With originations slowing down and delinquencies ticking up, Consumer Portfolio Services is provisioning more for its losses, Charles Bradley, chief executive of the subprime lender, said during its Tuesday earnings call.
The company set aside $48.5 million for credit losses in 2Q, a 3% increase from the previous quarter and a 9% jump year over year, Jeff Fritz, chief financial officer for the company said during the call.
“That’s a fairly substantial increase,” Bradley said. “With our focus on credit quality and launching the portfolio, we might expect that to continue in the future.”
During 2Q17, CPS purchased $233.9 million contracts, down from $319.1 million during the same period the year prior, according to the report. However, year to date CPS has grown originations by 4% year over year, Fritz said. The Company’s outstandings totaled $2.343 billion as of June 30, an increase from $2.253 billion in 2Q16.
“One thing that’s happening in the portfolio now is that with the growth levels where they are, the originations going where they are, the portfolio is seasoning somewhat quarter-after-quarter,” Fitz said. “For instance, where we stand right now at June 30th, the portfolio’s weighted average age is about 19 months and that compares to 16 months a year ago at June 30, 2016. So the portfolio is aging and that’s going to impact some of these metrics in terms of credit performance and the amounts of the allowance and provisions for credit losses.”
Delinquencies 30-day or more past due including repossession inventory came in at 9.64% of the total owned portfolio for the quarter, up 106 basis points from 8.58% in 2Q16. Annualized net charge-offs also rose in 2Q17 to 7.62% of the average owned portfolio compared with 6.94% in 2Q16.
In terms of the company’s future direction for the remainder of 2017, CEO Charles Bradley said he would, “Get back into the dealerships and reaffirm our relationships with the car dealers so they understand that we know what’s going on,” he said. “So as much as it’s subtle, it is something we’re working on today.”
