What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-08 compared with 2022-05-04 · 339 added, 139 removed, 508 unchanged (48% of the section changed)

16 unchanged sentences

our operations in March 1991.

From inception through March 31, 2022, we have originated a total of approximately $18.5 billion of automobile

From inception through June 30, 2022, we have originated a total of approximately $19.1 billion of automobile

contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured

3 unchanged sentences

Recent contract purchase volumes and managed portfolio levels are shown in the table below:

Contract Purchases

and Outstanding Managed Portfolio

$ in thousands

1 unchanged sentence

Managed Portfolio at Period End

Three months ended March 31, 2022

Six months ended June 30, 2022

In May 2021 we began purchasing

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in the third-party portfolio.

For the three months ended March 31, 2022, we originated $--20.6 million under this third-party program.

As of March 31, 2022, our managed portfolio includes $57.2 million of such third-party receivables.

For the six months ended June 30, 2022, we originated $63.6 million under this third-party program.

June 30, 2022, our managed portfolio includes $96.1 million of such third-party receivables.

Our principal executive offices

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For contracts acquired before 2018, we adopted CECL on January 1, 2020 and we may, as circumstances warrant, record as expense provisions

for credit losses, as we did during the year ended December 31, 2020 because of the uncertainty related to the pandemic.

for credit losses.

Since 1994 we have conducted

93 term securitizations of automobile contracts that we originated.

As of March 31, 2022, 19 of those securitizations are active and all

As of June 30, 2022, 19 of those securitizations are active and all

are structured as secured financings.

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$ in thousands

Number of Term Securitizations

Pledged in Term Securitizations

Three months ended March 31, 2022

Number of Term

Securitizations

Receivables Pledged

in Term Securitizations

Six months ended June 30, 2022

Generally, prior to a securitization

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funding capacity of $200 million, comprising three credit facilities.

The first $100 million credit facility was established in May 2012.

This facility was most recently renewed in December 2020, extending the revolving period to December 2022, with an optional amortization

period through December 2023.

In November 2015, we entered into another $100 million facility.

This facility was renewed in November 2017

and again in December 2019, extending the revolving period to December 2021, followed by an amortization period to December 2023.

2015, we entered into a $100 million facility that was renewed in April 2017 and again in February 2019.

We repaid the outstanding balance

for this facility at its maturity date in February 2021 and elected not to renew it.

We currently have short-term funding capacity of

The first credit facility was established in May 2012.

This facility

was most recently renewed in July 2022, extending the revolving period to July 2024, with an optional amortization period through July

In addition, the capacity was doubled from $100 million to $200 million at the July 2022 renewal.

In November 2015, we entered

into another $100 million facility.

This facility was most recently renewed in -January 2022, extending the revolving period to January

2024, followed by an amortization period to January 2026.

In June 2022, we doubled the capacity for this facility from $100 million to

$200 million.

In April 2015, we entered into

a $100 million facility that was renewed in April 2017 and again in February 2019.

We repaid the outstanding balance for this facility

at its maturity date in February 2021 and elected not to renew it.

We currently have short-term funding capacity of $400 million over

two credit facilities.

In a securitization and in

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such other event of default were to be accompanied by acceleration of such other indebtedness.

As of March 31, 2022, we were in compliance

As of June 30, 2022, we were in compliance

with all such covenants.

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Comparison of Operating Results for the

three months ended March 31, 2022 with the three months ended March 31, 2021

the three months ended March 31, 2022, our revenues were $74.4 million, an increase of $11.3 million, or 17.8%, from the prior year revenue

three months ended June 30, 2022 with the three months ended June 30, 2021

the three months ended June 30, 2022, our revenues were $82.0 million, an increase of $15.2 million, or 22.8%, from the prior year revenue

of $66.8 million.

The primary reason for the increase in revenues are the marks to the finance receivables measured at fair value and

the increase in the average outstanding balance of finance receivables measured at fair value.

Revenues for the three months ended March

31, 2022 include a $2.4 million mark up to the recorded value of the finance receivables measured at fair value.

This compares to a $4.4

million mark down in the prior year period.

