What changed in this filing

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Item 1. Financial Statements

2023-10-30 compared with 2023-08-01 · 124 added, 107 removed, 1396 unchanged (14% of the section changed)

3 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 3.1 $ 7.7

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, 12,821,681 and 12,756,885 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Common stock, $ .01 par value, 80,000,000 shares authorized, 12,566,219 and 12,756,885 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

Paid-in capital 271.3 245.7

7 unchanged sentences

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

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

27 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

Net income $ 70.8 $ 86.8 $ 192.5 $ 408.5

Other comprehensive gain (loss) , net of tax:

Unrealized gain (loss) on securities, net of tax ( 0.6 ) ( 0.7 ) 0.2 ( 2.4 )

Other comprehensive gain (loss) ( 0.6 ) ( 0.7 ) 0.2 ( 2.4 )

Other comprehensive loss, net of tax:

Unrealized loss on securities, net of tax ( 0.2 ) ( 1.2 ) — ( 3.6 )

Other comprehensive loss ( 0.2 ) ( 1.2 ) — ( 3.6 )

Comprehensive income $ 70.6 $ 85.6 $ 192.5 $ 404.9

2 unchanged sentences

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Dollars in millions) For the Three Months Ended June 30, 2023

(Dollars in millions) For the Three Months Ended September 30, 2023

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

6 unchanged sentences

( 256,232 ) — — ( 126.3 ) — ( 126.3 )

Restricted stock units converted to common stock

1,000 — — — — —

Stock options exercised 770 — 0.3 — — 0.3

Balance, end of period 12,566,219 $ 0.1 $ 271.3 $ 1,432.4 $ ( 2.9 ) $ 1,700.9

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

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

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

8 unchanged sentences

Balance, end of period 12,924,711 $ 0.1 $ 235.8 $ 1,356.7 $ ( 3.4 ) $ 1,589.2

(Dollars in millions) For the Six Months Ended June 30, 2023

(Dollars in millions) For the Nine Months Ended September 30, 2023

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

2 unchanged sentences

Net income — — — 192.5 — 192.5

Other comprehensive gain — — — — 0.2 0.2

Stock-based compensation — — 29.0 — — 29.0

3 unchanged sentences

Balance, end of period 12,566,219 $ 0.1 $ 271.3 $ 1,432.4 $ ( 2.9 ) $ 1,700.9

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

(Dollars in millions) For the Nine Months Ended September 30, 2022

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

11 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

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

(In millions) For the Nine Months Ended September 30,

Cash Flows From Operating Activities:

10 unchanged sentences

Decrease (increase) in income taxes receivable ( 5.5 ) 80.2

Decrease in income taxes payable ( 2.3 ) —

Increase in income taxes payable 7.0 —

Decrease in other assets 27.0 17.6

21 unchanged sentences

Net cash provided by (used in) financing activities 199.8 ( 651.6 )

Net decrease in cash and cash equivalents and restricted cash and cash equivalents ( 5.7 ) ( 3.4 )

Net increase (decrease) in cash and cash equivalents and restricted cash and cash equivalents 20.5 ( 38.8 )

Cash and cash equivalents and restricted cash and cash equivalents beginning of period 417.7 434.2

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 June 30, 2023 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 September 30, 2023 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

We are an indirect lender from a legal perspective, meaning the Consumer Loan is originated by the Dealer and assigned to us.

The vast majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories.

The majority of the Consumer Loans assigned to us are made to consumers with impaired or limited credit histories.

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 June 30, For the Six Months Ended June 30,

For the Three Months Ended September 30, For the Nine Months Ended September 30,

Consumer Loan Assignment Volume 2023 2022 2023 2022

2 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

In recent years, we have expanded our financing programs to consumers with higher credit ratings, which has contributed to the reduction in the percentage of total unit volume with either FICO ® scores below 650 or no FICO ® scores.

