RIFCO Reports Annual Net Income of $1.42M - 162% increase



    RED DEER, AB, June 30 /CNW/ - RIFCO Inc. (TSX.V-RFC) today announced its
annual results and filed it's audited consolidated financial statements for
the year ended March 31, 2009, and the related management's discussion and
analysis have been filed with Canadian securities authorities. Copies can be
obtained on SEDAR at www.sedar.com.

    
    Annual Results
    --------------
    

    For the year ending March 31, 2009, the Company is reporting revenue of
$13,591,589, an increase of 78.7% from the $7,604,692 in the prior year.
Operating expenses increased by 8.2% to $2,583,940 from $2,388,649 in the
prior year. The Company achieved a net income after taxes of $1,416,092
compared to a prior year's net income of $539,994. EPS increased to $0.07 from
$0.03 in the prior year.
    The Company continues to pursue ongoing operational improvement. As we
develop and invest in our systems and our people, it is our expectation that
measurable progress will continue. We have seen excellent measurable progress
in efficiency this year.

    
    (000's except credit
     applications and staff)                      2009      2008    % Change
    -------------------------------------------------------------------------
    Credit Applications Processed               16,165    10,707       51.0%
    Loan Originations                           38,317    24,934       53.7%
    Managed Finance Receivables                 50,573    30,169       67.6%
    Revenue                                     13,592     7,605       78.7%
    Net Income                                   1,416       540      162.2%

    Average Number of Ful  Time Employees           27        25        8.0%
    Operating Expenses                           2,584     2,389        8.2%
    

    RIFCO takes great pride in being able to report a revenue increase of
$5,986,897 during the year while only increasing operating expenses by
$195,291.
    RIFCO originated more than $38.32M in new finance receivables
corresponding to a 53.7% increase over the prior year originations of $24.93M.
As of March 31, 2009, managed finance receivables increased 67.6% to over
$50.57M compared to $30.17M a year earlier.

    
    Other Noteworthy Annual Highlights:

    -   ROE of 18.12% from a prior years 8.48%
    -   Book value per share increased to $0.44 from $0.36
    -   Applications processed increased by 51.0%
    -   Operating expense ratio reached a record low 6.14% from 9.49%
    -   Efficiency Ratio improved to 36.76% from 50.17%
    -   Annualized loss rate increased to 5.12% from 5.04%
    -   Average managed cost of borrowing decreased to 7.67% from 7.81%
    -   Delinquency over 30 days increased to 5.04% from 4.55%
    

