What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-10 compared with 2023-11-09 · 177 added, 376 removed, 413 unchanged (57% of the section changed)

10 unchanged sentences

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

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

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our operations in March 1991.

From inception through September 30, 2023, we have originated a total of approximately $21.0 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, 2024, we have originated a total of approximately $21.5 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:

Contract Purchases and Outstanding Managed Portfolio

$ in thousands

1 unchanged sentence

Managed Portfolio at Period End

Nine months ended September 30, 2023

Three months ended March 31, 2024

In May 2021 we began purchasing

3 unchanged sentences

in the third-party portfolio.

For the nine months ended September 30, 2023, we originated $92.0 million under this third-party program.

As of September 30, 2023, our managed portfolio includes $238.4 million of such third-party receivables.

For the three months ended March 31, 2024, we originated $16.1 million under this third-party program.

of March 31, 2024, our managed portfolio includes $222.2 million of such third-party receivables.

Our principal executive offices

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Credit and underwriting

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

functions are performed primarily in that 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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100 term securitizations of automobile contracts that we originated.

As of September 30, 2023, 18 of those securitizations are active and

As of March 31, 2024, 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

We generally conduct our securitizations on a quarterly basis, near the beginning 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

is summarized in the table below:

Recent Asset-Backed Term

Securitizations

However, we completed only three securitizations in 2020.

In April 2020

we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our

securitizations are executed.

Subsequently we successfully completed securitizations in June and September 2020, and then on a regular

quarterly schedule from January 2021 through April 2024.

Our recent history of term

securitizations is summarized in the table below:

Recent Asset-Backed Term Securitizations

$ in thousands

1 unchanged sentence

Receivables Pledged in Term Securitizations

Nine months ended September 30, 2023

Three months ended March 31, 2024

Generally, prior to a securitization

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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.

This facility was most recently renewed in March 2024, extending the revolving period to March 2026,

followed by an amortization period to March 2028.

In June 2022, we doubled the capacity for this facility from $100 million to $200 million.

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, 2023, we were in compliance

As of March 31, 2024, we were in compliance

with all such covenants.

1 unchanged sentence

Comparison of Operating Results

for the three months ended September 30, 2023 with the three months ended September 30, 2022

the three months ended September 30, 2023, our revenues were $92.1 million, an increase of $1.8 million, or 2.0%, from the prior year

revenue of $90.3 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 September 30, 2023

include a $6.0 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.

In the current period, our re-evaluation of the fair values of these

receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables.

The fair value

mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $6.0 million.

for the prior year period include an $8.2 million mark up to the fair value portfolio.

for the three months ended March 31, 2024 with the three months ended March 31, 2023

the three months ended March 31, 2024, our revenues were $91.7 million, an increase of $8.6 million, or 10.4%, from the prior year revenue

of $83.1 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, 2024 include

a $5.0 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.

In the current period, our re-evaluation of the fair values of these receivables resulted

in a mark up for certain older receivables and a mark down to the fair values of newer receivables.

The fair value mark up on the older

receivables exceeded the mark down to the newer receivables resulting in a net mark up of $5.0 million.

Based on this evaluation, 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 September 30, 2023 increased $3.4 million, or 4.3%, to $83.3 million from $79.8 million in the prior year.

months ended March 31, 2024 increased $4.2 million, or 5.3%, to $84.3 million from $80.1 million in the prior year.

The primary reason

for the increase in interest income is the 4.8% increase in the average balance of our loan portfolio over the prior year period.

interest yield on our total loan portfolio decreased from 12.1% in the prior year period to 11.3% in the current year period.

interest yield on our total loan portfolio increased from 11.2% in the prior year period to 11.3% in the current year period.

The receivables

measured at fair value makes up a larger portion of our total loan portfolio in the current year period is the primary reason for the

decrease in total interest yield.

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 table below shows the average balance and interest yield of our

loan portfolio for the three months ended September 30, 2023 and 2022:

Three Months Ended September 30,

measured at fair value make up a larger portion of our total loan portfolio in the current year period.

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 table below shows the average balance and interest yield of our loan portfolio for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

(Dollars in thousands)

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Loan Portfolio

Other income was $2.8 million for the three months ended September 30, 2023 compared

to $2.3 million for the comparable period in 2022.

This 22.3% increase was primarily driven by the increase in origination and servicing

fees we earned from third party receivables.

These fees were $2.5 million for the quarter ended September 30, 2023 compared to $2.0 million

in the prior year period.

Other income was $2.5 million for the three months ended March

31, 2024 compared to $3.0 million for the comparable period in 2023.

