November 19, 2008 16:58 ET

RIFCO Reports Net Profit of $321K in Second Quarter

Loan Originations Increase 101%, Net Profit Increases 464%

RED DEER, ALBERTA--(Marketwire - Nov. 19, 2008) - RIFCO Inc. (TSX VENTURE:RFC) is pleased to announce solid financial results for the second quarter ending September 30, 2008.

RIFCO is reporting positive quarterly net income and has done so for nine out of the last ten quarters. The reported net profit in Q2-09 of $321,021 is a dramatic 464% increase over the net profit of $56,870 in Q2 of the prior year. It is encouraging to report to shareholders $0.08 in EPS and $1.5M in net profits over the past twelve months.

RIFCO experienced an increase in loan originations in the quarter to $10.35M up from $5.15M in Q2 in the prior year, a 101% increase.

The first half of this year continues to demonstrate good progress in each of the metrics loan originations, revenue, net income, and EPS.

Six months ending September 30
$ 2008 2007
Loans Originated 19,865,376 10,791,973
Total Revenue 6,716,990 3,129,889
Net Income 928,367 (25,798)
EPS 0.05 -
Book value per share (rounded) 0.42 0.33

RIFCO is pleased to have added nearly $1 million in net income to retained earnings in the last two quarters. Shareholder's equity is nearly $8 million.

We are extremely pleased with the operational performance of the company. We continue to successfully originate and service a growing number of non-prime auto loans. As our company continues to enjoy benefits of increasing scale, our efficiency continues to improve. This improvement is detailed in our improving efficiency ratios. In Q2, our operating expense ratio improved to an all time quarterly low of 6.42%, a 1.03% reduction from 7.45% in the prior quarter.

Along with growth and efficiency, the credit performance of our loan portfolio has also been very good. Delinquency and loss rates are lower than a year ago. Delinquency levels in the quarter decreased to 3.77% from 3.95% in the prior quarter and compare favorably to industry norms. The Company is pleased to report an average loss rate of 4.40%. This ratio is better than our target loss rate range of 5-6%.

In the past year, each of three foreign owned auto finance companies have exited the Canadian marketplace. Between them, they had a significant share of non-prime auto lending in Canada. At its most competitive, the market was somewhat crowded and risk adjusted pricing was below optimal levels. Lower credit and documentation requirements and or lower contract interest rates were employed, by some, in order to defend or gain market share. Even with the firm competition that was previously witnessed, it is not believed that any of the foreign competitors ceased Canadian operations because they judged this market as unattractive. More likely, overall liquidity challenges and credit losses in other jurisdictions motivated a focusing and retrenchment strategy. RIFCO management believes that notwithstanding the recent peak competitive period, the Canadian non-prime auto sector represents a very attractive long term business niche.

Although less crowded than a year ago, the Canadian marketplace remains competitive. Canadian owned auto finance companies continue to serve the industry. Risk adjusted pricing and overall credit quality has improved for all. As always, RIFCO continues to leverage its competencies to develop strong industry relationships as it generates profitable loan growth.

RIFCO's effective cost of funds on recent securitizations has been higher. This is not unexpected based on the current capital markets environment. Much of the increased rates were not passed on to borrowers during the quarter, but instead impacted RIFCO's interest spreads.

In response to increased securitization costs and competitive easing, RIFCO has made adjustments to its pricing models to ensure that its interest spreads remain healthy.

Unfortunately, there are issues looming over many companies in many industries. RIFCO is not immune to the challenging economic and financial environment of today. While there are signs that the credit crunch which has frozen global debt markets is beginning to thaw, access to corporate capital remains severely impaired. Recent financial deterioration reported by the North American auto makers has added uncertainty to the entire auto industry. High energy prices, though recently moderated, have decreased demand for automobiles and have negatively impacted used vehicle prices. The American economic slowdown has spread to virtually every national economy. In Canada, our economic outlook has become less optimistic.

