What changed in this filing

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Item 1. Business

2024-03-15 compared with 2023-03-15 · 100 added, 131 removed, 728 unchanged (24% of the section changed)

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In addition to purchasing installment purchase contracts

directly from dealers, we also originate vehicle purchase money loans by lending directly to consumers and have (i) acquired installment

purchase contracts in four merger and acquisition transactions, and (ii) purchased immaterial amounts of vehicle purchase money loans

from non-affiliated lenders.

directly from dealers, we also have (i) originated vehicle purchase money loans by lending directly to consumers and have (ii) acquired

installment purchase contracts in four merger and acquisition transactions, and (iii) purchased immaterial amounts of vehicle purchase

money loans from non-affiliated lenders.

In this report, we refer to all of such contracts and loans as “automobile contracts.”

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Credit and underwriting

functions are performed primarily in our California branch with certain of these functions also performed in our Florida and Nevada branches.

functions are performed primarily in our California branch with certain of these functions also performed in our Florida, Nevada, and

Virginia branches.

We service our automobile contracts from our California, Nevada, Virginia, Florida, and Illinois branches.

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sell both new and used vehicles, and the remainder were independent used car dealers.

We also solicit credit applications

directly from prospective automobile consumers through the internet under a program we refer to as our direct lending platform.

For qualified

applicants we offer terms similar to those that we offer through dealers, though without a down payment requirement and with more restrictive

loan-to-value and credit score requirements.

Applicants approved in this fashion are free to shop for and purchase a vehicle from a dealer

of their choosing, after which we enter into a note and security agreement directly with the consumer.

During the year ended December

31, 2022 automobile contracts originated under the direct lending platform represented 3.2% of our total acquisitions and represented

2.7% of our outstanding managed portfolio as of December 31, 2022.

Regardless of whether an automobile contract is originated from one

of our dealers or through our direct lending platform, the discussion that follows regarding our acquisitions guidelines, procedures and

demographic statistics applies to all of our originated contracts.

We have in the past solicited

credit applications directly from prospective automobile consumers through the internet under a program we refer to as our direct lending

For qualified applicants we offered terms similar to those that we offer through dealers, though without a down payment requirement

and with more restrictive loan-to-value and credit score requirements.

Applicants approved in this fashion are free to shop for and purchase

a vehicle from a dealer of their choosing, after which we entered into a note and security agreement directly with the consumer.

We terminated

our direct lending platform in September 2023 and we do not intend to originate any such loans going forward.

However, we intend to continue

servicing our existing direct loans.

For the year ended December 31, 2023 automobile contracts originated under the direct lending platform

represented 2.8% of our total acquisitions and represented 2.7% of our outstanding managed portfolio as of December 31, 2023.

For the year ended December

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We also sustain a higher level of credit losses because of the higher risk customers we serve.

Coronavirus Pandemic

In December 2019, a new strain

of coronavirus (the “COVID-19 virus”) originated in Wuhan, China.

Since its discovery, the COVID-19 virus has spread throughout

the world, and the outbreak has been declared to be a pandemic by the World Health Organization.

We refer from time to time in this report

to the outbreak and spread of the COVID-19 virus as “the pandemic.” In March 2020 at the outset of the pandemic we complied

with government mandated shutdown orders in the five locations we operate by arranging for many of our staff to work from home and invoking

various safety protocols for workers who remained in our offices.

In April 2020, we laid off approximately 100 workers, or about 10% of

our workforce, throughout our offices because of significant reductions in new contract originations.

As of December 31, 2022, most of

our staff were working without a significant impact from the pandemic.

Contract Acquisitions

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Approximately 63% of all applications came through DealerTrack (the industry leading dealership

application aggregator), 36% via another aggregator, Route One and 1% via our website.

application aggregator), 37% via another aggregator, Route One.

A portion of the DealerTrack and Route One volume

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If these efforts are unsuccessful, we generally will require the dealer to repurchase the automobile contract.

Coronavirus Pandemic

Beginning in April 2020, we

experienced a decrease in monthly contract purchase volumes which continued through December 2020.

Since January 2021, our contract purchase

levels have returned to or exceeded pre-pandemic levels.

Servicing and Collections

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Delinquency and Extension Experience (1)

Managed Portfolio (Excludes Third Party Portfolio)

Total Managed Portfolio (Excludes Third Party Portfolio)

December 31, 2023

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Total delinquencies and amount in repossession (2)

Delinquencies as a percentage

Delinquencies as a percentage of gross servicing portfolio

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Total accounts with extensions

(1) All amounts and percentages

are based on the amount remaining to be repaid on each automobile contract.