The marks are estimates based on our evaluation of the appropriate fair value and future earnings

rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses.

During the three months ended March 31, 2022, we reduced our estimate for expected future losses in finance receivables measured at fair

value as we have observed that our previous estimates for increased losses due to the pandemic hand not materialized.

The change in estimated

losses resulted in the $2.4 million mark up for the three months ended March 31, 2022.

The primary reasons for the increase in revenues are the mark ups to the finance receivables measured at fair value

and the increase in the average outstanding balance of finance receivables measured at fair value.

Revenues for the three months ended

June 30, 2022 include a $4.7 million mark up to the recorded value of the finance receivables measured at fair value.

The marks are estimates

based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables

and increases or decreases in our estimates of future net losses.

During the three months ended June 30, 2022, we reduced our estimate

for expected future losses in finance receivables measured at fair value as we have observed that our previous estimates for increased

losses due to the pandemic had not materialized.

The change in estimated losses resulted in the $4.7 million mark up for the three months

ended June 30, 2022.

There was no mark up or mark down to the fair value portfolio in the prior year period.

Interest income for the three

months ended March 31, 2022 increased $4.0 million, or 6.0%, to $70.1 million from $66.1 million in the prior year.

months ended June 30, 2022 increased $10.2 million, or 15.6%, to $75.7 million from $65.4 million in the prior year.

The primary reason

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The table below shows the average balances and interest yields of the two components of our loan portfolio for the

three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

three months ended June 30, 2022 and 2021:

Three Months Ended June 30,

(Dollars in thousands)

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Other income was $1.6 million

for the three months ended March 31, 2022 compared to $1.4 million for the comparable period in 2021.

for the three months ended June 30, 2022 compared to $1.3 million for the comparable period in 2021.

24.0% increase was primarily driven by the origination and servicing fees we earned from third party receivables that began in May 2021.

These fees were $844,000 for the quarter ended March 31, 2022.

These fees were $1.2 million for the quarter ended June 30, 2022.

Our operating expenses

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Total operating expenses were

$45.0 million for the three months ended March 31, 2022, compared to $55.2 million for the prior period, a decrease of $10.1 million,

The decrease is primarily due to decreases in interest expense and provisions for credit losses.

$47.8 million for the three months ended June 30, 2022, compared to $52.9 million for the prior period, a decrease of $5.1 million, or

The decrease is primarily due to decreases in provisions for credit losses.

Employee costs were $20.6 million

during the three months ended March 31, 2022 compared to $20.2 million for the same quarter in the prior year.

during the three months ended June 30, 2022 compared to $19.4 million for the same quarter in the prior year.

The table below summarizes

our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended,

March 31, 2022 and 2021:

Three Months Ended March 31,

June 30, 2022 and 2021:

Three Months Ended June 30,

(Dollars in millions)

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services, and telecommunications.

General and administrative expenses were $8.2 million, a decrease from $7.7 million in the previous

year and represented 18.3% of total operating expenses.

General and administrative expenses was $8.3 million, a decrease from $7.8 million in the previous year

and represented 17.3% of total operating expenses.

Interest expense for the three

months ended March 31, 2022 were $16.4 million and represented 36.4% of total operating expenses, compared to $20.9 million in the previous

months ended June 30, 2022 were $18.8 million and represented 39.3% of total operating expenses, compared to $19.0 million in the previous

year, when it was 35.9% of total operating expenses.

Interest on securitization trust

debt decreased by $4.9 million for the three months ended March 31, 2022 compared to the prior period.

debt decreased by $1.1 million for the three months ended June 30, 2022 compared to the prior period.

The average balance of securitization

trust debt decreased to $1,808.5 million for the three months ended March 31, 2022 compared to $1,876.8 million for the three months ended

March 31, 2021.

In addition, the blended interest rates on new term securitizations have declined since 2020.

The annualized average rate

on our securitization trust debt was 3.0% for the three months ended March 31, 2022 compared to 3.9% in the prior year period.

quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest

rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors

are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization.

These and other

factors have resulted in fluctuations in our securitization trust debt interest costs.

