February 17, 2015

CPS Announces Fourth Quarter 2014 Earnings

  • Fourth quarter pretax income of $14.3 million
  • Fourth quarter net income of $8.0 million, or $0.25 per diluted share
  • Full year pretax income increased 40% to $52.2 million
  • Full year net income increased 40% to $29.5 million, or $0.92 per diluted share
  • New contract purchases of $264 million for the fourth quarter
  • Total managed portfolio increases to $1.644 billion from $1.519 billion at September 30, 2014

IRVINE, Calif., Feb. 17, 2015 (GLOBE NEWSWIRE) -- Consumer Portfolio Services, Inc. (Nasdaq:CPSS) ("CPS" or the "Company") today announced earnings of $8.0 million, or $0.25 per diluted share, for its fourth quarter ended December 31, 2014. This compares to net income of $6.5 million, or $0.21 per diluted share, in the fourth quarter of 2013, representing a 19% increase in earnings per diluted share. Earnings for 2014 were $29.5 million, or $0.92 per diluted share, as compared to earnings of $21.0 million, or $0.67 per diluted share, for 2013, representing a 37% increase in earnings per diluted share.

Revenues for the fourth quarter of 2014 were $83.5 million, an increase of $16.9 million, or 25.4%, compared to $66.6 million for the fourth quarter of 2013. Total operating expenses for the fourth quarter of 2014 were $69.1 million, an increase of $14.0 million, or 25.4%, compared to $55.1 million for the 2013 period. Pretax income for the fourth quarter of 2014 was $14.3 million compared to pretax income of $11.5 million in the fourth quarter of 2013, an increase of 24.4%.

For the year ended December 31, 2014 total revenues were $300.3 million compared to $255.8 million for the year ended December 31, 2013. However, in 2013, revenues included $10.9 million from a gain on cancellation of debt. Excluding that gain, revenues for the year ended December 31, 2014 increased $55.4 million, or 22.6%, over the prior year. Total expenses for the year ended December 31, 2014 were $248.0 million compared to $218.6 million for the year ended December 31, 2013. However, in 2013, operating expenses included a provision for contingent liabilities of $7.8 million. Excluding the provision for contingent liabilities, operating expenses for the year ended December 31, 2014 increased $37.2 million, or 17.7%, compared to the prior year period. Pretax income for the year ended December 31, 2014 was $52.2 million, compared to $37.2 million for the year ended December 31, 2013.

During the fourth quarter of 2014, CPS purchased $264.4 million of new contracts compared to $279.3 million during the third quarter of 2014 and $173.4 million during the fourth quarter of 2013. The Company's managed receivables totaled $1.644 billion as of December 31, 2014, an increase from $1.519 billion as of September 30, 2014 and $1.231 billion as of December 31, 2013, as follows ($ in millions):

       
Originating Entity December 31, 2014 September 30, 2014 December 31, 2013
       
CPS  $ 1,641.8  $ 1,514.6  $ 1,213.8
Fireside Bank 1.7 3.2 14.8
As Third Party Servicer 0.4 0.8 2.8
Total  $ 1,643.9  $ 1,518.6  $ 1,231.4
       

Annualized net charge-offs for the fourth quarter of 2014 were 6.44% of the average owned portfolio as compared to 5.57% for the fourth quarter of 2013. Delinquencies greater than 30 days (including repossession inventory) were 7.18% of the total owned portfolio as of December 31, 2014, as compared to 6.87% as of December 31, 2013.

As previously reported, during December CPS closed its fourth term securitization transaction of 2014 and the 15th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $267.5 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 3.07%. 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 4.00% of the then-outstanding receivable pool balance. The transaction was CPS's third consecutive senior subordinate securitization to receive a triple "A" rating on the senior class of notes.

"We are pleased to report another successful year in 2014," said Charles E Bradley, Jr., Chairman and Chief Executive Officer. "In addition to record pre-tax earnings, our new contract purchases grew 24% compared to 2013 and our total managed portfolio grew 34% to over $1.6 billion. We recorded our 3rd consecutive year of earnings growth and continued our strategy of deleveraging our balance sheet by repaying over $49 million in residual and corporate debt without refinancing."

Conference Call

CPS announced that it will hold a conference call on Wednesday February 18, 2015, at 1:00 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 February 18, 2015 and February 25, 2015 beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 87486533. 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     Twelve months ended   
   December 31,     December 31,   
  2014   2013   2014   2013  
Revenues:                
Interest income  $ 79,652    $ 63,904    $ 286,734    $ 231,330  
Servicing fees  218    609    1,376    3,093  
Other income  3,597    2,121    12,146    10,405  
Gain on cancellation of debt  --     --     --     10,947  
   83,467    66,634    300,256    255,775  
Expenses:                
Employee costs  14,732    11,285    50,129    42,960  
General and administrative  4,772    3,999    19,254    16,345  
Interest  12,833    13,379    50,395    58,179  
Provision for credit losses  31,433    24,130    108,228    76,869  
Provision for contingent liabilities  --     (1,809)    --     7,841  
Other expenses  5,351    4,110    20,008    16,408  
   69,121    55,094    248,014    218,602  
Income before income taxes  14,346    11,540    52,242    37,173  
Income tax expense  6,336    5,018    22,726    16,168  
 Net income   $ 8,010    $ 6,522    $ 29,516    $ 21,005  
                 
