Completion of Whole-Loan Sale Hurts 3Q Results for CPS
IRVINE, Calif. — In reporting its third quarter results, Consumer Portfolio Services announced a loss, indicating that the company took a hit from its whole-loan sale in September.
Basically, officials explained that CPS incurred a loss on the transaction as the effective purchase price of the sold receivables was less than the carrying value on the company's balance sheet.
The net loss for the third quarter was $6.3 million, or $0.32 per diluted share, compared with net income of $3.7 million, or $0.16 per diluted share, for the year-ago quarter.
"While the completion of the whole-loan sale negatively impacted our earnings, the quality of our franchise allowed us to access liquidity during this very difficult capital markets environment," explained Charles Bradley Jr., chief executive officer.
Continuing on, CPS said that its total revenues for the third quarter decreased approximately $11.1 million, or 10.8 percent, to $91.7 million, compared with $102.8 million for the third quarter of 2007.
Meanwhile, total operating expenses for the third quarter of 2008 were $104.4 million, an increase of $7.9 million, or 8.2 percent, compared with $96.4 million for the 2007 period.
During the third quarter of 2008, CPS purchased $33.6 million of contracts from dealers, compared with $79.8 million during the second quarter of 2008 and $340.2 million during the third quarter of 2007.
For the nine months period, total revenues increased about $8.8 million, or 3.1 percent, to $293.8 million, compared with $285.0 million in the previous year.
Additionally, total expenses for this time frame came in at $300 million, an increase of $32.9 million, or 12.3 percent, compared with $267.1 million for the nine months period in 2007.
The company reported that its net loss for the nine months was $2.7 million, or $0.14 per diluted share, compared with net income of $10.4 million, or $0.45 per diluted share.
During the first nine months of 2008, CPS purchased $289.6 million of contracts from dealers, compared with about $1.016 billion during the first nine months of last year.
Moreover, the company said its receivables totaled about $1.829 billion as of September 30, compared to $2.053 billion from the same period of 2007.
As previously reported by SubPrime Auto Finance News, in September 2008 the company completed a structured whole loan sale with the sale of $199 million of auto purchase receivables. In addition, CPS extended the maturity of one of its warehouse credit facilities from Sept. 30, 2008 to Nov. 28, 2008.
Annualized net charge-offs during the first nine months of 2008 were 7.2 percent of the average owned portfolio, compared with 5 percent during the same period in 2007.
Furthermore, delinquencies greater than 30 days (including repossession inventory) were 7.7 percent of the total owned portfolio for the time frame, compared with 6.1 percent last year.
The increase in net charge-off and delinquency percentages can be partly attributed to the aging of the portfolio and the decrease in the size of the managed portfolio as new contract purchases have not replaced portfolio run-off, officials explained.
"We expect the operating landscape to be challenging in the near term and have made adjustments to our business accordingly," said Bradley. "We have scaled back our operating infrastructure to focus on servicing our portfolio and maximizing collections while maintaining our best dealer relationships.
"With these moves, we feel confident in our ability to weather the current economic turbulence and should be well positioned to exploit a tremendous industry opportunity once the capital markets stabilize," he concluded.