The blended interest rates of our recent securitizations

are summarized in the table below:

Blended Cost of Funds on Recent Asset-Backed

Term Securitizations

trust debt increased to $2,037.3 million for the three months ended June 30, 2022 compared to $1,831.5 million for the three months ended

June 30, 2021.

The annualized average rate on our securitization trust debt was 3.1% for the three months ended June 30, 2022 compared

to 3.7% in the prior year period.

For each quarterly securitization transaction, the blended cost of funds is ultimately the result of

many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the

margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the

time of the securitization.

These and other factors have resulted in fluctuations in our securitization trust debt interest costs.

blended interest rates of our recent securitizations are summarized in the table below:

Blended Cost of Funds on Recent Asset-Backed Term Securitizations

Blended Cost of Funds

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Interest expense on warehouse

credit line debt increased by $156,000 to $1.2 million for the three months ended March 31, 2022 compared to $1.3 million in the prior

credit line debt increased by $366,000 to $1.4 million for the three months ended June 30, 2022 compared to $1.0 million in the prior

The increase was due to the higher utilization of our credit lines during the quarter compared to last year.

balance of our warehouse debt was $66.5 million during the three months ended March 31, 2022 compared to $50.3 million for the same period

balance of our warehouse debt was $85.6 million during the three months ended June 30, 2022 compared to $50.5 million for the same period

Interest expense on subordinated

renewable notes was $620,000 for the three months ended March 31, 2022.

renewable notes was $590,000 for the three months ended June 30, 2022.

The average balance of the outstanding subordinated debt increased

19.6% to $26.5 million for the three months ended March 31, 2022 compared to $22.2 million for the prior year.

7.6% to $26.7 million for the three months ended June 30, 2022 compared to $24.8 million for the prior year.

The average yield of subordinated

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and $50.0 million, respectively.

Interest expense on these residual interest financings was $1.1 million for the three months ended March

Interest expense on these residual interest financings was $1.1 million for the three months ended June

30, 2022 compared to $467,000 in the prior year period.

The following table presents

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended March 31, 2022

Three Months Ended March 31,

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended June 30, 2022

Three Months Ended June 30,

(Dollars in thousands)

Interest Earning Assets

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_____________

balances are based on month end balances except for warehouse lines of credit, which are

based on daily balances

of deferred fees and direct costs

(3) Annualized

net interest income divided by average interest earning assets

Three Months Ended March 31, 2022

Compared to March 31, 2021

(1) Average balances are based on month end balances except for warehouse lines of credit, which

are based on daily balances.

(2) Net of deferred fees and direct costs.

(3) Annualized net interest income divided by average interest earning assets.

Three Months Ended June 30, 2022

Compared to June 30, 2021

(In thousands)

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Net interest income/spread

The reduction in the annualized yield on our finance receivables for the three months ended March 31, 2022 compared

to the prior year period is the result of the lower interest yield on the receivables measured at fair value.

The interest yield on receivables

measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables.

The average balance of these receivables was $2,067.3 million for the three months ended March 31, 2022 compared to $1,687.2 million in

the prior year period.

The annualized yield on our finance receivables was 12.3% for the three months ended June 30, 2022 and 2021.

The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the

yield on other finance receivables.

The average balance of these fair value receivables was $2,305.6 million for the three months ended

June 30, 2022 compared to $1,749.0 million in the prior year period.

Effective January 1, 2020, the Company adopted

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receivable portfolio that was originated prior to January 2018.

The Company recorded an addition to its allowance for finance credit

losses of $127.0 million upon its adoption of CECL in January 2020.

In accordance with the rules for adopting CECL, the offset to the

addition to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective

For the three months ended March 31, 2022, we

recorded a reduction to provision for credit losses on finance receivables in the amount of $9.4 million.

The reserve decrease was primarily

due to a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses

The Company recorded an addition to its allowance for finance credit losses

of $127.0 million upon its adoption of CECL in January 2020.

In accordance with the rules for adopting CECL, the offset to the addition

to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method.

