Subprime mortgage companies are again reporting record earnings as they issue their first-quarter results, raising hopes the stocks will see a turnaround.
IMC Mortgage Inc., Southern Pacific Funding Corp., and FirstPlus Financial Corp. all reported record earnings for the quarter ended March 31, 1997.
IMC reported net income of $8.9 million for the quarter, up from $1.6 million the same time a year ago. The Tampa, Fla., company originated $818 million in subprime home equity loans during the quarter, a 209% increase from $264 million a year ago. Loans delinquent 30 days or more increased to 6.76%.
During the quarter, IMC also closed the acquisitions of Mortgage America, CoreWest Banc, and Equity Mortgage.
Southern Pacific reported a 188.1% increase in net income, to $12.6 million, and revenues of $37.0 million. The Lake Oswego, Ore., lender originated $358.0 million in loans. Of that total $317 million were nonconforming loans, an increase of 280.8% over the year-earlier period.
Delinquencies of 30 days or more increased to 7.6%, from 6.9% a year ago.
At FirstPlus, net income rose 369% to $30 million. The company, which specializes in debt-consolidation loans that often exceed the value of the borrower's home, originated $865.1 in loans in during the quarter. This represents a 565% increase over a year ago.
Delinquencies of 30 days and longer decreased to 2.3%, from 4.2% a year ago, while the average Fair, Isaac credit score increased 8 points during the quarter, to 676.
During the quarter, the company acquired Capital Direct Funding, Inc., Laguna Hills, Calif., and signed an agreement to acquire Modern Finance Co., Columbus, Ohio, and Western Interstate Bancorp, Tustin, Calif.
FirstPlus is in the process of opening a United Kingdom operation offering high LTV loans out of Cardiff, Wales. The operation will be headed by former Avco Financial Services Inc. general manager Nevill Allport, and former Beneficial Finance Corp. manager Jack France.
Analysts who follow these companies are projecting that the positive earnings reports will stem the decline in stock prices. Stocks of all major subprime lenders took a dive in the past month, reflecting investors recent distrust of the sector.
But any positive effect earnings may have on these companies stock performance won't be felt right away, analysts say. "They're more likely to make a battleship turn," than bounce back quickly, said Luke Smith, an analyst with Chesapeake Securities.