During these turbulent times, I believe that the priorities of RIFCO's leadership will serve the company well:

First, we need to preserve company value. We endeavor to protect the balance sheet, employ rational credit underwriting, maintain our access to funding, and always act with corporate integrity.

Second, we need to work to add company value. We endeavor to grow our origination and servicing capacity and efficiency. We endeavor to grow earnings per share, return on shareholder equity, and increase book value per share.

RIFCO has maintained its access to capital. 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.


- Net Income in Q2 increased to $321K from net profit of $57K, a 464% increase (YOY)

- Revenue in Q2 increased to $2.94M from $1.63M an increase of 80%(YOY)

- Managed Loans up 71% to $41.50M (YOY)

- Loan Originations in Q2 up 101% to $10.35M (YOY)

- Loans Securitized increased to $8.94M from $3.51M a 155% increase (YOY)

- Q2 - EPS was $0.02 up from $0.00 (YOY)

- Book value per share has increased to $0.42 from $0.33 (YOY)

- Operating Expense Ratio reduced by 4.59% to 6.42% (YOY)

- Funding Costs decreased to 6.81% from 6.89% (YOY)

- Average Cost of Borrowing reduced to 7.76% from 8.17% (YOY)

- Delinquency Ratio increased by 0.14% to 3.77% (YOY)

- Average Loan Loss Rate decreased from 5.20% to 4.40% (YOY)

- Managed Loans up 18% over the prior quarter

- Loan Originations up 9% over the prior quarter

- Operating Expense Ratio reduced to 6.42% from 7.45% in the prior quarter

- Delinquency Ratio decreased to 3.77% from 3.95% in the prior quarter

- Average Loan Loss Rate decreased to 4.40% from 4.54% in the prior quarter

As is our custom, please note our Q2 progress report against RIFCO's specific objectives for 2009 as published in our annual report to the shareholders.

1. Grow loan originations by 60% to over $40 million

Loan originations in the first two quarters were $19.87M an increase of 84% over the $10.79M originated in the first two quarters of the prior year. 50% of target achieved.

2. Grow managed assets by 50% to over $45 million

Managed financed receivables in the second quarter grew to $41.50M an increase of 71% over the $24.33M in the second quarter of the prior year. 92% of target achieved.

3. Grow revenue by 50% to over $11 million

Revenue in the first two quarters reached $6.72M an increase of 115% over the $3.13M in the first two quarters of the prior year. 61% of target achieved.

4. Achieve managed finance receivables annualized write offs between 5% and 6%

Year to date average loss rate achieved currently stands at 4.40% a decrease (improvement) from 5.20% reported in the second quarter of the prior year. Better than target.

5. Achieve continued growth in EPS, ROE and book value per share

- EPS of $.05 is reported for the first two quarters. This is a 67% increase over the EPS reported for all of the prior year of $0.03. On target.

- Based on the shareholders equity at the end of each prior quarter the ROE for the first two quarters is 12.93%. The first two quarters in the prior year reported negative ROE of .43%. The ROE reported in the prior year was 8.48%. On target.

- Book value per share has increased by $0.05 to $0.42. On target.

About RIFCO Inc.

RIFCO is one of Canada's fastest growing automotive finance companies. Non-prime auto loans are indirectly originated through a growing network of selected new and used vehicle dealers operating in all provinces except Saskatchewan and Quebec.

On Sept 27th this year, RIFCO attended the Small-Cap Conference in Calgary. As part of that conference Bill Graham, President and CEO gave a 14 minute presentation on RIFCO as an investment and financial results to June 30th, 2008.

The Video and PowerPoint presentation is posted to InvestmentPitch.com. We have provided the link below to allow those following our progress a chance to hear directly from the President.


The common shares of RIFCO INC. are traded on the TSX Venture Exchange under the symbol "RFC" and have 19.23 million shares outstanding.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

    Lance A. Kadatz
    Vice President and Chief Financial Officer
    (403) 314-1214 EXT 111
    (403) 314-1132 (FAX)
    Email: kadatz@rifco.net
    Website: www.rifco.net