HOUSTON — Discussing latest earnings this week, First Investors Financial Services' management reported that its decision to curtail originations had an impact on results. 

And while the company is seeing originations improve, the curtailment did play a factor in rises in both its delinquency rate and annualized charge-off rate.

Tommy Moore Jr., president and chief executive officer of First Investors, explained, "Our operating results for the period reflect a decline in our interest revenue as a result of our decision to curtail portfolio growth in light of our concerns over the economic environment and higher net losses."

"We have started to see some improvement in our origination volume, though we remain cautious, from an underwriting perspective, about the challenges which continue to face the consumer, particularly the unemployment rate," he added.

For the quarter that ended Oct. 31, First Investors reported a delinquency rate of 2.7 percent. It jumped 1 percent from the rate the company had at the close of the same quarter a year ago. First Investors indicated that it arrived at this rate based on the outstanding dollar balance of delinquent accounts.

In discussing its annual charge-off rate, the company explained this rate rose for the six-month period that ended Oct. 31 to 6.3 percent. Comparatively, executives reported its rate in this area for the six-month span was 4.2 percent.

According to the company, its net income for the quarter was just $44,732. That figure was compared to an income total of $176,745 for the same quarter in 2008.

The net income for the most recent quarter apparently boosted First Investors' total for the first two quarters of its current fiscal year to $567,381. Again, that amount remained off from the 2008 figure that stood at $1.23 million after two quarters.

First Investors also reported that its portfolio of receivables held for net investment decreased 14 percent to $380.5 million. That figure was compared to the amount on April 30.

Meanwhile for the first six months of the current fiscal year, the company reported a steep decline in new origination volume. Origination volume of $15.2 million for the period was a 75-percent decrease from the $61.4 million originated during the prior year time frame.

Furthermore, officials said First Investors' net interest income decreased 4.3 percent and 4.6 percent respectively during the three and six months when compared to the prior year periods.

"The decrease is due to a lower average portfolio balance outstanding during the periods which were partially offset by a wider net interest spread," company officials explained.

"The increase in net interest spreads reflects a lower cost of debt as a result of lower market interest rates, which were partially offset by an increase in borrowing spreads," they went on to state.

First Investors also pointed out that its total operating expenses as a percentage of the managed portfolio dropped slightly for the most recent three- and six-month spans. Those percentages stood at 3.6 percent and 3.8 percent, respectively, as compared with 3.9 percent and 4.1 percent for the prior year periods

"The improvement in operating expenses as a percentage of the managed portfolio reflects the growth in the average managed portfolio during the current-year periods which allowed the company to achieve a higher level of operating leverage," First Investors indicated.

First Investors also reiterated that it entered into a loan servicing agreement with an unrelated third party to cover a portfolio of approximately $44 million in vehicle receivables. The deal finalized in early November also includes performing, non-performing and charged off accounts.

Company executives explained that First Investors will receive a servicing fee based on a percentage of the outstanding balance of performing and non-performing accounts and a percentage of cash collections on charged-off accounts.

"We are pleased to announce the addition of a new servicing client, the fourth servicing contract we have entered into in the past 12 months," Moore pointed out.

Moore contended that this latest agreement plus other measures the company has in place could push First Investors toward better financial performances in the future.

"We believe that despite an extremely challenging operating environment, our focus on a disciplined approach to credit underwriting and creating a diversified revenue source through third-party servicing will create positive earnings momentum as the economic environment improves," he concluded.