HOUSTON — Sharing its first-quarter results, First Investors Financial Services announced a decrease in net income largely due to a decline in interest income that was the result of a drop in the average portfolio outstanding, in addition to lower revenues from third-party servicing.

However, the company's chief executive officer appears positive and explained that First Investors is working to grow its originations.

"We are encouraged by the continued growth in our origination volume and are optimistic that we will continue to grow our loan assets," said Tommy Moore Jr., president and CEO. "We are also pleased to see our credit quality continues to improve both in terms of delinquency rates as well as the dollar amount of net charge-offs.

"Our focus for the remainder of the fiscal year will be to grow our portfolio of receivables held for investment and interest revenue to take advantage of our improving net spread," he continued.

For the latest quarter, the company reported $28.3 million in new loan originations, compared with $6.8 million for the same time in 2009.

"Despite this increase in origination volume, the average outstanding balance for the portfolio of receivables held for investment decreased 21.3 percent during the three months ended July 31, 2010, as compared to July 31, 2009," officials highlighted.

For its first quarter, the company reported net income of $276,054, or $0.06 per share, compared with $522,649, or $0.11 per share in the previous year.

As of July 31, First Investors indicated it had $329.7 million in net portfolio receivables held for investment, compared with $339.3 million in the previous quarter.

Meanwhile, net interest income for the quarter decreased 14.1 percent compared to the prior year.

"The decrease was due to the decrease in average portfolio of receivables held for investment, which was partially offset by an increase in the effective yield and lower cost of funds," management noted.

Effective yields increased from 12.9 percent during the first quarter of last year to 13.4 percent in the latest quarter.

Also, the company's weighted average cost of funds decreased from 2.9 percent to 2.5 percent.

"The increase in effective yields reflects the company's efforts to increase the interest rates it charges on its portfolio as well as lower interest write-offs related to repossessions," officials pointed out.

The decrease in cost of funds is largely due to lower short-term interest rates and lower borrowing spreads, according to First Investors.

Revenue from servicing activities for the quarter declined 26.3 percent as the average portfolio serviced for others declined from $291.8 million to $188.9 million.

Continuing on, management revealed that total operating expenses declined 7.3 percent during the quarter, compared to the prior year. However, management noted that operating expenses as a percentage of average managed receivables increased from 3.6 percent to 4.6 percent due to the declining management portfolio.

The company went on to say that the dollar delinquency rate decreased from 2.8 percent to 2.5 percent, while the annualized charge-off rate increased from 5.8 percent to 6 percent.

The dollar amount of net charge-offs declined from $6.1 million to $5 million for the quarter.