For the three months ended June 30, 2022, we recorded

a reduction to provision for credit losses on finance receivables in the amount of $8.0 million.

The reserve decrease was primarily due

to a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses

exceeded actual incurred losses.

There were no additions or reductions to provision for credit losses for the three months ended March

There were no additions or reductions to provision for credit losses for the three months ended June

Our evaluation of the allowance for credit losses

indicated that the reserves against future losses are adequate as of March 31, 2022.

Although we have not yet seen a deterioration in

the credit performance for these receivables as a result of the pandemic, we expect that the absence of any additional government stimulus

indicated that the reserves against future losses are adequate as of June 30, 2022.

Although we have not yet seen a deterioration in the

credit performance for these receivables as a result of the pandemic, we expect that the absence of any additional government stimulus

payments, the expiration of the eviction moratorium, worsening economic conditions, inflation and a reversion to the mean for used car

pricing could negatively affect credit performance in the future.

The allowance applies only to

our finance receivables originated through December 2017, which we refer to as our legacy portfolio.

Finance receivables that we

have originated since January 2018 are accounted for at fair value.

Under the fair value method of accounting, we recognize interest income

net of expected credit losses.

Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value.

Sales expense consists primarily

of commission-based compensation paid to our employee sales representatives.

Our sales representatives earn a salary plus commissions

based on volume of contract purchases and sales of ancillary products and services that we offer our dealers, such as training programs,

internet lead sales, and direct mail products.

Sales expense increased by $1.6 million to $5.8 million during the three months ended June

30, 2022 and represented 12.2% of total operating expenses.

We purchased $548.1 million of new contracts during the three months ended

June 30, 2022 compared to $286.0 million in the prior year period.

Occupancy expenses was $1.9

million for the three months ending June 30, 2022 which is down from $2.0 million for the same period in 2021.

Depreciation and amortization

expenses decreased to $385,000 compared to $417,000 in the previous year and represented 0.8% of total operating expenses.

For the three months ended June 30, 2022, we recorded

income tax expense of $8.9 million, representing a 26% effective tax rate.

In the prior period, our income tax expense was $4.2 million,

representing a 30% effective tax rate.

Comparison of Operating Results for the

six months ended June 30, 2022 with the six months ended June 30, 2021

the six months ended June 30, 2022, our revenues were $156.4 million, an increase of $26.5 million, or 20.4%, from the prior year revenue

of $129.9 million.

The primary reasons for the increase in revenues are the mark ups to the finance receivables measured at fair value

and the increase in the average outstanding balance of finance receivables measured at fair value.

Revenues for the six months ended June

30, 2022 include a $7.1 million mark up to the recorded value of the finance receivables measured at fair value.

This compares to a $4.4

million mark down in the prior year period.

The marks are estimates based on our evaluation of the appropriate fair value and future earnings

rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses.

During the six months ended June 30, 2022, we reduced our estimate for expected future losses in finance receivables measured at fair

value as we have observed that our previous estimates for increased losses due to the pandemic had not materialized.

The change in estimated

losses resulted in the $7.1 million mark up for the six months ended June 30, 2022.

Interest income for the six

months ended June 30, 2022 increased $14.2 million, or 10.8%, to $145.7 million from $131.5 million in the prior year.

The primary reason

for the increase in interest income is the 27.3% increase in the average balance of finance receivables measured at fair value over the

prior year period.

The table below shows the average balances and interest yields of the two components of our loan portfolio for the

six months ended June 30, 2022 and 2021:

Six Months Ended June 30,

(Dollars in thousands)

Interest Earning Assets

Finance receivables

Finance receivables measured at fair value

Other income was $3.6 million for the six months ended June

This marks a decrease of $789,000 from other income of $2.8 million for the six months ended June 30, 2021.

Our operating

expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative

Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables

(other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of

reducing the internal rate of return or the recorded value applicable to such receivables).

Interest expense is significantly

affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse

facilities and asset-backed securitizations to finance those contracts.

Employee costs and general and administrative expenses are

incurred as applications and automobile contracts are received, processed and serviced.

