What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 350 added, 186 removed, 371 unchanged (59% of the section changed)

10 unchanged sentences

In addition to purchasing installment purchase contracts

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

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

from non-affiliated lenders.

directly from dealers, we, also, to a lesser extent, originate loans directly to consumers for the refinancing of an existing loan from

other lenders secured by an automobile and have also (i) originated vehicle purchase money loans by lending directly to consumers, (ii)

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

purchase money loans from non-affiliated lenders.

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

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our operations in March 1991.

From inception through March 31, 2026, we have originated a total of approximately $25.2 billion of automobile

From inception through June 30, 2026, we have originated a total of approximately $26.0 billion of automobile

contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers.

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Managed Portfolio at Period End

Three months ended March 31, 2026

Six months ended June 30, 2026

Our principal executive offices

34 unchanged sentences

109 term securitizations of automobile contracts that we originated.

As of March 31, 2026, 19 of those securitizations are active and

all are structured as secured financings.

As of June 30, 2026, 19 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

6 unchanged sentences

Receivables Pledged in Term Securitizations

Three months ended March 31, 2026

Six months ended June 30, 2026

Generally, prior to a securitization

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

We currently have short-term

funding capacity of $702.5 million over three credit facilities.

As of June 30, 2026 our

short-term funding capacity was $725.0 million over two credit facilities.

The first credit facility was established in May 2012.

This facility

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

In addition, the capacity was increased from $200 million to $335 million in December 2024.

In November 2015, we entered into a $100 million

facility with Ares Agent Services, L.P.

In June 2022, we increased the capacity of our credit agreement from $100 million to $200 million.

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

to March 2028.

In March 2026, the revolving period was extended to April 2026.

There was nothing outstanding under this facility at March

In October 2025, we entered

into a new $167.5 million facility.

This facility has a two year revolving period to October 2027, with an optional amortization period

through April 2029.

On April 3, 2026, it amended its two-year revolving credit agreement with Capital One, N.A.

the capacity of the facility.

The amendment applies to both Capital One, N.A.

and the subordinate lender, and increases the capacity of

the facility from $167.5 million to $390 million.

This facility has a two-year revolving period to October 2027, with an optional amortization

period through April 2029.

In a securitization and in

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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 4, 2026, we completed a $50 million securitization of residual interests from previously issued securitizations.

In the transaction,

qualified institutional buyers purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the

residual interests in four CPS securitizations issued from January 2025 through October 2025.

The sold notes (“2026-1 Notes”),

issued by CPS Auto Securitization Trust 2026-1, consist of a single class with a coupon of 8.75%.

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.

Most recently, in March 2026, we completed a $50 million securitization of residual interests from previously issued securitizations.

In the transaction, qualified institutional buyers purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate

that owns the residual interests in four CPS securitizations issued from January 2025 through October 2025.

The sold notes (“2026-1

Notes”), issued by CPS Auto Securitization Trust 2026-1, consist of a single class with a coupon of 8.75%.

Receivables we originate and

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a default if a default occurred under a different facility.

As of March 31, 2026 we were in compliance with all such financial covenants.

As of June 30, 2026 we were in compliance with all such financial covenants.

of Operations

Comparison of Operating Results

for the three months ended March 31, 2026, with the three months ended March 31, 2025

the three months ended March 31, 2026, our revenues were $112.3 million, an increase of $5.5 million, or 5.1% from the prior year revenue

of 106.9 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 March 31, 2026, 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 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 no marks to finance receivables measured at fair value.

There was a $3.5 million mark up to the fair value portfolio in the prior year

for the three months ended June 30, 2026, with the three months ended June 30, 2025

the three months ended June 30, 2026, our revenues were $121.4 million, an increase of $11.6 million, or 10.6% from the prior year

revenue of 109.8 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, 2026, 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 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 no marks to finance receivables measured at fair value.

There was a $3.0 million mark up to

the fair value portfolio in the prior year period.

