Springleaf Touts Higher Earnings
Evansville-based Springleaf Holdings Inc. (NYSE: LEAF) says it still expects its $4.25 billion acquisition of Maryland-based OneMain Financial to close in the third quarter of the year. The company today reported no net income or loss in the first quarter, but says core earnings were $64 million, compared to $50 million during the same quarter the previous year.
May 7, 2015
Evansville, Ind. — Springleaf Holdings, Inc. (NYSE:LEAF), today reported a GAAP basis net income of $0 million, or $0.00 per diluted share for the first quarter of 2015, compared with net income of $52 million or $0.45 per diluted share in the first quarter of 2014, which included a pretax gain of $55 million on the sale of real estate assets.
For Core Consumer Operations, core earnings (a non-GAAP measure) for the quarter was $64 million, a 28% increase from $50 million in the prior year quarter, and core earnings per diluted share (a non-GAAP measure) was $0.55 for the first quarter versus $0.43 in the prior year quarter.
First Quarter Highlights
Consumer net finance receivables reached $3.9 billion at March 31, 2015, an increase of $736 million, or 23% from March 31, 2014, and up 2% from December 31, 2014.
Consumer net finance receivables per branch were $4.7 million at March 31, 2015, up 24% from March 31, 2014 and 2% from December 31, 2014.
Risk-adjusted yield for our Consumer segment in the quarter was 21.24%, down 68 basis points from the first quarter of 2014.
The company generated $868 million of total consumer origination volume in the first quarter, including $207 million of direct auto loan originations. Direct auto loan receivables reached $415 million at quarter-end.
Jay Levine, President and CEO of Springleaf said, “We are very pleased to report another quarter of strong growth in core earnings, up 28% from last year, as we continue to generate positive operating leverage from our key strategy of serving our customer base and growing receivables per branch. Once again this quarter, both branch receivables and branch originations grew north of 20% year over year and consumer receivables per branch reached $4.7 million.”
Commenting on the pending acquisition of OneMain Financial, Levine added, “We are making progress toward closing the acquisition of OneMain, which we continue to expect to take place in the third quarter.”
Core Consumer Operations: (Reported on a historical accounting basis, which is a non-GAAP measure. Refer to the reconciliation of non-GAAP to comparable GAAP measures below.)
Consumer and Insurance
Consumer and Insurance pretax income was $65 million in the quarter versus $49 million in the first quarter of 2014, and up slightly from the fourth quarter of 2014.
Consumer net finance receivables reached $3.9 billion at March 31, 2015, an increase of 23% from March 31, 2014 and up 2% from December 31, 2014, driven by the company's same focus on increasing personal loan originations through its branch network, as well as the continued strong growth in the direct auto loan product. Consumer net finance receivables per branch continued to grow, reaching $4.7 million at March 31, 2015, up from $3.8 million at March 31, 2014 and $4.6 million at December 31, 2014.
Net interest income was $216 million in the quarter, up 28% from the prior year quarter and 4% from the prior quarter. Yield in the current quarter was 26.88%. Risk adjusted yield, representing yield less net charge-off rate, was 21.24% in the quarter, down 68 basis points from the first quarter of 2014 as net charge-offs increased year-over-year. Risk adjusted yield declined 75 basis points from the fourth quarter of 2014 due primarily to the increased charge-offs.
The annualized net charge-off ratio was 5.64% in the quarter, versus 5.01% in the prior year quarter and 4.96% in the prior quarter.
The annualized gross charge-off ratio was 6.43% in the quarter, up 87 basis points from the prior year quarter and up 65 basis points from the fourth quarter 2014. Recoveries improved in the quarter at 79 basis points versus 55 basis points in the first quarter of 2014.
The 60+ delinquency ratio was 2.53% at quarter end, versus 2.45% at prior year quarter end and 2.82% at prior quarter end.
Acquisitions and Servicing
The Acquisitions and Servicing segment contributed $36 million to the company's consolidated pretax income in the quarter. The entire Acquisitions and Servicing segment, which includes non-controlling interests, generated pretax income of $67 million in the quarter5, with net interest income of $104 million and a yield of 26.78%. Actual net finance receivables at quarter-end were $1.9 billion, down from $2.0 billion at December 31, 2014. The principal balance of the portfolio was $2.4 billion at quarter-end versus $3.0 billion at March 31, 2014.
The annualized net charge-off ratio was 5.43% in the quarter, versus 8.67% in the prior year quarter and 5.56% in the prior quarter.
The annualized gross charge-off ratio was 6.06% in the quarter, down 322 basis points from the prior year quarter and 9 basis points from the fourth quarter 2014. Recoveries continued to improve in the quarter at 64 basis points versus 59 basis points in the fourth quarter of 2014.
The delinquency ratio for the Acquisitions and Servicing segment was 4.22% at the end of the quarter, a decrease of 47 basis points from the prior quarter end.
Non-Core Portfolio: (Reported on a historical accounting basis, which is a non-GAAP measure.)
Legacy Real Estate and Other Non-Core
The Non-Core Portfolio (consisting of legacy real estate loans) generated a pretax loss of $48 million in the quarter. The loss resulted primarily from the reduction in interest earning assets due to real estate sales completed in 2014. The sale proceeds, which have been allocated to the Non-Core portfolio, are expected to be used to fund the purchase of OneMain. At closing, the majority of the debt allocated to the Non-Core Portfolio will be re-allocated to the Core Consumer segment. The real estate portfolio was $0.8 billion at quarter end, down from $8.1 billion from the prior year quarter end.
The Other Non-Core activities generated a pretax loss of $10 million.
Liquidity and Capital Resources
As of March 31, 2015, the company had $4.3 billion of cash and highly liquid investment securities. The company had total outstanding debt of $9.6 billion at quarter-end, in a variety of debt instruments.
On May 4, 2015, the company issued approximately 19.4 million shares of common stock for net proceeds of approximately $978 million. The proceeds may be used to fund the acquisition of OneMain and/or for general corporate purposes, which may include debt repurchases and repayments, capital expenditures and other possible acquisitions.
Source: Springleaf Holdings Inc.