RED DEER, AB, Nov. 13 /CNW/ - RIFCO Inc. (TSXV: RFC) is pleased to announce its financial results for the second quarter ending September 30, 2009.
Net income for the quarter of $34,699, represents a reduction from the $321,021 reported in Q2 of the prior year. This brings net income to $199,349 in the first half year down from $928,367 in the prior year. Management is pleased to report that despite a difficult economic environment RIFCO is on track for its fourth consecutive profitable year.
Loan originations in the second quarter decreased to $6.34M from $7.14M in the prior quarter, a decrease of 11.2% and a reduction of 38.7% from the $10.35M 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. This increase in pricing contributed to a 28.3% reduction in processed applications in the last six months over the prior six month period. However, managed finance receivables continued to grow by over 28% to $53.18M from $41.50M in the prior year.
As the Canadian economy weakened and as unemployment levels increased, RIFCO's credit performance decreased while remaining within stated targets. The Company is reporting an average loan loss rate of 5.68% which is within the target loan loss range of 5.5% - 6.5% for the year. Delinquent loans are now at 5.76% of managed assets. 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 higher loan losses and securitized loan prepayment losses seen in the quarter have eroded our net income to the marginally profitable level reported. We believe that loan losses have peaked and we have indications that improvement will be seen in coming quarters.
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 were the highest the Company had ever seen. However, in this quarter, and to be reflected in future financial results, RIFCO has seen an improvement in the availability of credit with improved pricing. The Company expects to enjoy improved rates for at least the coming 12 months.
In July, RIFCO announced the renewal of its $30 million securitization facility with Securcor Trust. In September, the Company announced a new securitization facility for $30M with a Schedule "1" Canadian Chartered Bank. This facility was accessed in September. In total, RIFCO has $60 million per year in authorized securitization facilities. Combined, these facilities have 89% in remaining authorized capacity.
On Oct 15th, the Company's senior credit facility was increased by $2M bringing the total credit available for the facility to $9.5M. At September 30th, the facility had $3.0M in outstanding Letters of Credit against it but was otherwise not drawn. The credit facility is used to grant non-traditional auto loans that are carried 'on-book' prior to securitization funding. It also remains RIFCO's strategy to pursue increased availability of senior credit facilities in order to re-grow the Company's overall level of on-book loan receivables. Senior credit facility is currently the lowest cost funds for the Company. Increased on-book receivables will likely lead to increased consistency of revenue and less volatility of earnings.
RIFCO is now 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 strong quarter over quarter loan origination growth moving forward with greatly 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 Q2 decreased to $35K from net profit of $321K (YOY)
- Revenue in Q2 decreased to $2.76M from $2.94M (YOY)
- Managed Loans increased 28.1% to $53.18M (YOY)
- Loan Originations in Q2 reduced 38.7% to $6.34M (YOY)
- Loans Securitized decreased to $6.47M from $8.94M (YOY)
- Q2 - EPS was zero down from $0.02 (YOY)
- Book value per share has increased to $0.46 from $0.42 (YOY)
- Operating Expense Ratio reduced by 1.21% to 5.21% (YOY)
- Funding Costs increased to 7.26% from 6.81% (YOY)
- Average Cost of Borrowing increased to 7.87% from 7.76% (YOY)
- Delinquency Ratio increased by 1.99% to 5.76% (YOY)
- Average Loan Loss Rate increased from 4.40% to 5.68% (YOY)
- Managed Loans down 10.3% over the prior quarter
- Loan Originations down 11.2% over the prior quarter
- Operating Expense Ratio increased to 5.21% from 5.02% in the prior
- Delinquency Ratio increased to 5.76% from 5.58% in the prior quarter
- Average Loan Loss Rate increased to 5.68% from 5.36% in the prior
As is RIFCO's custom, please note the Q2 progress report against RIFCO's
specific objectives for 2010 as published in the 2009 annual report to the
1. Maintain loan originations of over $40 million
Loan originations in the first two quarters were $13.47M.
2. Grow managed assets by 40% to over $70 million
Managed financed receivables in the first two quarters grew to
3. Maintain revenue of over $12 million
Revenue in the first two quarters reached $5.64M.
4. Achieve managed finance receivables annualized write offs between 5.5%
Year-to-date average loss rate currently stands at 5.68%.
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
20.98 million (fully diluted) shares.
Neither TSX Venture Exchange nor its Regulation Services Provider accepts
responsibility for the adequacy or accuracy of this release.
SOURCE RIFCO INC.
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: email@example.com, Website: www.rifco.net