IRVINE, Calif. -

Based on a view the competitive pressure in the subprime finance space isn’t quite as intense, Consumer Portfolio Services watched its second-quarter earnings per diluted share spike by 47 percent year-over-year.

CPS reported that its Q2 earnings rose to $7.0 million, or $0.22 per diluted share, for the quarter that ended June 30. During the same span a year earlier, the company’s net income was $4.8 million, or $0.15 per diluted share.

Through the first half of the year, CPS also is posting a 47-percent jump in earnings. Through the six months of 2014, CPS generated $13.7 million, or $0.43 per diluted share, compared to earnings of $8.6 million, or $0.27 per diluted share at the halfway mark of 2013.

“We are pleased with our operating results for the second quarter of 2014,” CPS chairman and chief executive officer Brad Bradley said. “We increased our new contract purchases and managed portfolio, and achieved continued earnings growth.

“In addition, we hit a milestone in one of our corporate objectives by earning a triple-A rating on the senior class of notes in our 2014-B securitization, which contributed to an extremely low cost of funds on that transaction,” Bradley continued.

During a conference call with investment analysts, Bradley gave his usual candid assessment of how the subprime finance market is behaving and how CPS is navigating current conditions.

“We certainly are very happy where we sit within the industry,” Bradley said. “A lot of folks say how competitive it is. From our opinion, it would appear that a lot of the sort of the competition has eased a bit.

“Whether everybody’s just taking a step back for a variety of reasons, it's a little hard to tell. We think that the competitive environment eased some. We have a few ideas on why, but we’re don’t have anything definitive to point out,” he continued.

Without naming any specific institutions, Bradley speculated on what other finance company strategy might have been in recent quarters.

“We think there was a few companies out there, particularly large ones, maybe growing on purpose, maybe before an IPO or something, and so maybe they’ve slowed down,” he said. “Some of the larger guys probably have slowed down. The really big players, no one appears to be being overly aggressive in trying to seize market share.

“And the medium segment of players, there’s probably a few guys that might have gotten a little ahead of themselves, and so we see some sort of true backing off in sort of the mid-level,” Bradley continued. “And then at the lower level, you have a bunch of small companies who are trying to go in and grab market share. Maybe they finally have been getting a little bit burned and backed off some.”

So is the subprime surge over, contrary to what some analysts said in this report posted by SubPrime Auto Finance News last week?

“If you look at it on the whole, what you really have is it’s not like everybody's backing up like crazy, but it’s really nobody’s particularly pushing forward,” Bradley said. “And that has given us a little bit of a growth spurt in the middle of summer when we would never really have one at all.

“We’re not making huge predictions. But it is interesting that people overall have appeared to at least slowed down or aren’t pushing aggressively forward,” he went on to say.

More Details of Q2 Performance

As Bradley reference, CPS purchased $211.4 million of new contracts compared to $189.9 million during the first quarter of 2014 and $203.8 million during the second quarter of 2013.

The company’s managed receivables totaled $1.374 billion as of June 30, an increase from $1.295 billion as of March 31 and $1.067 billion as of June 30 of last year.

Looking at second-quarter revenue, CPS generated $71.6 million for an increase of $1.1 million, or 1.6 percent. Officials pointed out that revenues in Q2 of last year included $10.9 million from a gain on cancellation of debt.

Excluding that gain, the company calculated that revenues for the second quarter increased by $12.1 million, or 20.3 percent, year-over-year.

CPS’ total operating expenses for the second quarter settled at $59.3 million, a decrease of $2.7 million, or 4.3 percent  compared to $61.9 million a year earlier.

However, in the second quarter of 2013, the company pointed out operating expenses included a provision for contingent liabilities of $9.7 million. Excluding the provision for contingent liabilities, operating expenses increased $7.0 million, or 13.3 percent.

Pretax income for the second quarter came in at $12.3 million compared to pretax income of $8.5 million in the second quarter of last year, an increase of 44.3 percent.

And finally in terms of the health of its portfolio, CPS indicated its annualized net charge-offs for the second quarter were 4.98 percent of the average owned portfolio as compared to 4.03 percent for the second quarter of 2013. 

The company’s delinquencies greater than 30 days (including repossession inventory) stood at 6.21 percent of the total owned portfolio as of June 30, as compared to 5.16 percent as of the same date last year.