Consumer Portfolio Services chairman and chief executive officer Brad Bradley likes the position where the subprime auto finance company sits after the first quarter.

And it’s not just because CPS posted its 23rd consecutive quarter of positive earnings.

Bradley pointed to the difference where CPS stands with more than 25 years in the subprime business versus newer operations that might have only a fraction of that the portfolio seasoning.

During the company’s Q1 conference call conducted last week, Bradley touched on some similarities in the competitive landscape he’s seeing now that percolated back in 2008 and 2009.

“Both of those were some result of a recession. We haven't had a recession this time, but certainly feels a lot like there is going to be some consolidation in industry. We’re going to lose some of the competitors in the industry,” Bradley said.

“There is a lot of competitors in our industry struggling. Lots of small ones that came into the industry over the last couple of years are now having some real significant problems as the paper they’ve bought hasn’t performed,” Bradley continued a couple of moments later during his opening comments when he often shares his assessment of the entire subprime industry.

“They’re going to have more difficult access to the capital markets. And that also applies to some of the larger players in our industry who have grown real fast and haven’t really done as well as people might have expected. And so again many folks are waiting to see how that shakes out,” he said.

In terms of how the first quarter shook out for Consumer Portfolio Services, the company reported earnings of $4.5 million, or $0.16 per diluted share.

Meanwhile, revenue jumped 6.9 percent year-over-year to land at $107.6 million. However, the company’s Q1 operating expenses spiked 12.9 percent to $99.8 million; impacting in part on the year-over-year decline in net income.

A year earlier, CPS said, its net income came in at $7.2 million, or $0.24 per diluted share.

During the first quarter of 2017, CPS purchased $229.6 million of new contracts compared to $215.3 million during the fourth quarter of 2016 and $312.3 million during the first quarter of 2016.  The company's managed receivables totaled $2.323 billion as of March 31, an increase from $2.308 billion as of Dec. 31 and $2.142 billion as of March 31 of last year.

“In terms of originations, as I mentioned, we haven't seen too much signs of tightening overall in the industry,” Bradley said. “I think some of the bigger folks, some of the larger banks have certainly talked about tightening, and you may be seeing a little bit of it there. Down in our end of the neck of woods, you really haven't seen too much of it lately.”

Bradley mentioned that CPS did tighten its loan-to-value ratio to the lowest point it has been since Q2 of 2014.

“We think LTV is one of the real indicators of what you're buying,” he said. “So, that would be an easy way to indicate that we certainly did do some tightening in the first quarter.

“I think other players will tighten as they go or maybe we’ll see more tightening, but at the moment certainly through the first quarter we haven’t seen too much other than sort of ourselves,” Bradley said.

Also noted in the company’s latest financial statement, CPS indicated annualized net charge-offs for the first quarter of 2017 stood at 7.91 percent of the average owned portfolio as compared to 7.57 percent for the first quarter of last year.

The company added its delinquencies greater than 30 days (including repossession inventory) involved 9.74 percent of the total owned portfolio as of March 31, as compared to 8.97 percent on the same date a year earlier.

CPS announces $225.2M securitization

In other company news, Consumer Portfolio Services also announced the closing of its second term securitization in 2017.  The transaction is CPS’ 24th senior subordinate securitization since the beginning of 2011 and the seventh consecutive securitization to receive a triple-A rating on the senior class of notes from at least two rating agencies. 

In the transaction, qualified institutional buyers purchased $225.17 million of asset-backed notes secured by $230.0 million in automobile receivables originated by CPS.  The sold notes, issued by CPS Auto Receivables Trust 2017-B, consist of five classes.

Ratings of the notes were provided by Standard & Poor’s and Kroll Bond Rating Agency, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer.

The company indicated the weighted average coupon on the notes is approximately 3.45 percent.

CPS said the 2017-B transaction has initial credit enhancement consisting of a cash deposit equal to 1.00 percent of the original receivable pool balance and over-collateralization of 2.10 percent.

The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 7.45 percent of the then-outstanding receivable pool balance.

Officials went on to note the transaction utilizes a pre-funding structure, in which CPS sold approximately $145.7 million of receivables in April and plans to sell approximately $84.3 million of additional receivables during May.

“This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of April,” the company said.