This 19.2% decrease was primarily driven by the decrease in origination

and servicing fees we earned from third party receivables.

These fees were $2.1 million for the quarter ended March 31, 2024 compared

to $2.7 million in the prior year period.

Our operating expenses

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Total operating expenses were

$77.9 million for the three months ended September 30, 2023, compared to $56.0 million for the prior period, an increase of $21.9 million,

$85.2 million for the three months ended March 31, 2024, compared to $64.7 million for the prior period, an increase of $20.5 million,

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

Employee costs were $24.4 million

during the three months ended September 30, 2023 compared to $20.7 million for the same quarter in the prior year.

during the three months ended March 31, 2024 compared to $22.0 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, 2023 and 2022:

Three Months Ended September 30,

March 31, 2024 and 2023:

Three Months Ended March 31,

(Dollars in millions)

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Interest expense for the three

months ended September 30, 2023 was $37.9 million and represented 48.7% of total operating expenses, compared to $23.5 million in the

previous year, when it was 42.0% of total operating expenses.

Interest on securitization trust

debt increased by $13.2 million for the three months ended September 30, 2023 compared to the prior period.

months ended March 31, 2024 was $42.0 million and represented 49.3% of total operating expenses, compared to $32.8 million in the previous

year, when it was 50.7% of total operating expenses.

Interest on securitization

trust debt increased by $9.6 million for the three months ended March 31, 2024 compared to the prior period.

The average balance of securitization

trust debt increased to $2,349.7 million for the three months ended September 30, 2023 compared to $2,032.5 million for the three months

ended September 30, 2022.

The annualized average rate on our securitization trust debt was 5.4% for the three months ended September 30,

trust debt increased to $2,388.1 million for the three months ended March 31, 2024 compared to $2,283.3 million for the three months

ended March 31, 2023.

The annualized average rate on our securitization trust debt was 6.0% for the three months ended March 31, 2024

compared to 4.6% 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.

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:

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

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Interest expense on warehouse

credit line debt increased by $1.4 million to $4.7 million for the three months ended September 30, 2023 compared to $3.3 million in the

credit line debt decreased by $528,000 to $4.3 million for the three months ended March 31, 2024 compared to $4.8 million in the prior

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

The average balance

of our warehouse debt was $164.9 million during the three months ended March 31, 2024 compared to $194.9 million for the same period in

The annualized average rate on our credit line debt was 10.5% for the three months ended March 31, 2024 compared to 9.9% in the

prior year period.

The increase was due to the higher rates on credit line debt during the quarter compared to last year.

balance of our warehouse debt was $170.9 million during the three months ended September 30, 2023 compared to $172.9 million for the same

period in 2022.

The annualized average rate on our credit line debt was 10.9% for the three months ended September 30, 2023 compared to

7.7% in the prior year period.

Interest expense on subordinated

renewable notes was $440,000 for the three months ended September 30, 2023.

renewable notes was $506,000 for the three months ended March 31, 2024.

The average balance of the outstanding subordinated debt decreased

by $7.6 million to $19.9 million for the three months ended September 30, 2023 compared to $27.5 million for the prior year.

yield of subordinated notes increased to 8.8% compared to 8.3% in the prior period.

by $3.3 million to $20.8 million for the three months ended March 31, 2024 compared to $24.1 million for the prior year.

The average yield

of subordinated notes increased to 9.7% compared to 8.4% in the prior period.

In June 2021, we completed a

residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.

expense on this residual interest financing was $1.1 million for the three months ended September 30, 2023 and 2022.

2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of

$50.0 million.

Interest expense on the residual interest financing was $1.2 million for the three months ended March 31, 2024 compared

to $1.1 for the same period in 2023.

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,

2023 and 2022:

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, 2024

Three Months Ended March 31,

(Dollars in thousands)

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

Three Months Ended September 30, 2023

Compared to September 30, 2022

Three Months Ended March 31, 2024

Compared to March 31, 2023

(In thousands)

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Net interest income/spread

For the three months ended September 30, 2023, we recorded a reduction to provision for credit

losses on finance receivables in the amount of $2.0 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 $6.0 million in reductions to provision for credit losses for the three months ended September 30, 2022.

For the three months ended March 31, 2024, we recorded a reduction to provision for credit losses

on finance receivables in the amount of $1.6 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 $9.0 million in reductions to provision for credit losses for the three months ended March 31, 2023.

Our evaluation of the allowance for credit losses

indicated that the reserves against future losses are adequate as of September 30, 2023.

indicated that the reserves against future losses are adequate as of March 31, 2024.

