What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-10 compared with 2025-08-11 · 268 added, 265 removed, 513 unchanged (51% 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 June 30, 2025, we have originated a total of approximately $23.9 billion of

We were incorporated and began

our operations in March 1991.

From inception through September 30, 2025, we have originated a total of approximately $24.3 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 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

$ in thousands

1 unchanged sentence

Managed Portfolio at Period End

Six months ended June 30, 2025

Nine months ended September 30, 2025

In May 2021 we began purchasing

3 unchanged sentences

in the third-party portfolio.

For the six months ended June 30, 2025, we originated $8.3 million under this third-party program.

June 30, 2025, our managed portfolio includes $146.4 million of such third-party receivables.

For the nine months ended September 30, 2025, we originated $11.0 million under this third-party program.

As of September 30, 2025, our managed portfolio includes $132.5 million of such third-party receivables.

Our principal executive offices

13 unchanged sentences

Securitization and Warehouse Credit Facilities

Throughout the period for

which information is presented in this report, we have purchased automobile contracts with the intention of financing them on a long-term

basis through securitizations, and on an interim basis through warehouse credit facilities.

Throughout the period for which

information is presented in this report, we have purchased automobile contracts with the intention of financing them on a long-term basis

through securitizations, and on an interim basis through warehouse credit facilities.

All such financings have involved identification

4 unchanged sentences

our active securitizations are structured as secured financings.

When structured to be treated as a secured financing for accounting purposes,

the subsidiary is consolidated with us.

Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities,

respectively, on our consolidated balance sheet.

We then periodically (i) recognize interest and fee income on the contracts, and (ii)

recognize interest expense on the securities issued in the transaction.

For automobile contracts acquired after 2017 we take account

of estimated credit losses in our computation of a level yield used to determine recognition of interest on the contracts.

For contracts

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

for credit losses.

When structured to be treated as a secured financing

for accounting purposes, the subsidiary is consolidated with us.

Accordingly, the sold automobile contracts and the related debt appear

as assets and liabilities, respectively, on our consolidated balance sheet.

We then periodically (i) recognize interest and fee income

on the contracts, and (ii) recognize interest expense on the securities issued in the transaction.

For automobile contracts acquired after

2017 we take account of estimated credit losses in our computation of a level yield used to determine recognition of interest on the contracts.

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

provisions for credit losses.

Since 1994 we have conducted

106 term securitizations of automobile contracts that we originated.

As of June 30, 2025, 17 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.

As of September 30, 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

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Receivables Pledged in Term Securitizations

Six months ended June 30, 2025

Nine months ended September 30, 2025

Generally, prior to a securitization

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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 June 30, 2025, we were in compliance

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

As of September 30, 2025, we were in compliance

with all such covenants.

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Comparison of Operating Results

for the three months ended June 30, 2025, with the three months ended June30, 2024

the three months ended June 30, 2025, our revenues were $109.8 million, an increase of $13.9 million, or 14.5% from the prior year revenue

of $95.9 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 June 30, 2025, include

a $3.0 million mark up to the recorded value of the finance receivables measured at fair value.

The marks are estimates based on our evaluation

for the three months ended September 30, 2025, with the three months ended September30, 2024

the three months ended September 30, 2025, our revenues were $108.4 million, an increase of $7.8 million, or 7.8% from the prior year

revenue of $100.6 million.

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

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

Revenues for the three months ended September 30, 2025,

did not include a mark to the recorded value of the finance receivables measured at fair value.

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

1 unchanged sentence

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

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

The net effect of the marks to the fair

value resulted in a net mark up of $3.0 million.

There was a $5.5 million mark up to the fair value portfolio in the prior year period.

in no marks to finance receivables measured at fair value.

There was a $5.5 million mark up to the fair value portfolio in the prior year

Interest income for the three

months ended June 30, 2025, increased $17.0 million, or 19.2%, to $105.4 million from $88.4 million in the prior year.

The primary reason

for the increase in interest income is the 18.0% increase in the average balance of our loan portfolio over the prior year period.

interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period.