    RIFCO is very pleased to report a third consecutive year with solid
profitability and the fourth out of the last five years. We were also pleased
to announce during the year that the milestone of $100 million in loan
originations was exceeded.
    RIFCO's loans continued to perform as intended. Our annualized loan loss
rate was an attractive 5.12%. This is in the lower range of what the Company
targets. Record applications, record loans, record revenue and record profits
punctuate the year.
    The success for the year is attributable to many factors. Our Board of
Directors positioned the Company well considering the speed at which all
economic and financial assumptions were being challenged. Tough strategic
decisions regarding product mix, credit quality, loan volumes, and credit
pricing have proved, in hindsight, to be largely correct ones. Our management
team and our dedicated staff executed on the business plan. Key investments in
infrastructure and systems continued to yield efficiencies. Our financial
partnerships provided the required funding throughout the year. Due largely to
a reduction in competitors, the lender/dealer industry relationships became
more balanced than they were in the past years. Lastly, while the strength of
the Canadian economy deteriorated during the year, unemployment levels did not
become seriously elevated until well into calendar 2009.
    It has been RIFCO's strategy over the last number of years to modify its
underwriting in order to focus on loans representing improved credit quality.
In the competitive auto loan marketplace, higher credit quality mix typically
results in reduced interest rate yield but provides improved operating
efficiencies and reduced loan losses. We have seen our interest rate yield
reduce to 19.31% from 20.75% in the prior year.
    In keeping a multi year time frame in mind, the company believes that it
may be near the most opportune time of the economic cycle in which to
originate new auto loans.
    Starting in September 2007, RIFCO began consistently reporting that the
marketplace had become 'aggressive' and that risk taking and pricing was
becoming 'unprofitable and unsustainable'. It is always more convenient to
grow originations during the 'peak of the cycle' while eternal optimism reigns
and credit quality is being compromised. Loans written during this past
euphoric period must still be collected during this current recession. Acting
contrary to the marketplace, RIFCO's originations during that period were
curtailed as we elected not to match mispriced risk taking.
    The world has now changed. Competition in our niche has eased
tremendously. The relationship between dealers and lenders was previously
unfairly one-sided against the lenders. Relationships are largely more
balanced now.
    If unemployment is peaking, and new auto loans will be written to those
still employed, risk is reduced. If used car values are bottoming, and new
auto loans will be written on vehicles that have already depreciated, risk is
reduced. RIFCO has further tightened its underwriting and yet has seemingly
unlimited growth opportunities. Most important, those loans that are
underwritten using today's more stringent criteria will perform better than
average as the economy improves.
    Canadians will continue to need to finance their automotive purchases. A
significant and growing portion of Canadians will continue to require non-bank
financing for these purchases. RIFCO requires only the funding capital to
further take advantage of this opportune market.
    RIFCO experienced no interruptions to its financing solutions since the
ABCP issues became significant in August 2007 and during the reported year.
The Company maintains a $7.5M senior debt facility from BMO Bank of Montreal
for the build up of finance receivables prior to loan securitization.
    The Company has been advised that the $30M securitization facility, with
Servus Credit Union (Servus) that was due for renewal on May 31, 2009 will not
be renewed. The facility was fully utilized prior to expiring.
    In communicating the non-renewal, Servus indicated that although the
loans sold into the facility has performed as expected, and that the
administration of the loans by RIFCO has been completed in a professional
manner, 'market conditions' dictate that no further capacity can be authorized
at this time.
    This facility was originally established in June 2007 with Community
Credit Union. On November 1, 2008, Community Credit Union completed a merger
with Servus and Commonwealth Credit Union to create the largest credit union
in Alberta. RIFCO will continue to administer previously securitized loans in
accordance with its agreement with the Servus agreement. RIFCO would like to
thank Servus for their participation as a valued funder. While there is no
assurance, the Company is optimistic that as market conditions improve, an
opportunity may exist in the future to renew securitizing of additional loans
into the facility.
    RIFCO maintains a separate securitization facility with Securcor Trust
for $30M that at year end had $30M in authorized remaining capacity. The
facility has been accessed since year end. This facility has a June 30, 2009
renewal date. The facility renewal date has been extended for 30 days in order
to facilitate the renewal process. The Company has maintained a securitization
facility with Securcor Trust since March 2005. The Company is confident that
the Securcor Trust facility will be renewed under acceptable terms. RIFCO has
met all covenants for all lender facilities since the inception of the Company
in 2002.
    Should the Securcor Trust facility be renewed for the expected $30M the
Company will have sufficient capacity to repeat the prior year's loan
origination and securitization levels for the upcoming fiscal year.
    The Company continues to dialogue with current funding partners and to
seek new funding partners. Among its efforts, RIFCO is working with federal
government representatives in order to determine its suitability for
participation in one or more government programs intended to alleviate recent
restrictions in access to credit.
    Access to increasing amounts of low cost capital is important to the
Company's continuing growth aspirations.

    
    Statements of Income
    For the year ended March 31                          2009           2008

    Revenue
      Loan Interest                                 1,941,885      2,199,625
      Income from Securitized assets               11,416,542      4,816,674
      Administration and other fees                   233,162        588,393
    -------------------------------------------------------------------------
    Total Revenue                                  13,591,589      7,604,692

      Financing fees & insurance                    1,328,578      1,053,529
      Interest                                        557,930        616,603
    -------------------------------------------------------------------------
    Net financing Income                           11,705,081      5,934,560

      Provision for credit & Prepayment Losses      6,807,152      2,584,044
      Repossession & recovery costs                   149,897        132,166
    -------------------------------------------------------------------------
    Net financing income after provision
     for losses                                     4,748,032      3,218,350

    Operating Expense
      Wages & Benefits                              1,720,704      1,525,178
      Professional Fees                               118,576        175,716
      Office & General                                569,970        540,368
      Stock-based compensation                        135,044        110,593
      Amortization                                     39,646         36,794
    -------------------------------------------------------------------------
    Total Operating Expenses                        2,583,940      2,388,649

      Income before taxes                           2,164,092        829,702
      Income Tax (expense) recovery - current      (1,142,000)      (214,208)
      Income Tax (expense) recovery - future          394,000        (75,500)
    -------------------------------------------------------------------------
    Net Income (loss)                               1,416,092        539,994