The allowance applies only to

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Sales expense decreased

to $5.3 million during the three months ended September 30, 2023 from $6.0 million in the same quarter in 2022.

to $4.9 million during the three months ended March 31, 2024 from $5.7 million in the same quarter in 2023.

We purchased $346.3 million

of new contracts during the three months ended September 30, 2023 compared to $468.2 million in the prior year period.

of new contracts during the three months ended March 31, 2024 compared to $415.2 million in the prior year period.

Occupancy expenses was $1.6

million for the three months ending September 30, 2023, which is down from the $2.0 million in the third quarter of 2022.

million for the three months ending March 31, 2024, which is up from the $1.5 million in the first quarter of 2023.

Depreciation and amortization

expenses decreased to $215,000 compared to $231,000 in the previous year.

For the three months ended September 30, 2023,

we recorded income tax expense of $3.8 million, representing a 27% effective tax rate.

In the prior period, our income tax expense was

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

Comparison of Operating Results for the

nine months ended September 30, 2023 with the nine months ended September 30, 2022

the nine months ended September 30, 2023, our revenues were $260.0 million, an increase of $13.3 million, or 5.4%, from the prior year

revenue of $246.7 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, 2023 include

a $6.0 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.

For the nine months ended September 30, 2023, our re-evaluation of the fair values

of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables.

fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $6.0 million.

Revenues for the prior year period include a $15.3 million mark up to the fair value portfolio.

Interest income for the nine

months ended September 30, 2023 increased $20.4 million, or 9.1%, to $246.0 million from $225.5 million in the prior year.

reason for the increase in interest income is the 17.6% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio decreased from 12.2% in the prior year period to 11.3% in the current year period.

receivables measured at fair value makes up a larger portion of our total loan portfolio in the current year period is the primary reason

for the decrease in total interest yield.

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 table below shows the average balance and interest yield

of our loan portfolio for the nine months ended September 30, 2023 and 2022:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Loan Portfolio

Other income was $8.1 million

for the nine months ended September 30, 2023 compared to $5.9 million for the comparable period in 2022.

This 37.8% increase was primarily

driven by the increase in origination and servicing fees we earned from third party receivables.

These fees were $7.2 million for the

nine months ended September 30, 2023 compared to $4.3 million in the prior year period.

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

$208.8 million for the nine months ended September 30, 2023, compared to $148.8 million for the prior period, an increase of $60.0 million,

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

Employee costs were $65.0 million

during the nine months ended September 30, 2023 compared to $63.4 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, 2023 and 2022:

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 was $36.2 million for the nine months ended September 30, 2023,

an increase of $10.3 million from $25.9 million in the prior year period.

Interest expense for the nine

months ended September 30, 2023 was $106.4 million, compared to $58.7 million in the previous year, an increase of $47.7 million.

Interest on securitization trust

debt increased by $39.5 million for the nine months ended September 30, 2023 compared to the prior period.

The average balance of securitization

trust debt increased to $2,322.0 million for the nine months ended September 30, 2023 compared to $1,959.5 million for the nine months

ended September 30, 2022.

The annualized average rate on our securitization trust debt was 5.0% for the nine months ended September 30,

2023 compared to 3.3% 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.

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 increased by $8.6 million to $14.5 million for the nine months ended September 30, 2023 compared to $5.9 million in the

prior year period.

The increase was due to the higher rates and the higher utilization of our credit lines and on the debt during the

nine month period compared to last year.

The average balance of our warehouse debt was $186.3 million during the nine months ended September

30, 2023 compared to $108.7 million for the same period in 2022.

The annualized average rate on our credit line debt was 10.4% for the

nine months ended September 30, 2023 compared to 7.2% in the prior year period.

Interest expense on subordinated

renewable notes was $1.4 million for the nine months ended September 30, 2023.

The average balance of the outstanding subordinated debt

decreased by $4.8 million to $22.1 million for the nine months ended September 30, 2023 compared to $26.9 million for the prior year.

The average yield of subordinated notes decreased to 8.6% compared to 8.8% in the prior period.

In June 2021, we completed a

residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million.

expense on this residual interest financing was $3.2 million for the nine months ended September 30, 2023 and 2022.

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,

2023 and 2022:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Loan portfolio

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

Net interest yield (2)

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

Nine Months Ended September 30, 2023

Compared to September 30, 2022

(In thousands)

Interest Earning Assets

Loan portfolio

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

For the nine months ended September 30, 2023, we recorded a reduction to provision for credit

losses on finance receivables in the amount of $20.7 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 $23.4 million in reductions to provision for credit losses for the nine months ended September 30, 2022.

Our evaluation of the allowance for credit losses

indicated that the reserves against future losses are adequate as of September 30, 2023.

