What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-12 compared with 2024-11-07 · 185 added, 362 removed, 413 unchanged (57% of the section changed)

14 unchanged sentences

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

We were incorporated and

began our operations in March 1991.

From inception through September 30, 2024, we have originated a total of approximately $22.6 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 table below:

Contract Purchases and Outstanding Managed Portfolio

We were incorporated and began

our operations in March 1991.

From inception through March 31, 2025, we have originated a total of approximately $23.5 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, 2024

Three months ended March 31, 2025

In May 2021 we began purchasing

3 unchanged sentences

in the third-party portfolio.

For the nine months ended September 30, 2024, we originated $29.5 million under this third-party program.

As of September 30, 2024, our managed portfolio includes $191.5 million of such third-party receivables.

For the three months ended March 31, 2025, we originated $4.3 million under this third-party program.

of March 31, 2025, our managed portfolio includes $160.1 million of such third-party receivables.

Our principal executive offices

34 unchanged sentences

104 term securitizations of automobile contracts that we originated.

As of September 30, 2024, 18 of those securitizations are active

and all are structured as secured financings.

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

calendar quarter, resulting in four securitizations per calendar year.

However, we completed only three securitizations in 2020.

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.

As of March 31, 2025, 18 of those securitizations are active and

all are structured as secured financings.

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

quarter, resulting in four securitizations per calendar year.

Our recent history of term securitizations

is summarized in the table below:

Recent Asset-Backed Term Securitizations

Recent Asset-Backed Term

Securitizations

$ in thousands

1 unchanged sentence

Receivables Pledged in Term Securitizations

Nine months ended September 30, 2024

Three months ended March 31, 2025

Generally, prior to a securitization

5 unchanged sentences

most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027.

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

In addition, a subordinated lender was added to the credit facility in November 2024, effectively increasing our advance rate to a maximum

of 95% for eligible receivables across the facility.

The capacity was then increased from $200 million at the most recent renewal date

to $335 million in December 2024.

In November 2015, we entered

into another $100 million facility.

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 June 2022, we increased the capacity of our credit agreement with Ares Agent Services, L.P.

$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 a securitization and in

2 unchanged sentences

If we breach any of our representations or

warranties, we will be obligated to repurchase the automobile contract at a price equal to the principal balance plus accrued and unpaid

warranties, we may be required to repurchase the automobile contract at a price equal to the principal balance plus accrued and unpaid

We may then be entitled under the terms of our dealer agreement to require the selling dealer to repurchase the contract at

8 unchanged sentences

our liquidity and results of operations.

In addition, from time to

time, we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored.

On March 20, 2025, we completed a $65 million securitization of residual interests from previously issued securitizations.

In the transaction,

a qualified institutional buyer purchased $65.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns

the residual interests in five CPS securitizations issued from October 2023 through September 2024.

The sold notes (“2025-1 Notes”),

issued by CPS Auto Securitization Trust 2025-1, consist of a single class with a coupon of 11.00%.

Receivables we originate and

9 unchanged sentences

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

As of September 30, 2024, we were in compliance

As of March 31, 2025, we were in compliance

with all such covenants.

1 unchanged sentence

Comparison of Operating Results

for the three months ended September 30, 2024 with the three months ended September 30, 2023

the three months ended September 30, 2024, our revenues were $100.6 million, an increase of $8.5 million, or 9.2%, from the prior year

revenue of $92.1 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 September 30, 2024

include a $5.5 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 $5.5 million.

a $6.0 million mark up to the fair value portfolio in the prior year period.

for the three months ended March 31, 2025, with the three months ended March 31, 2024

the three months ended March 31, 2025, our revenues were $106.9 million, an increase of $15.2 million, or 16.6%, from the prior year revenue

of $91.7 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.

Revenues for the three months ended March 31, 2025, include

a $3.5 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 $3.5 million.

There was a $5.0 million mark

up to the fair value portfolio in the prior year period.

Interest income for the three

months ended September 30, 2024 increased $9.9 million, or 11.9%, to $93.2 million from $83.3 million in the prior year.

months ended March 31, 2025, increased $17.6 million, or 20.9%, to $101.9 million from $84.3 million in the prior year.

