What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-14 · 165 added, 376 removed, 459 unchanged (54% of the section changed)

16 unchanged sentences

our operations in March 1991.

From inception through September 30, 2022, we have originated a total of approximately $19.6 billion of

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

loans secured by automobiles directly with consumers.

In addition, we acquired a total of approximately $822.3 million of automobile contracts

in mergers and acquisitions in 2002, 2003, 2004 and 2011.

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

Contract Purchases and Outstanding Managed Portfolio

From inception through March 31, 2023, we have originated a total of approximately $20.4 billion of automobile

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

by automobiles directly with consumers.

In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers

and acquisitions in 2002, 2003, 2004 and 2011.

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

$ in thousands

1 unchanged sentence

Managed Portfolio at Period End

Nine months ended September 30, 2022

Three months ended March 31, 2023

In May 2021 we began purchasing

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in the third-party portfolio.

For the nine months ended September 30, 2022, we originated $126.8 million under this third-party program.

As of September 30, 2022, our managed portfolio includes $151.5 million of such third-party receivables.

For the three months ended March 31, 2023, we originated $60.0 million under this third-party program.

of March 31, 2023, our managed portfolio includes $249.0 million of such third-party receivables.

Our principal executive offices

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96 term securitizations of automobile contracts that we originated.

As of September 30, 2022, 19 of those securitizations are active and

all are structured as secured financings.

Since September 2010 we have utilized senior subordinated structures without any financial guarantees.

We have generally conducted our securitizations on a quarterly basis, near the end of each calendar quarter, resulting in four securitizations

per calendar year.

However, in 2020, we closed only three term securitization transactions in that calendar year rather than four.

As of March 31, 2023, 18 of those securitizations are active and all

are structured as secured financings.

We have generally conducted our securitizations on a quarterly basis, near the end of each calendar

quarter, resulting in four securitizations per calendar year.

However, in 2020, we closed only three term securitization transactions

in that calendar year rather than four.

Our recent history of term securitizations

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Receivables Pledged in Term Securitizations

Nine months ended September 30, 2022

Three months ended March 31, 2023

Generally, prior to a securitization

transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities.

We previously had short-term

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

We currently have short-term

funding capacity of $400 million over two credit facilities.

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

This facility was

most recently renewed in July 2022, extending the revolving period to July 2024, with an optional amortization period through July 2025.

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

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$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 September 30, 2022, we were in compliance

As of March 31, 2023, we were in compliance

with all such covenants.

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Comparison of Operating Results for the

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

the three months ended September 30, 2022, our revenues were $90.3 million, an increase of $21.7 million, or 31.7%, from the prior year

revenue of $68.6 million.

The primary reason for the increase in revenues is the increase in interest income resulting from the increase

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

In addition, mark ups to the finance receivables measured

at fair value also contributed to the increase in revenues during the quarter.

Revenues for the three months ended September 30, 2022

include an $8.2 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 September 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 $8.2 million mark up for the three months

ended September 30, 2022.

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

three months ended March 31, 2023 with the three months ended March 31, 2022

the three months ended March 31, 2023, our revenues were $83.1 million, an increase of $8.7 million, or 11.7%, from the prior year revenue

of $74.4 million.

The primary reason for the increase in revenues is the increase in interest income resulting from 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.

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.

Based on this evaluation, there was no mark up or mark down to the fair value portfolio

in the current year period.

During the three months ended March 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 $2.4 million mark up for the prior year period.

Interest income for the three

months ended September 30, 2022 increased $12.8 million, or 19.1%, to $79.8 million from $67.0 million in the prior year.

reason for the increase in interest income is the 37.0% 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 three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

months ended March 31, 2023 increased $10.0 million, or 14.3%, to $80.1 million from $70.1 million in the prior year.

The primary reason

for the increase in interest income is the 34.4% 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

three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(Dollars in thousands)

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Finance receivables measured at fair value

Other income was $2.3 million for the three months ended September 30, 2022 compared

Other income was $3.0 million for the three months ended March 31, 2023 compared

to $1.9 million for the comparable period in 2022.

This 59.4% increase was primarily driven by the origination and servicing fees we earned

from third party receivables that began in May 2021.

These fees were $2.0 million for the quarter ended September 30, 2022.

from third party receivables.