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 June

30, 2025 and 2024:

Three Months Ended June 30,

months ended September 30, 2025, increased $14.0 million, or 15.0%, to $107.2 million from $93.2 million in the prior year.

reason for the increase in interest income is the 14.2% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio is 11.4% for both current and in the prior 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.

below shows the average balance and interest yield of our loan portfolio for the three months ended September 30, 2025 and 2024:

Three Months Ended September 30,

(Dollars in thousands)

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Loan Portfolio

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

Other income was $1.3 million for the three months ended September

30, 2025, compared to $1.9 million for the comparable period in 2024.

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and servicing fees we earned from third party receivables.

These fees were $1.4 million for the quarter ended June 30, 2025, compared

These fees were $1.2 million for the quarter ended September 30, 2025, compared

to $1.6 million in the prior year period.

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Total operating expenses were

$102.8 million for the three months ended June 30, 2025, compared to $89.2 million for the prior period, an increase of $13.6 million,

$101.4 million for the three months ended September 30, 2025, compared to $93.7 million for the prior period, an increase of $7.7 million,

The increase is primarily due to increases in interest expense.

Employee costs were $22.5 million

during the three months ended June 30, 2025, compared to $23.7 million for the same quarter in the prior year, an increase of $637,000,

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, June 30, 2025, and 2024:

Three Months Ended June 30,

during the three months ended September 30, 2025, compared to $24.2 million for the same quarter in the prior year, a decrease of $1.7

million, or 7.0%.

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, 2025, and 2024:

Three Months Ended September 30,

(Dollars in millions)

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services, and telecommunications.

General and administrative expenses was $13.2 million, a decrease of $77,000 from $13.3 million in the

prior year period.

General and administrative expenses were $13.4 million, an increase of $145,000 from $13.3 million in

the prior year period.

Interest expense for the three

months ended June 30, 2025, was $58.7 million and represented 57.1% of total operating expenses, compared to $46.7 million in the previous

year, when it was 52.4% of total operating expenses.

The $12.0 million increase in interest expense compared to the prior year period

was largely due to increases in the average balance of our securitization trust debt, warehouse credit line debt and residual interest

months ended September 30, 2025, was $59.1 million and represented 58.3% of total operating expenses, compared to $50.1 million in the

previous year, when it was 53.4% of total operating expenses.

The $9.0 million increase in interest expense compared to the prior year

period was largely due to increases in the average balance of our securitization trust debt, warehouse credit line debt and residual interest

financing debt.

To a lesser extent, the increase is also due to the increase in the interest rate on our securitization trust debt.

Interest on securitization

trust debt increased by $7.6 million for the three months ended June 30, 2025, compared to the prior period.

Interest on securitization trust

debt increased by $4.6 million for the three months ended September 30, 2025, compared to the prior period.

The average balance of securitization

trust debt increased to $2,811.9 million for the three months ended June 30, 2025, compared to $2,555.2 million for the three months

ended June 30, 2024.

The annualized average rate on our securitization trust debt was 6.5% for the three months ended June 30, 2025,

trust debt increased to $2.830 million for the three months ended September 30, 2025, compared to $2,706.3 million for the three months

ended September 30, 2024.

The annualized average rate on our securitization trust debt was 6.7% for the three months ended September 30,

2025, compared to 6.4% in the prior year period.

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

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

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

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Interest expense on warehouse

credit line debt increased by $2.5 million to $8.2 million for the three months ended June 30, 2025, compared to $5.7 million in the prior

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

average balance of our warehouse debt was $353.2 million during the three months ended June 30, 2025, compared to $215.4 million for the

same period in 2024.

The annualized average rate on our credit line debt was 9.3% for the three months ended June 30, 2025, compared to

10.6% in the prior year period.

credit line debt increased by $2.7 million to $6.7 million for the three months ended September 30, 2025, compared to $4.0 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

The average balance of our warehouse debt was $284.6 million during the three months ended September 30, 2025, compared to $132.3

million for the same period in 2024.

The annualized average rate on our credit line debt was 9.4% for the three months ended September

30, 2025, compared to 12.1% in the prior year period.

Interest expense on subordinated

renewable notes was $684,000 for the three months ended June 30, 2025.

renewable notes was $722,000 for the three months ended September 30, 2025.