The primary reason

3 unchanged sentences

finance receivables.

The table below shows the average balance and interest yield of our loan portfolio for the three months ended September

The table below shows the average balance and interest yield of our loan portfolio for the three months ended March

31, 2025 and 2024:

Three Months Ended September 30,

Three Months Ended March 31,

(Dollars in thousands)

1 unchanged sentence

Loan Portfolio

Other income was $1.9 million for the three months ended September

Other income was $1.4 million for the three months ended March

31, 2025, compared to $2.5 million for the comparable period in 2024.

1 unchanged sentence

and servicing fees we earned from third party receivables.

These fees were $1.6 million for the quarter ended September 30, 2024 compared

These fees were $1.4 million for the quarter ended March 31, 2025, compared

to $2.1 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 profit 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.

consist largely of interest expense, employee costs, sales and general and administrative expenses.

Interest expense is significantly

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

and asset-backed securitizations to finance those contracts.

Employee costs and general and administrative expenses are incurred

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

Factors that affect profit 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

7 unchanged sentences

Total operating expenses were

$93.7 million for the three months ended September 30, 2024, compared to $77.9 million for the prior period, an increase of $15.8 million,

The increase is primarily due to increases in interest expense and to a lesser extent, increases to employee costs.

$100.1 million for the three months ended March 31, 2025, compared to $85.2 million for the prior period, an increase of $14.9 million,

The increase is primarily due to increases in interest expense and to a lesser extent, increases to sales costs.

Employee costs were $25.0 million

during the three months ended September 30, 2024 compared to $21.8 million for the same quarter in the prior year, an increase of $2.4

million, or 10.8%.

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, 2024 and 2023:

Three Months Ended September 30,

during the three months ended March 31, 2025, compared to $24.4 million for the same quarter in the prior year, an increase of $617,000,

The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of,

and for the three-month periods ended, March 31, 2025, and 2024:

Three Months Ended March 31,

(Dollars in millions)

11 unchanged sentences

services, and telecommunications.

General and administrative expenses was $13.3 million, an increase of $231,000 from $13.0 million in

General and administrative expenses was $13.5 million, a decrease of $211,000 from $13.8 million in

the prior year period.

Interest expense for the three

months ended September 30, 2024 was $50.1 million and represented 53.4% of total operating expenses, compared to $37.9 million in the

previous year, when it was 48.7% of total operating expenses.

months ended March 31, 2025, was $54.9 million and represented 54.9% of total operating expenses, compared to $42.0 million in the previous

year, when it was 49.3% of total operating expenses.

The $12.9 million increase in interest expense compared to the same three month period

in the prior year was largely due to the volume, and to a lesser extent, due to the rate.

Interest on securitization trust

debt increased by $11.3 million for the three months ended September 30, 2024 compared to the prior period.

debt increased by $9.1 million for the three months ended March 31, 2025, compared to the prior period.

The average balance of securitization

trust debt increased to $2,706.3 million for the three months ended September 30, 2024 compared to $2,349.7 million for the three months

ended September 30, 2023.

The annualized average rate on our securitization trust debt was 6.4% for the three months ended September 30,

trust debt increased to $2,861.9 million for the three months ended March 31, 2025, compared to $2,388.1 million for the three months

ended March 31, 2024.

The annualized average rate on our securitization trust debt was 6.3% for the three months ended March 31, 2025,

compared to 6.0% 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.

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:

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

2 unchanged sentences

Interest expense on warehouse

credit line debt decreased by $665,000 to $4.0 million for the three months ended September 30, 2024 compared to $4.7 million in the prior

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

average balance of our warehouse debt was $132.3 million during the three months ended September 30, 2024 compared to $170.9 million for

the same period in 2023.

The annualized average rate on our credit line debt was 12.1% for the three months ended September 30, 2024 compared

credit line debt increased by $2.2 million to $6.5 million for the three months ended March 31, 2025, compared to $4.3 million in the

prior year period.

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

The average balance of our warehouse debt was $275.8 million during the three months ended March 31, 2025, compared to $164.9 million

for the same period in 2024.