    Earnings per share Basic/Diluted                     0.07           0.03

    Issued and Outstanding Shares                  19,229,598     19,229,598
    Fully Diluted Basis                            20,975,320     22,106,652
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Quarterly Results:
    ------------------
    

    A net loss in Q4 of $195K is being reported compared to net income of
$340K in the prior year. EPS of negative $0.01 compares to positive EPS of
$0.02 in the prior year.
    Loan originations decreased 1.6% to $7.91M from $8.04M in the prior year.
Company revenues decreased 5.7% to $2.56M from $2.71M in the prior year.
Operating expenses were unchanged at $671K from $670K in the prior year.
    Revenues were reduced by 40.7% from Q3's record revenues of $4,316K due
to a 52.6% decrease in loans securitized. This reduction in loans securitized
resulted in decreased taxable income in the fiscal year. To accommodate the
lower securitization level in Q4 and the resulting decreased cash, the Company
secured $1.0M of short term subordinated debt financing on April 1, 2009 which
was subsequently repaid on May 15, 2009.
    Actual loans written off during the quarter totaled $670K compared to
$287K in the prior year. With the addition of collection expenses this
corresponds to an annualized quarterly loss rate of 5.71% and was a negative
contribution to our year end average loss rate of 5.12%.
    Actual prepayment losses on securitized loans during the quarter totaled
$790,397 compared to $258,594 in the prior year. The prepayment losses during
the quarter were negatively impacted by increasing delinquency of securitized
loans and the early buy-back requirement of loans. Prepayment losses increase
in periods of rising delinquency and losses and will stabilize when these
items level off or start to recede.
    In Q4, special provisioning totaling an additional $150,000 against
future loan loss and $438,000 against future prepayment losses was made.
Without these special provisions the company would have reported a profitable
quarter.

    
    Additional Q4 Highlights over the same quarter of the prior year:

    -   Managed finance receivables increased by 53.7%
    -   Applications processed increased by 31.5%
    -   Operating expense ratio reached a record low 5.42% from 9.40%
    -   Operating expenses saw no increase in actual dollars
    -   Average managed cost of borrowing increased to 7.75% from 6.90%

    Statements of Income
    For the three months ended March 31                  2009           2008

    Revenue
      Loan Interest                                   370,437        562,042
      Income from Securitized assets                2,133,485      2,032,270
      Administration and other fees                    54,466        117,510
    -------------------------------------------------------------------------
    Total Revenue                                   2,558,388      2,711,822

      Financing fees & insurance                      272,076        314,882
      Interest                                        115,838        175,999
    -------------------------------------------------------------------------
    Net financing Income                            2,170,474      2,220,941

      Provision for credit & prepayment Losses      1,698,530        919,028
      Repossession & recovery costs                    44,411         35,687
    -------------------------------------------------------------------------
    Net financing income after
     provision for losses                             427,533      1,266,226

    Operating Expense
      Wages & Benefits                                456,810        453,643
      Professional Fees                                53,746         67,601
      Office & General                                128,972        119,459
      Stock-based compensation                         21,180         22,789
      Amortization                                     10,089          6,594
    -------------------------------------------------------------------------
    Total Operating Expenses                          670,797        670,086

      Income before taxes                            (243,264)       596,140
      Income Tax Recovery (expense)                    48,000       (206,608)
    -------------------------------------------------------------------------
    Net Income (loss)                                (195,264)       389,532

    Earnings per share Basic/Diluted                    (0.01)          0.02

    RIFCO's Annual Shareholders meeting will be held on September 9, 2009 at
3:00PM at the Red Deer Lodge, 4311 - 49th Avenue, Red Deer, Alberta. We look
forward to meeting with our shareholders and interested parties to share our
vision for the future.

    About RIFCO Inc.
    ----------------
    

    RIFCO is one of Canada's fastest-growing automotive finance companies.
Non-prime auto loans are indirectly originated through a growing network of
selected new and used vehicle dealers operating in all provinces except
Saskatchewan and Quebec.
    The common shares of RIFCO INC. are traded on the TSX Venture Exchange
under the symbol "RFC". There are 19.23 million shares (basic) outstanding and
20.98 million (fully diluted) shares.

    
    The TSX Venture Exchange does not accept responsibility for the adequacy
    or accuracy of this release
    






For further information:

For further information: RIFCO INC., Lance A. Kadatz, Vice President and
Chief Financial Officer, Telephone: (403) 314-1214 Ext 111, Fax: (403)
314-1132, Email: kadatz@rifco.net, Website: www.rifco.net

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