What changed in this filing

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Item 1. Financial Statements

2022-08-01 compared with 2022-05-02 · 224 added, 98 removed, 1243 unchanged (21% of the section changed)

3 unchanged sentences

(Dollars in millions, except per share data) As of

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Cash and cash equivalents $ 4.1 $ 23.3

21 unchanged sentences

Preferred stock, $ .01 par value, 1,000,000 shares authorized, none issued

Common stock, $ .01 par value, 80,000,000 shares authorized, 13,363,783 and 14,145,888 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,975,455 and 14,145,888 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Paid-in capital 225.8 197.2

7 unchanged sentences

(Dollars in millions, except per share data) For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Finance charges $ 425.6 $ 445.4 $ 849.7 $ 870.3

23 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Net income $ 107.4 $ 288.6 $ 321.7 $ 490.7

6 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Dollars in millions) For the Three Months Ended March 31, 2022

(Dollars in millions) For the Three Months Ended June 30, 2022

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

4 unchanged sentences

Stock-based compensation — — 9.1 — — 9.1

Repurchase of common stock

( 403,953 ) — — ( 229.7 ) — ( 229.7 )

Stock options exercised 15,625 — 5.2 — — 5.2

Balance, end of period 12,975,455 $ 0.1 $ 225.8 $ 1,296.4 $ ( 2.2 ) $ 1,520.1

(Dollars in millions) For the Three Months Ended June 30, 2021

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

Number Amount

Balance, beginning of period 16,710,422 $ 0.2 $ 161.7 $ 2,207.0 $ 0.9 $ 2,369.8

Net income — — — 288.6 — 288.6

Stock-based compensation — — ( 10.9 ) — — ( 10.9 )

Restricted stock forfeitures ( 109,010 ) — — — — —

1 unchanged sentence

( 598,163 ) — — ( 254.5 ) — ( 254.5 )

Balance, end of period 16,003,249 $ 0.2 $ 150.8 $ 2,241.1 $ 0.9 $ 2,393.0

(Dollars in millions) For the Six Months Ended June 30, 2022

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

Number Amount

Balance, beginning of period 14,145,888 $ 0.1 $ 197.2 $ 1,626.7 $ 0.2 $ 1,824.2

Net income — — — 321.7 — 321.7

Other comprehensive loss — — — — ( 2.4 ) ( 2.4 )

Stock-based compensation — — 18.2 — — 18.2

Repurchase of common stock ( 1,207,688 ) — ( 0.7 ) ( 652.0 ) — ( 652.7 )

Restricted stock units converted to common stock 3,980 — — — — —

3,980 — — — — —

Stock options exercised 33,275 — 11.1 — — 11.1

Balance, end of period 12,975,455 $ 0.1 $ 225.8 $ 1,296.4 $ ( 2.2 ) $ 1,520.1

(Dollars in millions) For the Three Months Ended March 31, 2021

(Dollars in millions) For the Six Months Ended June 30, 2021

Common Stock Paid-In Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) Total Shareholders' Equity

6 unchanged sentences

Repurchase of common stock ( 991,571 ) — ( 1.3 ) ( 388.4 ) — ( 389.7 )

( 393,408 ) — ( 1.3 ) ( 133.9 ) — ( 135.2 )

Restricted stock units converted to common stock 11,416 — — — — —

11,416 — — — — —

Balance, end of period 16,003,249 $ 0.2 $ 150.8 $ 2,241.1 $ 0.9 $ 2,393.0

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions) For the Three Months Ended March 31,

(In millions) For the Six Months Ended June 30,

Cash Flows From Operating Activities:

22 unchanged sentences

Purchases of property and equipment ( 1.0 ) ( 3.1 )

Net cash used in investing activities ( 18.5 ) ( 112.6 )

Net cash provided by (used in) investing activities ( 166.4 ) 21.6

Cash Flows From Financing Activities:

8 unchanged sentences

Net cash used in financing activities ( 462.6 ) ( 225.4 )

Net increase in cash and cash equivalents and restricted cash and cash equivalents 64.5 188.0

Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents ( 3.4 ) 464.7

Cash and cash equivalents and restricted cash and cash equivalents beginning of period

15 unchanged sentences

Actual results could differ from those estimates.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of March 31, 2022 for items that could potentially be recognized or disclosed in these financial statements.

We have evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2022 for items that could potentially be recognized or disclosed in these financial statements.

We did not identify any items that would require disclosure in or adjustment to the consolidated financial statements.

12 unchanged sentences

The following table shows the percentage of Consumer Loans assigned to us with either FICO ® scores below 650 or no FICO ® scores:

For the Three Months Ended March 31,

For the Three Months Ended June 30, For the Six Months Ended June 30,

Consumer Loan Assignment Volume 2022 2021 2022 2021

10 unchanged sentences

Dealer Loans and Purchased Loans are collectively referred to as “Loans”.