These fees were $2.7 million for the quarter ended March 31, 2023 compared to $844,000 in the prior year

Our operating expenses

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Total operating expenses were

$56.0 million for the three months ended September 30, 2022, compared to $49.0 million for the prior period, an increase of $7.0 million,

The increase is primarily due to increases in interest expense, employee costs and general and administrative expenses.

$64.7 million for the three months ended March 31, 2023, compared to $45.0 million for the prior period, an increase of $19.6 million,

The increase is primarily due to increases in interest expense and general and administrative expenses.

Employee costs were $22.0 million

during the three months ended September 30, 2022 compared to $18.2 million for the same quarter in the prior year.

during the three months ended March 31, 2023 compared to $22.2 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,

September 30, 2022 and 2021:

Three Months Ended September 30,

March 31, 2023 and 2022:

Three Months Ended March 30,

(Dollars in millions)

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Interest expense for the three

months ended September 30, 2022 were $23.5 million and represented 42.0% of total operating expenses, compared to $18.3 million in the

previous year, when it was 37.4% of total operating expenses.

Interest on securitization

trust debt increased by $3.2 million for the three months ended September 30, 2022 compared to the prior period.

The average balance

of securitization trust debt increased to $2,032.5 million for the three months ended September 30, 2022 compared to $1,819.8 million

for the three months ended September 30, 2021.

The annualized average rate on our securitization trust debt was 3.6% for the three months

ended September 30, 2022 compared to 3.4% in the prior year period.

The blended interest rates on new term securitizations have been

increasing in 2022.

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

months ended March 31, 2023 was $32.8 million and represented 50.7% of total operating expenses, compared to $16.4 million in the previous

year, when it was 36.4% of total operating expenses.

Interest on securitization trust

debt increased by $10.7 million for the three months ended March 31, 2023 compared to the prior period.

The average balance of securitization

trust debt increased to $2,283.3 million for the three months ended March 31, 2023 compared to $1,808.5 million for the three months ended

March 31, 2022.

The annualized average rate on our securitization trust debt was 4.2% for the three months ended March 31, 2023 compared

to 3.0% in the prior year period.

The blended interest rates on new term securitizations have been increasing since 2022.

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

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Interest expense on warehouse

credit line debt increased by $2.4 million to $3.3 million for the three months ended September 30, 2022 compared to $929,000 in the prior

credit line debt increased by $3.1 million to $4.3 million for the three months ended March 31, 2023 compared to $1.2 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 $172.9 million during the three months ended September 30, 2022 compared to $39.4 million for the same

period in 2021.

balance of our warehouse debt was $194.9 million during the three months ended March 31, 2023 compared to $66.5 million for the same period

Interest expense on subordinated

renewable notes was $572,000 for the three months ended September 30, 2022.

The average balance of the outstanding subordinated debt increased

2.4% to $27.5 million for the three months ended September 30, 2022 compared to $26.9 million for the prior year.

The average yield of

subordinated notes decreased to 8.3% compared to 10.4% in the prior period.

renewable notes was $508,000 for the three months ended March 31, 2023.

The average balance of the outstanding subordinated debt decreased

9.1% to $24.1 million for the three months ended March 31, 2023 compared to $26.5 million for the prior year.

The average yield of subordinated

notes decreased to 8.4% compared to 9.3% in the prior period.

In May 2018 and June 2021, we

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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 September

Interest expense on these residual interest financings was $983,000 for the three months ended March

31, 2023 compared to $1.1 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 three-month periods ended September

30, 2022 and 2021:

Three Months Ended September 30,

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended March 31, 2023

Three Months Ended March 31,

(Dollars in thousands)

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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.

Three Months Ended September 30, 2022

Compared to September 30, 2021

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.

Three Months Ended March 31, 2023

Compared to March 31, 2022

(In thousands)

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Net interest income/spread

The annualized yield on our finance receivables was 12.1% for the three months ended September 30, 2022 and 12.5%

The annualized yield on our finance receivables was 11.2% for the three months ended March 31, 2023 and 12.3%

for the same period in 2022.

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The average balance of these fair value receivables was $2,777.9 million

for the three months ended September 30, 2022 compared to $1,837.1 million in the prior year period.

For the three months ended September 30, 2022,

we recorded a reduction to provision for credit losses on finance receivables in the amount of $6.0 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.

This compares to $1.6 million in reductions to provision for credit losses for the three

months ended September 30, 2021.

for the three months ended March 31, 2023 compared to $2,067.3 million in the prior year period.

