Consumer Portfolio Services’ loan-to-value ratio hit its lowest mark in four years, despite a continuous slowdown in loan originations, Chief Executive Charles Bradley said on an earnings call last week.
The LTV ratio declined to 112.7% in the second quarter, from around 115% for the past three years, eliminating some risk in those loans.
CPS purchased $233.9 million of retail contracts in 2Q17, down from $319.1 million during the same period the year prior. However, year-to-date CPS has grown originations 4% year over year, Chief Financial Officer Jeff Fritz said on the call.
Additionally, credit metrics have been improving steadily for the past two quarters, Bradley said. “It’s hard to tell in the numbers, but we think things are improving still,” he said. “It looks like the changes we made a few years back are starting to show up in the [cumulative net losses], and it’s a little too early to really call it a huge success.”
Annualized net charge-offs rose in 2Q17 to 7.6%, compared with 6.9% in 2Q16. “In terms of originations, it’s still quality over quantity,” Bradley added, noting that CPS has a stringent standard for originations. “We have always verified 100% of the income of our borrowers before we buy a loan. It is [odd] that this isn’t the norm in the industry, but for us it is.”