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last five quarters:

The following table shows the percentage of Consumer Loans assigned to us as Dealer Loans and Purchased Loans for each of the last six quarters:

Unit Volume Dollar Volume (1)

5 unchanged sentences

March 31, 2022 72.7 % 27.3 % 68.6 % 31.4 %

June 30, 2022 74.0 % 26.0 % 70.4 % 29.6 %

(1) Represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program and one-time payments made to Dealers to purchase Consumer Loans assigned under our Purchase Program.

46 unchanged sentences

Cash equivalents consist of readily marketable securities with original maturities at the date of acquisition of three months or less.

As of March 31, 2022 and December 31, 2021, we had $ 17.3 million and $ 22.9 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

As of June 30, 2022 and December 31, 2021, we had $ 3.8 million and $ 22.9 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

Restricted cash and cash equivalents consist of cash pledged as collateral for secured financings and cash held in a trust for future vehicle service contract claims.

As of March 31, 2022 and December 31, 2021, we had $ 477.8 million and $ 407.9 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of June 30, 2022 and December 31, 2021, we had $ 423.2 million and $ 407.9 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

1 unchanged sentence

(In millions) As of

March 31, 2022 December 31, 2021 March 31, 2021 December 31, 2020

June 30, 2022 December 31, 2021 June 30, 2021 December 31, 2020

Cash and cash equivalents $ 4.1 $ 23.3 $ 383.5 $ 16.0

99 unchanged sentences

For additional information, see Note 6.

For the three months ended March 31, 2022 and 2021, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

For the three and six months ended June 30, 2022 and 2021, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

Finance Charges

86 unchanged sentences

A comparison of the carrying amount and estimated fair value of these financial instruments is as follows:

(In millions) As of March 31, 2022 As of December 31, 2021

(In millions) As of June 30, 2022 As of December 31, 2021

Amount Estimated Fair

19 unchanged sentences

The following table provides the level of measurement used to determine the fair value for each of our financial instruments measured or disclosed at fair value:

(In millions) As of March 31, 2022

(In millions) As of June 30, 2022

Level 1 Level 2 Level 3 Total Fair Value

22 unchanged sentences

Restricted securities available for sale consist of the following:

(In millions) As of March 31, 2022

(In millions) As of June 30, 2022

Amortized Cost Gross Unrealized

17 unchanged sentences

The fair value and gross unrealized losses for restricted securities available for sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:

(In millions) Securities Available for Sale with Gross Unrealized Losses as of March 31, 2022

(In millions) Securities Available for Sale with Gross Unrealized Losses as of June 30, 2022

Less than 12 Months 12 Months or More

3 unchanged sentences

Fair Value Total

Corporate bonds $ 21.2 $ ( 0.7 ) $ 4.6 $ ( 0.4 ) $ 25.8 $ ( 1.1 )

Government and agency securities

$ 24.2 $ ( 1.0 ) $ — $ — $ 24.2 $ ( 1.0 )

Corporate bonds 19.5 ( 1.1 ) 4.5 ( 0.4 ) 24.0 ( 1.5 )

Asset-backed securities

10 unchanged sentences

Fair Value Total

Corporate bonds $ 15.0 $ ( 0.2 ) $ 1.3 $ — $ 16.3 $ ( 0.2 )

Government and agency securities

$ 10.1 $ ( 0.1 ) $ — $ — $ 10.1 $ ( 0.1 )

Corporate bonds 15.0 ( 0.2 ) 1.3 — 16.3 ( 0.2 )

Asset-backed securities 8.4 ( 0.1 ) — — 8.4 ( 0.1 )

6 unchanged sentences

(In millions) As of

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

Loans receivable and allowance for credit losses consist of the following:

(In millions) As of March 31, 2022

(In millions) As of June 30, 2022

Dealer Loans Purchased Loans Total

9 unchanged sentences

A summary of changes in Loans receivable and allowance for credit losses is as follows:

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

(In millions)

28 unchanged sentences

$ 5,832.9 $ 3,357.7 $ 9,190.6 $ ( 1,844.8 ) $ ( 1,022.1 ) $ ( 2,866.9 ) $ 3,988.1 $ 2,335.6 $ 6,323.7

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

(In millions)

28 unchanged sentences

$ 5,869.3 $ 4,097.2 $ 9,966.5 $ ( 1,733.4 ) $ ( 1,465.0 ) $ ( 3,198.4 ) $ 4,135.9 $ 2,632.2 $ 6,768.1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Six Months Ended June 30, 2022

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,655.1 $ 3,694.7 $ 9,349.8 $ ( 1,767.8 ) $ ( 1,245.7 ) $ ( 3,013.5 ) $ 3,887.3 $ 2,449.0 $ 6,336.3

Finance charges 679.3 519.8 1,199.1 ( 212.0 ) ( 137.4 ) ( 349.4 ) 467.3 382.4 849.7

Provision for credit losses — — — ( 74.8 ) ( 96.0 ) ( 170.8 ) ( 74.8 ) ( 96.0 ) ( 170.8 )

New Consumer Loan assignments (1) 1,320.0 578.4 1,898.4 — — — 1,320.0 578.4 1,898.4