We have two programs:

3 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 six quarters:

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

Unit Volume Dollar Volume (1)

6 unchanged sentences

June 30, 2023 72.4 % 27.6 % 68.6 % 31.4 %

September 30, 2023 74.8 % 25.2 % 71.7 % 28.3 %

(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 June 30, 2023 and December 31, 2022, we had $ 2.8 million and $ 7.1 million, respectively, in cash and cash equivalents that were not insured by the Federal Deposit Insurance Corporation (“FDIC”).

As of September 30, 2023 and December 31, 2022, we had $ 2.8 million and $ 7.1 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 June 30, 2023 and December 31, 2022, we had $ 405.0 million and $ 406.5 million, respectively, in restricted cash and cash equivalents that were not insured by the FDIC.

As of September 30, 2023 and December 31, 2022, we had $ 431.2 million and $ 406.5 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

June 30, 2023 December 31, 2022 June 30, 2022 December 31, 2021

September 30, 2023 December 31, 2022 September 30, 2022 December 31, 2021

Cash and cash equivalents $ 3.1 $ 7.7 $ 10.7 $ 23.3

94 unchanged sentences

Since all known, significant credit quality indicators have already been factored into our forecasts and pricing, we are not able to use any specific credit quality indicators to predict or explain variances in actual performance from our initial expectations.

Any variances in performance from our initial expectations are the result of Consumer Loans performing differently from historical Consumer Loans with similar characteristics.

Any variances in performance from our initial expectations are a result of Consumer Loans performing differently from historical Consumer Loans with similar characteristics.

We periodically adjust our statistical pricing model for new trends that we identify through our evaluation of these forecasted collection rate variances.

6 unchanged sentences

For additional information, see Note 6.

For the three and six months ended June 30, 2023 and 2022, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

For the three and nine months ended September 30, 2023 and 2022, we did not make any other methodology changes for Loans that had a material impact on our financial statements.

Finance Charges

88 unchanged sentences

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

(In millions) As of June 30, 2023 As of December 31, 2022

(In millions) As of September 30, 2023 As of December 31, 2022

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 June 30, 2023

(In millions) As of September 30, 2023

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 June 30, 2023

(In millions) As of September 30, 2023

Amortized Cost Gross Unrealized

4 unchanged sentences

Asset-backed securities 16.9 — ( 0.5 ) 16.4

Municipal securities 0.8 — — 0.8

Mortgage-backed securities 0.2 — — 0.2

10 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 June 30, 2023

(In millions) Securities Available for Sale with Gross Unrealized Losses as of September 30, 2023

Less than 12 Months 12 Months or More

26 unchanged sentences

(In millions) As of

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Contractual Maturity Amortized Cost Estimated Fair

8 unchanged sentences

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

(In millions) As of June 30, 2023

(In millions) As of September 30, 2023

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 June 30, 2023

For the Three Months Ended September 30, 2023

(In millions)

28 unchanged sentences

$ 6,784.6 $ 3,027.6 $ 9,812.2 $ ( 2,269.6 ) $ ( 762.1 ) $ ( 3,031.7 ) $ 4,515.0 $ 2,265.5 $ 6,780.5

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

(In millions)

29 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

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

12 unchanged sentences

Balance, end of period $ 6,784.6 $ 3,027.6 $ 9,812.2 $ ( 2,269.6 ) $ ( 762.1 ) $ ( 3,031.7 ) $ 4,515.0 $ 2,265.5 $ 6,780.5

For the Six Months Ended June 30, 2022

For the Nine Months Ended September 30, 2022

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

24 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Provision for Credit Losses

5 unchanged sentences

$ 108.0 $ 76.6 $ 184.6

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

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

Provision for Credit Losses Dealer Loans Purchased Loans Total

3 unchanged sentences

(In millions)

