Most consumer finance companies reported solid earnings in the second quarter as loan originations continued to grow despite rising prepayment rates.
FirstPlus Financial Group Inc. reported a 35% increase in earnings per share for the quarter ended June 30, to 65 cents. Net income was $27.8 million, compared with $19.8 million the year earlier.
FirstPlus, the largest originator of high-loan-to-value home equity loans, is on schedule to acquire Life Financial Corp., a small subprime lender, despite rumor to the contrary, a company spokesman said.
For the three months ended June 30, the company increased total loan originations to $1.5 billion, compared with the $1.3 billion in the quarter ended March 31, and the $1.0 billion a year earlier.
FirstPlus increased its subprime originations more than 100% during the quarter, to $76.9 million.
Delinquencies declined 10 basis points from the quarter before, to 2.2% of the total loan portfolio.
Defaults before recoveries were $40 million, or 0.58% of the June 30 loan portfolio. The company had $547.7 million of interest-only strips outstanding at June 30.
Southern Pacific Funding Corp. announced a roughly 10% increase in earnings for the quarter, to $14.5 million, or 60 cents per share.
Southern Pacific, Lake Oswego, Ore., is rumored to have retained an investment banking firm to sell all or part of the company. It also took a $4.8 million charge for adjustments to its interest-only residuals.
Total loan origination volume increased 82% from a year earlier, to $800.2 million. Wholesale loan production grew to $425.1 million, from $269.9 million a year earlier.
The company's U.K. loan volume increased 60% from a year earlier, to $44.6 million. Southern Pacific's servicing portfolio was $3.5 billion at June 30, up from $1.6 billion a year earlier. Delinquent loans increased significantly, to 4.48% of the total portfolio, from 3.62% in the first quarter, though loans in default decreased 20 basis points, to 5.51%.
CIT Group, New York, reported net quarterly income of $93.7 million, down 12% from year-earlier income that included a one-time pretax gain. Excluding that gain, this year's net income would have shown a gain of 44% by comparison. Total managed assets grew to $23.9 billion, up 15% from a year earlier.
Consumer managed assets increased to $7.1 billion, up 30% from a year earlier. Net chargeoffs declined almost 100% from a year earlier, to 0.36% of receivables.