Collections (2) ( 1,698.8 ) ( 1,010.8 ) ( 2,709.6 ) — — — ( 1,698.8 ) ( 1,010.8 ) ( 2,709.6 )

Accelerated Dealer Holdback payments 24.9 — 24.9 — — — 24.9 — 24.9

Dealer Holdback payments 90.4 — 90.4 — — — 90.4 — 90.4

Transfers (3) ( 43.2 ) 43.2 — 10.6 ( 10.6 ) — ( 32.6 ) 32.6 —

Write-offs ( 199.7 ) ( 469.1 ) ( 668.8 ) 199.7 469.1 668.8 — — —

Recoveries (4) 0.5 1.5 2.0 ( 0.5 ) ( 1.5 ) ( 2.0 ) — — —

Deferral of Loan origination costs 4.4 — 4.4 — — — 4.4 — 4.4

Balance, end of period $ 5,832.9 $ 3,357.7 $ 9,190.6 $ ( 1,844.8 ) $ ( 1,022.1 ) $ ( 2,866.9 ) $ 3,988.1 $ 2,335.6 $ 6,323.7

For the Six Months Ended June 30, 2021

(In millions) Loans Receivable Allowance for Credit Losses Loans Receivable, Net

Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,869.6 $ 4,255.2 $ 10,124.8 $ ( 1,702.1 ) $ ( 1,634.8 ) $ ( 3,336.9 ) $ 4,167.5 $ 2,620.4 $ 6,787.9

Finance charges 695.9 561.6 1,257.5 ( 204.8 ) ( 182.4 ) ( 387.2 ) 491.1 379.2 870.3

Provision for credit losses — — — 27.3 ( 18.1 ) 9.2 27.3 ( 18.1 ) 9.2

New Consumer Loan assignments (1) 1,158.7 672.8 1,831.5 — — — 1,158.7 672.8 1,831.5

Collections (2) ( 1,773.2 ) ( 1,067.9 ) ( 2,841.1 ) — — — ( 1,773.2 ) ( 1,067.9 ) ( 2,841.1 )

Accelerated Dealer Holdback payments 26.6 — 26.6 — — — 26.6 — 26.6

Dealer Holdback payments 79.4 — 79.4 — — — 79.4 — 79.4

Transfers (3) ( 66.9 ) 66.9 — 21.1 ( 21.1 ) — ( 45.8 ) 45.8 —

Write-offs ( 126.2 ) ( 392.6 ) ( 518.8 ) 126.2 392.6 518.8 — — —

Recoveries (4) 1.1 1.2 2.3 ( 1.1 ) ( 1.2 ) ( 2.3 ) — — —

Deferral of Loan origination costs 4.3 — 4.3 — — — 4.3 — 4.3

Balance, end of period $ 5,869.3 $ 4,097.2 $ 9,966.5 $ ( 1,733.4 ) $ ( 1,465.0 ) $ ( 3,198.4 ) $ 4,135.9 $ 2,632.2 $ 6,768.1

(1) The Dealer Loans amount represents advances paid to Dealers on Consumer Loans assigned under our Portfolio Program.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Provision for Credit Losses

5 unchanged sentences

$ 73.3 $ 74.2 $ 147.5

(In millions) For the Three Months Ended March 31, 2021

(In millions) For the Three Months Ended June 30, 2021

Provision for Credit Losses Dealer Loans Purchased Loans Total

2 unchanged sentences

Total $ ( 27.2 ) $ ( 3.3 ) $ ( 30.5 )

(In millions)

For the Six Months Ended June 30, 2022

Provision for Credit Losses

Purchased Loans

New Consumer Loan assignments

$ 93.1 $ 107.0 $ 200.1

Forecast changes

( 18.3 ) ( 11.0 ) ( 29.3 )

$ 74.8 $ 96.0 $ 170.8

(In millions) For the Six Months Ended June 30, 2021

Provision for Credit Losses Dealer Loans Purchased Loans Total

New Consumer Loan assignments $ 91.2 $ 132.2 $ 223.4

Forecast changes ( 118.5 ) ( 114.1 ) ( 232.6 )

Total $ ( 27.3 ) $ 18.1 $ ( 9.2 )

The net Loan income (finance charge revenue less provision for credit losses expense) that we will recognize over the life of a Loan equals the cash we collect from the underlying Consumer Loan less the cash we pay to the Dealer.