Interest income for the three

months ended March 31, 2026, increased $6.8 million, or 6.7% to $108.7 million from $101.9 million in the prior year.

months ended June 30, 2026, increased $12.8 million, or 12.1% to $118.1 million from $105.4 million in the prior year.

The primary reason

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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 March 31, 2026 and 2025:

Three Months Ended March 31,

below shows the average balance and interest yield of our loan portfolio for the three months ended June 30, 2026 and 2025:

Three Months Ended June 30,

(Dollars in thousands)

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Loan Portfolio

Other income was $3.6 million for the three months ended March

Other income was $3.3 million for the three months ended June

30, 2026, compared to $1.4 million for the comparable period in 2025.

This $1.9 million increase was primarily driven by the dealer recoveries

collected for the three months ending March 31, 2026.

These dealer recoveries were $2.3 million for the quarter ended March 31, 2026.

There were no dealer recoveries in the prior year period.

The Company engaged a third party that identifies discrepancies in the values

of the vehicles that have been repossessed and sold at auction.

The third party attempts to collect the amount of the discrepancy from

the dealers and remits the amounts collected to the Company net of fees charged.

collected for the three months ending June 30, 2026.

These dealer recoveries were $1.8 million for the quarter ended June 30, 2026.

were no dealer recoveries in the prior year period.

The Company engaged a third party that identifies discrepancies in the values of the

vehicles that have been repossessed and sold at auction.

The third party attempts to collect the amount of the discrepancy from the dealers

and remits the amounts collected to the Company net of fees charged.

Our operating expenses

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Total operating expenses were

$104.3 million for the three months ended March 31, 2026, compared to $100.1 million for the prior period, an increase of $4.2 million,

$112.4 million for the three months ended June 30, 2026, compared to $102.8 million for the prior period, an increase of $9.5 million,

The increase is primarily due to increases in interest expense.

Employee costs were $23.4 million

during the three months ended March 31, 2026, compared to $25.0 million for the same quarter in the prior year, a decrease of $2.0 million,

during the three months ended June 30, 2026, compared to $24.4 million for the same quarter in the prior year, a decrease of $944,000,

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, 2026, and 2025.

Three Months Ended March 31,

and for the three-month periods ended, June 30, 2026, and 2025.

Three Months Ended June 30,

(Dollars in millions)

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Total number of employees

Increases in headcount among our Sales staff during

the three-month period ended, March 31, 2026, and the decrease from the prior year period in the average cost of our Servicing staff,

were the largest contributing factors to the increase in headcount and decrease to employee costs for the three-month period ended, March

31, 2026 compared to the prior year period.

The increase in headcount within

our Sales staff throughout the three-month periods ended, June 30, 2026, and the decrease in the average employee cost of our Servicing

staff from June 30, 2025, were the largest contributing factors to the increase in headcount and decrease to employee costs from the three-month

period ended, June 30, 2025 to June 30, 2026.

General and administrative expenses

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services, and telecommunications.

General and administrative expenses were $12.9 million, a decrease of $345,000 from $12.6 million in

the prior year period.

General and administrative expenses were $14.7 million, an increase of $2.3 million from $12.4 million

in the prior year period.

Interest expense for the three

months ended March 31, 2026, was $60.1 million and represented 57.6% of total operating expenses, compared to $54.9 million in the previous

months ended June 30, 2026, was $64.3 million and represented 57.2% of total operating expenses, compared to $58.7 million in the previous

year, when it was 57.1% of total operating expenses.

The $5.5 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

Interest on securitization trust

debt increased by $3.7 million for the three months ended March 31, 2026, compared to the prior period.

debt increased by $4.5 million for the three months ended June 30, 2026, compared to the prior period.

The average balance of securitization

trust debt increased to $3,127.4 million for the three months ended March 31, 2026, compared to $2,861.9 million for the three months

ended March 31, 2025.

The annualized average rate on our securitization trust debt was 6.2% for the three months ended March 31, 2026,

compared to 6.3% in the prior year period.

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

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

and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds

at the time of the securitization.

trust debt increased to $3,272.1 million for the three months ended June 30, 2026, compared to $2,811.9 million for the three months ended

June 30, 2025.