For the three months ended March 31, 2023, we

recorded a reduction to provision for credit losses on finance receivables in the amount of $9.0 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.

This compares to $9.4 million in reductions to provision for credit losses for the three months ended

March 31, 2022.

Our evaluation of the allowance for credit losses

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

indicated that the reserves against future losses are adequate as of March 31, 2023.

Although we have not yet seen a meaningful deterioration

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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 $1.7 million to $6.0 million during the three months ended September

30, 2022 and represented 10.7% of total operating expenses.

We purchased $468.2 million of new contracts during the three months ended

September 30, 2022 compared to $326.8 million in the prior year period.

based on volume of contract purchases and sales of ancillary products and services that we offer our dealers.

Sales expense increased

to $5.7 million during the three months ended March 31, 2023 from $5.4 million in the same quarter in 2022.

We purchased $415.2 million

of new contracts during the three months ended March 31, 2023 compared to $410.0 million in the prior year period.

Occupancy expenses was $1.5

million for the three months ending September 30, 2022 and 2021.

million for the three months ending March 31, 2023, which is down from the $1.9 million in the first quarter of 2022.

Depreciation and amortization

expenses decreased to $231,000 compared to $417,000 in the previous year and represented 0.4% of total operating expenses.

For the three months ended September 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

$5.9 million, representing a 30% effective tax rate.

Comparison of Operating Results for the

nine months ended September 30, 2022 with the nine months ended September 30, 2021

the nine months ended September 30, 2022, our revenues were $246.7 million, an increase of $48.2 million, or 24.3%, from the prior year

revenue of $198.4 million.

The primary reason for the increase in revenues is the increase in interest income resulting from the increase

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

In addition, mark ups to the finance receivables measured

at fair value also contributed to the increase in revenues during the period.

Revenues for the nine months ended September 30, 2022 include

a $15.3 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.

the nine months ended September 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.

These changes resulted

in the $15.3 million mark up for the nine months ended September 30, 2022.

Interest income for the nine

months ended September 30, 2022 increased $27.0 million, or 13.6%, to $225.5 million from $198.6 million in the prior year.

reason for the increase in interest income is the 30.7% 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 nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Finance receivables

Finance receivables measured at fair value

Other income was $5.9 million for the nine months ended September

This marks a decrease of $1.5 million from other income of $4.3 million for the nine months ended September 30, 2021.

Our operating expenses

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

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

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

$148.8 million for the nine months ended September 30, 2022, compared to $157.1 million for the prior period, a decrease of $8.3 million,

The decrease is primarily due to larger provision for credit loss reversals in 2022.

Employee costs were $63.4 million

during the nine months ended September 30, 2022 compared to $57.8 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 nine-month periods ended,

September 30, 2022 and 2021:

Nine Months Ended September 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 $25.9 million, an increase from $23.0 million in the previous

year and represented 17.4% of total operating expenses.

Interest expense for the nine

months ended September 30, 2022 were $58.7 million and represented 39.4% of total operating expenses, compared to $58.3 million in the

previous year, when it was 37.1% of total operating expenses.

Interest on securitization

trust debt decreased by $2.8 million for the nine months ended September 30, 2022 compared to the prior period.

The average balance of

securitization trust debt increased to $1,959.5 million for the nine months ended September 30, 2022 compared to $1,842.7 million for

the nine months ended September 30, 2021.

The annualized average rate on our securitization trust debt was 3.3% for the nine months ended

September 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.

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 $5.9 million for the nine months ended September 30, 2022 compared to $3.3 million in the prior year period.

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

The average balance of our warehouse

debt was $108.7 million during the nine months ended September 30, 2022 compared to $46.7 million for the same period in 2021.

Interest expense on subordinated

renewable notes decreased by $198,000.

The average balance of the outstanding subordinated debt increased 9.2% to $26.9 million for the

nine months ended September 30, 2022 compared to $24.6 million for the nine months ended September 30, 2021.

The average yield of subordinated

notes decreased to 8.8% in the nine-month period ended September 30, 2022 compared to 10.7% 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 $3.2

million for the nine months ended September 30, 2022 compared to $2.4 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 nine-month periods ended September 30,

2022 and 2021:

Nine Months Ended September 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.

Nine Months Ended September 30, 2022

Compared to September 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 12.2% for the nine months ended September

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 $2,296.8 million for the nine months ended September 30, 2022 compared to $1,757.8 million in the prior year period.