2 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

New Consumer Loan Assignments

12 unchanged sentences

$ 265.2 $ 104.7 $ 369.9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

(In millions)

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

New Consumer Loan Assignments

12 unchanged sentences

$ 213.0 $ 117.5 $ 330.5

(In millions) For the Six Months Ended June 30, 2022

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 2,017.2 $ 1,150.1 $ 3,167.3

Expected net cash flows at the time of assignment (2) 1,830.8 784.7 2,615.5

Loans receivable at the time of assignment (3) 1,320.0 578.4 1,898.4

Provision for credit losses expense at the time of assignment $ ( 93.1 ) $ ( 107.0 ) $ ( 200.1 )

Expected future finance charges at the time of assignment (4) 603.9 313.3 917.2

Expected net Loan income at the time of assignment (5) $ 510.8 $ 206.3 $ 717.1

(In millions) For the Six Months Ended June 30, 2021

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

Contractual net cash flows at the time of assignment (1) $ 1,820.3 $ 1,439.2 $ 3,259.5

Expected net cash flows at the time of assignment (2) 1,636.0 949.4 2,585.4

Loans receivable at the time of assignment (3) 1,158.7 672.8 1,831.5

Provision for credit losses expense at the time of assignment $ ( 91.2 ) $ ( 132.2 ) $ ( 223.4 )

Expected future finance charges at the time of assignment (4) 568.5 408.8 977.3

Expected net Loan income at the time of assignment (5) $ 477.3 $ 276.6 $ 753.9

(1) The Dealer Loans amount represents repayments that we were contractually owed at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we would be required to make if we collected all of the contractual repayments.

10 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2022

For the Three Months Ended June 30, 2022

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended March 31, 2021

For the Three Months Ended June 30, 2021

Expected Future Net Cash Flows

12 unchanged sentences

$ 5,626.5 $ 3,984.7 $ 9,611.2

(In millions) For the Six Months Ended June 30, 2022

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,249.7 $ 3,698.6 $ 8,948.3

New Consumer Loan assignments (1) 1,830.8 784.7 2,615.5

Realized net cash flows (2) ( 1,583.5 ) ( 1,010.8 ) ( 2,594.3 )

Forecast changes 19.9 46.9 66.8

Transfers (3) ( 48.3 ) 54.2 5.9

Balance, end of period $ 5,468.6 $ 3,573.6 $ 9,042.2

(In millions) For the Six Months Ended June 30, 2021

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

Balance, beginning of period $ 5,664.3 $ 3,880.1 $ 9,544.4

New Consumer Loan assignments (1) 1,636.0 949.4 2,585.4

Realized net cash flows (2) ( 1,667.2 ) ( 1,067.9 ) ( 2,735.1 )

Forecast changes 59.6 152.3 211.9

Transfers (3) ( 66.2 ) 70.8 4.6

Balance, end of period $ 5,626.5 $ 3,984.7 $ 9,611.2

(1) The Dealer Loans amount represents repayments that we expected to collect at the time of assignment on Consumer Loans assigned under our Portfolio Program, less the related Dealer Holdback payments that we expected to make.

8 unchanged sentences

For additional information regarding credit quality, see Note 3.

The following table compares our forecast of Consumer Loan collection rates as of March 31, 2022 with the forecasts as of December 31, 2021 and at the time of assignment, segmented by year of assignment:

Total Loans as of March 31, 2022

The following table compares our forecast of Consumer Loan collection rates as of June 30, 2022 with the forecasts as of March 31, 2022, as of December 31, 2021 and at the time of assignment, segmented by year of assignment:

Total Loans as of June 30, 2022

Forecasted Collection Percentage as of (1) Current Forecast Variance from

Consumer Loan

Assignment Year March 31, 2022 December 31, 2021 Initial

Forecast December 31, 2021 Initial

Assignment Year June 30, 2022 March 31, 2022 December 31, 2021 Initial

Forecast March 31, 2022 December 31, 2021 Initial

2013 73.4 % 73.4 % 73.4 % 72.0 % 0.0 % 0.0 % 1.4 %

8 unchanged sentences

2022 67.1 % 66.9 % — 67.6 % 0.2 % — - 0.5 %

Dealer Loans as of March 31, 2022

Dealer Loans as of June 30, 2022

Forecasted Collection Percentage as of (1) (2) Current Forecast Variance from

Consumer Loan

Assignment Year March 31, 2022 December 31, 2021 Initial

Forecast December 31, 2021 Initial

Assignment Year June 30, 2022 March 31, 2022 December 31, 2021 Initial

Forecast March 31, 2022 December 31, 2021 Initial

2013 73.4 % 73.3 % 73.3 % 72.1 % 0.1 % 0.1 % 1.3 %

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Purchased Loans as of March 31, 2022

Purchased Loans as of June 30, 2022

Forecasted Collection Percentage as of (1) (2) Current Forecast Variance from

Consumer Loan

Assignment Year March 31, 2022 December 31, 2021 Initial

Forecast December 31, 2021 Initial

Assignment Year June 30, 2022 March 31, 2022 December 31, 2021 Initial

Forecast March 31, 2022 December 31, 2021 Initial

2013 74.3 % 74.2 % 74.2 % 71.6 % 0.1 % 0.1 % 2.7 %

13 unchanged sentences

We evaluate and adjust the expected collection rate of each Consumer Loan subsequent to assignment primarily through the monitoring of consumer payment behavior.