For the Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

Provision for Credit Losses

5 unchanged sentences

$ 327.3 $ 245.2 $ 572.5

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

(In millions) For the Nine Months Ended September 30, 2022

Provision for Credit Losses Dealer Loans Purchased Loans Total

6 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

New Consumer Loan Assignments

14 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

New Consumer Loan Assignments

12 unchanged sentences

$ 253.7 $ 101.2 $ 354.9

(In millions) For the Six Months Ended June 30, 2023

(In millions) For the Nine Months Ended September 30, 2023

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

5 unchanged sentences

Expected net Loan income at the time of assignment (5) $ 915.2 $ 387.1 $ 1,302.3

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

(In millions) For the Nine Months Ended September 30, 2022

New Consumer Loan Assignments Dealer Loans Purchased Loans Total

17 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2023

For the Three Months Ended September 30, 2023

Expected Future Net Cash Flows

13 unchanged sentences

(In millions)

For the Three Months Ended June 30, 2022

For the Three Months Ended September 30, 2022

Expected Future Net Cash Flows

12 unchanged sentences

$ 5,591.1 $ 3,467.7 $ 9,058.8

(In millions) For the Six Months Ended June 30, 2023

(In millions) For the Nine Months Ended September 30, 2023

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

5 unchanged sentences

Balance, end of period $ 6,429.0 $ 3,510.2 $ 9,939.2

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

(In millions) For the Nine Months Ended September 30, 2022

Expected Future Net Cash Flows Dealer Loans Purchased Loans Total

15 unchanged sentences

For additional information regarding credit quality, see Note 3.

The following table compares our forecast of Consumer Loan collection rates as of June 30, 2023 with the forecasts as of March 31, 2023, December 31, 2022, and at the time of assignment, segmented by year of assignment:

The following table compares our forecast of Consumer Loan collection rates as of September 30, 2023 with the forecasts as of June 30, 2023, December 31, 2022, and at the time of assignment, segmented by year of assignment:

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

Consumer Loan

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

Assignment Year September 30, 2023 June 30, 2023 December 31, 2022 Initial

Forecast June 30, 2023 December 31, 2022 Initial

2014 71.7 % 71.7 % 71.7 % 71.8 % 0.0 % 0.0 % - 0.1 %

10 unchanged sentences

Consumer Loan

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

Assignment Year September 30, 2023 June 30, 2023 December 31, 2022 Initial

Forecast June 30, 2023 December 31, 2022 Initial

2014 71.6 % 71.6 % 71.6 % 71.9 % 0.0 % 0.0 % - 0.3 %

12 unchanged sentences

Consumer Loan

Assignment Year June 30, 2023 March 31, 2023 December 31, 2022 Initial

Forecast March 31, 2023 December 31, 2022 Initial

Assignment Year September 30, 2023 June 30, 2023 December 31, 2022 Initial

Forecast June 30, 2023 December 31, 2022 Initial

2014 72.5 % 72.5 % 72.5 % 70.9 % 0.0 % 0.0 % 1.6 %

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 June 30, 2023 and December 31, 2022, segmented by year of assignment:

The following table summarizes the past-due status of Consumer Loan assignments as of September 30, 2023 and December 31, 2022, segmented by year of assignment:

(In millions)

Total Loans as of June 30, 2023 (1) (2)

Total Loans as of September 30, 2023 (1) (2)

Pre-term Consumer Loans (3)

9 unchanged sentences

(In millions)

Dealer Loans as of June 30, 2023 (1)

Dealer Loans as of September 30, 2023 (1)

Pre-term Consumer Loans (3)

10 unchanged sentences

(In millions)

Purchased Loans as of June 30, 2023 (2)

Purchased Loans as of September 30, 2023 (2)

Pre-term Consumer Loans (3)

50 unchanged sentences

(5) We consider a Consumer Loan to be current for purposes of forecasting expected collection rates if contractual repayments are less than 11 days past due.

The following table summarizes the write-offs for Consumer Loan assignments for the three and six months ended June 30, 2023, segmented by year of assignment:

(In millions) For the Three Months Ended June 30, 2023

The following table summarizes the write-offs for Consumer Loan assignments for the three and nine months ended September 30, 2023, segmented by year of assignment:

(In millions) For the Three Months Ended September 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

6 unchanged sentences

$ 153.7 $ 180.2 $ 333.9

(In millions) For the Six Months Ended June 30, 2023

(In millions) For the Nine Months Ended September 30, 2023

Write-offs by Consumer Loan Assignment Year Dealer Loans Purchased Loans Total

8 unchanged sentences

During the first half of 2023, we experienced a decrease in Consumer Loan prepayments to below-average levels and, as a result, slowed our forecasted net cash flow timing.