The annualized average rate on our securitization trust debt was 6.1% for the three months ended June 30, 2026, compared

to 6.5% in the prior year period.

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

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

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

time of the securitization.

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

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

Blended Cost of Funds on Recent Asset-Backed Term Securitizations

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

Blended Cost of Funds on Recent Asset-Backed

Term Securitizations

Blended Cost of Funds

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Interest expense on warehouse

credit line debt was $6.5 million for the three months ended March 31, 2026, and in the same period prior year period.

The average balance

of our warehouse debt was $276.0 million during the three months ended March 31, 2026, compared to $275.8 million for the same period

The annualized average rate on our credit line debt was 9.4% for the three months ended March 31, 2026, consistent with the same

period in the prior year.

credit line debt increased by $617,000 to $8.8 million for the three months ended June 30, 2026, compared to $8.2 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 $445.6 million during the three months ended June 30, 2026, compared to $353.2 million for the

same period in 2025.

The annualized average rate on our credit line debt was 7.9% for the three months ended June 30, 2026, compared to

9.3% in the prior year period.

Interest expense on subordinated

renewable notes was $685,000 for the three months ended March 31, 2026.

renewable notes was $668,000 for the three months ended June 30, 2026.

The average balance of the outstanding subordinated debt was $28.1

million for the three months March 31, 2026, compared to $26.9 million for the prior year period.

million for the three months June 30, 2026, compared to $28.0 million for the prior year period.

The average yield of subordinated notes

is 9.6% for both current and the prior period.

is 9.5% for the three months ended June 30, 2025, compared to 9.7% in the prior year period.

In June 2021, March 2024, March

20, 2025, and again on March 4, 2026 we completed a securitization of residual interests from other previously issued securitizations

in the amount of $50 million, $50 million, $65 million, and $50 million, respectively.

2025, and again in March 2026 we completed a securitization of residual interests from other previously issued securitizations in the

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

Interest expense for these residual interest financings

was $4.2 million for the three months ended March 31, 2026, compared to $2.7 million for the same period in 2025.

was $4.7 million for the three months ended June 30, 2026, compared to $4.2 million for the same period in 2025.

The following table presents

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended March 31, 2026,

Three Months Ended March 31,

the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended June 30, 2026,

Three Months Ended June 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.

Annualized net interest income divided by average interest earning assets.

Three Months Ended March 31, 2026

Compared to March 31, 2025

(2) Annualized net interest income

divided by average interest earning assets.

Three Months Ended June 30, 2026

Compared to June 30, 2025

(In thousands)

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on volume of contract purchases.

Sales expense increased by $641,000 to $6.6 million during the three months ended March 31, 2026, from

Sales expense increased by $2.6 to $8.3 million during the three months ended June 30, 2026, from $5.7

million for the same quarter in 2025.

We purchased $533.2 million of new contracts during the three months ended March 31, 2026,

compared to $451.2 million in the prior year period.

We purchased $757.7 million of new contracts during the three months ended June 30, 2026, compared

to $433.0 million in the prior year period.

Occupancy expenses were $1.5

million for the three months ending March 31, 2026, which is up from $1.4 million in the first quarter of 2025.

million for the three months ending June 30, 2026, which is up from $1.4 million in the second quarter of 2025.

Depreciation and amortization

expenses is $249,000 for both current and the prior period.

For the three months ended June 30, 2026, we recorded

income tax expense of $2.8 million, representing a 31% effective tax rate.

In the prior period, our income tax expense was $2.2 million,

representing a 31% effective tax rate.

Comparison of Operating Results for the

six months ended June 30, 2026 with the six months ended June 30, 2025

the six months ended June 30, 2026, our revenues were $233.7 million, an increase of $17.1 million, or 7.9% from the prior year revenue

of $216.6 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, 2026, did not include

a mark 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 no

marks to finance receivables measured at fair value.

There was a $6.5 million mark up to the fair value portfolio in the prior year period.

Interest income for the six

months ended June 30, 2026 increased $19.5 million, or 9.4%, to $226.8 million from $207.3 million in the prior year.