The following table summarizes the past-due status of Consumer Loan assignments as of March 31, 2022 and December 31, 2021, segmented by year of assignment:

The following table summarizes the past-due status of Consumer Loan assignments as of June 30, 2022 and December 31, 2021, segmented by year of assignment:

(In millions)

Total Loans as of March 31, 2022 (1) (2)

Total Loans as of June 30, 2022 (1) (2)

Pre-term Consumer Loans (3)

9 unchanged sentences

(In millions)

Dealer Loans as of March 31, 2022 (1)

Dealer Loans as of June 30, 2022 (1)

Pre-term Consumer Loans (3)

10 unchanged sentences

(In millions)

Purchased Loans as of March 31, 2022 (2)

Purchased Loans as of June 30, 2022 (2)

Pre-term Consumer Loans (3)

56 unchanged sentences

Under CECL, changes in the amount and timing of forecasted net cash flows are recorded as a provision for credit losses in the period of change.

The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology impacted forecasted net cash flows and provision for credit losses as follows:

The removal of the COVID forecast adjustment and the implementation of the enhanced forecasting methodology during the first quarter of 2022 impacted forecasted net cash flows and provision for credit losses as follows:

(In millions) Increase / (Decrease) in

5 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Net assumed written premiums $ 19.1 $ 15.1 $ 36.8 $ 33.8

4 unchanged sentences

(In millions) As of

Balance Sheet location March 31, 2022 December 31, 2021

Balance Sheet location June 30, 2022 December 31, 2021

Trust assets Restricted cash and cash equivalents $ 1.0 $ 0.3

5 unchanged sentences

Other income consists of the following:

(In millions) For the Three Months Ended March 31,

(In millions) For the Three Months Ended June 30, For the Six Months Ended June 30,

2022 2021 2022 2021

Ancillary product profit sharing $ 12.9 $ 7.2 $ 27.6 $ 15.4

1 unchanged sentence

Dealer enrollment fees 0.7 0.7 1.1 1.1

Dealer support products and services 0.4 0.4

Interest 0.7 0.4 1.0 0.7

Dealer support products and services 0.2 0.3 0.6 0.7

Other — — — 0.2

Total $ 16.4 $ 10.5 $ 34.2 $ 22.2

13 unchanged sentences

Beginning August 5, 2019, Dealers may enroll in our Portfolio Program without incurring an enrollment fee.

Dealer support products and services consist of income earned from products and services provided to Dealers to assist with their operations, including sales and marketing, purchasing supplies and materials and acquiring vehicle inventory.

Income is recognized in the period the product or service is provided.

Interest consists of income earned on cash and cash equivalents, restricted cash and cash equivalents, and restricted securities available for sale.

1 unchanged sentence

Interest income on restricted securities available for sale is recognized over the life of the underlying financial instruments using the interest method.

Income is recognized in the period the product or service is provided.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The following table disaggregates our other income by major source of income and timing of the revenue recognition:

(In millions) For the Three Months Ended March 31, 2022

Ancillary product profit sharing Remarketing fees Dealer enrollment fees Dealer support products and services Interest Total Other Income

(In millions) For the Three Months Ended June 30, 2022

Ancillary product profit sharing Remarketing fees Dealer enrollment fees Interest Dealer support products and services Total Other Income

Source of income

6 unchanged sentences

Total $ 12.9 $ 1.9 $ 0.7 0.7 $ 0.2 $ 16.4

(In millions) For the Six Months Ended June 30, 2022

Ancillary product profit sharing Remarketing fees Dealer enrollment fees Interest Dealer support products and services Total Other Income

Source of income

Third Party Providers $ 27.6 $ — $ — $ 1.0 $ — $ 28.6

Dealers — 3.9 1.1 — 0.6 5.6

Total $ 27.6 $ 3.9 $ 1.1 $ 1.0 $ 0.6 $ 34.2

Timing of revenue recognition

Over time $ 27.6 $ — $ 1.1 $ 1.0 $ — $ 29.7

At a point in time — 3.9 — — 0.6 4.5

Total $ 27.6 $ 3.9 $ 1.1 $ 1.0 $ 0.6 $ 34.2

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Debt consists of the following:

(In millions) As of March 31, 2022

(In millions) As of June 30, 2022

Principal Outstanding Unamortized Debt Issuance Costs Carrying

11 unchanged sentences

Total debt $ 4,642.7 $ ( 26.4 ) $ 4,616.3

(1) Excludes deferred debt issuance cost s of $ 3.2 million and $ 3.6 million as of March 31, 2022 and December 31, 2021, respectively, which are included in other assets.

(1) Excludes deferred debt issuance cost s of $ 4.7 million and $ 3.6 million as of June 30, 2022 and December 31, 2021, respectively, which are included in other assets.