The average balance of the outstanding subordinated debt was

million for the three months June 30, 2025, compared to $22.3 million for the prior year period.

The average yield of subordinated notes

is 9.7% for both current and in the prior period.

$29.0 million for the three months September 30, 2025, compared to $23.2 million for the prior year period.

The average yield of subordinated

notes is 10.0% for both current and the prior period.

In June 2021, March 2024, and

again on June 30, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount

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 $4.1 million for

the three months ended June 30, 2025, compared to 2.5 million for the same period in 2024.

the three months ended September 30, 2025, compared to 2.5 million 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 June 30, 2025,

Three Months Ended June 30,

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

2025, and 2024:

Three Months Ended September 30,

(Dollars in thousands)

Annualized Average

Interest Earning Assets

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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.

Three Months Ended June 30, 2025

Compared to June 30, 2024

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

Three Months Ended September 30, 2025

Compared to September 30, 2024

(In thousands)

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Net interest income/spread

Our evaluation of the allowance

for credit losses indicated that the reserves against future losses are adequate as of June 30, 2025.

The allowance applies only to our

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

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

June 30, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $781,000.

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

as of September 30, 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

30, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $712,000.

The reserve decrease

1 unchanged sentence

performance as our previous estimates for future losses exceeded actual incurred losses.

This compares to $2.0 million in reductions

to provision for credit losses for the three months ended June 30, 2024.

This compares to $994,000 in reductions to provision

for credit losses for the three months ended September 30, 2024.

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 expense decreased to $5.7 million during the three months ended June 30, 2025 from $5.9 million

for the same quarter in 2024.

We purchased $433.0 million of new contracts during the three months ended June 30, 2025 compared to $431.9

million in the prior year period.

Occupancy expenses was $1.4

million for the three months ending June 30, 2025, which is up from $1.3 million in the second quarter of 2024.

Our sales representatives earn a salary plus commission based

on volume of contract purchases.

Sales expense decreased by $41,000 to $5.7 million during the three months ended September 30, 2025,

from $5.7 million for the same quarter in 2024.

We purchased $391.1 million of new contracts during the three months ended September 30,

2025, compared to $445.9 million in the prior year period.

Occupancy expenses were $1.2

million for the three months ending September 30, 2025, which is down from $1.3 million in the third quarter of 2024.

Depreciation and amortization

expenses increased to $249,000 compared to $221,000 in the previous year.

For the three months ended June 30, 2025, we recorded

income tax expense of $2.2 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.

expenses decreased to $207,000 compared to $214,000 in the previous year.

For the three months ended September 30, 2025,

we recorded income tax expense of $2.2 million, representing a 31% effective tax rate.

In the prior period, our income tax expense was

$2.1 million, representing a 30% effective tax rate.

Comparison of Operating Results for the

six months ended June 30, 2025 with the six months ended June 30, 2024

the six months ended June 30, 2025, our revenues were $216.6 million, an increase of $29.0 million, or 15.5%, from the prior year revenue

of $187.6 million.

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

average outstanding balance of finance receivables measured at fair value.

Revenues for the six months ended June 30, 2025 include a $6.5

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 receivables and a mark down to the fair values of selected receivables.

The net effect of the marks to the fair

value resulted in a net mark up of $6.5 million..

There was a $10.5 million mark up to the fair value portfolio in the prior year period.

Interest income for the six

months ended June 30, 2025 increased $34.6 million, or 20.1%, to $207.3 million from $172.7 million in the prior year.

The primary reason

for the increase in interest income is the 18.6% increase in the average balance of our loan portfolio over the prior year period.

interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period.

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 six months ended June

30, 2025 and 2024:

Six Months Ended June 30,

nine months ended September 30, 2025 with the nine months ended September 30, 2024

the nine months ended September 30, 2025, our revenues were $325.1 million, an increase of $36.9 million, or 12.8%, from the prior year

revenue of $288.2 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, 2025

include a $6.5 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 receivables and a mark down to the fair values of selected receivables.

The net effect of

the marks to the fair value resulted in a net mark up of $6.5 million.