The information in the table represents the gross principal

amount of all automobile contracts we purchased, including automobile contracts we 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.

(2) We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following

due date, which date may have been extended within limits specified in the servicing agreements.

amounts and percentages are based on the amount remaining to be repaid on each automobile

The information in the table represents the gross principal amount of all automobile

contracts we purchased, including automobile contracts we 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

consider an automobile contract delinquent when an obligor fails to make at least 90% of

a contractually due payment by the following due date, which date may have been extended

within limits specified in the servicing agreements.

The period of delinquency is based on

the number of days payments are contractually past due.

Automobile contracts less than 31 days delinquent are not included.

The delinquency

aging categories shown in the tables reflect the effect of extensions.

(3) Amount in repossession represents the contract balance on financed vehicles that have been repossessed but not yet liquidated.

(4) We do not recognize interest income on accounts past due more than 90 days.

Automobile contracts less than 31

days delinquent are not included.

The delinquency aging categories shown in the tables reflect

the effect of extensions.

in repossession represents the contract balance on financed vehicles that have been repossessed

but not yet liquidated.

not recognize interest income on accounts past due more than 90 days.

Net Credit Loss Experience (1)

Total Owned Portfolio

Finance Receivables Portfolio (2)

Year Ended December 31,

(Dollars in thousands)

Average portfolio outstanding

Net charge-offs as a percentage of average portfolio (3)

Fair Value Receivables Portfolio (4)

Year Ended December 31,

(Dollars in thousands)

Average portfolio outstanding

Net charge-offs as a percentage of average portfolio (3)

Total Owned Portfolio

Total Managed Portfolio (Excludes Third Party Portfolio)

Year Ended December 31,

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earn servicing fees only, and have no credit risk.

(2) The finance receivables portfolio is comprised of contracts we originated prior to January 2018.

(2) Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the

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been classified as other income in the accompanying financial statements.

(4) The fair value portfolio is comprised of contracts we have originated since January 2018.

In certain circumstances we

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Accordingly, we consider such extensions to be insignificant

delays in payments rather than troubled debt restructurings.

delays in payments.

The basic question in deciding to grant an extension

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problem that may be resolved with an extension.

The credit assessment for granting an extension

is initially made by our collector, who bases the recommendation on the collector’s discussions with the obligor.

In such assessments

the collector will consider, among other things, the following factors:

The credit assessment for granting an extension is initially made by our collector, who

bases the recommendation on the collector’s discussions with the obligor.

In such assessments the collector will consider, among

other things, the following factors:

(1) the reason the obligor has fallen behind in payments;

whether or not the reason for the delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making

regular monthly payments again after the extension;

(2) whether or not the reason for the

delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making regular monthly payments again

after the extension;

(3) the obligor’s past payment history, including past extensions if applicable;

(4) the obligor’s willingness to communicate and cooperate on resolving the delinquency.

If the collector believes the obligor is

a good candidate for an extension, he must obtain approval from his supervisor, who will review the same factors stated above prior to

offering the extension to the obligor.

During 2020 we incorporated an algorithmic extension score card which provides our staff with an

objective and quantitative assessment of whether or not a obligor is a good candidate for an extension, based on the current circumstances

of the account.

The extension score card was developed by our internal risk management team and is derived from the post-extension performance

of accounts in our managed portfolio.

and (4) the obligor’s

willingness to communicate and cooperate on resolving the delinquency.

If the collector believes the obligor is a good candidate for

an extension, he must obtain approval from his supervisor, who will review the same factors stated above prior to offering the extension

to the obligor.

During 2020 we incorporated an algorithmic extension score card which provides our staff with an objective and quantitative

assessment of whether or not a obligor is a good candidate for an extension, based on the current circumstances of the account.

The extension

score card was developed by our internal risk management team and is derived from the post-extension performance of accounts in our managed

After receiving an extension,

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After Extension

Charged Off <= 6 Months

After Extension

% Charged Off <= 6 Months

After Extension

Avg Months to Charge Off

Post Extension

Charged Off <= 6 Months After Extension

% Charged Off <= 6 Months After Extension

Avg Months to Charge Off Post Extension

We view these results as a

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Contracts with six extensions

Gross servicing portfolio

Gross servicing portfolio (Excludes Third Party Portfolio)

Non-Accrual Receivables

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Subsequently we successfully completed securitizations in June and September 2020.

Our history of term securitizations, over the most

recent ten years, is summarized in the table below:

Our recent history of term securitizations is summarized

in the table below:

Recent Asset-Backed Securitizations

$ in thousands

Number of Term Securitizations

Amount of Receivables

$ in thousands

From time to time we have

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In this residual interest

financing transaction, qualified institutional buyers purchased $40.0 million of asset-backed notes secured by residual interests in thirteen

CPS securitizations consecutively conducted from September 2013 through December 2016, and an 80% interest in a CPS affiliate that owns

the residual interests in the four CPS securitizations conducted in 2017.

