Readjusted accounting standards took a toll on earnings of Green Tree Financial Corp. and FirstPlus Financial Corp., two of the largest specialty finance companies.
But both did better than in the fourth quarter, when they made the accounting shift.
At Green Tree, a manufactured-housing lender, first-quarter earnings were 30% lower than a year earlier because the company is making more conservative assumptions about how its loans will perform.
St. Paul-based Green Tree, which recently agreed to sell itself to Conseco Inc. for $7.6 billion, earned $63.5 million in the latest quarter. But that is a big improvement from the $17.3 million loss in the fourth quarter, when Green Tree took two multimillion dollar writedowns because loans prepayed faster than the company expected.
"As previously indicated, we are using higher prepayment assumptions in the recording of revenues and assets related to our loan securitization activities," said Lawrence M. Coss, Green Tree's chairman and chief executive officer.
Although securitization volume increased 46% from a year earlier, to $2.65 billion, gain-on-sale revenue declined by 16%, Mr. Coss said.
Revenue totaled $285.8 million in the quarter, up 7% from a year earlier.
Net credit losses increased to 0.98%, from 0.96% a year earlier, but were down from from 1.04% in the fourth quarter.
FirstPlus Financial Corp., the largest high-loan-to-value lender, reported net income of $17.0 million for the quarter, 44% less than a year earlier but almost double the fourth-quarter figure.
Dallas-based FirstPlus stopped using gain-on-sale accounting last year. The company increased its managed loan portfolio to $6.4 billion as of March 31?, from $5.5 billion at yearend?. Originations totaled $1.3 billion in the first quarter, level with the fourt but up from $879.1 million a year earlier.
Retail originations totaled $651.3 million in the first quarter, or 51% of total production, up from 42.7% in the fourth quarter. Many specialty finance companies have been trying to beef up their retail origination networks, as loans written in such networks are less likely to be prepaid. The company also tightened underwriting guidelines for its high-loan-to- value product.
Life Financial Corp., a federal savings bank that FirstPlus intends to acquire this year, announced net income of $3.7 million for the quarter.