The below-average levels of Consumer Loan prepayments continued through the third quarter of 2023.

Historically, Consumer Loan prepayments have been lower in periods with less availability of consumer credit.

15 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

5 unchanged sentences

(In millions) As of

Balance Sheet Location June 30, 2023 December 31, 2022

Balance Sheet Location September 30, 2023 December 31, 2022

Trust assets Restricted cash and cash equivalents $ 1.7 $ 0.4

4 unchanged sentences

Other income consists of the following:

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

(In millions) For the Three Months Ended September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

9 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Remarketing fees consist of fees retained from the sale of repossessed vehicles by Vehicle Remarketing Services, Inc.

Remarketing fees consist of fees charged to dealers that are retained from the sale of repossessed vehicles by Vehicle Remarketing Services, Inc.

(“VRS”), our wholly owned subsidiary that is responsible for remarketing vehicles for Credit Acceptance.

2 unchanged sentences

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 June 30, 2023

(In millions) For the Three Months Ended September 30, 2023

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

7 unchanged sentences

Total $ 7.8 $ 5.3 $ 2.5 $ 0.5 $ 16.1

(In millions) For the Six Months Ended June 30, 2023

(In millions) For the Nine Months Ended September 30, 2023

Ancillary Product Profit Sharing Interest Remarketing Fees Other Total Other Income

9 unchanged sentences

Debt consists of the following:

(In millions) As of June 30, 2023

(In millions) As of September 30, 2023

Principal Outstanding Unamortized Debt Issuance Costs Unamortized Discount Carrying

11 unchanged sentences

Total debt $ 4,616.5 $ ( 22.4 ) $ ( 3.4 ) $ 4,590.7

(1) Excludes deferred debt issuance cost s of $ 4.9 million and $ 3.9 million as of June 30, 2023 and December 31, 2022, respectively, which are included in other assets.

(1) Excludes deferred debt issuance cost s of $ 4.6 million and $ 3.9 million as of September 30, 2023 and December 31, 2022, respectively, which are included in other assets.

(2) Warehouse facilities and Term ABS financings.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

General information for each of our financing transactions in place as of June 30, 2023 is as follows:

General information for each of our financing transactions in place as of September 30, 2023 is as follows:

(Dollars in millions)

2 unchanged sentences

Amount Interest Rate Basis as of

June 30, 2023

September 30, 2023

Revolving Secured Line of Credit Facility n/a 06/22/2026 $ 390.0 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

17 unchanged sentences

Term ABS 2023-2 (2) Credit Acceptance Funding LLC 2023-2 5/15/2025 (3) $ 400.0 Fixed rate

Term ABS 2023-3 (2) Credit Acceptance Funding LLC 2023-3 8/15/2025 (3) $ 400.0 Fixed rate

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

14 unchanged sentences

(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

19 unchanged sentences

(Dollars in millions) As of

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Revolving Secured Lines of Credit

104 unchanged sentences

Interest rate 6.39 % — %

Term ABS 2023-3

Principal balance outstanding $ 400.0 $ —

Loans pledged as collateral 604.8 —

Restricted cash and cash equivalents pledged as collateral 37.2 —

Interest rate 6.86 % — %

2024 Senior Notes

13 unchanged sentences

This limitation equals 80 % of the value of Loans, as defined in the agreement governing our revolving secured line of credit facility, less a hedging reserve (not exceeding $ 1.0 million), and the amount of other debt secured by the collateral that secures our revolving secured line of credit facility.

Borrowings under our revolving secured line of credit facility are secured by a lien on most of our assets.

Borrowings under our revolving secured line of credit facility are secured by a lien on most of our assets that do not secure obligations under our Warehouse facilities or Term ABS financings.