Factors that affect margins and net income

include changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates and

changes in the unemployment level.

Employee costs include base

salaries, commissions and bonuses paid to employees, and certain expenses related to the accounting treatment of outstanding stock options

and are one of our most significant operating expenses.

These costs (other than those relating to stock options) generally fluctuate with

the level of applications and automobile contracts purchased and serviced.

Other operating expenses consist

largely of facilities expenses, telephone and other communication services, credit services, computer services, sales and advertising

expenses, and depreciation and amortization.

Total operating expenses were

$92.8 million for the six months ended June 30, 2022, compared to $108.1 million for the prior period, a decrease of $15.3 million, or

The decrease is primarily due to decreases in provisions for credit losses.

Employee costs were $42.7 million

during the six months ended June 30, 2022 compared to $39.6 million for the same period in the prior year.

The table below summarizes

our employees by category as well as contract purchases and units in our managed portfolio as of, and for the six-month periods ended,

June 30, 2022 and 2021:

Six Months Ended June 30,

(Dollars in millions)

Contracts purchased (dollars)

Contracts purchased (units)

Managed portfolio outstanding (dollars)

Managed portfolio outstanding (units)

Number of Originations staff

Number of Sales staff

Number of Servicing staff

Number of other staff

Total number of employees

General and administrative expenses

include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit

services, and telecommunications.

General and administrative expenses were $16.5 million, an increase from $15.6 million in the previous

year and represented 17.8% of total operating expenses.

Interest expense for the six

months ended June 30, 2022 were $35.2 million and represented 37.9% of total operating expenses, compared to $39.9 million in the previous

year, when it was 36.9% of total operating expenses.

Interest on securitization trust

debt decreased by $6.0 million for the six months ended June 30, 2022 compared to the prior period.

The average balance of securitization

trust debt increased to $1,922.9 million for the six months ended June 30, 2022 compared to $1,854.1 million for the six months ended

June 30, 2021.

However, the blended interest rates on new term securitizations have declined in 2022.

The annualized average rate on our

securitization trust debt was 3.0% for the six months ended June 30, 2022 compared to 3.8% in the prior year period.

For each quarterly

securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for

benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing

to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization.

These and other factors have

resulted in fluctuations in our securitization trust debt interest costs.

The blended interest rates of our recent securitizations are

summarized in the table below:

Blended Cost of Funds on Recent Asset-Backed Term Securitizations

Blended Cost of Funds

September 2020

Interest expense on warehouse

credit line debt was $2.5 million for the six months ended June 30, 2022 compared to $2.3 million in the prior year period.

were mostly offset by higher utilization of our credit lines during the quarter compared to last year.

The average balance of our warehouse

debt was $76.1 million during the six months ended June 30, 2022 compared to $50.4 million for the same period in 2021.

Interest expense on subordinated

renewable notes decreased by $71,000.

The average balance of the outstanding subordinated debt increased 13.2% to $26.6 million for the

six months ended June 30, 2022 compared to $23.5 million for the six months ended June 30, 2021.

The average yield of subordinated notes

decreased to 9.1% in the six-month period ended June 30, 2022 compared to 10.9% in the prior period.

On May 16, 2018, we completed

a $40.0 million securitization of residual interests from previously issued securitizations.

On June 30, 2021, we completed a $50 million

securitization of residual from other previously issued securitizations.

Interest expense on these residual interest financings were $2.1

million for the six months ended June 30, 2022 compared to $1.0 million in the prior year period.

The following table presents

the components of interest income and interest expense and a net interest yield analysis for the six-month periods ended June 30, 2022

Six Months Ended June 30,

(Dollars in thousands)

Interest Earning Assets

Finance receivables gross (2)

Finance receivables at fair value

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

Net interest yield (3)

Ratio of average interest earning assets to average interest bearing liabilities

_____________

(1) Average balances are based on month end balances except for warehouse lines of credit, which

are based on daily balances.

(2) Net of deferred fees and direct costs.

(3) Annualized net interest income divided by average interest earning assets.

