HOUSTON — First Investors Financial Services made strong strides in several facets of its balance sheet — including net income and loan origination volume — during its fiscal second quarter that wrapped up Oct. 31.

Company officials revealed that they generated net income of $1,005,324 or 21 cents per fully diluted share for the three months that ended Oct. 31. Looking at it from the six-month span that concluded on the same date, they indicated the net income amount was $1,281,379 or 26 cents per fully diluted share.

Comparing these amounts to the year-ago marks shows how much First Investors gained. For the same three-month span in 2009, the company posted $44,732 or 1 cent per fully diluted share in net income. In six months, the figure was $567,381 or 12 cents per fully diluted share

First Investors indicated the change in net income for the three- and six-month time frames was primarily driven by lower provision expense, which offset lower net interest income and lower other income.

Furthermore, officials added that their results also were positively impacted by a one-time exit fee received by the company in September. The fee came in exchange for an agreement to release servicing rights on a portfolio back to the third-party client that had elected to re-establish a servicing platform.

First Investors calculated the net impact of this agreement positively impacted net income by approximately $404,000 or 8 cents per fully diluted share.

In other company activity during the second quarter, First Investors also acquired a portfolio consisting of $39.1 million in active loans and $35.8 million in charged-off loans for a total purchase price of $36 million. Officials mentioned one of their subsidiaries had served as the loan servicer since December 2008.

"The acquisition was funded through a combination of equity and borrowings under the company's senior credit facility and the issuance of subordinated notes," First Investors explained.

Turning to other elements of its balance sheet, First Investors determined its portfolio of receivables held for net investment decreased 4.3 percent to $324.6 million, a mark compared to the figure as of April 30.

But quite noteworthy during the six-month span that ended Oct. 31, First Investors reported new origination volume of $60 million, which represents an increase of 296 percent over the $15.2 million originated during the prior-year period. 

Despite the origination volume gains, the company reported decreases in net interest income during the recent three- and six-month spans, which were 3.8 percent and 9.1 percent, respectively, when compared the year-ago periods. First Investors stressed the decreases were due to a lower average portfolio balance of receivables held for investment during the periods, which was partially offset by a wider net interest spread. The net interest spread was 11.4 percent and 11.1 percent for the three- and six-month span, respectively, as compared with 10.1 percent for each of the prior-year time periods.

"The increase in net interest spread reflects a higher interest rate on new receivables originated over the past 18 months and a lower cost of debt as a result of lower market interest rates," company officials pointed out.

Looking at its total operating expenses as a percentage of the managed portfolio during these three- and six-month periods, First Investors said these came in at 5.2 percent and 4.9 percent, respectively. In the year-ago spans, they were 3.6 percent and 3.8 percent.

Management contended the increase in operating expenses as a percentage of the managed portfolio reflected the decline in the average managed portfolio during the current year periods, which lowered the level of operating leverage that First Investors was able to achieve.

Additionally, officials stressed their decision to re-enter the direct lending market in August caused an increase in postage and printing expenses. 

Moving on, First Investors indicated its delinquency rate — based on the outstanding dollar balance of delinquent accounts — increased from 2.7 percent as of Oct. 31 of last year to 3.2 percent on the same date this year.

And looking at its annualized charge-off rate during the same time span, the company determined it dipped from 6.3 percent to 5.8 percent. Officials believe the drop-off stems from a decrease in repossessions and defaults which, "reflects better performance of loans from the 2009 and newer vintages."

Tommy Moore Jr., president and chief executive officer of First Investors, shared his overall assessment of how the company performed.

"We are pleased with the operating results for the quarter," Moore stated. "Our decision to re-enter the direct lending market in August provided a lift in our origination volume, and we expect to see continued improvement in year-over-year volume, which will translate into growth in our portfolio of receivables held for investment."