The annualized average rate on our credit line debt was 9.4% for the three months ended March 31, 2025, compared

to 10.5% in the prior year period.

Interest expense on subordinated

renewable notes was $581,000 for the three months ended September 30, 2024.

renewable notes was $646,000 for the three months ended March 31, 2025.

The average balance of the outstanding subordinated debt was $26.9

$23.2 million for the three months ended September 30, 2024 compared to $19.9 million for the prior year period.

The average yield of

subordinated notes increased to 10.0% 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.

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 for these residual interest financings was $2.5 million for the three months ended September 30, 2024

compared to $1.1 for the same period in 2023.

million for the three months ended March 31, 2025, compared to $20.8 million for the prior year period.

The average yield of subordinated

notes decreased to 9.6% compared to 9.7% in the prior period.

In June 2021, March 2024, and

again on March 20, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount

of $50 million, $50 million, and $65 million, respectively.

Interest expense for these residual interest financings was $2.7 million for

the three months ended March 31, 2025, compared to $1.2 for the same period in 2024.

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,

2024 and 2023:

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, 2025,

Three Months Ended March 31,

(Dollars in thousands)

10 unchanged sentences

(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.

Three Months Ended September 30, 2024

Compared to September 30, 2023

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

Three Months Ended

March 31, 2025

March 31, 2024

(In thousands)

Interest Earning

Interest Earning Assets

Loan Portfolio

5 unchanged sentences

Net interest income/spread

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate

as of September 30, 2024.

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.

Our evaluation of the allowance for credit losses indicated that the reserves against future

losses are adequate as of March 31, 2025.

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.

For the three months ended September

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

For the three months ended March

31, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $979,000.

3 unchanged sentences

This compares to $1.6 million in reductions to

provision for credit losses for the three months ended September 30, 2023.

provision for credit losses for the three months ended March 31, 2024.

Sales expenses consist primarily

2 unchanged sentences

based on volume of contract purchases.

Sales expense increased to $5.7 million during the three months ended September 30, 2024 from $5.3

Sales expense increased to $5.9 million during the three months ended March 31, 2025, from $4.9

million for the same quarter in 2024.

We purchased $445.9 million of new contracts during the three months ended September 30, 2024 compared

We purchased $451.2 million of new contracts during the three months ended March 31, 2025, compared

to $346.3 million in the prior year period.

Occupancy expenses was $1.4

million for the three months ending September 30, 2024, which is down from the $1.6 million in the third quarter of 2023.

million for the three months ending March 31, 2025, which is down from the $1.6 million in the first quarter of 2024.

Depreciation and amortization

expenses increased to $249,000 compared to $215,000 in the previous year.

For the three months ended September 30, 2024,

we recorded income tax expense of $2.1 million, representing a 30% effective tax rate.

For the three months ended March 31, 2025, we

recorded income tax expense of $2.1 million, representing a 31% effective tax rate.

In the prior period, our income tax expense was $2.0

million, representing a 30% effective tax rate.

Comparison of Operating Results for the

nine months ended September 30, 2024 with the nine months ended September 30, 2023

the nine months ended September 30, 2024, our revenues were $288.2 million, an increase of $28.2 million, or 10.8%, from the prior year

revenue of $260.0 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 nine months ended September 30, 2024

include a $16.0 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 $16.0 million.

$6.0 mark up to the fair value portfolio in the prior year period.

Interest income for the nine

months ended September 30, 2024 increased $19.8 million, or 8.1%, to $265.8 million from $246.0 million in the prior year.

reason for the increase in interest income is the 8.0% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio is 11.3% in the current year period and prior 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 nine months ended September 30, 2024 and 2023:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning Assets

Loan Portfolio

Other income was $6.4 million

for the nine months ended September 30, 2024 compared to $8.1 million for the comparable period in 2023.

This 20.9% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables.

fees were $5.5 million for the nine months ended September 30, 2024 compared to $7.2 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 profit 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

$268.1 million for the nine months ended September 30, 2024, compared to $208.8 million for the prior period, an increase of $59.3 million,

The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses.

