HOUSTON — While net earnings were down for First Investors Financial Services for the three-month period ending April 30, the company's chief executive officer said the origination growth kicked back into gear in the third quarter and continues to ramp up. He said the company will continue to drive more originations during fiscal year 2011.

Basically, the company pulled back on originations over the past two years due to the tough economy; however, the company is now working to push originations higher. Despite the renewed drive for growth, the company is still feeling the impact from the amortization of its portfolio, which continues to exceed the origination rate, thus leading First Investors to reduced net earnings.

Tommy Moore Jr., president and CEO, said, "As we have reported in previous earnings announcements, our operating results for fiscal-year 2010 reflect a continued decline in our interest income as a result of our decision to curtail origination growth over the past two years given our concerns surrounding economic conditions."

He went on to explain, "The origination growth that we began to see late in the third quarter continues to accelerate, though the amortization of our portfolio continues to exceed our origination rate."

For the fourth-fiscal quarter, the company reported net earnings of $155,999, or $0.03 per basic common share, and $737,735, or $0.16 per basic common share, for the 12-month period ending April 30.

This compares to net earnings of $593,657, or $0.13 per basic common share, for the three-month period in the last fiscal year, and $1.943 million, or $0.43 per basic common share, for the 12-month period in the prior fiscal year.

Adjusting for non-recurring items, pro-forma net income for the recent 12 months was $485,492, or $0.10 per basic common share, compared with net earnings of $2.097 million, or $0.46 per basic common share.

"Net earnings for the 12 months ended April 30, 2010, were positively affected by a $250,243 gain, after taxes, associated with the reduction of uncertain tax position and the reversal of certain accruals for interest and penalties related to this position," according to company management.

"Net earnings for the 12 months ended April 30, 2009 were negatively impacted by a non-cash after tax charge of $153,513 associated with the restructuring of the company's warehouse credit facilities and the retirement of a $5 million senior subordinated note in December 2008. These non-recurring items did not impact the three months ended April 30, 2010 and 2009, respectively," the team continued.

For the 12-month time frame, First Investors indicated that it benefited from lower interest expense, lower provision for credit losses and higher servicing revenue, which were offset by lower interest income and higher operating expenses related to growth in the company's managed loan portfolio.

Net interest income declined 11.4 percent during the 12-month period due mostly to a 21-percent decrease in average portfolio outstanding, which was partially offset by a 22-percent decrease in the average debt outstanding and a 115 basis point decline in the average cost of debt.

Continuing on, management explained that servicing revenue increased 104 percent thanks to the addition of three new servicing clients during the second half of fiscal year 2009, and one new servicing client during the third quarter of fiscal-year 2010.  According to officials, the increase in servicing revenue "more than offset" the decrease in income from the direct sale of insurance products associated with the company's direct lending channel, which was suspended in January 2009.

"Other factors which negatively affected fee income were a decline in reinvestment income due to lower reinvestment rates on cash balances and lower average invested balances, and lower finance charges and fees resulting from a decline in the average portfolio of receivables held for investment," management said.

"Total operating expenses increased 1.3 percent for the 12 months ended April 30, 2010, as compared to the 12 months ended April 30, 2009, primarily due to the addition of the serviced portfolios," officials added.

As of the end of the recent three-month period, the portfolio of receivables held for investment net was $339.3 million, a 23.3-percent decline over the balance in the prior-year period. For the 12-month time frame, the company reported new origination volume of $49.5 million, which is a decrease of 42.9 percent over the $86.7 million originated during the same period in the previous fiscal year.

Furthermore, the company revealed that the delinquency rate by dollars of delinquent accounts was down from 2.6 percent to 2.1 percent. Meanwhile, the annual net charge-off rate increased from 4.7 percent to 6.5 percent over the same period. Officials attributed the higher net charge-off rate to a combination of higher net charge-offs and a decrease in the average portfolio outstanding.

"Our delinquency rates and net-loss rates, particularly during the fourth quarter, showed a significant decrease," pointed out Moore. "While our focus during fiscal-year 2011 will be to increase our origination growth rates in order to generate positive interest revenue growth, we are pleased with the performance of First Investors during a very challenging economic and capital markets environment, and believe that the merits of our diversified and conservative business model have been validated by our ability to remain profitable while significantly deleveraging our balance sheet."