AmeriCredit Corporation (ACF)
F3Q10 (Qtr End 03/31/10) Earnings Call Transcript
April 21, 2010 5:30 pm ET
Heidi Hak [ph] – Communications Manager
Dan Berce – President & CEO
Chris Choate – CFO, EVP & Treasurer
John Hecht – JMP Securities
Sameer Gokhale – Keefe, Bruyette & Woods
Bill Carcache – Macquarie Research
Chris Brendler – Stifel
Scott Valentin – FBR
Henry Coffey – Sterne, Agee
Bob Napoli – Piper Jaffray
Previous Statements by ACF
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Good afternoon everyone, my name is Jamie, and I will be your conference facilitator today. At this time I’d like to welcome everyone to the AmeriCredit Third Quarter Fiscal Year 2010 Earnings Conference Call. This call is being recorded. All lines have been placed on mute to prevent any background noise. After managements’ remarks there will be a question and answer period. I will now turn the call over Heidi Hak [ph], Communications Manager. Please go ahead, ma’am.
Good afternoon and welcome to AmeriCredit’s third quarter fiscal year 2010 earnings conference call. With me today for the prepared remarks are Dan Berce, President and CEO and Chris Choate, Chief Financial Officer. Also joining us are Clifton Morris, Chairman of the Board and Steve Bowman, Chief Credit and Risk Officer.
Before we proceed I must remind everyone that the topics we will discuss during today’s call will include forward-looking statements that involve risks and uncertainties detailed in the Company’s filings and reports with the Securities & Exchange Commission, including the Annual Report on Form 10-K for the year ended June 30, 2009.
Forward-looking statements are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management. Actual results and events may differ materially. We will be posting a transcript of the prepared remarks to our website shortly after we conclude today’s call. I will now turn the call over to Dan Berce. Dan?
Thank you, Heidi. Just a quick remark, first of all, Caitlin DeYoung is not with us today. She is out on maternity leave. She had a baby boy this past Monday. If you call her regular line for questions you will get taken care of by Chris or me or Heidi.
Anyway back to the script. Our March quarter proved to be exceptionally strong on many fronts. Originations grew to $624 million, credit performance continued to improve, and we earned $63 million, or $0.45 a share. While some of the strength in our key metrics can be attributed to favorable seasonal trends and an improving economic environment, we are also benefiting from the steps we have taken since early 2008 to improve the overall economics of new loan originations.
In our prepared remarks today I will cover our portfolio of credit performance and originations. Chris will then provide highlights of the March operating results and will update you on liquidity and funding.
Now, starting with credit, for the March 2010 quarter we had net credit losses of 7.6%, down from 8.9% last quarter and 7.8% a year ago. We also saw significant improvements in our delinquency metrics with 31 to 60 days delinquency declining to 5.3% at March 31
, 2010, down from 7.7% at December 31
, and 6% a year ago. Accounts greater than 60 days delinquent declined to 2.2% at quarter-end from 3.7% at December 31
, 2009, and 3% a year ago.
Our strong portfolio of credit performance reflected a confluence of positive factors. First, we benefited from normal seasonal improvements and higher tax refunds to consumers. Second, and more significantly, our portfolio continues to shift away from the weaker 2006 and 2007 originations to an increase in concentration of more recent vintages. Loans that we have originated since our credit tightening in the Spring of 2008 are performing much better than our initial expectations and may ultimately perform in line with or better than our 2003 production, which was the best in our history. Finally, we are seeing exceptionally strong used vehicle pricing for our repossessed vehicles.
Recovery rates on repossessed collateral were 44.9% for the March quarter compared to 42.2% last quarter and 39% a year ago. While we had anticipated a modest seasonal lift in our recovery rates in March, the imbalanced supply-demand dynamics within the used vehicle market have continued to help push up used vehicle pricing. Consistent with the Mannheim Index, which reached an all-time high rating in March, we saw extraordinarily strong used vehicle pricing for the month of March. However, with an increase in manufacture incentives on new cards, expected stabilization in the demand-supply dynamics and the adverse effect of the increasing age of vehicles we repossess and sell, we expect to see a moderation in recovery rates for the remainder of the calendar year.
Prospectively, with respect to credit trends the June quarter should bring seasonal trends in credit performance with credit losses improving and delinquencies beginning to rise. Overall, we anticipate sustained year-over-year improvement in our credit metrics the remainder of 2010 and into 2011.
Turning to originations, we originated $624 million of new loans in the March quarter, up from $379 million in the December quarter. The strong sequential increase in originations reflected normal seasonal trends in vehicle sales and loan applications and benefits from the steps we took to rebuild the originations including staffing increases, dealer additions, and more competitive pricing.
The average APRs on new loan originations decreased to 17.1% for the March quarter from 17.9% for the December quarter. Net acquisition fees decreased to 1% from 1.6% last quarter. Other key loan characteristics such as loan terms and loan to value ratios were similar compared to previous quarters. While pricing of these have decreased, loan level returns have remained very attractive due to declining cost of funds and favorable credit development.