There was a $16.0 million mark up to the fair value portfolio in

the prior year period.

Interest income for the nine

months ended September 30, 2025 increased $48.7 million, or 18.3%, to $314.5 million from $265.8 million in the prior year.

reason for the increase in interest income is the 17.1% increase in the average balance of our loan portfolio over the prior year period.

The interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period.

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, 2025 and 2024:

Nine Months Ended September 30,

(Dollars in thousands)

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Other income was $4.1 million

for the six months ended June 30, 2025 compared to $4.5 million for the comparable period in 2024.

36.4% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables.

were $2.8 million for the six months ended June 30, 2025 compared to $3.8 million in the prior year period.

for the nine months ended September 30, 2025 compared to $6.4 million for the comparable period in 2024.

This $2.3 million decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables.

These fees were $4.1 million for the nine months ended September 30, 2025 compared to $5.5 million in the prior year period.

Our operating expenses

18 unchanged sentences

Total operating expenses were

$202.9 million for the six months ended June 30, 2025, compared to $174.4 million for the prior period, an increase of $28.5 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 sales expenses also contributed to the increase in operating expenses during the period.

$304.3 million for the nine months ended September 30, 2025, compared to $268.1 million for the prior period, an increase of $36.2 million,

or 13.5% 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 sales expenses also contributed to the increase in operating expenses during the period.

Employee costs were $71.9 million

during the six months ended June 30, 2025 compared to $48.1 million for the same period in the prior year.

during the nine months ended September 30, 2025 compared to $72.3 million for the same period in the prior year.

The table below summarizes

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

June 30, 2025 and 2024:

Six Months Ended June 30,

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, 2025 and 2024:

Nine Months Ended September 30,

(Dollars in millions)

11 unchanged sentences

services, and telecommunications.

General and administrative expenses were $26.7 million for the six months ended June 30, 2025, an increase

of $287,000 from $27.0 million in the prior year period.

Interest expense for the six

months ended June 30, 2025 was $113.6 million, compared to $88.7 million in the previous year, an increase of $24.9 million.

Interest on securitization trust

debt increased by $16.7 million for the six months ended June 30, 2025 compared to the prior period.

The average balance of securitization

trust debt increased to $2,836.9 million for the six months ended June 30, 2025 compared to $2,471.7 million for the six months ended

June 30, 2024.

The annualized average rate on our securitization trust debt was 6.4% for the six months ended June 30, 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.

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:

General and administrative expenses were $40.1 million for the nine months ended September 30, 2025,

a decrease of $141,000 from $40.3 million in the prior year period.

Interest expense for the nine

months ended September 30, 2025, was $172.7 million, compared to $138.7 million in the previous year, an increase of $34.0 million.

Interest on securitization

trust debt increased by $21.3 million for the nine months ended September 30, 2025, compared to the prior period.

The average balance

of securitization trust debt increased to $2,834.4 million for the nine months ended September 30, 2025, compared to $2,549.9 million

for the nine months ended September 30, 2024.

The annualized average rate on our securitization trust debt was 6.5% for the nine months

ended September 30, 2025, compared to 6.1% in the prior year period.

The blended interest rates on new term securitizations have been

increasing since 2022.

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

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

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

securitization.

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

The blended interest

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

Blended Cost of Funds on Recent Asset-Backed Term Securitizations

2 unchanged sentences

Interest expense on warehouse

credit line debt increased by $4.7 million to $14.7 million for the six months ended June 30, 2025 compared to $10.0 million in the prior

The increase was due to higher rates on the debt during the six month period compared to last year.

The average balance of

our warehouse debt was $314.7 million during the six months ended June 30, 2025 compared to $190.1 million for the same period in 2024.

The annualized average rate on our credit line debt was 9.4% for the six months ended June 30, 2025 compared to 10.5% in the prior year

credit line debt increased by $7.4 million to $21.4 million for the nine months ended September 30, 2025 compared to $14.0 million in

the prior year period.

The increase was due to higher rates on the debt during the nine month period compared to last year.

balance of our warehouse debt was $304.6 million during the nine months ended September 30, 2025 compared to $170.7 million for the same

period in 2024.