The primary reason

for the increase in interest income is the 10.8% increase in the average balance of our loan portfolio over the prior year period.

interest yield on our total loan portfolio decreased from 11.4% in the prior year period to 11.3% 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, 2026 and 2025:

Six Months Ended June 30,

(Dollars in thousands)

Interest Earning Assets

Loan Portfolio

Other income was $6.9 million

for the six months ended June 30, 2026 compared to $2.8 million for the comparable period in 2025.

$4.1 million increase was primarily driven by the dealer recoveries collected for the six months ended June 30, 2026.

These dealer recoveries

were $4.1 million for the six months ended June 30, 2026.

There were no dealer recoveries in the prior year period.

Our operating expenses

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

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

$216.7 million for the six months ended June 30, 2026, compared to $202.9 million for the prior period, an increase of $13.8 million,

The increase is primarily due to increases in interest expense.

To a lesser extent, increases in sales expense also contributed

to the increase in operating expenses during the period.

Employee costs were $46.5 million

during the six months ended June 30, 2026 compared to $49.4 million for the same period in the prior year.

The table below summarizes

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

June 30, 2026 and 2025:

Six Months Ended June 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

The increase in headcount within

our Sales staff throughout the six-month periods ended, June 30, 2026, and the decrease in the average employee cost of our Servicing

staff from June 30, 2025, were the largest contributing factors to the increase in headcount and decrease to employee costs from the six-month

period ended, June 30, 2025 to June 30, 2026.

General and administrative expenses

include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit

services, and telecommunications.

General and administrative expenses were $27.6 million for the six months ended June 30, 2026, an increase

of $2.6 from $25.0 million in the prior year period.

Interest expense for the six

months ended June 30, 2026 was $124.3 million, compared to $113.6 million in the previous year, an increase of $10.7 million.

Interest on securitization trust

debt increased by $8.2 million for the six months ended June 30, 2026 compared to the prior period.

The average balance of securitization

trust debt increased to $3,199.7 million for the six months ended June 30, 2026 compared to $2,836.9 million for the six months ended

June 30, 2025.

The annualized average rate on our securitization trust debt was 6.2% for the six months ended June 30, 2026 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 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.

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 increased by $569,000 to $15.3 million for the six months ended June 30, 2026, compared to $14.7 million in the prior

The average balance of our warehouse debt was $361.3 million during the six months ended June 30, 2026, compared to $314.7

million for the same period in 2025.

The annualized average rate on our credit line debt was 8.5% for the six months ended June 30, 2026,

compared to 9.4% in the prior year period.

Interest expense on subordinated

renewable notes was $1.4 million for the six months ended June 30, 2026.

The average balance of the outstanding subordinated debt increased

by $890,000 to $28.4 million for the six months ended June 30, 2026, compared to $27.5 million for the prior year.

The average yield of

subordinated notes was 9.5% in the current compare to 9.7% prior period.

In June 2021, March 2024, March

2025, and again in March 2026 we completed a securitization of residual interests from other previously issued securitizations in the

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

Interest expense on the residual interest financing was

$8.9 million for the six months ended June 30, 2026 compared to $7.0 million for the same period in 2025.

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, 2026

Six Months Ended June 30,

(Dollars in thousands)

Interest Earning Assets

Loan portfolio

Interest Bearing Liabilities

Warehouse lines of credit

Residual interest financing

Securitization trust debt

Subordinated renewable notes

Net interest income/spread

Net interest yield (2)

Ratio of average interest earning assets to average interest bearing

(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.

Six Months Ended June 30, 2026

Compared to June 30, 2025

(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

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 increased to $14.9 million during the six months ended June 30, 2026 from $11.6 million

in the same period in 2025.

We purchased $1,290.9 million of new contracts during the six months ended June 30, 2026 compared to $884.2

million in the prior year period.

Occupancy expenses was $3.0

million for the six months ending June 30, 2026, which is up from $2.8 million for the same period in 2025.

Depreciation and amortization

expenses decreased to $474,000 compared to $498,000 in the previous year.