Six Months Ended June 30, 2022

Compared to June 30, 2021

(In thousands)

Interest Earning Assets

Finance receivables gross

Finance receivables at fair value

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

The annualized yield on our finance receivables was 12.3% for the six months ended June

30, 2022 and 12.4% for the same period in 2021.

The interest yield on receivables measured at fair value is reduced to take account of

expected losses and is therefore less than the yield on other finance receivables.

The average balance of these fair value receivables

was $2,186.4 million for the six months ended June 30, 2022 compared to $1,718.1 million in the prior year period.

Effective January 1, 2020, the Company adopted

Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses:

Measurement of Credit Losses on Financial Instruments.

The amendment introduces a new credit reserving model known as the Current Expected Credit Loss model, generally referred to as CECL.

Adoption of CECL required the establishment of an allowance for the remaining expected lifetime credit losses on the portion of the Company’s

receivable portfolio that was originated prior to January 2018.

The Company recorded an addition to its allowance for finance credit losses

of $127.0 million at the adoption of CECL in January 2020.

In accordance with the rules for adopting CECL, the offset to the addition

to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method.

For the six months ended June 30, 2022, we recorded

a reduction to provision for credit losses on finance receivables in the amount of $17.4 million.

The reserve decrease was primarily due

to a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses

exceeded actual incurred losses.

There were no additions or reductions to provision for credit losses for the six months ended June 30,

Our evaluation of the allowance for credit losses

indicated that the reserves against future losses are adequate as of June 30, 2022.

Although we have not yet seen a deterioration in the

credit performance for these receivables as a result of the pandemic, we expect that the absence of any additional government stimulus

payments, the expiration of the eviction moratorium and a reversion to the mean for used car pricing could negatively affect credit performance

12 unchanged sentences

internet lead sales, and direct mail products.

Sales expense increased by $1.4 million to $5.4 million during the three months ended March

Sales expense increased by $3.0 million to $11.2 million during the six months ended June

30, 2022 and represented 12.1% of total operating expenses.

We purchased $410.0 million of new contracts during the three months ended

March 31, 2022 compared to $205.5 million in the prior year period.

We purchased $958.1 million of new contracts during the six months ended June

30, 2022 compared to $491.5 million in the prior year period.

Occupancy expenses was $3.8

million for the three months ending March 31, 2022 and 2021.

million for the six months ending June 30, 2022 compared to $3.9 million for the same period in 2021.

Depreciation and amortization

expenses decreased to $802,000 compared to $845,000 in the previous year and represented 0.8% of total operating expenses.

For the three months ended March 31, 2022, we

recorded income tax expense of $8.2 million, representing a 28% effective tax rate.

In the prior period, our income tax expense was $2.9

million, representing a 35% effective tax rate.

For the six months ended June 30, 2022, we recorded

income tax expense of $17.1 million, representing a 27% effective tax rate.

In the prior period, our income tax expense was $6.9 million,

representing a 32% effective tax rate.

Credit Experience

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Total Owned Portfolio

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

December 31, 2021

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Delinquencies as a percentage of gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of

gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of gross servicing portfolio

Extension Experience

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interim consolidated financial statements.

March 31, 2022 and March 31, 2021 percentages represent three months ended March 31, 2022 and

March 31, 2021 annualized.

June 30, 2022 and June 30, 2021 percentages represent three months ended June 30, 2022 and

June 30, 2021 annualized.

December 31, 2021 represents 12 months ended December 31, 2021.

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believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables.

The table below summarizes the status, as of March 31, 2022, for accounts that received extensions from 2008 through 2020:

The table below summarizes the status, as of June 30, 2022, for accounts that received extensions from 2008 through 2020:

Period of Extension

# Extensions Granted

Active or Paid Off at March 31, 2022

% Active or Paid Off at March 31, 2022

Active or Paid Off at June 30, 2022

% Active or Paid Off at June 30, 2022

Charged Off > 6 Months After Extension

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For example, of the accounts granted extensions in

2018, 56.7% were either paid in full or active and performing March 31, 2022.

Each of these successful accounts represent continued payments

of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial

loss and no interest revenue after the extension.

