RIFCO Reports Record Loan Originations in Q3
Red Deer , Alberta , February 22, 2007: RIFCO Inc. (TSX.V-RFC) today announced that it has filed its unaudited financial statements for the third quarter ended December 31, 2007 , and related management's discussion and analysis with the regulatory authorities. Copies can be obtained from SEDAR at www.sedar.com or on the Company's website at www.rifco.net .
RIFCO experienced an increase in loan originations in the quarter to $6.10M up from $5.15M in the prior quarter, an 18.4% increase. In December, which is typically a slower origination month, the company generated record loan originations of $2.34M. The Canadian automotive industry sales have been reported as being "painfully slow" during the quarter with December sales reaching a 5.0% reduction year over year.
In the third quarter ending on December 31, 2007 , the Company reported net income of $176K, a 210% increase over the net income of $57K in the prior quarter. Revenue in the quarter was $1.76M, an increase of 7.3% over $1.64M recorded in the prior quarter. Managed loans grew to $26.3M, an increase from $24.3M in the prior quarter and 30.7% over Q3 in the prior year. EPS of $0.01 was achieved in the quarter. RIFCO has now reported quarterly net income in seven out of the last eight quarters.
Much of the growth has come from the enrollment and relationship building with additional automobile retailers. This task has been made easier by RIFCO's proprietary loan origination interface. On Nov 1, 2007 , RIFCO launched its online loan application solution for RIFCO enrolled new & used auto dealers. The interactive technology is intended to maintain personal interaction while efficiently communicating our innovative deal structuring. When combined with our competitive dealer incentives, the Company receives positive responses. By Dec 31, 2007 , we had converted and trained 107 dealers on the new online system of which 56 were existing RIFCO dealers and 51 were new dealers to RIFCO. We are currently enrolling & training up to 20 new dealers per month which will continue to positively fuel our loan origination growth.
RIFCO previously reported that certain competitors had reduced underwriting and documentation requirements and were offering, what was believed to be, unsustainable risk pricing. In this quarter, we have seen signs of a dichotomy of underwriting and pricing. Certain national non-prime auto lenders have tightened underwriting requirements and increased lending rates. Other national competitors seem to be maintaining relatively low credit requirements and pricing, or even lowering relative underwriting standards. It is RIFCO's intention to maintain consistent and sustainable underwriting with adequate pricing to compensate for the underwriting risk. RIFCO will continue to leverage its nimbleness to meet the needs of today's dynamic auto finance marketplace in order to foster stable dealer relationships. In the short term, RIFCO's growth opportunities may be affected by aggressive market pricing by competitors in select markets. The Company believes that in the current capital markets environment, such pricing by our competitors will ultimately prove to be unsustainable and unrewarding.
RIFCO has continued to invest in technology and human resources in order to improve capacity and efficiency. Increasing loan originations and assets under management will allow these investments to be leveraged toward increased revenues and improved earnings. The gains made in efficiencies continue to be evidenced in the Company's improving operating expense ratio. In Q3, this ratio improved to an all time quarterly low of 8.02%. Annual operating expense ratios for 2007, 2006, and 2005 were 12.12%, 18.13% and 22.25% respectively.
The Company is pleased to report that the average loss rate of 5.33% remains in our target range of 5 to 6%. Delinquency levels have increased from last years record lows but at 4.48% still compare favorably to the industry. Management is confident that credit quality remains within our targets levels but increased delinquency normally will result in increased losses. Diligence in this key priority remains.
RIFCO's liquidity position remains good. RIFCO has experienced no interruptions to its financing solutions since the ABCP issues became significant in August 2007. RIFCO's funding solutions remain as a $7.5M senior debt facility from BMO Bank of Montreal , $30M in a securitization facility from Securcor Trust and $30M in a securitization facility from Community Credit Union. On December 17, the Company disclosed the renewal of our BMO credit facility with no changes to terms, rates, limits and security from the prior year's facility.
- Highlights:
- Managed Loans up 30.7% to $26.33M (YOY)
- Loan Originations year to date up 7.9% to $16.89M (YOY)
- Operating Expense Ratio reduced by 2.25% to 8.02% (YOY)
- Average Cost of Borrowing stable at 8.18% from 8.16% (YOY)
- On-book Loans up 33.9% to $10.0M (YOY)
- Net Income in Q3 increased to $176K from $57K in the prior quarter, a 210% increase
- Revenue in Q3 increased 7.9% to $1.76M from $1.64M in the prior quarter
- Loan Originations up 18.4% over the prior quarter
- EPS of $0.01 up from $0.00 in the prior quarter
- On-book loans increased by $1.4M over the prior quarter a 16.5% increase
- Average Loan Loss Rate increased to 5.33% from 5.20% in the prior quarter
- Alberta Venture magazine ranked RIFCO with a 71% revenue growth rate, 21st on their 2008 Fast 50 list for Companies with revenue under $20M. This is the second time the Company has made this list.
Ultimately, changes to the global and Canadian credit environment will affect the credit underwriting of all lenders. We remain optimistic that those lenders that have remained true to their underwriting standards will ultimately be rewarded as risk adjusted pricing returns to more profitable levels.
About RIFCO Inc
RIFCO Inc. operates through its wholly owned subsidiary Repair Industry Finance Corporation. RIFCO is a specialty consumer finance corporation currently providing motorists with non-prime Auto Purchase Financing and mid-market Automotive & Commercial Repair Financing. RIFCO has a growing network of new & used vehicle dealers and licensed repair facilities 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". RIFCO Inc. has 19.23 million shares outstanding.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release
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