For the three months ended March 31, 2026, we

recorded income tax expense of $2.5 million, representing a 31% effective tax rate.

In the prior period, our income tax expense was $2.1

million, representing a 31% effective tax rate.

For the six months ended June

30, 2026, we recorded income tax expense of $5.3 million, representing a 31% effective tax rate.

In the prior period, our income tax expense

was $4.3 million, representing a 31% effective tax rate.

Credit Experience

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Total Managed Portfolio (Excludes Third Party

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

December 31, 2025

7 unchanged sentences

Delinquencies as a percentage of gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of

gross servicing portfolio

Total delinquencies and amount in repossession as a percentage of gross servicing portfolio

Extension Experience

5 unchanged sentences

____________________________________

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

The information in the table

represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold

in securitization transactions that we continue to service.

The table does not include certain contracts we have serviced for third parties

on which we earn servicing fees only and have no credit risk.

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

due date, which date may have been extended within limits specified in the Servicing Agreements.

The period of delinquency is based on

the number of days payments are contractually past due.

(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

Automobile contracts less than 31 days delinquent are not included.

The delinquency

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

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

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

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

Total Managed Portfolio (Excludes Third Party Portfolio)

Finance Receivables Portfolio

1 unchanged sentence

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)

_________________________

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

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

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

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

March 31, 2026, and March 31, 2025, percentages

represent three months ended March 31, 2026, and March 31, 2025, annualized.

(1) All amounts and percentages are based

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

(2) Net charge-offs include the remaining principal

balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts

collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying

interim consolidated financial statements.

June 30, 2026, and June 30, 2025, percentages represent three months ended June 30, 2026, and

June 30, 2025, annualized.

December 31, 2025, represents 12 months ended December 31, 2025.

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a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables.

below summarizes the status, as of March 31, 2026, for accounts that received extensions from 2014 through 2025:

below summarizes the status, as of June 30, 2026, for accounts that received extensions from 2014 through 2025:

Period of Extension

# Extensions Granted

Active or Paid Off at March 31, 2026

% Active or Paid Off at March 31,

Active or Paid Off at June 30, 2026

% Active or Paid Off at June 30, 2026

Charged Off > 6 Months After Extension

% Charged Off > 6 Months After

% Charged Off > 6 Months After Extension

% Charged Off <= 6 Months After

Charged Off <= 6 Months After Extension

% Charged Off <= 6 Months After Extension

Avg Months to Charge Off Post Extension

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We consider accounts that have had extensions and were active or paid off

as of March 31, 2026, to be successful.

as of June 30, 2026, to be successful.

Successful extensions result in continued payments of interest and principal (including payment

in full in many cases).

Without the extension, however, the account may have defaulted, and we would have likely incurred a substantial

loss and no additional interest revenue.

Without extension, however, the account may have defaulted, and we would have likely incurred a substantial loss

and no additional interest revenue.

For extension accounts that

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In such cases, despite the ultimate loss, we received additional payments of principal and interest that otherwise we would not have received.

information about our extensions is provided in the tables below:

Three Months Ended

Additional information

about our extensions is provided in the tables below:

Six Months Ended June 30,

Year Ended December 31,

Average number of extensions granted per month

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and owned by third parties

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

December 31, 2025

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and owned by third parties

Since 2019, we have been able to reduce extensions

by working with our servicing staff to be more selective in granting extensions including, where appropriate, to exhaust all possibilities

of payment by the customer before granting an extension.

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

Non-Accrual Receivables

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Net cash provided by operating

activities for the three-month period ended March 31, 2026 was $83.8 million, an increase of $9.9 million, compared to net cash provided

by operating activities for the three-month period ended March 31, 2026 of $73.9 million.

activities for the six-month period ended June 30, 2026 was $189.9 million, an increase of $61.6 million, compared to net cash provided

by operating activities for the six-month period ended June 30, 2025 of $128.3 million.

Net cash from operating activities is generally

provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and marks to finance

receivables measured at fair value.

provided by net income from operations adjusted for significant non-cash items such as marks to finance receivables measured at fair value.