For the nine months ended September 30, 2022,

we recorded a reduction to provision for credit losses on finance receivables in the amount of $23.4 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.

In the prior year period, reductions to provision for credit losses were $1.6 million.

Our evaluation of the allowance for credit losses

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

Although we have not yet seen a meaningful deterioration

in the credit performance for these receivables, 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 $4.7 million to $17.2 million during the nine months ended September

30, 2022 and represented 11.5% of total operating expenses.

We purchased $1,426.3 million of new contracts during the nine months ended

September 30, 2022 compared to $818.3 million in the prior year period.

Occupancy expenses was $5.8

million for the nine months ending September 30, 2022 compared to $5.9 million for the same period in 2021.

Depreciation and amortization

expenses decreased to $1.2 million compared to $1.3 million in the previous year and represented 0.8% of total operating expenses.

For the nine months ended September 30, 2022,

we recorded income tax expense of $26.0 million, representing a 27% effective tax rate.

For the three months ended March 31, 2023, we

recorded income tax expense of $4.6 million, representing a 25% effective tax rate.

In the prior period, our income tax expense was $8.2

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Total Owned Portfolio

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

December 31, 2022

2 unchanged sentences

Gross servicing portfolio (1)

Period of delinquency (2) 31-60 days

Period of delinquency (2)

Total delinquencies (2)

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________________________

(1) All amounts and percentages are based on

the amount remaining to be repaid on each automobile contract, including, for pre-computed automobile contracts, any unearned interest.

(1) All amounts and percentages are based

on the amount remaining to be repaid on each automobile contract, including, for pre-computed automobile contracts, any unearned interest.

The information in the table represents the gross principal amount of all automobile contracts we have purchased, including automobile

contracts subsequently sold in securitization transactions that we continue to service.

The table does not include certain contracts we

have serviced for third parties on which we earn servicing fees only and have no credit risk.

The table does not include certain contracts

we have serviced for third parties on which we earn servicing fees only and have no credit risk.

(2) We consider an automobile contract delinquent

9 unchanged sentences

due more than 90 days are on non-accrual.

Net Charge-Off Experience

Total Owned Portfolio

Net Charge-Off

Experience (1)

Finance Receivables Portfolio

September 30,

(Dollars in thousands)

1 unchanged sentence

Annualized net charge-offs as a percentage of average servicing portfolio (2)

Fair Value Receivables Portfolio

September 30,

(Dollars in thousands)

Average servicing portfolio outstanding

Annualized net charge-offs as a percentage of average servicing portfolio (2)

Total Owned Portfolio

September 30,

(Dollars in thousands)

Average servicing portfolio outstanding

Annualized net charge-offs as a percentage of average servicing portfolio (2)

_________________________

(1) All amounts and percentages are based on

the principal amount scheduled to be paid on each automobile contract, net of unearned income on pre-computed automobile contracts.

(1) All amounts and percentages are based

on the principal amount scheduled to be paid on each automobile contract, net of unearned income on pre-computed automobile contracts.

(2) Net charge-offs include the remaining principal

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interim consolidated financial statements.

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

30, 2022 and September 30, 2021 annualized.

March 31, 2023 and March 31, 2022 percentages represent three months ended March 31, 2023 and

March 31, 2022 annualized.

December 31, 2022 represents 12 months ended December 31, 2022.

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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 September 30, 2022, for accounts that received extensions from 2008 through 2020:

The table below summarizes the status, as of March 31, 2023, for accounts that received extensions from 2008 through 2021:

Period of Extension

# Extensions Granted

Active or Paid Off at September 30, 2022

% Active or Paid Off at September 30, 2022

Active or Paid Off at March 31, 2023

% Active or Paid Off at March 31, 2023

Charged Off > 6 Months After Extension

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For example, of the accounts granted extensions in

2018, 55.1% were either paid in full or active and performing as of September 30, 2022.

2019, 69.9% were either paid in full or active and performing as of March 31, 2023.

Each of these successful accounts represent continued

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of principal and interest.

Additional information

about our extensions is provided in the tables below:

Nine Months Ended September 30,

Year Ended December 31,

Nine Months Ended September 30,

information about our extensions is provided in the tables below:

Three Months Ended March 31,

Average number of extensions granted per month

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and owned by third parties

September 30, 2022

September 30, 2021

March 31, 2023

March 31, 2022

December 31, 2022

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However, as delinquency rates have risen, so has the average number of extensions

granted for the nine month period ended September 30, 2022.