We entered into the RTP facility on May 3, 2023.

1 unchanged sentence

The RTP facility terminates automatically if the lender ceases to be part of the commercial bank syndicate under our revolving secured line of credit facility or if its lending commitments under our revolving secured line of credit facility are terminated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Warehouse Facilities

3 unchanged sentences

In turn, each such subsidiary pledges the Loans as collateral to secure financing that will fund the cash portion of the purchase price of the Loans.

The financing provided to each such subsidiary under the applicable facility is generally limited to the lesser of 80 % of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

outstanding balance of the conveyed Loans, as determined in accordance with the applicable agreement, plus certain restricted cash and cash equivalents pledged as collateral, or the facility limit.

The financing provided to each such subsidiary under the applicable facility is generally limited to the lesser of 80 % of the outstanding balance of the conveyed Loans, as determined in accordance with the applicable agreement, plus certain restricted cash and cash equivalents pledged as collateral, or the facility limit.

The financings create indebtedness for which the subsidiaries are liable and which is secured by all the assets of each subsidiary.

22 unchanged sentences

In addition, in our capacity as servicer of the Loans, we have a limited right to exercise a “clean-up call” option to purchase Loans from the Funding LLCs and/or the trusts under certain specified circumstances.

For those Funding LLCs with a trust, when the trust’s indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust.

For all Funding LLCs, after the indebtedness is paid in full, any remaining collections will ultimately be available to be distributed to us as the sole member of the respective Funding LLC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

those Funding LLCs with a trust, when the trust’s indebtedness is paid in full, either through collections or through a prepayment of the indebtedness, the trust is to pay any remaining collections over to its Funding LLC as the sole beneficiary of the trust.

For all Funding LLCs, after the indebtedness is paid in full, any remaining collections will ultimately be available to be distributed to us as the sole member of the respective Funding LLC.

The table below sets forth certain additional details regarding the outstanding Term ABS financings:

(Dollars in millions)

Term ABS Financings Close Date Net Book Value of Loans

Term ABS Financings Closing Date Net Book Value of Loans

Conveyed at Closing Revolving Period

11 unchanged sentences

Term ABS 2023-2 May 25, 2023 500.1 Through May 15, 2025

Term ABS 2023-3 August 24, 2023 500.1 Through August 15, 2025

On December 18, 2019, we issued $ 400.0 million aggregate principal amount of 5.125 % senior notes due 2024 (the “2024 senior notes”).

12 unchanged sentences

We used the net proceeds from the offering of the 2026 senior notes for general corporate purposes, including repayment of outstanding borrowings under our revolving secured line of credit facility.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

The 2024 senior notes and 2026 senior notes (the “senior notes”) are guaranteed on a senior basis by the Guarantors, which are also guarantors of obligations under our revolving secured line of credit facility.

1 unchanged sentence

The indentures for the senior notes provide for a guarantor of the senior notes to be released from its obligations under its guarantee of the senior notes under specified circumstances.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

Mortgage Note

2 unchanged sentences

Debt Covenants

As of June 30, 2023, we were in compliance with our covenants under our 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 September 30, 2023, we were in compliance with our covenants under our 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.

3 unchanged sentences

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

As of June 30, 2023, we were in compliance with all such covenants.

As of September 30, 2023, 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 and the RTP facility.

3 unchanged sentences

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 June 30, 2023 and December 31, 2022:

The following tables provide the terms of our interest rate cap agreements that were in effect as of September 30, 2023 and December 31, 2022:

(Dollars in millions)

As of June 30, 2023

As of September 30, 2023

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

1 unchanged sentence

300.0 Warehouse Facility IV Cap Floating Rate 05/2023 11/2024 300.0 7.50 %

Cap Floating Rate 05/2023 11/2024 275.0 7.50 %

200.0 Warehouse Facility V Cap Floating Rate 04/2023 01/2026 94.0 5.44 %

200.0 Warehouse Facility VIII Cap Floating Rate 09/2022 09/2025 200.0 5.42 %

Cap Floating Rate 09/2022 09/2025 166.7 5.42 %

100.0 Term ABS 2021-1 Cap Floating Rate 04/2023 06/2024 56.3 5.46 %

12 unchanged sentences

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

As of June 30, 2023 and December 31, 2022, the interest rate caps had a fair value of $ 1.4 million and $ 2.0 million, respectively.

