FORT WORTH, Texas — In its Strategic and Operational Overview released this month, GM Financial revealed its near-term initiatives include continuing to grow its core subprime business, as well as expanding its product line for General Motors dealers, such as providing a new prime leasing product, Canadian leasing and increasing subprime loans.

GM Financial's management team pointed out that the "rational competitive environment allows for continued originations of loans with strong loan-level returns.

"Key portfolio metrics reflect positive impact of loans with high-risk adjusted returns that were originated since credit tightening in 2008," the team highlighted.

Officials went on to report that the company has sufficient liquidity and funding capacity to support increased originations.

The partnership GM Financial (then known as AmeriCredit) established with General Motors back in September 2009 to offer a subvention program to franchised dealers has contributed about 15 percent of originations by September of this year, according to the company.

While continuing to offer this program, GM Financial's management said the team will also expand its credit risk appetite in select geographic regions based on credit performance and regional economic outlook. However, despite seeking continued origination growth, GM Financial stressed that it has not changed any key underwriting standards, such as LTV and verification requirements.

The company has about $9 billion in finance receivables as of September of this year.

Offering a quarterly analysis, management broke down some key statistics. The company's net income came in at $81 million, including adjustment for acquisition-related costs. This compares to $86 million in the June quarter and $26 million in September quarter of last year.

Meanwhile, origination volume for the period hit $959 million, compared with $906 million in the June time frame and $229 million in the September period of 2009.

The average custom score for customers was 244 in the September quarter, as opposed to 250 in the previous year and 249 in 2008. This score went as low as 239 in the September quarter of 2005.

The payment to income ratio was 8 percent in the current period, compared with 7 percent in 2009 and 8 percent in 2008. This figured stood as high as 11 percent in September 2005.

Reviewing term lengths, management said the average term was 69 months in the most recent time frame, compared with 67 months in 2009 and 70 months in 2008. September 2007 was a high mark for the last five years, with this figure reaching 71 months.

Loan-to-value, meanwhile, was 106 percent most recently, compared with 109 percent in the previous year and 109 percent in 2008. The high water mark for this statistic was 120 percent in the September quarter of 2007.

Continuing on, specifically GM Financial said finance receivables came in at $8.7 million, compared with $8.7 million in the prior quarter and $10 million in the year-ago period.

Revenue for the company grew a bit, reaching $373 million in the recent quarter, compared with $362 million in the previous quarter and $413 million in the 2009 quarter.

Management said its net interest margin reached 12.9 percent, up from 12 percent in the June period and 10.7 percent in the same quarter of 2009.

As for annualized operating expense, this came in at 3.1 percent, including acquisition-related costs, which is flat from the prior quarter, but up from 2.6 percent in the September quarter of last year.

Moving on, GM Financial reported that annualized net credit losses were 5.4 percent, compared with 4.5 percent in the prior period and 8.4 percent a year ago.

Allowance for loan losses stood at 6.1 percent for the most recent quarter, compared with 6.6 percent in the last quarter and 8.2 percent in the 2010 period.

As for unsecured debt, this was $533 million, flat from the prior quarter, but down from $554 million in the same quarter of last year.

GM Financial's tangible net worth is $2.5 billion, compared with $2.4 billion earlier this year and $2.2 billion a year ago, officials highlighted.

Discussing the company's acquisition by GM, management revealed it will "focus on financing GM dealer sales while preserving non-GM dealer business. Maintain profitability objectives and credit underwriting standards as if independent. Access securitization and unsecured debt markets for funding. Remain a SEC registrant and maintain a high level of transparency for investors."

As for the recent Wall Street reform legislation, the company said it's "too early to tell if there will be any substantial long-term impact on business."

Also touching upon the proposed Reg AB requirements for securitization issuances, management said it will see "increased disclosure requirements and 5-percent vertical risk retention by securitization sponsors."

In more data released from the company, GM officials revealed average APRs and net fees. For the most recent period, the average APR was an adjusted 16.4 percent, while net fees were 0.4 percent. The unadjusted average was 15.8 percent and 0.4 percent in fees. This compared to an average APR of 19.1 percent and fees of 3.1 percent in September of last year and 16.6 percent average APR and 0.4 percent fees posted in the September period of 2008.

Management said it "Increased rates and fees in 2008 and first half of 2009 to offset higher cost of funds."

"As cost of funds improved, (we) lowered loan pricing and fees beginning in September 2009. (We will) continue to evaluate pricing changes in markets where appropriate. APR and net fees for September 2010 (were) impacted by increasing volume of subvented loans," the team pointed out.

"Under the subvention program, GM Financial receives upfront cash from manufacturer in return for lower APRs to consumers and fee waivers for dealers," officials noted.

Going on to discuss financials, the company pointed out that it has a warehouse line to support interim financing. This includes a $1.3 billion credit facility that supports $1.9 billion of receivables. This warehouse remained undrawn as of the quarter and is sized to support at least six months of loan origination volume, according to GM Financial officials.

As for unsecured debt, the company expects convertible notes to be retired this December quarter in connection with the merger. Moreover, senior note holders have "put" option, but notes are expected to remain outstanding, management said. There is also an intercompany credit facility with GM to support retirement of debt.

"(We) may access unsecured debt market to support growth initiatives and refinance unsecured debt," management noted.

Looking ahead, the company's team expects ongoing improvement in credit metrics and further reductions in allowance for loan losses into next year.

"Increasing concentration of loans originated since credit tightening in early 2008," staff pointed out. "(Also seeing) stronger recovery rates. Normal seasonal fluctuation in credit performance expected, including weaker credit results in December quarter."

Finally, officials concluded by stressing that the franchise was strengthened by the GM acquisition.

"(We're) well-positioned to take advantage of favorable competitive environment to originate loans with high risk-adjusted returns. (We) have a strong balance sheet with ample liquidity and funding capacity to support higher origination levels. Reliable access to securitization markets further strengthens funding platform and increases capital efficiency. (And we are) expecting sustained improvement in credit performance," the management team indicated.