Net cash used in investing activities

was $250.7 million for the three months ended March 31, 2026 compared to $194.1 million in the prior year period.

was $697.0 million for the six months ended June 30, 2026 compared to $360.8 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 $524.9 million and $449.6 million during the first three months

Purchases of finance receivables excluding acquisition fees were $1,266.6 million and $882.9 million during the first six months

of 2026 and 2025, respectively.

Net cash provided by financing

activities for the three months ended March 31, 2026 was $180.1 million compared to $166.3 million in the prior year period.

activities for the six months ended June 30, 2026 was $515.1 million compared to $255.3 million in the prior year period.

Cash provided

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

In the first three months of 2026, we issued

In the first six months of 2026, we issued

$859.7 million in new securitization trust debt compared to $862.4 million for the same period in 2025.

We repaid $715.1 million in securitization

trust debt in the three months ended March 31, 2026 compared to repayments of securitization trust debt of $293.0 million in the prior

In the three months ended March 31, 2026, we had net advances on warehouse lines of credit of $141.5 million, compared to

net repayments from warehouse lines of credit of $45.8 million in the prior year’s period.

trust debt in the six months ended June 30, 2026 compared to repayments of securitization trust debt of $642.7 million in the prior year

In the six months ended June 30, 2026, we had net advances on warehouse lines of credit of $354.4 million, compared to net repayments

from warehouse lines of credit of $16.6 million in the prior year’s period.

We purchase automobile contracts

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at which we purchase automobile contracts.

We are and may in the future be limited in our

ability to purchase automobile contracts due to limits on our capital.

As of March 31, 2026, we had unrestricted cash of $6.9 million

and $178.5 million aggregate available borrowings under our three warehouse credit facilities (assuming the availability of sufficient

eligible collateral).

As of March 31, 2026, we had approximately $5.3 million of such eligible collateral.

Our plans 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 three-month period ended March 31, 2026, we completed one securitizations aggregating $345.6 million

of notes sold.

Our liquidity will also be affected by releases

of cash from the trusts established with our securitizations.

While the specific terms and mechanics of each spread account vary among

transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit

enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below certain predetermined

In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may

require increased credit enhancement to be accumulated for the particular pool.

There can be no assurance that collections from the related

trusts will continue to generate sufficient cash.

Our warehouse credit facilities contain various financial covenants requiring certain

minimum financial ratios and results.

Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding

maximum leverage levels.

In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect

to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness.

As of March 31, 2026, we were in compliance with all such financial covenants.

We are and may in the future

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

As of June 30, 2026, we had unrestricted cash

of $7.5 million and $43.4 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability

of sufficient eligible collateral).

As of June 30, 2026, we had approximately $20.9 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 six-month period ended June 30, 2026, we completed two securitizations aggregating

$859.7 million of notes sold.

Our liquidity will also be

affected by releases of cash from the trusts established with our securitizations.

While the specific terms and mechanics of each spread

account vary among transactions, our securitization agreements generally provide that we will receive excess cash flow, if any, only if

the amount of credit enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below

certain predetermined levels.

In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the

securitization may require increased credit enhancement to be accumulated for the particular pool.

There can be no assurance that collections

from the related trusts will continue to generate sufficient cash.

Our warehouse credit facilities

contain various financial covenants requiring certain minimum financial ratios and results.

Such covenants include maintaining minimum

levels of liquidity and net worth and not exceeding maximum leverage levels.

In addition, certain of our debt agreements other than our

term securitizations contain cross-default provisions.

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

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

accompanied by acceleration of such other indebtedness.

As of June 30, 2026, we were in compliance with all such financial covenants.

We currently have and will

continue to have a substantial amount of outstanding indebtedness.

At March 31, 2026, we had approximately $3,668.2 million of debt outstanding.

At June 30, 2026, we had approximately $4,008.3 million of debt outstanding.

Such debt consisted primarily of $3,131.1 million of securitization trust debt, and also included $679.9 million of warehouse lines of

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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