LAS VEGAS -

While also touching on how the subprime auto finance company is navigating challenges in both collections and rolling out securitizations, Consumer Portfolio Services highlighted that it closed the first quarter by originating the most contracts ever in a single month.

During Q1 of 2016 that closed on March 31, CPS purchased $312.3 million of new contracts compared to $269.2 million during the fourth quarter of last year and $233.9 million during the year-ago quarter. During the company’s quarterly conference call, chairman and chief executive officer Charles “Brad” Bradley Jr. wasn’t sure whether it was solely tax refund monies that pushed CPS to originate a record amount of paper in March, which happened to coincide with the 25th anniversary of the company.

“It’s really hard to figure out, and to be honest, I don’t know that we really care,” Bradley said.

“What we care is we’ve got a nice little kick in the first quarter, which we didn’t have in the previous two years,” he continued. “That enable us to have a strong originations. We actually got back to our 2007 levels. March was a record month in terms of originations in one month.”

The Q1 origination amount left the company's managed receivables total at $2.142 billion as of March 31 an increase from $2.031 billion as of Dec. 31 and $1.726 billion when the first quarter of last year finished.

All of the first-quarter origination activity coupled with its rising portfolio helped CPS to generate earnings of $7.2 million, or $0.24 per diluted share. The figures were down a bit year-over-year as net income in the first quarter of 2015 came in at $8.3 million, or $0.26 per diluted share.

CPS did generate a 17.1-percent increase in revenues as the Q1 figure was $100.6 million, up by $14.7 million above the year-ago amount of $86.0 million.

Cutting into the company’s net income was a 24.1-percent jump in total operating expenses as the Q1 figures climbed from $71.2 million to $88.4 million.

Looking at the financial statement from the perspective of pretax income, CPS sustained a 17.1-percent decrease year-over-year as the metric fell from $14.7 million to $12.2 million

Despite the income declines, Bradley defended CPS’ performance during his opening remarks to investment analysts.

“We’re still quite profitable, making lots of money,” he said. “We’re making more money than we ever made before and so we’re really doing pretty well at that.

“And so as much as we’re not personally all that happy with CPS’ performance on its own, if you hold this up to the rest industry, we look surprisingly great,” Bradley went on to say.

Looking at collections

CPS reported that its annualized net charge-offs for the first quarter came in at 7.57 percent of the average owned portfolio as compared to 6.64 percent a year earlier.

The company also mentioned delinquencies greater than 30 days (including repossession inventory) stood at 8.97 percent of the total owned portfolio as of March 31 as compared to 6.86 percent when Q1 of 2015 closed.

When discussing these topics, Bradley acknowledged that “collections remain a challenge.” He insisted that both the regulatory environment finance companies navigate nowadays as well as how consumers communicate are changing significantly as they would rather trade text messages than phone calls.

“We used to call people at home and the phone on the wall would ring,” Bradley said. “Today it is the phone in their pocket and they’re not always wanting to answer that phone. So you have to come up with new ways to do things.”

A look at securitizations

After the first quarter closed, Consumer Portfolio Services announced the closing of its second term securitization of the year, a $332.7 million deal. The April transaction was CPS’ 20th senior subordinate securitization since the beginning of 2011 and the third consecutive securitization to receive a triple-A rating on the senior class of notes from two rating agencies.

Even though the transaction didn’t happen during the reporting period CPS shared, Bradley still assessed how the auto ABS market is impacting the company’s performance.

“The price and cost of funds has gone up significantly over the last few quarters. It certainly different world than a year ago in terms of what it cost to get securitization done,” Bradley said.

Having said that the cost of funds still low when we look at our historical average in terms of what it cost to get deals done,” he continued. “There’s still lots of appetite, but the people in the market mostly want to get paid a little more. And so that’s sort of an interesting new dynamic in that market that might be somewhat challenging as we go forward, so we will see.”