To a lesser extent, increases to employee costs and general and administrative expenses also contributed to the increase in operating

expenses during the period.

Employee costs were $72.3 million

during the nine months ended September 30, 2024 compared to $65.0 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, 2024 and 2023:

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 $40.3 million for the nine months ended September 30, 2024,

an increase of $4.1 million from $36.2 million in the prior year period.

Interest expense for the nine

months ended September 30, 2024 was $138.7 million, compared to $106.4 million in the previous year, an increase of $32.3 million.

Interest on securitization trust

debt increased by $29.6 million for the nine months ended September 30, 2024 compared to the prior period.

The average balance of securitization

trust debt increased to $2,549.9 million for the nine months ended September 30, 2024 compared to $2,322.0 million for the nine months

ended September 30, 2023.

The annualized average rate on our securitization trust debt was 6.1% for the nine months ended September 30,

2024 compared to 5.0% 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.

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 2024

Interest expense on warehouse

credit line debt decreased by $499,000 to $14.0 million for the nine months ended September 30, 2024 compared to $14.5 million in the

prior year period.

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

The average balance of our warehouse debt was $170.7 million during the nine months ended September 30, 2024 compared to $186.3 million

for the same period in 2023.

The annualized average rate on our credit line debt was 11.0% for the nine months ended September 30, 2024

compared to 10.4% in the prior year period.

Interest expense on subordinated

renewable notes was $1.6 million for the nine months ended September 30, 2024.

The average balance of outstanding subordinated debt was

$22.1 million for the nine months ending September 30, 2024, consistent with the prior year.

The average yield of subordinated notes increased

to 9.8% compared to 8.6% 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.

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 $6.2 million for the nine months ended September 30, 2024 compared

to $3.2 million 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 nine-month periods ended September 30,

2024 and 2023:

Nine Months Ended September 30,

(Dollars in thousands)

Interest Earning

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, 2024

Compared to September 30, 2023

(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

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate

as of September 30, 2024.

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.

For the nine months ended September

30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $4.6 million.

The reserve decrease

was primarily due to better than expected recovery rates and 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 $20.7 million in reductions

to provision for credit losses for the nine months ended September 30, 2023.

Sales expenses consist 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.

Sales expenses remained consistent at $16.5 million for both the nine months ending September 30,

2024, and the same period last year.

We purchased $1,224.1 million of new contracts during the nine months ended September 30, 2024 compared

to $1,056.0 million in the prior year period.

Occupancy expenses was $4.3

million for the nine months ending September 30, 2024, which is down from $4.8 million for the same period in 2023.

Depreciation and amortization

expenses decreased to $650,000 compared to $642,000 in the previous year.

nine months ended September 30, 2024, we recorded income tax expense of $6.0 million, representing a 30% effective tax rate.

period, our income tax expense was $13.1 million, representing a 26% effective tax rate.

Credit Experience

8 unchanged sentences

Total Managed Portfolio (Excludes Third Party

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

December 31, 2024

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

(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.

Net Charge-Off Experience (1)

Total Managed Portfolio (Excludes Third Party Portfolio)

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.

Finance Receivables Portfolio

September 30,

(Dollars in thousands)

2 unchanged sentences

_________________________

(1) All amounts and percentages are based

on the principal amount scheduled to be paid on each automobile contract.

(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

2 unchanged sentences

interim consolidated financial statements.

September 30, 2024 and September 30, 2023 percentages represent three months ended September

30, 2024 and September 30, 2023 annualized.

March 31, 2025, and March 31, 2024, percentages represent three months ended March 31, 2025,

and March 31, 2024,, annualized.

December 31, 2024, represents 12 months ended December 31, 2024.

35 unchanged sentences

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, 2024, for accounts that received extensions from 2010 through 2023:

The table below summarizes the status, as of March 31, 2025, for accounts that received extensions from 2011 through 2024:

Period of Extension

# Extensions Granted

Active or Paid Off at September 30, 2024

% Active or Paid Off at September 30, 2024

Active or Paid Off at March 31, 2025

% Active or Paid Off at March 31, 2025

Charged Off > 6 Months After Extension

8 unchanged sentences

For example, of the accounts granted extensions in

2019, 61.2% were either paid in full or active and performing as of September 30, 2024.