(2) Warehouse facilities and Term ABS.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

General information for each of our financing transactions in place as of March 31, 2022 is as follows:

General information for each of our financing transactions in place as of June 30, 2022 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

March 31, 2022

Revolving Secured Line of Credit n/a 06/22/2024 $ 435.0 (1) At our option, either LIBOR plus 187.5 basis points or the prime rate plus 87.5 basis points

June 30, 2022

Revolving Secured Line of Credit n/a 06/22/2025 $ 410.0 (1) At our option, either the Bloomberg Short-Term Bank Yield Index rate (BSBY) plus 187.5 basis points or the prime rate plus 87.5 basis points

Warehouse Facility II (2) CAC Warehouse Funding LLC II 04/30/2024 (3) 400.0 LIBOR plus 175 basis points (4)

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 11/17/2023 (3) 300.0 LIBOR plus 210 basis points (4)

Warehouse Facility IV (2) CAC Warehouse Funding LLC IV 05/20/2025 (3) 300.0 The Secured Overnight Financing Rate (SOFR) plus 221.4 basis points (4)

Warehouse Facility V (2) CAC Warehouse Funding LLC V 12/18/2023 (5) 125.0 LIBOR plus 225 basis points (4)

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Term ABS 2020-3 (2) Credit Acceptance Funding LLC 2020-3 10/17/2022 (3) 600.0 Fixed rate

Term ABS 2021-1 (2) Credit Acceptance Funding LLC 2021-1 02/15/2023 (3) 100.0 LIBOR plus 198.5 basis points (4)

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Term ABS 2021-4 (2) Credit Acceptance Funding LLC 2021-4 10/16/2023 (3) 250.1 Fixed rate

Term ABS 2022-1 (2) Credit Acceptance Funding LLC 2022-1 06/17/2024 (3) $ 350.0 Fixed rate

2024 Senior Notes n/a 12/31/2024 400.0 Fixed rate

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Mortgage Note (2) Chapter 4 Properties, LLC 08/06/2023 12.0 LIBOR plus 150 basis points

(1) The amount of the facility will decrease by $35.0 million on June 22, 2022 and will further decrease by $25.0 million on June 22, 2023.

(1) The amount of the facility will decrease by $25.0 million on June 22, 2023.

(2) Financing made available only to a specified subsidiary of the Company.

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(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Revolving Secured Line of Credit

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(Dollars in millions) As of

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Revolving Secured Line of Credit

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Interest rate 1.44 % 1.44 %

2024 Senior Notes

Term ABS 2022-1

Principal balance outstanding $ 350.0 $ —

Loans pledged as collateral 436.4 —

Restricted cash and cash equivalents pledged as collateral 47.6 —

Interest rate 5.03 % — %

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2026 Senior Notes

Principal balance outstanding $ 400.0 $ 400.0

Interest rate 6.625 % 6.625 %

Mortgage Note

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We have a $ 410.0 million revolving secured line of credit facility with a commercial bank syndicate.

The amount of the facility will decrease by $35.0 million on June 22, 2022 and will further decrease by $25.0 million on June 22, 2023.

The amount of the facility will decrease by $25.0 million on June 22, 2023.

Borrowings under the revolving secured line of credit facility, including any letters of credit issued under the facility, are subject to a borrowing-base limitation.

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Because the subsidiaries are organized as legal entities separate from us, their assets (including the contributed Loans) are not available to our creditors.

The subsidiaries pay us a monthly servicing fee equal to 6 % (4% for Warehouse Facility II and Warehouse Facility VIII) of the collections received with respect to the contributed Loans.

The subsidiaries pay us a monthly servicing fee equal to either 4 % or 6 %, depending upon the facility, of the collections received with respect to the contributed Loans.

The servicing fee is paid out of the collections.

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The Funding LLCs for the Term ABS 2019-2 and 2021-1 transactions pledged the Loans to their respective lenders.

The Term ABS 2019-1, 2019-3, 2020-1, 2020-2, 2020-3, 2021-2, 2021-3 and 2021-4 transactions each consist of three classes of notes.

The Term ABS 2019-3, 2020-1, 2020-2, 2020-3, 2021-2, 2021-3 and 2021-4 transactions each consist of three classes of notes, while Term ABS 2022-1 consists of four classes of notes.

Each financing at the time of issuance has a specified revolving period during which we are likely to contribute additional Loans to each Funding LLC.

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Because the Funding LLCs are organized as legal entities separate from us, their assets (including the contributed Loans) are not available to our creditors.

We receive a monthly servicing fee on each financing equal to 6 % ( 4 % for Term ABS 2021-2, 2021-3 and 2021-4) of the collections received with respect to the contributed Loans.

We receive a monthly servicing fee on each financing equal to either 4 % or 6 %, depending upon the financing, of the collections received with respect to the contributed Loans.

The fee is paid out of the collections.

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Contributed at Closing Revolving Period

Term ABS 2019-1 February 21, 2019 $ 503.1 Through February 15, 2021

Term ABS 2019-2 August 28, 2019 $ 625.1 Through August 15, 2022

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Term ABS 2021-4 October 28, 2021 312.6 Through October 16, 2023

Term ABS 2022-1 June 16, 2022 437.6 Through June 17, 2024

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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Debt Covenants

As of March 31, 2022, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

As of June 30, 2022, we were in compliance with our covenants under the revolving secured line of credit facility and our Warehouse facilities, including those that require the maintenance of certain financial ratios and other financial conditions.