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.

Sales expenses were $16.5

million for the nine months ended September 30, 2023, and represented 7.9% of total operating expenses.

This compares to $17.2 million

in the previous year.

We purchased $1,056.0 million of new contracts during the nine months ended September 30, 2023 compared to $1,426.3

million in the prior year period.

Occupancy expenses was $4.8

million for the nine months ending September 30, 2023, which is down from $5.8 million for the same period in 2022.

Depreciation and amortization

expenses decreased to $642,000 compared to $1.2 million in the previous year.

For the nine months ended September 30, 2023,

we recorded income tax expense of $13.1 million, representing a 26% effective tax rate.

For the three months ended March 31, 2024, we

recorded income tax expense of $2.0 million, representing a 30% effective tax rate.

In the prior period, our income tax expense was $4.6

9 unchanged sentences

Delinquency, Repossession and Extension Experience

Total Owned Portfolio

September 30, 2023

September 30, 2022

Total Managed Portfolio (Excludes Third Party

March 31, 2024

March 31, 2023

December 31, 2023

15 unchanged sentences

_________________________

(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 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.

(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.

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 financed vehicles that have been repossessed but not yet liquidated.

(4) Amount in

repossession and accounts past due more than 90 days are on non-accrual.

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 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.

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.

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.

Amount in repossession represents financed vehicles that have been repossessed but not yet liquidated.

Amount in repossession and accounts past due more than 90 days are on non-accrual.

Net Charge-Off Experience

Total Owned Portfolio

Total Managed Portfolio

(Excludes Third Party Portfolio)

Finance Receivables Portfolio

September 30,

(Dollars in thousands)

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_________________________

(1) All amounts

and percentages are based on the principal amount scheduled to be paid on each automobile contract.

(2) Net charge-offs

include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued

and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified

as other income in the accompanying interim consolidated financial statements.

September 30, 2023 and September 30, 2022 percentages

represent three months ended September 30, 2023 and September 30, 2022 annualized.

All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract.

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

(excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have

been classified as other income in the accompanying interim consolidated financial statements.

March 31, 2024 and March 31, 2023 percentages

represent three months ended March 31, 2024 and March 31, 2023 annualized.

December 31, 2022 represents 12 months ended December 31,

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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, 2023, for accounts that received extensions from 2010 through 2022:

The table below summarizes the status, as of March 31, 2024, for accounts that received extensions from 2010 through 2023:

Period of Extension

# Extensions Granted

Active or Paid Off at September 30, 2023

% Active or Paid Off at September 30, 2023

Active or Paid Off at March 31, 2024

% Active or Paid Off at March 31, 2024

Charged Off > 6 Months After Extension

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______________________

Table excludes

extensions on portfolios serviced for third parties

Table excludes extensions on portfolios

serviced for third parties

view these results as a confirmation of the effectiveness of our extension program.

For example, of the accounts granted extensions in

2019, 69.1% were either paid in full or active and performing as of September 30, 2023.

2019, 65.3% were either paid in full or active and performing as of March 31, 2024.

Each of these successful accounts represent continued

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about our extensions is provided in the tables below:

Nine Months Ended September 30,

Three Months Ended March 31,

Year Ended December 31,

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____________________

Table excludes

portfolios originated and owned by third parties

September 30, 2023

September 30, 2022

Table excludes portfolios originated

and owned by third parties

March 31, 2024

March 31, 2023

December 31, 2023

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___________________

Table excludes

portfolios originated and owned by third parties

Table excludes portfolios originated

and owned by third parties

Since 2019, we have been able to reduce extensions

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Net cash provided by operating

activities for the nine-month period ended September 30, 2023 was $181.9 million, a decrease of $17.2 million, compared to net cash provided

by operating activities for the nine-month period ended September 30, 2022 of $164.7 million.

activities for the three-month period ended March 31, 2024 was $52.7 million, a decrease of $12.4 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2023 of $65.1 million.

Net cash from operating activities is generally

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Net cash used in investing activities

was $275.8 million for the nine months ended September 30, 2023 compared to $566.5 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 period.

Purchases of finance receivables excluding acquisition fees were $958.6 million and $1,311.7 million during the first

nine months of 2023 and 2022, respectively.

was $108.6 million for the three months ended March 31, 2024 compared to $121.2 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 $353.9 million during the first three months

of 2024 and 2023, respectively.

Net cash provided by financing

activities for the nine months ended September 30, 2023 was $73.1 million compared to $397.9 million in the prior year period.

activities for the three months ended March 31, 2024 was $81.5 million compared to $62.3 million in the prior year period.