As of September 30, 2023 and December 31, 2022, the interest rate caps had a fair value of $ 0.9 million and $ 2.0 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

2 unchanged sentences

For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

5 unchanged sentences

State and local income taxes

The decrease in our state income tax rate from 2022 to 2023 was primarily the result of the settlement of an uncertain tax position for state income taxes during the second quarter of 2023.

For the three months ended September 30, 2023, the impact of state and local income taxes on our effective income tax rate decreased from the same period in 2022 primarily due to the greater impact of state and local tax law changes recorded in the prior period.

For the nine months ended September 30, 2023, the impact of state and local income taxes on our effective income tax rate decreased from the same period in 2022 primarily due to the settlement of an uncertain tax position for state income taxes during the second quarter of 2023.

Excess tax benefits from stock-based compensation

2 unchanged sentences

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 six months ended June 30, 2023 increased from the same period in 2022 primarily due to an increase in the number of restricted stock units that were converted to common stock during the first quarter of 2023 due to the timing of long-term stock award grants.

The impact of excess tax benefits on our effective income tax rate for the nine months ended September 30, 2023 increased from the same period in 2022 primarily due to an increase in the number of restricted stock units that were converted to common stock during the first quarter of 2023 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 expense.

The impact of non-deductible expense on our effective income tax rate for the three and six months ended June 30, 2023 increased in magnitude from the same period in 2022 due to an increase in non-deductible executive compensation and a decrease in pre-tax income.

The impact of non-deductible expense on our effective income tax rate for the three and nine months ended September 30, 2023 increased in magnitude from the same periods in 2022 due to an increase in non-deductible executive compensation and a decrease in pre-tax income.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONTINUED)

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For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

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For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

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STOCK REPURCHASES

The following table summarizes our stock repurchases for the three and six months ended June 30, 2023 and 2022:

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

The following table summarizes our stock repurchases for the three and nine months ended September 30, 2023 and 2022:

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

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

Open Market (1) 256,232 $ 126.3 53,769 $ 26.5

Other (2) 424 0.2 — —

Total 16,226 $ 7.8 403,953 $ 229.7

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

(Dollars in millions) For the Nine Months Ended September 30,

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

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(1) Represents repurchases under authorizations by the board of directors for the repurchase of shares by us from time to time in the open market through privately negotiated transactions, through block trades, pursuant to trading plans adopted in accordance with Rule 10b5-1 under the Securities Exchange Act of 1934 or otherwise.

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 June 30, 2023, we had authorization to repurchase 142,267 shares of our common stock.

On August 21, 2023, 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 September 30, 2023, we had authorization to repurchase 1,886,035 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 units and the conversion of restricted stock units to common stock.

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Forfeited ( 791 ) 461.95

Outstanding as of June 30, 2023

Outstanding as of September 30, 2023

253,707 $ 160.24

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(In millions) For the Three Months Ended

June 30, For the Six Months Ended

September 30, For the Nine Months Ended

September 30,

2023 2022 2023 2022

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On March 14, 2023, the Company filed a motion to dismiss the complaint.

We cannot predict the eventual scope, 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 litigation.

The Company intends to vigorously defend itself in this matter.

On August 7, 2023, the court stayed the action pending the U.S.

Supreme Court’s decision in Consumer Financial Protection Bureau v.

Community Financial Services Association of America, Ltd., No.

22-448 (the “CFSA case”).

The court ordered the parties to file a joint letter updating the court by the earlier of November 3, 2023, or one week after a major development in the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (CONCLUDED)

We are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this litigation.

The Company intends to vigorously defend itself in this matter.

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.

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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