The annualized average rate on our credit line debt was 9.4% for the nine months ended September 30, 2025 compared to

11.0% in the prior year period.

Interest expense on subordinated

renewable notes was $1.3 million for the six months ended June 30, 2025.

The average balance of the outstanding subordinated debt increased

by $5.9 million to $27.5 million for the six months ended June 30, 2025 compared to $21.6 million for the prior year.

The average yield

of subordinated notes was 9.7% in the current and 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 $7.0 million for the six months ended June 30, 2025 compared to

$3.7 million for the same period in 2024.

renewable notes was $2.1 million for the nine months ended September 30, 2025.

The average balance of the outstanding subordinated debt

increased by $5.9 million to $28.0 million for the nine months ended September 30, 2025 compared to $22.1 million for the prior year.

The average yield of subordinated notes was 9.8% in the current and 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 on the residual interest financing was $11.0 million for

the nine months ended September 30, 2025 compared to $6.2 million 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 six-month periods ended June 30, 2025

Six Months Ended June 30,

the components of interest income and interest expense and a net interest yield analysis for the nine-month periods ended September 30,

2025 and 2024:

Nine Months Ended September 30,

(Dollars in thousands)

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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.

_________________________

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

Six Months Ended June 30, 2025

Compared to June 30, 2024

Nine Months Ended September 30, 2025

Compared to September 30, 2024

(In thousands)

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

as of June 30, 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.

as of September 30, 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.

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for credit loss expense is recorded for finance receivables measured at fair value.

For the six months ended June

For the nine months ended September

30, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $2.5 million.

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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.

performance as our previous estimates for future losses exceeded actual losses incurred.

This compares to $4.6 million in reductions to

provision for credit losses for the six months ended June 30, 2024.

provision for credit losses for the nine months ended September 30, 2024.

Sales expenses consist primarily

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Sales expense increased

to $11.6 million during the six months ended June 30, 2025 from $10.8 million in the same period in 2024.

We purchased $884.2 million

of new contracts during the six months ended June 30, 2025 compared to $778.2 million in the prior year period.

Occupancy expenses was $2.8

million for the six months ending June 30, 2025, which is down from $3.0 million for the same period in 2024.

to $17.3 million during the nine months ended September 30, 2025 from $16.5 million in the same period in 2024.

We purchased $1,275.3

million of new contracts during the nine months ended September 30, 2025 compared to $1,224.1 million in the prior year period.

Occupancy expenses were $4.0

million for the nine months ending September 30, 2025, which is down from $4.3 million for the same period in 2024.

Depreciation and amortization

expenses increased to $705,000 compared to $650,000 in the previous year.

six months ended June 30, 2025, we recorded income tax expense of $4.3 million, representing a 31% effective tax rate.

In the prior period,

our income tax expense was $4.0 million, representing a 30% effective tax rate.

nine months ended September 30, 2025, we recorded income tax expense of $6.4 million, representing a 31% effective tax rate.

period, our income tax expense was $6.0 million, representing a 30% effective tax rate.

Credit Experience

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Total Managed Portfolio (Excludes Third Party

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

December 31, 2024

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_________________________

(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

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.

(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

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the effect of extensions.

(3) Amount in repossession represents financed

vehicles that have been repossessed but not yet liquidated.

(3) Amount in repossession represents

financed vehicles that have been repossessed but not yet liquidated.

(4) Amount in repossession and accounts past

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Finance Receivables Portfolio

September 30,

(Dollars in thousands)

Average servicing portfolio outstanding

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

Annualized net charge-offs as a percentage of

average servicing portfolio (2)

_________________________

(1) All amounts and percentages are based on

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

(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

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interim consolidated financial statements.

June 30, 2025, and June 30, 2024, percentages represent three months ended June 30, 2025, and

June 30, 2024, annualized.

September 30, 2025, and September 30, 2024, percentages represent nine months ended September

30, 2025, and September 30, 2024, annualized.

