Coinciding with the release of its second-quarter performance, Consumer Portfolio Services also discussed a structural reorganization of sales representatives and origination staff to cater to dealerships in its origination network more effectively.
CPS reported this week that it closed the second quarter with more than 8,000 active dealers booking paper with the subprime finance company. CPS leverages a staff of approximately 250 employees located at three branches in Irvine Calif., Las Vegas and Orlando, Fla.
In an effort to improve dealer service and product “usability,” CPS said in a message to SubPrime Auto Finance News that it has reorganized its staff. Prior to making this alignment change, CPS explained dealers would generally be connected to the next available buyer from a pool when they contacted the finance company. With the re-alignment in place, CPS said dealers will work with the same staff on each of their applications and loan packages.
“Our goal is to have dealers working with the same loan origination staff at CPS whenever possible,” said Teri Robinson, who is senior vice president of originations at CPS.
“We expect this move to strengthen dealer relationships and build familiarity for dealers with CPS, plus help our staff get to know dealers better,” Robinson continued. “Dealers need support, flexibility and quick answers to their questions when they contact CPS. We’re confident they will like our improved alignment strategy.”
Q2 results as revenue drops, costs decrease
Also this week, CPS announced earnings of $1.8 million, or $0.08 per diluted share, for its second quarter that ended June 30. This figure compares to net income of $3.2 million, or $0.13 per diluted share, in the second quarter of last year.
The company reported its Q2 revenues came in at $86.3 million, a decrease of $13.0 million, or 13.1%, compared to $99.4 million for the second quarter of 2018. However, the company trimmed its costs as CPS said its total operating expenses for the second quarter were $83.6 million, compared to $94.7 million a year earlier.
CPS noted its Q2 pretax income for the second quarter of 2019 was $2.8 million, which represented a drop of 40.5%.compared to pretax income of $4.7 million in the second quarter of last year.
For the first six months of 2019, CPS tallied up its total revenues of $174.6 million, which were down compared to $202.9 million for the six months of 2018. That’s a decrease of approximately $28.4 million or 14.0%.
CPS pointed out its total expenses for the first six months of 2019 were $169.1 million, a decrease of $24.6 million, or 12.7%, compared to $193.7 million for the six months of 2018.
The company’s pretax income for the first six months of 2019 came in at $5.4 million, compared to $9.2 million for the same period in 2018. Net income through the first half of 2019 was $3.5 million compared to $6.3 million a year earlier.
During the second quarter of 2019, CPS said it purchased $250.1 million of new contracts compared to $243.0 million during the first quarter of 2019 and $214.7 million during the second quarter of last year.
The company's receivables totaled $2.399 billion as of June 30, an increase from $2.393 billion as of March 31 and $2.329 billion as of June 30 of last year.
CPS mentioned its annualized net charge-offs for the second quarter constituted 7.82% of the average portfolio as compared to 7.58% for the second quarter of last year. Its delinquencies greater than 30 days (including repossession inventory) represented 14.83% of the total portfolio as of June 30 as compared to 10.07% as of June 30 last year.
“We are pleased to report that this quarter represented our fourth consecutive quarter of year over year increases in quarterly originations volume,” said Charles Bradley, Jr., chairman and chief executive officer.
“In addition, since Q3 of 2018, we have seen consecutive quarterly increases in the coupon rates on new receivables and lower fees paid to dealers,” Bradley added in a news release.
CPS announces $243.5M senior subordinate asset-backed securitization
And in other company news released this week, CPS also announced the closing of its third term securitization of 2019. The transaction is CPS’ 33rd senior subordinate securitization since the beginning of 2011 and the 16th consecutive securitization to receive a triple-A rating from at least two rating agencies on the senior class of notes.
In the transaction, the finance company qualified institutional buyers purchased $243.5 million of asset-backed notes secured by $244.1 million in automobile receivables originated by CPS.
The sold notes, issued by CPS Auto Receivables Trust 2019-C, consist of six classes. Ratings of the notes were provided by Standard & Poor’s and DBRS, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer.
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CPS said the weighted average coupon on the notes is approximately 3.36%.
The finance company mentioned the 2019-C transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and over-collateralization of 0.25%.
CPS added the transaction agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of 6.00% of the original receivable pool balance, or 16.00% of the then outstanding pool balance.
The company went on to say the transaction utilizes a pre-funding structure, in which CPS sold approximately $161.1 million of receivables at inception and plans to sell approximately $83.0 million of additional receivables during August.
This further sale is intended to provide CPS with long-term financing for receivables purchased primarily in the month of July, according to the company.