Cash provided

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trust debt and net proceeds or repayments on our warehouse lines of credit and other debt.

In the first nine months of 2023, we issued

In the first three months of 2024, we issued

$280.9 million in new securitization trust debt compared to $324.8 million for the same period in 2023.

We repaid $814.5 million in

securitization trust debt in the nine months ended September 30, 2023 compared to repayments of securitization trust debt of $804.8 million

in the prior year period.

In the nine months ended September 30, 2023, we had net repayments on warehouse lines of credit of $46.4 million,

compared to net advances from warehouse lines of credit of $139.5 million in the prior year’s period.

We repaid $268.7 million in securitization

trust debt in the three months ended March 31, 2024 compared to repayments of securitization trust debt of $258.2 million in the prior

In the three months ended March 31, 2024, we had net repayments on warehouse lines of credit of $17.2 million, compared to

net proceeds from warehouse lines of credit of $7,000 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, 2023, we had unrestricted

cash of $8.3 million and $159.6 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

As of March 31, 2024, we had unrestricted cash

of $13.2 million and $150.5 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of September 30, 2023, we had approximately $19.6 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, 2024, we had approximately $39.5 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, 2023, we completed three securitizations

aggregating $949.4 million of notes sold.

During the three-month period ended March 31, 2024, we completed one securitization aggregating

$280.9 million of notes sold.

Our liquidity will also be

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term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare a

default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be

accompanied by acceleration of such other indebtedness.

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

Such cross-default provisions would allow the respective creditors to declare

a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to

be accompanied by acceleration of such other indebtedness.

As of March 31, 2024, we were in compliance with all such financial covenants.

We have and will continue to

have a substantial amount of indebtedness.

At September 30, 2023, we had approximately $2,552.6 million of debt outstanding.

consisted primarily of $2,243.3 million of securitization trust debt and $240.4 million of debt from warehouse lines of credit.

At March 31, 2024, we had approximately $2,648.3 million of debt outstanding.

Such debt consisted

primarily of $2,277.7 million of securitization trust debt and $249.5 million of debt from warehouse lines of credit.

Our securitization

trust debt has increased by $134.5 million while our warehouse lines of credit debt has decreased by $44.9 million since December 31,

trust debt has increased by $12.2 million while our warehouse lines of credit debt has increased by $15.5 million since December 31, 2023

(each net of deferred financing costs).

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We had $22.1 million and $17.2 million in subordinated renewable

notes outstanding at September 30, 2023 and December 31, 2022, respectively.

notes outstanding at March 31, 2024 and December 31, 2023, respectively.

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

of residual interests from other previously issued securitizations.

As of September 30, 2023, all $50.0 million of this debt remains outstanding.

On March 2024, we completed a new residual interest financing of our

residual interests from previously issued securitizations in the amount of $50.0 million.

As of March 31, 2024, all $100.0 million of

this debt remains outstanding.

Although we believe we are

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when due, it could have a material adverse effect on us and may require us to issue additional debt or equity securities.

Looking Statements

This report on Form 10-Q includes certain “forward-looking

statements.” Forward-looking statements may be identified by the use of words such as “anticipates,” “expects,”

“plans,” “estimates,” or words of like meaning.

Our provision for credit losses is a forward-looking statement,

as it is dependent on our estimates as to future chargeoffs and recovery rates.

Factors that could affect charge-offs and recovery rates

include changes in the general economic climate, which could affect the willingness or ability of obligors to pay pursuant to the terms

of automobile contracts, changes in laws respecting consumer finance, which could affect our ability to enforce rights under automobile

contracts, and changes in the market for used vehicles, which could affect the levels of recoveries upon sale of repossessed vehicles.

Our valuation of receivables measured at fair value is a forward-looking statement, as it is dependent, among other things, on our estimates

of cash to be received in the future with respect to such receivables.

Each of the factors listed above as affecting charge-offs and recovery

rates could have a similar effect on cash to be received in the future with respect to receivables measured at fair value.

could affect our revenues in the current year include the levels of cash releases from existing pools of automobile contracts, which would

affect our ability to purchase automobile contracts, the terms on which we are able to finance such purchases, the willingness of dealers

to sell automobile contracts to us on the terms that we offer, and the terms on which and whether we are able to complete term securitizations

once automobile contracts are acquired.

Factors that could affect our expenses in the current year include competitive conditions in the

market for qualified personnel and interest rates (which affect the rates that we pay on notes issued in our securitizations).

identified in this and other reports as “Risk Factors” could affect our revenues, expenses, liquidity and financial condition,

and the timing and amount of cash received with respect to our automobile contracts.

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