These covenants require a minimum ratio of (1) our net earnings, adjusted for specified items, before income taxes, depreciation, amortization and fixed charges to (2) our fixed charges, as defined in the agreements.

These covenants also limit the maximum ratio of our funded debt less unrestricted cash and cash equivalents to tangible net worth.

Additionally, we must maintain consolidated net income, as defined in the agreements, of not less than $ 1 for the two most recently ended fiscal quarters.

Additionally, for one of our Warehouse facilities, we must maintain consolidated net income, as defined in the agreement, of not less than $1 for the two most recently ended fiscal quarters.

Some of these covenants may indirectly limit the repurchase of common stock or payment of dividends on common stock.

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Our Term ABS financings also contain covenants that measure the performance of the contributed assets.

As of March 31, 2022, we were in compliance with all such covenants.

As of June 30, 2022, we were in compliance with all such covenants.

As of the end of the quarter, we were also in compliance with our covenants under the senior notes indentures.

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We utilize interest rate cap agreements to manage the interest rate risk on certain secured financings.

The following tables provide the terms of our interest rate cap agreements that were in effect as of March 31, 2022 and December 31, 2021:

The following tables provide the terms of our interest rate cap agreements that were in effect as of June 30, 2022 and December 31, 2021:

(Dollars in millions)

As of March 31, 2022

As of June 30, 2022

Facility Amount Facility Name Purpose Start End Notional Cap Interest Rate (1)

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100.0 Term ABS 2021-1 Cap Floating Rate 02/2021 06/2024 100.0 5.50 %

(1) Rate excludes the spread over the corresponding LIBOR or commercial paper rate.

(1) Rate excludes the spread over the corresponding benchmark rate.

The interest rate caps have not been designated as hedging instruments.

As of March 31, 2022 and December 31, 2021, the interest rate caps had a fair value of $ 1.4 million and $ 0.2 million, respectively, as the capped rates were significantly above market rates.

As of June 30, 2022 and December 31, 2021, the interest rate caps had a fair value of $ 1.6 million and $ 0.2 million, respectively, as the capped rates were significantly above market rates.

The increase in fair value from December 31, 2021 was the result of an increase in market rates.

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For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

federal statutory income tax rate 21.0 % 21.0 % 21.0 % 21.0 %

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Effective income tax rate 24.4 % 24.0 % 24.6 % 23.8 %

State income taxes

State income taxes include non-deductible expenses related to uncertain tax positions.

The impact of these non-deductible expenses on our effective income tax rate for the three months ended March 31, 2022 increased from the same period in 2021 primarily due to an increase in the proportion of pre-tax income reserved for uncertain tax positions.

Excess tax benefits from stock-based compensation

We recognize an excess tax benefit or tax deficiency when the deduction for the stock-based compensation expense of a stock award for tax purposes differs from the cumulative stock-based compensation expense recognized in the financial statements.

The excess tax benefit or tax deficiency is recognized in provision for income taxes in the period in which the amount of the deduction is determined, which is when restricted stock vests, restricted stock units are converted to common stock or stock options are exercised.

Excess tax benefits reduce our effective income tax rate, while tax deficiencies increase our effective income tax rate.

The impact of excess tax benefits on our effective income tax rate for the three months ended March 31, 2022 decreased from the same period in 2021 primarily due to a decrease in the number of restricted stock units that were converted to common stock during the first quarter of 2022 due to the timing of long-term stock award grants.

Other items impacting our effective income tax rate primarily consist of non-deductible executive compensation expenses.

The impact of other items on our effective income tax rate for the three months ended March 31, 2022 increased from the same period in 2021 primarily due to an increase in non-deductible executive compensation, which was primarily the result of stock options granted under our Amended and Restated Incentive Compensation Plan (the “Incentive Plan”).

The impact of other items on our effective income tax rate for the three and six months ended June 30, 2022 increased from the same periods in 2021 primarily due to an increase in non-deductible executive compensation, which was primarily the result of stock options granted under our Amended and Restated Incentive Compensation Plan (the “Incentive Plan”).

For additional information, see Note 14.

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For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Weighted average shares outstanding:

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Dilutive number of weighted average shares outstanding 13,517,979 16,794,279 13,927,372 16,944,900

For the three months ended March 31, 2022, there were 45,600 stock opti ons outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three months ended March 31, 2022, there w ere no share s of restricted stock or restricted stock units outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three months ended March 31, 2021, there were no stock options, shares of restricted stock or restricted stock units outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For the three and six months ended June 30, 2022, there were 67,264 and 56,492 stock options outstanding, respectively, that were excluded from the computation of diluted net income per share because t heir inclusion would have been anti-dilutive.

For th e three and six months ended June 30, 2022, there w ere no shares of res tricted stock or restricted stock units outstanding that were excluded from the computation of diluted net income per share because their inclusion would have been anti-dilutive.

For th e three and six months ended June 30, 2021, t here were no stock options, shares of restricted stock or restricted stock units outstanding that were excluded from the computation of diluted net in come per share because their inclusion would have been anti-dilutive.

