  $ 41.55 20.9%  $ 106.96 21.6%  $ 82.16 20.8%
Servicing fees and other income  3.74 1.4%  2.61 1.3%  7.16 1.4%  6.51 1.7%
Interest expense  (14.60) -5.6%  (19.83) -10.0%  (30.95) -6.3%  (42.14) -10.7%
Net interest margin  44.93 17.4%  24.32 12.2%  83.18 16.8%  46.53 11.8%
Provision for credit losses  (17.37) -6.7%  (7.71) -3.9%  (32.52) -6.6%  (12.55) -3.2%
Risk adjusted margin  27.56 10.7%  16.61 8.4%  50.66 10.2%  33.99 8.6%
Core operating expenses  (20.31) -7.9%  (15.27) -7.7%  (36.89) -7.5%  (32.13) -8.1%
Provision for contingent liabilities  (9.65) -3.7%  --  0.0%  (9.65) -2.0%  --  0.0%
Gain on cancellation of debt  10.95 4.2%  --  0.0%  10.95 2.2%  --  0.0%
Pre-tax income  $ 8.55 3.3%  $ 1.34 0.7%  $ 15.07 3.0%  $ 1.85 0.5%
                 
                 
                 
(1) Includes allowance for finance credit losses and allowance for repossession inventory.
(2) Wholesale auction liquidation amounts (net of expenses) for CPS portfolio as a percentage of the account balance at the time of sale.
(3) Numbers may not add due to rounding.
(4) Annualized percentage of the average managed portfolio. Percentages may not add due to rounding.
CONTACT: Investor Relations Contact



         Robert E. Riedl, Chief Investment Officer

         949 753-6800
Source: Consumer Portfolio Services, Inc.

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