Non-Accrual Receivables

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Net cash provided by operating

activities for the nine-month period ended September 30, 2022 was $164.7 million, an increase of $1.6 million, compared to net cash provided

by operating activities for the nine-month period ended September 30, 2021 of $163.1 million.

activities for the three-month period ended March 31, 2023 was $65.1 million, a decrease of $3.2 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2022 of $68.3 million.

Net cash from operating activities is generally

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Net cash used in investing activities

was $566.5 million for the nine months ended September 30, 2022.

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

September 30, 2021 was $50.2 million.

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

received on finance receivables.

Cash used in investing activities generally relates to purchases of automobile contracts.

finance receivables excluding acquisition fees were $1,426.3 million and $818.3 million during the first nine months of 2022 and 2021,

respectively.

was $121.2 million for the three months ended March 31, 2023 compared to $139.5 million in the prior year period.

Net cash used in investing

activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the

Purchases of finance receivables excluding acquisition fees were $353.9 million and $393.4 million during the first three months

of 2023 and 2022, respectively.

Net cash provided by financing

activities for the nine months ended September 30, 2022 was $397.9 million compared to net cash used in financing activities of $83.3

million in the prior year period.

Cash provided by financing activities is primarily related to the issuance of securitization trust debt,

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

In the first nine months of 2022, we issued $1,104.0 million in new securitization trust debt compared to $761.5 million in the

same period of 2021.

We repaid $804.8 million in securitization trust debt in the nine months ended September 30, 2022 compared to repayments

of securitization trust debt of $861.0 million in the prior year period.

In the nine months ended September 30, 2022, we had net advances

on warehouse lines of credit of $139.5 million, compared to net repayments of $22.1 million in the prior year’s period.

activities for the three months ended March 31, 2023 was $62.3 million compared to $80.9 million in the prior year period.

Cash provided

by financing activities is primarily related to the issuance of securitization trust debt, reduced 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 2023, we issued

$324.8 million in new securitization trust debt compared to $316.8 million for the same period in 2022.

We repaid $258.2 million in securitization

trust debt in the three months ended March 31, 2023 compared to repayments of securitization trust debt of $262.7 million in the prior

In the three months ended March 31, 2023, we had net repayments on warehouse lines of credit of $7,000, compared to net proceeds

from warehouse lines of credit of $42.2 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 September 30, 2022, we had unrestricted

cash of $12.9 million and $157.6 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

As of March 31, 2023, we had unrestricted cash

of $10.2 million and $114.2 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of September 30, 2022, we had approximately $40.3 million of such eligible collateral.

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

As of March 31, 2023, we had approximately $26.4 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 nine-month period ended September 30, 2022, we completed three securitizations

aggregating $1,104.0 million of notes sold.

During the three-month period ended March 31, 2023, we completed one securitization aggregating

$324.8 million of notes sold.

Our liquidity will also be

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accompanied by acceleration of such other indebtedness.

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

As of March 31, 2023, we were in compliance with all such financial covenants.

We have and will continue to

have a substantial amount of indebtedness.

At September 30, 2022, we had approximately $2,376.4 million of debt outstanding.

consisted primarily of $2,057.1 million of securitization trust debt and $242.4 million of debt from warehouse lines of credit.

At March 31, 2023, we had approximately $2,534.0 million of debt outstanding.

Such debt consisted

primarily of $2,175.1 million of securitization trust debt and $285.8 million of debt from warehouse lines of credit.

Our securitization

trust debt has increased by $297.1 million while our warehouse lines of credit debt has increased by $136.8 million since December 31,

2021 (each net of deferred financing costs).

Since 2005, we have offered renewable subordinated notes to the public on a continuous basis,

and such notes have maturities that range from six months to 10 years.

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

notes outstanding at September 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 September 30, 2022, all $50.0 million of this debt remains outstanding.

trust debt has increased by $66.3 million while our warehouse lines of credit debt has increased by $481,000 since December 31, 2022 (each

net of deferred financing costs).

Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such

notes have maturities that range from six months to 10 years.

We had $23.4 million and $25.3 million in subordinated renewable notes outstanding

at March 31, 2023 and December 31, 2022, respectively.

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

from other previously issued securitizations.

As of March 31, 2023, 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