2018, 56.4% were either paid in full or active and performing as of June 30, 2022.

Each of these successful accounts represent continued

payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred

a substantial loss and no interest revenue after the extension.

For the extension accounts that

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about our extensions is provided in the tables below:

Three Months Ended

Three Months Ended June 30,

Year Ended December 31,

Six Months Ended June 30,

Average number of extensions granted per month

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and owned by third parties

March 31, 2022

March 31, 2021

June 30, 2022

June 30, 2021

December 31, 2021

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Net cash provided by operating

activities for the three-month period ended March 31, 2022 was $68.3 million, an increase of $2.9 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2021 of $65.4 million.

activities for the six-month period ended June 30, 2022 was $119.7 million, an increase of $7.3 million, compared to net cash provided

by operating activities for the six-month period ended June 30, 2021 of $112.4 million.

Net cash from operating activities is generally

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Net cash used in investing activities

was $139.5 million for the three months ended March 31, 2022.

Net cash provided by investing activities for the three-month period ended

March 31, 2021 was $23.9 million.

was $398.4 million for the six months ended June 30, 2022.

Net cash provided by investing activities for the six-month period ended June

30, 2021 was $12.7 million.

Cash provided by investing activities primarily results from principal payments and other proceeds received

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Purchases of finance

receivables excluding acquisition fees were $393.4 million and $205.5 million during the first three months of 2022 and 2021, respectively.

receivables excluding acquisition fees were $904.5 million and $485.1 million during the first six months of 2022 and 2021, respectively.

Net cash provided by financing

activities for the three months ended March 31, 2022 was $80.9 million compared to net cash used in financing activities of $64.8 million

activities for the six months ended June 30, 2022 was $270.5 million compared to net cash used in financing activities of $70.4 million

in the prior year period.

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by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt.

In the first three months of 2022, we issued $316.8 million in new securitization trust debt compared to $230.5 million in the same period

We repaid $262.7 million in securitization trust debt in the three months ended March 31, 2022 compared to repayments of securitization

In the first six months of 2022, we issued $712.4 million in new securitization trust debt compared to $470.5 million in the same period

We repaid $536.8 million in securitization trust debt in the six months ended June 30, 2022 compared to repayments of securitization

trust debt of $541.1 million in the prior year period.

In the three months ended March 31, 2022, we had net advances on warehouse lines

of credit of $42.2 million, compared to net repayments of $48.3 million in the prior year’s period.

In the six months ended June 30, 2022, we had net advances on warehouse lines of

credit of $124.6 million, compared to net repayments of $42.6 million in the prior year’s period.

We purchase automobile contracts

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be limited in our ability to purchase automobile contracts due to limits on our capital.

As of March 31, 2022, we had unrestricted cash

As of June 30, 2022, we had unrestricted cash

of $11.3 million and $171.1 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of March 31, 2022, we had approximately $93.9 million of such eligible collateral.

As of June 30, 2022, we had approximately $82.0 million of such eligible collateral.

manage our liquidity include maintaining our rate of automobile contract purchases at a level that matches our available capital, and,

as appropriate, minimizing our operating costs.

During the three-month period ended March 31, 2022, we completed one securitizations aggregating

During the six-month period ended June 30, 2022, we completed two securitizations aggregating

$712.4 million of notes sold.

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accompanied by acceleration of such other indebtedness.

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

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

We have and will continue to

have a substantial amount of indebtedness.

At March 31, 2022, we had approximately $2,036.7 million of debt outstanding.

At June 30, 2022, we had approximately $2,239.8 million of debt outstanding.

Such debt consisted

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We had $27.2 million and $26.5 million in subordinated renewable

notes outstanding at March 31, 2022 and December 31, 2021, respectively.

notes outstanding at June 30, 2022 and December 31, 2021, respectively.

On June 30, 2021, we completed a $50.0 million securitization

of residual interests from other previously issued securitizations.

As of March 31, 2022, $50.0 million of this debt remains outstanding.

As of June 31, 2022, all $50.0 million of this debt remains outstanding.

Although we believe we are

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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 2. Management’s Discussion and Analysis