2019, 57.8% were either paid in full or active and performing as of March 31, 2025.

Each of these successful accounts represent continued

8 unchanged sentences

about our extensions is provided in the tables below:

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Three Months Ended March 31,

Average number of extensions granted per month

4 unchanged sentences

and owned by third parties

September 30, 2024

September 30, 2023

March 31, 2025

March 31, 2024

December 31, 2024

58 unchanged sentences

Net cash provided by operating

activities for the nine-month period ended September 30, 2024 was $165.8 million, a decrease of $16.2 million, compared to net cash provided

by operating activities for the nine-month period ended September 30, 2023 of $181.9 million.

activities for the three-month period ended March 31, 2025, was $73.9 million, an increase of $24.2 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2024, of $52.7 million.

Net cash from operating activities is generally

2 unchanged sentences

Net cash used in investing activities

was $536.8 million for the nine months ended September 30, 2024 compared to $275.8 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 $1,195.9 million and $958.6 million during the first

nine months of 2024 and 2023, respectively.

was $194.1 million for the three months ended March 31, 2025, compared to $108.6 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 $449.6 million and $328.9 million during the first three months

of 2025 and 2024, respectively.

Net cash provided by financing

activities for the nine months ended September 30, 2024 was $524.7 million compared to $73.1 million in the prior year period.

activities for the three months ended March 31, 2025, was $166.3 million compared to $81.5 million in the prior year period.

Cash provided

1 unchanged sentence

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

In the first nine months of 2024, we issued

In the first three months of 2025, we issued

$442.4 million in new securitization trust debt compared to $280.9 million for the same period in 2024.

We repaid $840.5 million in

securitization trust debt in the nine months ended September 30, 2024 compared to repayments of securitization trust debt of $814.5 million

in the prior year period.

In the nine months ended September 30, 2024, we had net repayments on warehouse lines of credit of $125.6 million,

compared to net advances from warehouse lines of credit of $46.4 million in the prior year’s period.

We repaid $293.0 million in securitization

trust debt in the three months ended March 31, 2025, compared to repayments of securitization trust debt of $268.7 million in the prior

In the three months ended March 31, 2025, we had net repayments on warehouse lines of credit of $45.8 million, compared to

net advances from warehouse lines of credit of $17.2 million in the prior year’s period.

We purchase automobile contracts

16 unchanged sentences

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

As of September 30, 2024, we had unrestricted

cash of $8.1 million and $294.2 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

As of March 31, 2025, we had unrestricted cash

of $29.8 million and $153.6 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of September 30, 2024, we had approximately $20.9 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, 2025, we had approximately $23.5 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, 2024, we completed four securitizations

aggregating $1,453.9 million of notes sold.

During the three-month period ended March 31, 2025, we completed one securitization aggregating

$442.4 million of notes sold.

Our liquidity will also be

17 unchanged sentences

accompanied by acceleration of such other indebtedness.

As of September 30, 2024, we were in compliance with all such financial covenants.

As of March 31, 2025, we were in compliance with all such financial covenants.

We have and will continue to

have a substantial amount of indebtedness.

At September 30, 2024, we had approximately $3,105.0 million of debt outstanding.

consisted primarily of $2,875.8 million of securitization trust debt and $105.8 million of debt from warehouse lines of credit.

At March 31, 2025, we had approximately $3,300.0 million of debt outstanding.

Such debt consisted

primarily of $2,743.3 million of securitization trust debt and $365.7 million of debt from warehouse lines of credit.

Our securitization

4 unchanged sentences

We had $27.5 million and $26.5 million in subordinated renewable

notes outstanding at September 30, 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.

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 September 30, 2024, all $100.0 million

of this debt remains outstanding.

notes outstanding at March 31, 2025, and December 31, 2024, respectively.

In June 2021, March 2024, and again on March 20, 2025, we completed

a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, and $65

million, respectively.

As of March 31, 2025, all $165.0 million of the residual interest debt remains outstanding.

Although we believe we are

5 unchanged sentences

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