RIFCO Reports $347K Third Quarter Profit

RED DEER, AB, Feb. 17 /CNW/ - RIFCO Inc. (TSXV: RFC) is pleased to announce its financial results for the third quarter ending December 31, 2009. The Company is pleased to report that despite a difficult economic environment RIFCO remains on track for its fourth consecutive profitable year.

Net income for the quarter of $347,090, represents a reduction from the $682,989 reported in Q3 of the prior year. This brings net income to $546,439 in the first three quarters, down from $1,611,356 in the prior year. Loan originations in the third quarter increased to $8.46M from $6.34M in the prior quarter, an increase of 33%, and a reduction of 19.8% from the $10.54M in the prior year.

As the Company faced high securitization pricing through the "credit crunch", RIFCO's loan pricing was increased to preserve the Company's lending margin in the first half of the year.

RIFCO has been granting non-traditional loans in the automotive sector since 2002 and has granted over $136M in loans. The Company has always believed that its underwriting and operational systems would hold up under stress. The economic environment over the past 18 months has acted as a real life "stress test" for RIFCO's core assumptions. While granting and collecting RIFCO's loans in 2010 will remain more challenging than in some previous years, the Company has earned its confidence.

RIFCO's platform, made up of people and systems, leverages reasonably priced capital into above average returns. This platform has become even more valuable as it performs admirably and is validated through these challenging times. The Company is optimistic about the future.

Increased lending rates have resulted in lower origination volumes. In anticipation of the improved funding costs in Q3, lending rates in some key areas were decreased in the quarter. This has contributed to an increased loan closing rate. While the total number of processed applications declined by 4.7% over the prior quarter the loan closing rate improved to 16.6% from 12.8%. Neither credit nor documentation requirements were reduced in the quarter.

For the first time in five quarters the delinquency rate has declined. In Q3, delinquency dropped to 4.91% from 5.76% in the prior quarter overall. Loan credit performance has been stressed in concert with the economy over the last five quarters. It is our belief that delinquency will continue to trend downward.

The Company's average loan loss rate (12 month rolling) stands at 5.86% which is an increase from 5.68% in the prior quarter. We believe the average loan loss rate has peaked and will start to stabilize and decline moving forward. The Company is within the target loan loss range of 5.5% - 6.5% for the year. While operating within this challenging environment, RIFCO has continued diligent efforts in both the credit adjudication and payment collections functions in order to maintain targeted credit results.

The Company has endeavoured to ensure secure stable reasonably priced capital through the crisis of credit availability. In the first half of the fiscal year, securitization costs rose to the highest levels the Company had ever experienced. However, in this quarter the Company has enjoyed more attractive funding costs. The Company expects the improved rates to continue.

To fund the acquisition of a growing level of finance receivables, the Company uses borrowings under its senior credit facilities ($9.50M) and subordinated debentures ($6.5M). Most of the Company's finance receivables are ultimately securitized through $60M per year in loan securitization facilities that currently have 75% in remaining authorized capacity.

It also remains RIFCO's strategy to pursue increased availability of senior credit facilities in order to grow the Company's overall level of on-book loan receivables. The senior credit facility is currently the lowest cost funds for the Company. Increased on-book (non-securitized) receivables will likely lead to increased consistency of revenue and less volatility of earnings.

RIFCO is well positioned to regain its growth trajectory and fund an increasing amount of new loans. As funding market conditions continue to improve, increasingly profitable growth opportunities will be restored for the Company. RIFCO expects to see quarter over quarter loan origination growth moving forward with improved profitability.

RIFCO remains steadfast in originating only loans that it believes can achieve acceptable profit margins. As margins are affected by funding rates and by expected credit performance, RIFCO adjusts targeted origination levels, credit requirements, and lending rates while maintaining market continuity.


    -   Net Income in Q3 decreased to $347K from net profit of $683K (YOY)
    -   Revenue in Q3 decreased to $3.67M from $4.32M (YOY)
    -   Managed Loans increased 17.7% to $55.65M (YOY)
    -   Cash releases increased 198% from securitization holdback accounts to
        $2.06M from $.69M (YOY)
    -   Loan Originations in Q3 reduced 19.8% to $8.46M (YOY)
    -   Loans Securitized decreased to $8.46M from $12.55M (YOY)
    -   Q3 - EPS was $0.02 down from $0.04 (YOY)
    -   Book value per share has increased to $0.474 from $0.452 (YOY)
    -   Operating Expense Ratio reduced by 1.08% to 4.64% (YOY)
    -   Operating Expenses were $640K a 3.0% reduction (YOY)
    -   Funding Costs increased to 7.71% from 6.64% (YOY)
    -   Average Cost of Borrowing increased to 7.85% from 7.53% (YOY)
    -   Delinquency Ratio increased by .80% to 4.91% (YOY)
    -   Average Loan Loss Rate increased from 4.77% to 5.86% (YOY)
    -   Revenue increased by 33% to $3.67M over the prior quarter
    -   Managed Loans increased 4.6% over the prior quarter
    -   Net Income increased to $347K from $35K in the prior quarter
    -   Loan Originations increased 33% over the prior quarter
    -   Operating Expense Ratio decreased (improved) to 4.64% from 5.21% in
        the prior quarter
    -   Operating Expenses were reduced by 7.0% over the prior quarter
    -   Delinquency Ratio decreased to 4.91% from 5.76% in the prior quarter
    -   Average Loan Loss Rate increased to 5.86% from 5.68% in the prior

As is RIFCO's custom, please note the Q3 progress report against RIFCO's specific objectives for 2010 as published in the 2009 annual report to the shareholders.

    1.  Maintain loan originations of over $40 million
           Loan originations in the first three quarters were $21.93M.

    2.  Grow managed assets by 40% to over $70 million
           Managed financed receivables in the first three quarters grew to

    3.  Maintain revenue of over $12 million
           Revenue in the first three quarters reached $9.31M.

    4.  Achieve managed finance receivables annualized write offs between
        5.5% and 6.5%
           Year-to-date average loss rate currently stands at 5.86%.

    About RIFCO

RIFCO is one of Canada's fastest growing automotive finance companies. Non-traditional 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 20.82 million (fully diluted) shares.

Neither TSX Venture Exchange nor its Regulation Services Provider accepts 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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