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

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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 June 30, 2025, for accounts that received extensions from 2011 through 2024:

The table below summarizes the status, as of September 30, 2025, for accounts that received extensions from 2011 through 2024:

Period of Extension

# Extensions Granted

Active or Paid Off at June 30, 2025

% Active or Paid Off at June 30, 2025

Active or Paid Off at September 30, 2025

% Active or Paid Off at September 30, 2025

Charged Off > 6 Months After Extension

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For example, of the accounts granted extensions in

2019, 57.8% were either paid in full or active and performing as of June 30, 2025.

2019, 57.6% were either paid in full or active and performing as of September 30, 2025.

Each of these successful accounts represent continued

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about our extensions is provided in the tables below:

Six Months Ended June 30,

Year Ended December 31,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Average number of extensions granted per month

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and owned by third parties

June 30, 2025

June 30, 2024

September 30, 2025

September 30, 2024

December 31, 2024

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Net cash provided by operating

activities for the six-month period ended June 30, 2025 was $128.3 million, a increase of $32.3 million, compared to net cash provided

by operating activities for the six-month period ended June 30, 2024 of $96.0 million.

activities for the nine-month period ended September 30, 2025 was $213.2 million, an increase of $47.4 million, compared to net cash provided

by operating activities for the nine-month period ended September 30, 2024 of $165.8 million.

Net cash from operating activities is generally

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Net cash used in investing activities

was $360.8 million for the six months ended June 30, 2025 compared to $317.8 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

Purchases of finance receivables excluding acquisition fees were $882.9 million and $753.8 million during the first six months

of 2025 and 2024, respectively.

was $492.3 million for the nine months ended September 30, 2025 compared to $536.8 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 $1,275.7 million and $1,195.9 million during the first

nine months of 2025 and 2024, respectively.

Net cash provided by financing

activities for the six months ended June 30, 2025 was $255.3 million compared to $363.0 million in the prior year period.

activities for the nine months ended September 30, 2025 was $293.5 million compared to $524.7 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 six months of 2025, we issued

In the first nine months of 2025, we issued

$1,280.7 million in new securitization trust debt compared to $1,453.9 million for the same period in 2024.

We repaid $957.6 million in

securitization trust debt in the six months ended June 30, 2025 compared to repayments of securitization trust debt of $563.7 million

securitization trust debt in the nine months ended September 30, 2025 compared to repayments of securitization trust debt of $840.5 million

in the prior year period.

In the six months ended June 30, 2025, we had net repayments on warehouse lines of credit of $16.6 million,

In the nine months ended September 30, 2025, we had net repayments on warehouse lines of credit of $72.3 million,

compared to net advances from warehouse lines of credit of $125.6 million in the prior year’s period.

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

As of June 30, 2025, we had unrestricted cash

of $15.8 million and $136.4 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

As of September 30, 2025, we had unrestricted

cash of $8.1 million and $271.0 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of June 30, 2025, we had approximately $18.6 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 of September 30, 2025, we had approximately $8.5 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 appropriate, minimizing our operating costs.

During the six-month period ended June 30, 2025, we completed two securitizations aggregating

$862.4 million of notes sold.

During the nine-month period ended September 30, 2025, we completed three securitizations

aggregating $1,280.7 million of notes sold.

Our liquidity will also be

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be accompanied by acceleration of such other indebtedness.

As of June 30, 2025, we were in compliance with all such financial covenants.

As of September 30, 2025, we were in compliance with all such financial covenants.

We have and will continue to

have a substantial amount of indebtedness.

At June 30, 2025, we had approximately $3,392.8 million of debt outstanding.

Such debt consisted

primarily of $2,813.2 million of securitization trust debt and $395.6 million of debt from warehouse lines of credit.

At September 30, 2025, we had approximately $3,435.2 million of debt outstanding.

consisted primarily of $2,916.4 million of securitization trust debt and $340.6 million of debt from warehouse lines of credit.

Our securitization

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We had $28.6 million and $26.5 million in subordinated renewable

notes outstanding at June 30, 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 June 30, 2025, all $155.1 million of the residual interest debt remains outstanding.

notes outstanding at September 30, 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 September 30, 2025, we have $149.5 million of the residual interest debt remains outstanding.

Although we believe we are

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis