Carfinco Reports Record Originations for Q3
Carfinco Financial Group Inc. — who recently penned a deal to be acquired by Banco Santander for $300 million — announced its third quarter results today, showing record loan originations and low delinquencies.
Highlights for Q3 included what company management is calling record loan originations of $64.4 million.
This represents a 19.2 percent jump from Q2’s originations of $54 million. And this number is also 38.5 percent above the $46.5 million in loan originations for the third quarter of 2013.
The rate of loan originations during the quarter pushed Carfinco to achieve finance receivable portfolio growth of $17.2 million with finance receivables of $269.4 million. This is up $28.5 million from Q3 of 2013.
Tracy Graf, chief executive officer of Carfinco, acknowledged that as the Canadian non-prime auto finance market becomes more and more competitive, “Carfinco continuously evaluates the competitiveness of our credit policies and programs, as we strive to focus more heavily on the long-term strength of our finance receivable portfolio and future earnings growth potential, rather than short-term gains.”
Graf went on to mention that the company is working to add financing programs that are beneficial to dealer customers, such as a loyalty program designed to retain its customers who have established a positive payment history with Carfinco.
These initiatives may be playing a role in the company’s recent boost in loan originations.
During the quarter, the annualized loss rate on finance receivables was relatively stable, though it did show a slight increase.
In Q3, the rate came in at 15.7 percent from 14.6 percent in the second quarter of 2014, and 15.2 percent in the first quarter of the year.
The company pointed out, historically, the annualized loss rate has ranged from as low as the 11.2 percent in the second quarter of fiscal 2012 to as high as 20.7 percent in the second quarter of fiscal 2009, during the height of the economic downturn.
“Management estimates the annualized loss rate to range from 13 percent to 16 percent on a normalized basis depending on the company's portfolio mix,” Graf said.
Delinquencies, or accounts 31 or more days overdue, also increased slightly, but still remain low. For Q3, delinquencies came in at 4.6 percent, an increase from the 3.5 percent recorded in Q2.
Though most results illustrated success for the quarter, net earnings were down a bit in Q3.
Net earnings came in at $4.4 million for the quarter, a decrease from the $5.4 million seen in Q2. That said, this number is still an improvement from 2013 rates, when the company brought in $4.3 million for the third quarter of 2013.
Graf explained the drop from Q2 is mostly related to legal fees incurred related to recent acquisitions as well as the addition of $825,000 to the allowance for credit losses during Q3 versus $725,000 in Q2.
“This increased allowance requirement was a result of the portfolio growth achieved in the current quarter,” Graf said.
During the third quarter, the company announced a deal to be acquired by Banco Santander, and Carfinco expected the completion of the deal to occur near the end of the fourth quarter or early in the first quarter of 2015.