Some specialty finance companies were hurt by high prepayment rates in the quarter that ended March 31, but the crisis atmosphere in the sector appears to have dissipated.
Amid competition for accounts, consumers have continued prepaying loans more rapidly, so lenders have been recalculating their profit projections. But many analysts had already adjusted their expectations, so there were few unpleasant surprises.
"It was the least eventful quarter we've had" in the past year, said E. Reilly Tierney, analyst with Fox-Pitt, Kelton, New York. "And that's good- no news is good news in this sector."
Earnings at United Companies Financial Corp. were down 70% from a year earlier, at $6 million, because of rising prepayment rates and other expenses. Per-share earnings of the Baton Rouge, La.-based company came to 19 cents, beating the consensus of analysts tracked by First Call Corp. by 3 cents.
United Companies originated $827.2 million of loans, 41% more than in the year-earlier quarter but less than in the fourth quarter.
The decline can be attributed to reduced reliance on bulk purchases. UC Acquisition, the company's bulk purchasing unit, bought $56.6 million in the first quarter, down from $273.7 million in the fourth quarter.
Loans 30 or more days delinquent dipped 5 basis points from a year earlier, to 10.30%.
Aames Financial Corp., Los Angeles, earned $4.1 million, 77% less than a year earlier. Net income per share was 15 cents, down from 51 cents.
The decrease was attributed to the previously announced plan to reduce reliance on gain-on-sale accounting and sell whole loan production for cash. The company also accrued expenses because of expansion of its retail sector, said chief executive Cary Thompson.
Retail originations were up 21% from a year earlier, to $165 million.
The subprime lender Delta Financial Corp. earned $8.3 million, 18% more than a year earlier. Earnings per share increased 20%, to 54 cents.
Loan originations for the Woodbury, N.Y.-based lender increased 63%, to $387 million, while the servicing portfolio grew 14%, to $2.1 billion.
Delta Financial, which originally concentrated on the Northeast, has been expanding geographically. Loan originations in the Midwest increased 113%; those in the New York, New Jersey, and Connecticut area rose 46%.
Loans delinquent 30 days or more fell 52 basis points, to 6.90%; those in foreclosure increased 24 basis points, to 4.89%.
Delta has not turned to whole loan sales to raise cash, as many others in the sector have, said CEO Hugh Miller. Instead it is relying on new securitization methods and reducing correspondent production, Mr. Miller said.
Money Store Inc. reported a 27% increase in net income, to $34 million. Earnings per share increased 29%, to 53 cents.
First Union Corp., Charlotte, N.C., said during the quarter that it would pay $2.1 billion for Union, N.J.-based Money Store. The deal, originally expected to close in the third quarter, is now scheduled to close June 30, Money Store said in its earnings announcement.
Loan originations totaled $1.9 billion for the quarter, up 33%. The company's serviced loan portfolio increased 32%, to $16.6 billion.
Home equity delinquencies 30 or more days past due increased 15 basis points from a year ago. The company shuttered its auto loan division during the quarter because of rising delinquencies.
Southern Pacific Funding Corp., Lake Oswego, Ore., reported net earnings for the quarter of $12.8 million, versus $12.6 million a year earlier. The company increased its originations 104%, to $647.2 million, while reducing its gain on securitization to 7.26%, from 8.09%.
Loans purchased from third-party originators decreased 68%, to $28.8 million, because the company can no longer compete with the prices charged by third parties for the loans, said CEO Robert Howard.