The sold notes (“2018-1 Notes”), issued by CPS Auto

Securitization Trust 2018-1, consist of a single class with a coupon of 8.595%.

The remaining balance on the notes were paid in full on

February 16, 2022.

On June 30, 2021, we completed

a $50.0 million securitization of residual interests from previously issued securitizations.

In this residual interest financing transaction,

qualified institutional buyers purchased $50.0 million of asset-backed notes secured by residual interests in three CPS securitizations

consecutively conducted from January 2018 through July 2018, and an 80% interest in a CPS affiliate that owns the residual interests in

the eight CPS securitizations conducted from December 2018 through September 2020.

The sold notes (“2021-1 Notes”), issued

by CPS Auto Securitization Trust 2021-1, consist of a single class with a coupon of 7.86%.

As of December 31, 2022, the notes had a principal

balance of $50.0 million.

financing transaction, qualified institutional buyers purchased $50.0 million of asset-backed notes secured by residual interests in three

CPS securitizations consecutively conducted from January 2018 through July 2018, and an 80% interest in a CPS affiliate that owns the

residual interests in the eight CPS securitizations conducted from December 2018 through September 2020.

The sold notes (“2021-1

Notes”), issued by CPS Auto Securitization Trust 2021-1, consist of a single class with a coupon of 7.86%.

As of December 31, 2023,

the notes had a principal balance of $50.0 million.

Generally, prior to a securitization

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$200 million.

Prior to the expiration of the revolving period in January 2024, the revolving period was extended to March 31, 2024.

In a securitization and in

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everything we do.

To make our business work, we seek to supply them with the tools and knowledge they need to succeed.

In addition to

new hire training, we provide mentor programs and management workshops.

Workforce Allocation and

Diversity We had 792 employees as of December 31, 2022.

Our employee population was 66% female, and 67% self-identified as ethnically

diverse (defined as all EEOC classifications other than white).

Broken out by function, our human capital was allocated thus:

senior management personnel;

To make our business work, we seek to supply employees with the tools and knowledge they need to succeed.

to new hire training, we provide mentor programs and management workshops.

We offer an education costs assistance program to help with

college tuition and costs incurred to obtain job related certifications and licenses.

Workforce Allocation

and Diversity We had 890 employees as of December 31, 2023.

Our employee population was 67% female, and 71% self-identified as

ethnically diverse (defined as all EEOC classifications other than white).

Broken out by function, our human capital was allocated

15 were senior management personnel;

529 were servicing personnel;

185 were automobile contract origination personnel;

127 were sales personnel

and program development (78 of whom were sales representatives);

65 were various administrative personnel including human resources, legal,

accounting and systems.

were sales personnel (67 of whom were sales representatives);

56 were various administrative personnel including human resources,

legal, accounting and systems.

Compensation and benefits

Our compensation policy is to be market competitive.

We offer a benefits and wellness package that includes healthcare coverage, defined

contribution retirement benefits, and other components.

We offer a total rewards package, which includes competitive compensation, incentives, and comprehensive benefits that will attract, retain,

and motivate talent within our organization.

Our compensation and benefits package includes competitive pay, healthcare, mental health,

retirement benefits, as well as paid time off and holidays, disability benefits, and volunteer time off, along with other benefits and

employee resources.

We offer performance pay to help enhance career development.

Employee Engagement

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senior management on or close to the employee’s anniversary date.

On an aggregate basis, a new hire survey and department

round table meetings.

The feedback from the meetings and survey results are reviewed by senior management and used to assist in reviewing

our human capital strategies, programs, and practices.

Other metrics used in human capital management include average employee tenure

and annual turnover rate.

We believe that our relations with our employees are good.

Most departments meet one-on-one with employees monthly

to discuss performance, suggestions, and concerns.

On an aggregate basis, we distribute new hire surveys and host department round table

The feedback from the meetings and survey results are reviewed by senior management and used to assist in reviewing our human

capital strategies, programs, and practices.

Our COO holds town hall meetings in every branch and virtual sessions to provide company-wide

updates and conduct open Q&A for all employees.

We foster collaboration through charity committees which plan events to raise funds

and/or provide resources to various 501(c)(3) organizations in our communities.

We also offer paid community service time.

in human capital management include average employee tenure and annual turnover rate.

We believe that our relations with our employees

We are not a party to any collective bargaining agreement.

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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-K

Item 1. Business