Earnings per share:                
Basic  $ 0.31    $ 0.28    $ 1.18    $ 0.98  
Diluted  $ 0.25    $ 0.21    $ 0.92    $ 0.67  
                 
Number of shares used in computing earnings per share:                
Basic 25,470   23,256   25,040   21,538  
Diluted 32,060   31,629   32,032   31,574  
                 
                 
Condensed Consolidated Balance Sheets          
(In thousands)          
(Unaudited)          
                 
                 
  December 31,   December 31,          
  2014   2013          
Assets:                
Cash and cash equivalents  $ 17,859    $ 22,112          
Restricted cash and equivalents 175,382   132,284          
Total cash and cash equivalents 193,241   154,396          
                 
Finance receivables 1,595,956   1,155,063          
Allowance for finance credit losses (61,460)   (39,626)          
Finance receivables, net 1,534,496   1,115,437          
                 
Finance receivables measured at fair value 1,664   14,476          
Residual interest in securitizations 68   854          
Deferred tax assets, net 42,847   59,215          
Other assets 60,742   51,988          
   $ 1,833,058    $ 1,396,366          
                 
Liabilities and Shareholders' Equity:                
Accounts payable and accrued expenses  $ 21,660    $ 24,839          
Warehouse lines of credit 56,839   9,452          
Residual interest financing 12,327   19,096          
Debt secured by receivables measured at fair value 1,250   13,117          
Securitization trust debt 1,598,496   1,177,559          
Senior secured debt, related party --   38,559          
Subordinated renewable notes 15,233   19,142          
  1,705,805   1,301,764          
                 
Shareholders' equity 127,253   94,602          
   $ 1,833,058    $ 1,396,366          
                 
                 
Operating and Performance Data ($ in millions)
                 
   At and for the     At and for the   
   Three months ended     Twelve months ended   
   December 31,     December 31,   
  2014   2013   2014   2013  
                 
Contracts purchased  $ 264.37    $ 173.41    $ 944.94    $ 764.09  
Contracts securitized  269.93    185.37    901.07    759.59  
                 
Total managed portfolio  $ 1,643.92    $ 1,231.42    $ 1,643.92    $ 1,231.42  
Average managed portfolio  1,605.04    1,214.55    1,422.87    1,081.94  
                 
Allowance for finance credit losses as % of fin. receivables 3.85%   3.43%          
                 
Aggregate allowance as % of fin. receivables (1) 4.88%   4.61%          
                 
Delinquencies                
31+ Days 5.46%   4.82%          
Repossession Inventory 1.72%   2.05%          
Total Delinquencies and Repo. Inventory 7.18%   6.87%          
                 
Annualized net charge-offs as % of average owned portfolio 6.44%   5.57%   5.83%   4.73%  
                 
Recovery rates (2) 42.7%   45.4%   46.0%   47.0%  
                 
   For the   For the 
   Three months ended   Twelve months ended 
   December 31,   December 31, 
  2014 2013 2014 2013
  $ (3) % (4) $ (3) % (4) $ (3) % (4) $ (3) % (4)
Interest income  $ 79.65 19.9%  $ 63.90 21.0%  $ 286.73 20.2%  $ 231.33 21.4%
Servicing fees and other income  3.82 1.0%  2.73 0.9%  13.52 1.0%  13.50 1.2%
Interest expense  (12.83) -3.2%  (13.38) -4.4%  (50.40) -3.5%  (58.18) -5.4%
Net interest margin  70.63 17.6%  53.26 17.5%  249.86 17.6%  186.65 17.3%
Provision for credit losses  (31.43) -7.8%  (24.13) -7.9%  (108.23) -7.6%  (76.87) -7.1%
Risk adjusted margin  39.20 9.8%  29.13 9.6%  141.63 10.0%  109.78 10.1%
Core operating expenses  (24.86) -6.2%  (19.39) -6.4%  (89.39) -6.3%  (75.71) -7.0%
Provision for contingent liabilities  --  0.0%  1.81 0.6%  --  0.0%  (7.84) -0.7%
Gain on cancellation of debt  --  0.0%  --  0.0%  --  0.0%  10.95 1.0%
Pre-tax income  $ 14.35 3.6%  $ 11.54 3.8%  $ 52.24 3.7%  $ 37.17 3.4%
                 
                 
(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



         Jeffrey P. Fritz, Chief Financial Officer

         844 878-2777
Source: Consumer Portfolio Services, Inc.

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