STOCK REPURCHASES

The following table summarizes our stock repurchases for the three months ended March 31, 2022 and 2021:

(Dollars in millions) For the Three Months Ended March 31,

The following table summarizes our stock repurchases for the three and six months ended June 30, 2022 and 2021:

(Dollars in millions) For the Three Months Ended June 30,

Number of Shares Repurchased Cost Number of Shares Repurchased Cost

Open Market (1) 403,953 $ 229.7 598,163 $ 254.5

(Dollars in millions) For the Six Months Ended June 30,

Stock Repurchases Number of Shares Repurchased Cost Number of Shares Repurchased Cost

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On September 28, 2021, the board of directors authorized the repurchase of up to two million shares of our common stock in addition to the board’s prior authorizations.

As of March 31, 2022, we had authorization to repurchase 823,560 shares of our common stock.

As of June 30, 2022, we had authorization to repurchase 419,607 shares of our common stock.

(2) Represents shares of common stock released to us by team members as payment of tax withholdings upon the vesting of restricted stock and restricted stock units and the conversion of restricted stock units to common stock.

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(In millions) For the Three Months Ended

June 30, For the Six Months Ended

2022 2021 2022 2021

Stock options $ 8.5 $ — $ 17.0 $ —

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Accordingly, the accounting grant date of the 770,500 previously-awarded stock options is July 21, 2021, and no expense was recognized for stock options prior to that date.

The reversal of stock-based compensation expense for the three and six months ended June 30, 2021 was primarily due to the forfeiture of unvested restricted stock and restricted stock units upon the retirement of our former Chief Executive Officer in May 2021, which resulted in an $ 11.5 million reversal of stock-based compensation expense.

We expect to recognize the future stock-based compensation expense as follows:

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The following matters include current actions to which we are a party and updates to matters that were disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On December 1, 2021, we received a subpoena from the Office of the Attorney General for the State of California seeking documents and information regarding GAP products, GAP product administration and refunds.

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As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

On October 2, 2020, a shareholder filed a putative class action complaint against the Company, its Chief Executive Officer and its Chief Financial Officer in the United States District Court for the Eastern District of Michigan, Southern Division, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements or omissions regarding the Company and its business, and seeking class certification, unspecified damages plus interest and attorney and expert witness fees and other costs on behalf of a purported class consisting of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired Credit Acceptance common stock from November 1, 2019 through August 28, 2020.

On October 2, 2020, a shareholder filed a putative class action complaint against the Company, its Chief Executive Officer (now former Chief Executive Officer), and its Chief Financial Officer (now Chief Executive Officer) in the United States District Court for the Eastern District of Michigan, Southern Division, alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5, promulgated thereunder, based on alleged false and/or misleading statements or omissions regarding the Company and its business, and seeking class certification, unspecified damages plus interest and attorney and expert witness fees and other costs on behalf of a purported class consisting of all persons and entities (subject to specified exceptions) that purchased or otherwise acquired Credit Acceptance common stock from November 1, 2019 through August 28, 2020.

On May 28, 2021, the court issued an opinion and order appointing lead plaintiff and lead counsel.

On July 22, 2021, the lead plaintiffs filed an amended complaint asserting similar violations, seeking similar relief and expanding the putative class to include all persons and entities (subject to specified exceptions) that purchased or otherwise acquired Credit Acceptance common stock from May 4, 2018 through August 28, 2020.

We cannot predict the duration or outcome of this lawsuit at this time.

As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this lawsuit.

The Company intends to vigorously defend itself in this matter.

On June 14, 2022, the Company reached an agreement in principle to settle this putative class action.

The agreement in principle contemplates an aggregate cash payment by the Company of $ 12.0 million to settle claims brought on behalf of all persons and entities that purchased or otherwise acquired Credit Acceptance common stock from May 4, 2018 through August 28, 2020.

The parties have agreed to negotiate in good faith to execute a definitive stipulation of settlement to be filed with the court, which the Company anticipates will provide for a full release of all claims against all defendants, including the Company and its officers, and expressly deny any liability, wrongdoing or responsibility by any of the defendants.

The definitive stipulation of settlement will be subject to approval by the court, which process may take several months.

Upon final approval of the settlement, the litigation would be dismissed with prejudice.

There can be no assurance that the litigation will be finally resolved in accordance with the agreement in principle.

We have estimated a probable loss of $ 12.0 million, all of which was recognized as a contingent loss during the second quarter of 2022.

On May 7, 2019, we received a subpoena from the Consumer Frauds and Protection Bureau of the Office of the New York State Attorney General, relating to the Company’s origination and collection policies and procedures in the state of New York.

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As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

On April 22, 2019, we received a civil investigative demand from the Bureau of Consumer Financial Protection (the “Bureau”) seeking, among other things, certain information relating to the Company’s origination and collection of Consumer Loans, TPPs and credit reporting.

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As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

On March 18, 2016, we received a subpoena from the Attorney General of the State of Maryland, relating to the Company’s repossession and sale policies and procedures in the state of Maryland.

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements