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Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2024

 

Commission file number: 001-11416

 

CONSUMER PORTFOLIO SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

California 33-0459135
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
   

3800 Howard Hughes Parkway, Suite 1400,

Las Vegas, Nevada

 89169
(Address of principal executive offices) (Zip Code)

 

Registrant’s telephone number, including Area Code: (949) 753-6800

 

Former name, former address and former fiscal year, if changed since last report: N/A

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading Symbol Name of Each Exchange on Which Registered
Common Stock, no par value CPSS The NASDAQ Stock Market LLC (Global Market)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer ☐     Accelerated Filer ☒    Non-Accelerated Filer ☐     Smaller Reporting Company ☒     Emerging Growth Company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of October 31, 2024 the registrant had 21,405,198 common shares outstanding.

 

   

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended September 30, 2024

 

    Page
PART I. FINANCIAL INFORMATION
     
Item 1. Financial Statements  
  Unaudited Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 3
  Unaudited Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, 2024 and 2023 4
  Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended September 30, 2024 and 2023 5
  Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2024 and 2023 6
  Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month and nine-month periods ended September 30, 2024 and 2023 7
  Notes to Unaudited Condensed Consolidated Financial Statements 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
Item 4. Controls and Procedures 46
     
PART II. OTHER INFORMATION
     
Item 1. Legal Proceedings 47
Item 1A. Risk Factors 47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 47
Item 5. Other Information 48
Item 6. Exhibits 48
  Signatures

49

 

 

 

 

 

 

 

 

 2 

 

 

PART I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

 

           
   September 30,   December 31, 
   2024   2023 
ASSETS          
Cash and cash equivalents  $8,071   $6,174 
Restricted cash and equivalents   270,981    119,257 
Finance receivables measured at fair value   3,132,310    2,722,662 
           
Finance receivables   8,274    27,553 
Less: Allowance for finance credit losses   (486)   (2,869)
Finance receivables, net   7,788    24,684 
           
Furniture and equipment, net   1,078    1,372 
Deferred tax assets, net   1,565    3,736 
Other assets   40,899    25,861 
Total assets   $3,462,692   $2,903,746 
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
Liabilities          
Accounts payable and accrued expenses  $72,626   $62,544 
Warehouse lines of credit   105,783    234,025 
Residual interest financing   99,127    49,875 
Securitization trust debt   2,875,777    2,265,446 
Subordinated renewable notes   24,288    17,188 
Total liabilities   3,177,601    2,629,078 
COMMITMENTS AND CONTINGENCIES   –    – 
Shareholders' Equity          
Preferred stock, $1 par value; authorized 4,998,130 shares; none issued   –    – 
Series A preferred stock, $1 par value; authorized 5,000,000 shares; none issued   –    – 
Series B preferred stock, $1 par value; authorized 1,870 shares; none issued   –    – 
Common stock, no par value; authorized 75,000,000 shares; 21,405,198 and 21,174,856 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively   25,043    28,678 
Retained earnings   261,915    247,857 
Accumulated other comprehensive loss   (1,867)   (1,867)
Total shareholders' equity   285,091    274,668 
           
Total liabilities and shareholders' equity  $3,462,692   $2,903,746 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

 3 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

 

                     
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Revenues:                
Interest income  $93,158   $83,261   $265,812   $245,960 
Mark to finance receivables measured at fair value   5,500    6,000    16,000    6,000 
Other income   1,922    2,818    6,391    8,077 
Total revenues   100,580    92,079    288,203    260,037 
                     
Expenses:                    
Employee costs   24,162    21,812    72,303    64,991 
General and administrative   13,276    13,045    40,288    36,224 
Interest   50,056    37,889    138,735    106,354 
Provision for credit losses   (994)   (2,000)   (4,579)   (20,700)
Sales   5,723    5,330    16,476    16,517 
Occupancy   1,292    1,586    4,250    4,756 
Depreciation and amortization   214    199    650    642 
Total expenses   93,729    77,861    268,123    208,784 
Income before income tax expense   6,851    14,218    20,080    51,253 
Income tax expense   2,055    3,839    6,022    13,097 
Net income  $4,796   $10,379   $14,058   $38,156 
                     
Earnings per share:                    
Basic  $0.22   $0.49   $0.66   $1.83 
Diluted  $0.20   $0.41   $0.58   $1.51 
                     
Number of shares used in computing earnings per share:                    
Basic   21,343    21,154    21,250    20,815 
Diluted   24,153    25,218    24,340    25,331 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

 4 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 

                     
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
                     
Net income  $4,796   $10,379   $14,058   $38,156 
                     
Other comprehensive income/(loss); change in funded status of pension plan   –    –    –    – 
Comprehensive income  $4,796   $10,379   $14,058   $38,156 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

 

 5 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

           
   Nine Months Ended 
   September 30, 
   2024   2023 
Cash flows from operating activities:          
Net income  $14,058   $38,156 
Adjustments to reconcile net income to net cash provided by operating activities:          
Net interest income accretion on fair value receivables   164,394    143,949 
Depreciation and amortization   650    642 
Amortization of deferred financing costs   7,740    7,264 
Mark to finance receivables measured at fair value   (16,000)   (6,000)
Provision for credit losses   (4,579)   (20,700)
Stock-based compensation expense   2,368    2,634 
Changes in assets and liabilities:          
Deferred tax assets, net   2,171    4,414 
Other assets   (15,126)   4,671 
Accounts payable and accrued expenses   10,082    6,888 
Net cash provided by operating activities   165,758    181,918 
           
Cash flows from investing activities:          
Payments received on finance receivables held for investment   21,475    56,986 
Purchases of finance receivables measured at fair value   (1,195,886)   (958,587)
Payments received on finance receivables at fair value   637,844    625,715 
Change in repossessions held in inventory   88    411 
Purchase of furniture and equipment   (356)   (277)
Net cash used in investing activities   (536,835)   (275,752)
           
Cash flows from financing activities:          
Proceeds from issuance of securitization trust debt   1,453,921    949,385 
Proceeds from issuance of subordinated renewable notes   8,784    – 
Payments on subordinated renewable notes   (1,684)   (6,100)
Net proceeds from (repayments of) warehouse lines of credit   (125,566)   (46,407)
Net Proceeds from (repayment of) residual interest financing debt   50,000    – 
Repayment of securitization trust debt   (840,480)   (814,473)
Payment of financing costs   (14,274)   (5,984)
Purchase of common stock   (12,828)   (19,116)
Exercise of options and warrants   6,825    15,833 
Net cash provided by financing activities   524,698    73,138 
Increase in cash and cash equivalents   153,621    (20,696)
Cash and restricted cash at beginning of period   125,431    162,789 
Cash and restricted cash at end of period  $279,052   $142,093 
           
Supplemental disclosure of cash flow information:          
Cash paid during the period for:          
Interest  $129,335   $97,812 
Income taxes  $9,552   $4,389 
Non-cash financing activities:          
Right-of-use asset, net  $(21,008)  $(3,983)
Lease liability  $22,944   $4,307 
Deferred office rent  $(1,936)  $(324)

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 6 

 

 

CONSUMER PORTFOLIO SERVICES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

 

                     
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Common Stock (Shares Outstanding)                    
Balance, beginning of period   21,305    21,152    21,175    20,131 
Common stock issued upon exercise of options and warrants   272    27    1,700    2,832 
Repurchase of common stock   (172)   (66)   (1,470)   (1,850)
Balance, end of period   21,405    21,113    21,405    21,113 
                     
Common Stock                    
Balance, beginning of period  $25,062   $27,937   $28,678   $28,906 
Common stock issued upon exercise of options and warrants   910    155    6,825    15,833 
Repurchase of common stock   (1,656)   (652)   (12,828)   (19,116)
Stock-based compensation   727    817    2,368    2,634 
Balance, end of period  $25,043   $28,257   $25,043   $28,257 
                     
Retained Earnings                    
Balance, beginning of period  $257,119   $230,291   $247,857   $202,514 
Net income   4,796    10,379    14,058    38,156 
Balance, end of period  $261,915   $240,670   $261,915   $240,670 
                     
Accumulated Other Comprehensive Loss                    
Balance, beginning of period  $(1,867)  $(3,031)  $(1,867)  $(3,031)
Pension benefit obligation   –    –    –    – 
Balance, end of period  $(1,867)  $(3,031)  $(1,867)  $(3,031)
                     
Balance, beginning of period   –    –    274,668    – 
Pension benefit obligation   –    –    –    – 
Total Shareholders' Equity  $285,091   $265,896   $285,091   $265,896 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

(1) Summary of Significant Accounting Policies

 

Description of Business

 

We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts."

 

Basis of Presentation

 

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the nine-month period ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.

 

Finance Receivables Measured at Fair Value

 

Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter, we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value of the receivables.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required.

 

Anticipated credit losses are included in our estimation of cash to be received with respect to receivables.  In accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.

 

Other Income

 

The following table presents the primary components of Other Income for the three-month and nine-month periods ending September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Origination and servicing fees from third party receivables  $1,647   $2,546   $5,485   $7,207 
Sales tax refunds   254    256    803    780 
Other   21    16    103    90 
Other income for the period  $1,922   $2,818   $6,391   $8,077 

 

Leases

 

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The following table presents the supplemental balance sheet information related to leases:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Operating Leases          
Operating lease right-of-use assets  $51,093   $29,575 
Less: Accumulated amortization right-of-use assets   (30,419)   (26,651)
Operating lease right-of-use assets, net  $20,674   $2,924 
           
Operating lease liabilities  $(22,601)  $(3,220)
           
Finance Leases          
Property and equipment, at cost  $3,794   $3,474 
Less: Accumulated depreciation   (3,460)   (3,385)
Property and equipment, net  $334   $89 
           
Finance lease liabilities  $(343)  $(93)
           
Weighted Average Discount Rate          
Operating lease   5.0%    5.0% 
Finance lease   6.5%    6.5% 

 

Maturities of lease liabilities were as follows:

        
(In thousands)  Operating   Finance 
Year Ending December 31,  Lease   Lease 
2024 (excluding the nine months ended September 30, 2024)  $1,216   $33 
2025   5,233    128 
2026   5,084    118 
2027   5,242    61 
2028   5,408    30 
Thereafter   4,747    10 
Total undiscounted lease payments   26,930    380 
Less amounts representing interest   (4,329)   (37)
Lease Liability  $22,601   $343 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Operating lease cost  $1,311  $1,410   $3,996   $4,181 
Finance lease cost   34    18    82    144 
Total lease cost  $1,345  $1,428   $4,078   $4,325 

 

The following table presents the supplemental cash flow information related to leases:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Cash paid for amounts included in the measurement of lease liabilities:  (In thousands)   (In thousands) 
Operating cash flows from operating leases  $1,311   $1,410   $3,996   $4,181 
Operating cash flows from finance leases  $29   $17   $70   $139 
Financing cash flows from finance leases  $6   $1   $13   $5 

 

Stock-based Compensation

 

We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”.

 

For the three and nine months ended September 30, 2024, we recorded stock-based compensation costs in the amount of $727,000 and $2.4 million, respectively. These stock-based compensation costs were $816,000 and $2.6 million for the three and nine months ended September 30, 2023. As of September 30, 2024, unrecognized stock-based compensation costs to be recognized over future periods equaled $3.7 million. This amount will be recognized as expense over a weighted-average period of 1.3 years.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The following represents stock option activity for the nine months ended September 30, 2024:

             
           Weighted
   Number of   Weighted   Average
   Shares   Average   Remaining
   (in thousands)   Exercise Price   Contractual Term
Options outstanding at the beginning of period   8,125   $5.11   N/A
Granted   –    –   N/A
Exercised   (1,700)   4.01   N/A
Forfeited   (270)   5.30   N/A
Options outstanding at the end of period   6,155   $5.41   2.91 years
              
Options exercisable at the end of period   5,145   $4.75   2.63 years

 

The following table presents the price distribution of stock options outstanding and exercisable for the years ended September 30, 2024 and December 31, 2023:

                    
   Number of shares as of   Number of shares as of 
   September 30, 2024   December 31, 2023 
   Outstanding   Exercisable   Outstanding   Exercisable 
   (In thousands)   (In thousands) 
Range of exercise prices:                    
$2.00 - $2.99   1,205    1,205    1,410    1,082 
$3.00 - $3.99   2,046    2,046    2,473    2,473 
$4.00 - $4.99   1,262    972    2,539    1,929 
$10.00 - $10.99   1,642    922    1,703    578 
Total shares   6,155    5,145    8,125    6,062 

 

At September 30, 2024 the aggregate intrinsic value of options outstanding and exercisable was $25.9 million and $24.6 million, respectively. There were 1.7 million options exercised for the nine months ended September 30, 2024 compared to 2.8 million for the comparable period in 2023. The total intrinsic value of options exercised was $8.0 million and $13.5 million for the nine-month periods ended September 30, 2024 and 2023. There were 2,954,000 shares available for future stock option grants under existing plans as of September 30, 2024.

 

 

 

 12 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Purchases of Company Stock

 

The table below describes the purchase of our common stock for the nine-month ended September 30, 2024 and 2023:

                    
   Nine Months Ended 
   September 30, 2024   September 30, 2023 
   Shares   Avg. Price   Shares   Avg. Price 
Open market purchases   473,202   $8.67    625,887   $11.20 
Shares redeemed upon net exercise of stock options   876,456    8.66    1,224,673    13.56 
Other   120,000    9.49    –    – 
Total stock purchases   1,469,658   $8.73    1,850,560   $11.80 

 

Reclassifications

 

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity.

 

Financial Covenants

 

Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of September 30, 2024, we were in compliance with all such covenants. 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.

 

Provision for Contingent Liabilities

 

We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

 

Recent Accounting Pronouncements

 

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280)," which is intended to enhance the disclosures on reportable segments. This new standard will be effective for annual reporting periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)," which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 

(2) Finance Receivables

 

Our portfolio of finance receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on a portfolio basis according to delinquency status. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. We report delinquency on a contractual basis. Once a contract becomes greater than 90 days delinquent, we do not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days delinquent. Any payments received on a contract that is greater than 90 days delinquent are first applied to accrued interest and then to principal reduction.

 

In January 2018 the Company adopted the fair value method of accounting for finance receivables acquired after 2017. Finance receivables measured at fair value are recorded separately on the Company’s Balance Sheet and are excluded from all tables in this footnote.

 

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, as extended where applicable. Automobile contracts less than 31 days delinquent are not reported as delinquent. In certain circumstances we will grant obligors one-month payment extensions. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In certain limited cases, a two-month extension may be granted. There are no other concessions, such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments. The following table summarizes the delinquency status of finance receivables as of September 30, 2024 and December 31, 2023:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status          
Current  $4,687   $17,771 
31-60 days   1,900    5,626 
61-90 days   1,316    3,087 
91 + days   371    1,069 
   $8,274   $27,553 

 

Finance receivables totaling $371,000 and $1.1 million at September 30, 2024 and December 31, 2023, respectively, have been placed on non-accrual status as a result of their delinquency status.

 

 

 

 14 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Allowance for Credit Losses – Finance Receivables

 

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of finance receivables to present the net amount expected to be collected. Charge offs are deducted from the allowance when management believes that collectability is unlikely.

 

Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions and, reasonable and supportable forecasts. We believe our historical credit loss experience provides the best basis for the estimation of expected credit losses. Consequently, we use historical loss experience for older receivables, aggregated into vintage pools based on their calendar quarter of origination, to forecast expected losses for less seasoned quarterly vintage pools.

 

We measure the weighted average monthly incremental change in cumulative net losses for the vintage pools in the relevant historical period. For the pools in the relevant historical period, we consider each pool’s performance from its inception through the end of the current period. We then apply the results of the historical analysis to less seasoned vintage pools beginning with each vintage pool’s most recent actual cumulative net loss experience and extrapolating from that point based on the historical data. We believe the pattern and magnitude of losses on older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages.

 

Our contract purchase guidelines are designed to produce a homogenous portfolio. For key credit characteristics of individual contracts such as obligor credit history, job stability, residence stability and ability to pay, there is relatively little variation from the average for the portfolio. Similarly, for key structural characteristics such as loan-to-value, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. Consequently, we do not believe there are significant differences in risk characteristics between various segments of our portfolio.

 

Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment.

 

In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. Throughout our history we have observed how events such as extreme weather, political unrest, and other qualitative factors have influenced the performance of our portfolio. Consequently, we have considered how such qualitative factors may affect future credit losses and have incorporated our judgement of the effect of those factors into our estimates.

 

The following table presents the amortized cost basis of our finance receivables by annual vintage as of September 30, 2024 and December 31, 2023.

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Annual Vintage Pool        
2014 and prior  $93   $370 
2015   435    1,788 
2016   2,101    7,673 
2017   5,645    17,722 
   $8,274   $27,553 

 

 

 

 15 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The following table presents a summary of the activity for the allowance for finance credit losses for the three-month and nine-month periods ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $684  $5,721   $2,869   $21,753 
Provision for credit losses on finance receivables   (994)   (2,000)   (4,579)   (20,700)
Charge-offs   (544)   (1,477)   (1,976)   (6,391)
Recoveries   1,340    1,984    4,172    9,566 
Balance at end of period  $486  $4,228   $486   $4,228 

 

The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month and nine-month ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Annual Vintage Pool                    
2014 and prior  $69   $43   $249   $251 
2015   60    129    242    870 
2016   145    568    790    2,602 
2017   446    948    972    3,548 
Applied against repos in inventory (net)   (176)   (211)   (277)   (880)
   $544   $1,477   $1,976   $6,391 

 

Excluded from finance receivables are contracts that were previously classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle securing the Contract. The following table presents a summary of such repossessed inventory together with the allowance for losses in repossessed inventory that is not included in the allowance for finance credit losses:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Gross balance of repossessions in inventory  $233   $597 
Allowance for losses on repossessed inventory   (195)   (472)
Net repossessed inventory included in other assets  $38   $125 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

(3) Securitization Trust Debt

 

We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:

                      Weighted 
                       Average 
   Final   Receivables       Outstanding   Outstanding   Contractual Debt 
   Scheduled   Pledged at       Principal at   Principal at   Interest Rate at 
   Payment   September 30,   Initial   September 30,   December 31,   September 30, 
Series  Date (1)   2024 (2)   Principal   2024   2023   2024 
   (Dollars in thousands)     
CPS 2019-B   June 2026   $–   $228,275   $–   $15,742    – 
CPS 2019-C   September 2026    –    243,513    –    19,725    – 
CPS 2019-D   December  2026    –    274,313    –    27,445    – 
CPS 2020-A   March 2027    –    260,000    –    26,382    – 
CPS 2020-B   June 2027    22,376    202,343    14,713    24,197    7.38% 
CPS 2020-C   November 2027    32,459    252,200    27,676    43,487    4.68% 
CPS 2021-A   March 2028    36,454    230,545    25,947    39,039    2.14% 
CPS 2021-B   June 2028    47,359    240,000    36,486    55,684    3.07% 
CPS 2021-C   September 2028    72,712    291,000    56,495    85,563    2.34% 
CPS 2021-D   December  2028    99,030    349,202    82,400    126,059    3.09% 
CPS 2022-A   April 2029    111,547    316,800    90,679    137,479    3.23% 
CPS 2022-B   October 2029    175,458    395,600    149,736    213,779    5.46% 
CPS 2022-C   April 2030    206,276    391,600    160,019    230,273    6.35% 
CPS 2022-D   June 2030    174,044    307,018    150,809    205,583    8.57% 
CPS 2023-A   August 2030    207,876    324,768    164,803    231,906    6.64% 
CPS 2023-B   November 2030    228,550    332,885    193,019    268,172    6.85% 
CPS 2023-C   February 2031    218,498    291,732    194,436    257,568    6.82% 
CPS 2023-D   May 2031    235,473    286,149    212,009    271,939    7.45% 
CPS 2024-A   August 2031    249,646    280,924    227,163    –    6.16% 
CPS 2024-B   November 2031    305,382    319,871    283,906    –    6.32% 
CPS 2024-C   March 2032    435,745    436,310    406,350    –    6.19% 
CPS 2024-D   June 2032    295,408    436,310    416,816    –    5.16% 
    –   $3,154,293   $6,691,358   $2,893,462   $2,280,021      

_________________

(1)The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $262.7 million in 2024, $1,003.5 million in 2025, $686.9 million in 2026, $460.9 million in 2027, $288.5 million in 2028, $134.8 million in 2029, and $38.5 million in 2030.
(2)Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

Debt issuance costs of $17.7 million and $14.6 million as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the Securitization trust debt on our Consolidated Balance Sheets.

 

All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets.

 

The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of September 30, 2024, we were in compliance with all such covenants.

 

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of September 30, 2024, restricted cash under the various agreements totaled approximately $271.0 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

 

Our wholly-owned bankruptcy remote subsidiaries were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors.

 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

(4) Debt

 

The terms and amounts of our other debt outstanding at September 30, 2024 and December 31, 2023 are summarized below:

                
         Amount Outstanding at 
         September 30,   December 31, 
         2024   2023 
         (In thousands) 
Description  Interest Rate  Maturity        
               
Warehouse lines of credit  3.00% over CP yield rate (Minimum 3.75%) 8.27% and 8.58% at September 30, 2024 and December 31 2023, respectively  July 2026  $109,059   $165,628 
                 
   4.50% over a commercial paper rate (Minimum 7.50%) 9.60% and 9.63% at September 30 2024, and December 31 2023, respectively  March 2026   –    68,997 
                 
Residual interest financing  7.86%  June 2026   50,000    50,000 
                 
Residual interest financing  11.50%  March 2029   50,000    – 
                 
Subordinated renewable notes  Weighted average rate of 9.22% and 8.45% at September 30, 2024 and December 31, 2023, respectively  Weighted average maturity of October 2026 and February 2026 at September 30, 2024 and December 31, 2023, respectively   24,288    17,188 
                 
         $233,347   $301,813 

 

On July 11, 2024, we renewed our two-year $200 million revolving credit agreement with Citibank, N.A. The revolving period for this facility was extended to July 2026 followed by an amortization period through July 2027 for any receivables pledged at the end of the revolving period. There was $109.1 million outstanding under this facility at September 30, 2024.

 

On March 29, 2024, we renewed our two-year $200 million revolving credit agreement with Ares Agent Services, L.P. The revolving period for this facility was extended to March 2026 followed by an amortization period through March 2028 for any receivables pledged at the end of the revolving period. There was no amount outstanding under this facility at September 30, 2024.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

On March 22, 2024, we completed a $50 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023. The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. At September 30, 2024 there was $50.0 million outstanding under this facility.

 

Unamortized debt issuance costs of $873,000 and $125,000 as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $3.3 million and $599,000 as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the Warehouse lines of credit amounts in the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets.

 

(5) Interest Income and Interest Expense

 

The following table presents the components of interest income:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Interest on finance receivables  $1,516   $3,769   $5,634   $12,809 
Interest on finance receivables at fair value   89,942    77,848    255,546    228,641 
Other interest income   1,700    1,644    4,632    4,510 
Interest income  $93,158   $83,261   $265,812   $245,960 

 

The following table presents the components of interest expense:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
    (In thousands)    (In thousands) 
Securitization trust debt  $42,998   $31,734   $116,859   $87,258 
Warehouse lines of credit   4,000    4,665    14,022    14,521 
Residual interest financing   2,477    1,050    6,225    3,149 
Subordinated renewable notes   581    440    1,629    1,426 
Interest expense  $50,056   $37,889   $138,735   $106,354 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

(6) Earnings Per Share

 

Earnings per share for the three-month and nine-month periods ended September 30, 2024 and 2023 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month and nine-month periods ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Weighted average number of common shares outstanding during the period used to compute basic earnings per share   21,343    21,154    21,250    20,815 
                     
Incremental common shares attributable to exercise of outstanding options and warrants   2,810    4,064    3,090    4,516 
                     
Weighted average number of common shares used to compute diluted earnings per share   24,153    25,218    24,340    25,331 

 

If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and nine-month periods ended September 30, 2024 would have included an additional 1.6 million and 1.7 million shares, respectively, attributable to the exercise of outstanding options and warrants. For the three-month and nine-month periods ended September 30, 2023, 1.5 million shares, would be included in the diluted earnings per share calculation.

 

(7) Income Taxes

 

We file numerous consolidated and separate income tax returns with the United States and with many states. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015.

 

As of September 30, 2024 and December 31, 2023, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The Company and its subsidiaries file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $1.6 million as of September 30, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $1.6 million consists of approximately $667,000 of net U.S. federal deferred tax assets and $898,000 of net state deferred tax assets.

 

Income tax expense was $2.1 million and $6.0 million for the three months and nine months ended September 30, 2024, representing effective income tax rates of 30%, compared to income tax expense of $3.8 million and $13.1 million for the three months and nine months ended September 30, 2023, and representing effective income tax rates of 27% and 26% respectively.

 

(8) Legal Proceedings

 

Consumer Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate. For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case.

 

Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019 alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. The complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. In April 2024, a motion for certification of a class was filed but has not been ruled upon. It is reasonable to expect that resolution of these claims will be on a class basis.

 

Wage and Hour Claim. On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. In August 2023, the parties settled by agreement the claims of the plaintiff and a California settlement class for $1.1 million. The settlement was approved by the court on October 9, 2024. Under the settlement, the Company paid, after September 30, 2024, $1.1 million to the settlement administrator.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

In General. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of September 30, 2024, our best estimate of probable incurred losses for legal contingencies, including the matters identified above. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of September 30, 2024 is $2.3 million, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of September 30, 2024 does not exceed $4.3 million.

 

Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.

 

(9) Fair Value Measurements

 

ASC 820, "Fair Value Measurements" clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.

 

ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter.

 

Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process.

 

Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

For the quarter ended September 30, 2024, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value and did not record a mark down to that portfolio.

 

The table below presents a reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $2,960,375   $2,618,420   $2,722,662   $2,476,617 
Finance receivables at fair value acquired during period   442,126    300,539    1,195,886    958,587 
Payments received on finance receivables at fair value   (217,945)   (203,775)   (637,844)   (625,715)
Net interest income accretion on fair value receivables   (57,746)   (49,644)   (164,394)   (143,949)
Mark to fair value   5,500    6,000    16,000    6,000 
Balance at end of period  $3,132,310   $2,671,540   $3,132,310   $2,671,540 

 

The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:

                    
   September 30, 2024   December 31, 2023 
   Contractual   Fair   Contractual   Fair 
   Balance   Value   Balance   Value 
   (In thousands) 
Finance receivables measured at fair value  $3,321,329   $3,132,310   $2,941,915   $2,722,662 

 

The following table provides certain qualitative information about our level 3 fair value measurements:

                       
Financial Instrument  Fair Values as of      Weighted Avg. Inputs as of 
   September 30,   December 31,      September 30,   December 31, 
   2024   2023   Unobservable Inputs  2024   2023 
   (In thousands)            
Finance receivables measured at fair value  $3,132,310   $2,722,662   Discount rate   11.36%    11.35% 
             Cumulative net losses   15.44%    15.25% 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

The following table summarizes the delinquency status of these finance receivables measured at fair value as of September 30, 2024 and December 31, 2023:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status        
Current   $2,857,495   $2,520,158 
31 - 60 days   217,365    204,574 
61 - 90 days   102,088    101,057 
91 + days   51,675    49,541 
Repo   92,706    66,585 
   $3,321,329   $2,941,915 

 

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended September 30, 2024 and 2023.

 

The estimated fair values of financial assets and liabilities at September 30, 2024 and December 31, 2023, were as follows:

                         
   As of September 30, 2024 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $8,071   $8,071   $–   $–   $8,071 
Restricted cash and equivalents   270,981    270,981    –    –    270,981 
Finance receivables, net   7,788    –    –    6,201    6,201 
Accrued interest receivable   91    –    –    91    91 
Liabilities:                         
Warehouse lines of credit  $105,783   $–   $–   $105,783   $105,783 
Residual interest financing   99,127              99,127    99,127 
Accrued interest payable   9,589    –    –    9,589    9,589 
Securitization trust debt   2,875,777    –    –    2,897,538    2,897,538 
Subordinated renewable notes   24,288    –    –    24,288    24,288 

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 
                          
   As of December 31, 2023 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $6,174   $6,174   $–   $–   $6,174 
Restricted cash and equivalents   119,257    119,257    –    –    119,257 
Finance receivables, net   24,684    –    –    20,848    20,848 
Accrued interest receivable   292    –    –    292    292 
Liabilities:                         
Warehouse lines of credit  $234,025   $–   $–   $234,025   $234,025 
Accrued interest payable   7,928    –    –    7,928    7,928 
Securitization trust debt   2,265,446    –    –    2,183,331    2,183,331 
Subordinated renewable notes   17,188    –    –    17,188    17,188 

 

(10) Subsequent Events

 

On November 1, 2024, we amended our revolving credit agreement with Citibank, N.A., to add a subordinate third party lender that increases the rate at which we receive advances secured by automobile contracts pledged to this credit facility. The amendment allows us to advance up to 96% of the purchase price of the automobile contracts. This amendment also increases the capacity for this facility from $200 million to $225 million.

 

 

Cautionary Note Regarding Forward-Looking Statements

 

Discussions of certain matters contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. You can generally identify forward-looking statements as statements containing the words “will,” “would,” “believe,” “may,” “could,” “expect,” “anticipate,” “intend,” “estimate,” “judgment,” “assume,” “plans,” “goals, “strategy,” “future,” “likely,” “should” or other similar expressions.

 

Examples of forward-looking statements include, among others, statements we make regarding:

 

  · charge-offs and recovery rates;
  · the willingness or ability of obligors to pay pursuant to contractual terms;
  · our ability to enforce rights under contracts;
  · our ability to and rates at which we plan to acquire automobile contracts;
  · the anticipated levels of recoveries upon sale of repossessed vehicles;
  · revenues or expenses;
  · provisions for credit losses;

 

 

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

  · expected industry and general economic trends;
  · accrued losses for legal contingencies;
  · anticipated deferred tax assets;
  · estimates of taxable income;
  · our ability to service and repay our debt;
  · the structuring of securitization transactions as secured financings and the effects of such structures on financial items and future profitability; or
  · the effect of the change in structure on our profitability and the duration of the period in which our profitability would be affected by the change in securitization structure.

 

Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. Some of the factors that might cause such a difference include, but are not limited to, the following:

 

  · unexpected exogenous events, such as a widespread public health emergency;
  · mandates imposed in reaction to such events, such as prohibitions of otherwise permissible activity;
  · changes in general economic conditions;
  · changes in performance of our automobile contracts;
  · increases in interest rates;
  · our ability to generate sufficient operating and financing cash flows;
  · competition;
  · the level of losses incurred on contracts in our managed portfolio;
  · adverse decisions by courts or regulators;
  · regulatory changes with respect to consumer finance;
  · changes in the market for used vehicles;
  · levels of cash releases from existing pools of contracts;
  · the terms on which we are able to finance contract purchases;
  · the willingness or ability of dealers to assign contracts to us on acceptable terms;
  · the terms on which we are able to complete term securitizations once contracts are acquired;
  · any breach in the security of our systems; and
  · such other factors as discussed through the “Risk Factors” section of this report.

 

Forward-looking statements are neither historical facts nor guarantees of performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other uncertain conditions. Because forward-looking statements relate to the future, they involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond our ability to control or predict, including those described herein, and in any documents incorporated by reference in this report. Therefore, you should not rely on any of these forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

We undertake no obligation to publicly update any forward-looking information. You are advised to consult any additional disclosure we make in our periodic reports filed with the SEC.

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

We are a specialty finance company. Our business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers and, to a lesser extent, by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through our automobile contract purchases, we provide indirect financing to the customers of dealers who have limited credit histories or past credit problems, who we refer to as sub-prime customers. We serve as an alternative source of financing for dealers, facilitating sales to customers who otherwise might not be able to obtain financing from traditional sources, such as commercial banks, credit unions and the captive finance companies affiliated with major automobile manufacturers. 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. In this report, we refer to all of such contracts and loans as "automobile contracts."

 

We were incorporated and began our operations in March 1991. From inception through September 30, 2024, we have originated a total of approximately $22.6 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

 

Contract Purchases and Outstanding Managed Portfolio
 
   $ in thousands 
Period  Contracts Purchased in Period   Managed Portfolio at Period End 
2018   902,416    2,380,847 
2019   1,002,782    2,416,042 
2020   742,584    2,174,972 
2021   1,146,321    2,249,069 
2022   1,854,385    3,001,308 
2023   1,357,752    3,194,623 
Nine months ended September 30, 2024   1,224,130    3,521,336 

 

In May 2021 we began purchasing some contracts for immediate sale to a third-party to whom we refer applications that don’t meet our lending criteria. We service all such contracts on behalf of the third-party. We earn fees for originating the receivable and also servicing fees on active accounts in the third-party portfolio. For the nine months ended September 30, 2024, we originated $29.5 million under this third-party program. As of September 30, 2024, our managed portfolio includes $191.5 million of such third-party receivables.

 

Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California. Credit and underwriting functions are performed primarily in that California branch with certain of these functions also performed in our Florida, Nevada, and Virginia branches. We service our automobile contracts from our California, Nevada, Virginia, Florida and Illinois branches.

 

The programs we offer to dealers and consumers are intended to serve a wide range of sub-prime customers, primarily through franchised new car dealers. We originate automobile contracts with the intention of financing them on a long-term basis through securitizations. Securitizations are transactions in which we sell a specified pool of contracts to a special purpose subsidiary of ours, which in turn issues asset-backed securities to fund the purchase of the pool of contracts from us.

 

 

 

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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. All such financings have involved identification of specific automobile contracts, sale of those automobile contracts (and associated rights) to one of our special-purpose subsidiaries, and issuance of asset-backed securities to be purchased by institutional investors. Depending on the structure, these transactions may be accounted for under generally accepted accounting principles as sales of the automobile contracts or as secured financings. All of 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.

 

Since 1994 we have conducted 103 term securitizations of automobile contracts that we originated. As of September 30, 2024, 18 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. However, we completed only three securitizations in 2020. In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020.

 

Our recent history of term securitizations is summarized in the table below:

 

Recent Asset-Backed Term Securitizations
 
   $ in thousands 
Period  Number of Term Securitizations   Receivables Pledged in Term Securitizations 
2018   4    883,452 
2019   4    1,014,124 
2020   3    741,867 
2021   4    1,145,002 
2022   4    1,537,383 
2023   4    1,352,114 
Nine months ended September 30, 2024   4    1,533,854 

 

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 $400 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 2027. In addition, the capacity was doubled from $100 million to $200 million in July 2022.

 

In November 2015, we entered into another $100 million facility. This facility was most recently renewed in March 2024, extending the revolving period to March 2026, followed by an amortization period to March 2028. In June 2022, we doubled the capacity for this facility from $100 million to $200 million.

 

 

 

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In a securitization and in our warehouse credit facilities, we are required to make certain representations and warranties, which are generally similar to the representations and warranties made by dealers in connection with our purchase of the automobile contracts. If we breach any of our representations or warranties, we will be obligated to repurchase the automobile contract at a price equal to the principal balance plus accrued and unpaid interest. We may then be entitled under the terms of our dealer agreement to require the selling dealer to repurchase the contract at a price equal to our purchase price, less any principal payments made by the customer. Subject to any recourse against dealers, we will bear the risk of loss on repossession and resale of vehicles under automobile contracts that we repurchase.

 

In a securitization, the related special purpose subsidiary may be unable to release excess cash to us if the credit performance of the securitized automobile contracts falls short of pre-determined standards. Such releases represent a material portion of the cash that we use to fund our operations. An unexpected deterioration in the performance of securitized automobile contracts could therefore have a material adverse effect on both our liquidity and results of operations.

 

Receivables we originate and service for third-parties are not pledged to our warehouse facilities or included in our securitizations.

 

Financial Covenants

 

Certain of our securitization transactions and 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 September 30, 2024, we were in compliance with all such covenants.

 

Results of Operations

 

Comparison of Operating Results for the three months ended September 30, 2024 with the three months ended September 30, 2023

 

Revenues.  During the three months ended September 30, 2024, our revenues were $100.6 million, an increase of $8.5 million, or 9.2%, from the prior year revenue of $92.1 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended September 30, 2024 include a $5.5 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $5.5 million. There was a $6.0 million mark up to the fair value portfolio in the prior year period.

 

Interest income for the three months ended September 30, 2024 increased $9.9 million, or 11.9%, to $93.2 million from $83.3 million in the prior year. The primary reason for the increase in interest income is the 11.7% 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. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the three months ended September 30, 2024 and 2023:

 

   Three Months Ended September 30, 
   2024   2023 
   (Dollars in thousands) 
   Average       Interest   Average       Interest 
   Balance   Interest   Yield   Balance   Interest   Yield 
Interest Earning Assets                        
Loan Portfolio  $3,278,336   $93,158    11.4%   $2,934,749   $83,261    11.3% 

 

 

 

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Other income was $1.9 million for the three months ended September 30, 2024 compared to $2.8 million for the comparable period in 2023. This 31.8% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $1.6 million for the quarter ended September 30, 2024 compared to $2.5 million in the prior year period.

 

Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). Interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those 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 $93.7 million for the three months ended September 30, 2024, compared to $77.9 million for the prior period, an increase of $15.8 million, or 20.4%. The increase is primarily due to increases in interest expense and to a lesser extent, increases to employee costs.

 

Employee costs were $24.2 million during the three months ended September 30, 2024 compared to $21.8 million for the same quarter in the prior year, an increase of $2.4 million, or 10.8%. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended, September 30, 2024 and 2023:

 

   Three Months Ended September 30, 
   2024   2023 
   (Dollars in millions) 
Contracts purchased (dollars)  $445.9   $322.4 
Contracts purchased (units)   20,179    15,275 
Managed portfolio outstanding (dollars)  $3,329.8   $2,943.3 
Managed portfolio outstanding (units)   194,434    177,709 
           
Number of Originations staff   200    181 
Number of Sales staff   116    103 
Number of Servicing staff   525    511 
Number of other staff   84    72 
Total number of employees   925    867 

 

 

 

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General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $13.3 million, an increase of $231,000 from $13.0 million in the prior year period.

 

Interest expense for the three months ended September 30, 2024 was $50.1 million and represented 53.4% of total operating expenses, compared to $37.9 million in the previous year, when it was 48.7% of total operating expenses.

 

Interest on securitization trust debt increased by $11.3 million for the three months ended September 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,706.3 million for the three months ended September 30, 2024 compared to $2,349.7 million for the three months ended September 30, 2023. The annualized average rate on our securitization trust debt was 6.4% for the three months ended September 30, 2024 compared to 5.4% 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
 
Period   Blended Cost of Funds
January 2021   1.11%
April 2021   1.65%
July 2021   1.55%
October 2021   2.09%
January 2022   2.54%
April 2022   4.83%
July 2022   6.02%
October 2022   8.48%
January 2023   6.48%
April 2023   7.17%
July 2023   7.13%
October 2023   7.89%
January 2024   6.51%
April 2024   6.69%
June 2024   6.56%
September 2024   5.52%

 

Interest expense on warehouse credit line debt decreased by $665,000 to $4.0 million for the three months ended September 30, 2024 compared to $4.7 million in the prior year period. The decrease was primarily due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $132.3 million during the three months ended September 30, 2024 compared to $170.9 million for the same period in 2023. The annualized average rate on our credit line debt was 12.1% for the three months ended September 30, 2024 compared to 10.9% in the prior year period.

 

Interest expense on subordinated renewable notes was $581,000 for the three months ended September 30, 2024. The average balance of the outstanding subordinated debt was $23.2 million for the three months ended September 30, 2024 compared to $19.9 million for the prior year period. The average yield of subordinated notes increased to 10.0% compared to 8.8% in the prior period.

 

 

 

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In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense for these residual interest financings was $2.5 million for the three months ended September 30, 2024 compared to $1.1 for the same period in 2023.

 

The following table presents the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended September 30, 2024 and 2023:

 

   Three Months Ended September 30, 
   2024   2023 
   (Dollars in thousands) 
           Annualized           Annualized 
   Average       Average   Average       Average 
   Balance (1)   Interest   Yield/Rate   Balance (1)   Interest   Yield/Rate 
Interest Earning Assets                        
Loan Portfolio  $3,278,336   $93,158    11.4%   $2,937,749   $83,261    11.3% 
    $                          
Interest Bearing Liabilities                              
Warehouse lines of credit  $132,254    4,000    12.1%   $170,870    4,665    10.9% 
Residual interest financing   100,000    2,477    9.9%    50,000    1,050    8.4% 
Securitization trust debt   2,706,266    42,998    6.4%    2,349,655    31,734    5.4% 
Subordinated renewable notes   23,237    581    10.0%    19,904    440    8.8% 
   $2,961,757    50,056    6.8%   $2,590,429    37,889    5.9% 
                               
Net interest income/spread   $   $43,102             $45,372      
Net interest yield (2)             4.6%              5.4% 
Ratio of average interest earning assets to average interest bearing liabilities   $         111%              113% 

 

(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.

 

 

 

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   Three Months Ended September 30, 2024 
   Compared to September 30, 2023 
   Total   Change Due   Change Due 
   Change   to Volume   to Rate 
   (In thousands) 
Interest Earning Assets  $         
Loan Portfolio  $9,897   $9,077   $820 
                
Interest Bearing Liabilities               
Warehouse lines of credit   (665)   (1,062)   397 
Residual interest financing   1,427    1,052    375 
Securitization trust debt   11,264    4,498    6,766 
Subordinated renewable notes   141    71    70 
    12,167    4,559    7,608 
                
Net interest income/spread  $(2,270)  $4,518   $(6,788)

 

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of September 30, 2024. The allowance applies only to our finance receivables originated through December 2017, which we refer to as our legacy portfolio.  Finance receivables that we have originated since January 2018 are accounted for at fair value. Under the fair value method of accounting, we recognize interest income net of expected credit losses. Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value.

 

For the three months ended September 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $994,000. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $2.0 million in reductions to provision for credit losses for the three months ended September 30, 2023.

 

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expense increased to $5.7 million during the three months ended September 30, 2024 from $5.3 million for the same quarter in 2023. We purchased $445.9 million of new contracts during the three months ended September 30, 2024 compared to $322.4 million in the prior year period.

 

Occupancy expenses was $1.3 million for the three months ending September 30, 2024, which is down from the $1.6 million in the third quarter of 2023.

 

Depreciation and amortization expenses increased to $214,000 compared to $199,000 in the previous year.

 

For the three months ended September 30, 2024, we recorded income tax expense of $2.1 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $3.8 million, representing a 27% effective tax rate.

 

 

 

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Comparison of Operating Results for the nine months ended September 30, 2024 with the nine months ended September 30, 2023

 

Revenues.  During the nine months ended September 30, 2024, our revenues were $288.2 million, an increase of $28.2 million, or 10.8%, from the prior year revenue of $260.0 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the nine months ended September 30, 2024 include a $16.0 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $16.0 million. There was $6.0 mark up to the fair value portfolio in the prior year period.

 

Interest income for the nine months ended September 30, 2024 increased $19.8 million, or 8.1%, to $265.8 million from $246.0 million in the prior year. The primary reason for the increase in interest income is the 8.0% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio is 11.3% in the current year period and prior year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the nine months ended September 30, 2024 and 2023:

 

   Nine Months Ended September 30, 
   2024   2023 
   (Dollars in thousands) 
   Average       Interest   Average       Interest 
   Balance   Interest   Yield   Balance   Interest   Yield 
Interest Earning Assets                              
Loan Portfolio  $3,131,477   $265,812    11.3%   $2,898,445   $245,960    11.3% 

 

Other income was $6.4 million for the nine months ended September 30, 2024 compared to $8.1 million for the comparable period in 2023. This 20.9% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $5.5 million for the nine months ended September 30, 2024 compared to $7.2 million in the prior year period.

 

Expenses. Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). Interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those 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.

 

 

 

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Other operating expenses consist largely of facilities expenses, telephone and other communication services, credit services, computer services, sales and advertising expenses, and depreciation and amortization.

 

Total operating expenses were $268.1 million for the nine months ended September 30, 2024, compared to $208.8 million for the prior period, an increase of $59.3 million, or 28.4%. The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses. To a lesser extent, increases to employee costs and general and administrative expenses also contributed to the increase in operating expenses during the period.

 

Employee costs were $72.3 million during the nine months ended September 30, 2024 compared to $65.0 million for the same period in the prior year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the nine-month periods ended, September 30, 2024 and 2023:

 

   Nine Months Ended September 30, 
   2024   2023 
   (Dollars in millions) 
Contracts purchased (dollars)  $1,224.1   $1,056.0 
Contracts purchased (units)   56,303    50,746 
Managed portfolio outstanding (dollars)  $3,329.8   $3,181.8 
Managed portfolio outstanding (units)   194,434    189,747 
           
Number of Originations staff   200    181 
Number of Sales staff   116    103 
Number of Servicing staff   525    511 
Number of other staff   84    72 
Total number of employees   925    867 

 

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $40.3 million for the nine months ended September 30, 2024, an increase of $4.1 million from $36.2 million in the prior year period.

 

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

 

 

 

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Interest on securitization trust debt increased by $29.6 million for the nine months ended September 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,549.9 million for the nine months ended September 30, 2024 compared to $2,322.0 million for the nine months ended September 30, 2023. The annualized average rate on our securitization trust debt was 6.1% for the nine months ended September 30, 2024 compared to 5.0% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. 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
 
Period   Blended Cost of Funds
January 2021   1.11%
April 2021   1.65%
July 2021   1.55%
October 2021   2.09%
January 2022   2.54%
April 2022   4.83%
July 2022   6.02%
October 2022   8.48%
January 2023   6.48%
April 2023   7.17%
July 2023   7.13%
October 2023   7.89%
January 2024   6.51%
April 2024   6.69%
June 2024   6.56%
September 2024   5.52%

 

Interest expense on warehouse credit line debt decreased by $499,000 to $14.0 million for the nine months ended September 30, 2024 compared to $14.5 million in the prior year period. The decrease was primarily due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $170.7 million during the nine months ended September 30, 2024 compared to $186.3 million for the same period in 2023. The annualized average rate on our credit line debt was 11.0% for the nine months ended September 30, 2024 compared to 10.4% in the prior year period.

 

Interest expense on subordinated renewable notes was $1.6 million for the nine months ended September 30, 2024. The average balance of outstanding subordinated debt was $22.1 million for the nine months ending September 30, 2024, consistent with the prior year. The average yield of subordinated notes increased to 9.8% compared to 8.6% in the prior period.

 

In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense on the residual interest financing was $6.2 million for the nine months ended September 30, 2024 compared to $3.2 million for the same period in 2023.

 

 

 

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The following table presents the components of interest income and interest expense and a net interest yield analysis for the nine-month periods ended September 30, 2024 and 2023:

 

   Nine Months Ended September 30, 
   2024   2023 
   (Dollars in thousands) 
           Annualized           Annualized 
   Average       Average   Average       Average 
   Balance (1)   Interest   Yield/Rate   Balance (1)   Interest   Yield/Rate 
Interest Earning Assets                        
Loan portfolio  $3,131,477   $265,812    11.3%   $2,898,445   $245,960    11.3% 
    $                          
Interest Bearing Liabilities   $                          
Warehouse lines of credit  $170,706   $14,022    11.0%   $186,311   $14,521    10.4% 
Residual interest financing   89,051    6,225    9.3%    50,000    3,149    8.4% 
Securitization trust debt   2,549,877    116,859    6.1%    2,321,970    87,258    5.0% 
Subordinated renewable notes   22,117    1,629    9.8%    22,070    1,426    8.6% 
   $2,831,751    138,735    6.5%   $2,580,351    106,354    5.5% 
                               
Net interest income/spread       $127,077             $139,606      
Net interest yield (2)             4.8%              5.8% 
                               
Ratio of average interest earning assets to average interest bearing liabilities             111%              112% 

 

(1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.

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

 

   Nine Months Ended September 30, 2024 
   Compared to September 30, 2023 
   Total   Change Due   Change Due 
   Change   to Volume   to Rate 
   (In thousands) 
Interest Earning Assets            
Loan portfolio  $19,852   $19,293   $559 
Interest Bearing Liabilities               
Warehouse lines of credit   (499)   (1,442)   943 
Residual interest financing   3,076    2,256    820 
Securitization trust debt   29,601    1,283    28,318 
Subordinated renewable notes   203    (67)   270 
    32,381    2,030    30,351 
                
Net interest income/spread  $(12,529)  $17,262   $(29,791)

 

 

 

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Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of September 30, 2024. The allowance applies only to our finance receivables originated through December 2017, which we refer to as our legacy portfolio.  Finance receivables that we have originated since January 2018 are accounted for at fair value. Under the fair value method of accounting, we recognize interest income net of expected credit losses. Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value.

 

For the nine months ended September 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $4.6 million. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $20.7 million in reductions to provision for credit losses for the nine months ended September 30, 2023.

 

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expenses remained consistent at $16.5 million for both the nine months ending September 30, 2024, and the same period last year. We purchased $1,224.1 million of new contracts during the nine months ended September 30, 2024 compared to $1,056.0 million in the prior year period.

 

Occupancy expenses was $4.3 million for the nine months ending September 30, 2024, which is down from $4.8 million for the same period in 2023.

 

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

 

For the nine months ended September 30, 2024, we recorded income tax expense of $6.0 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $13.1 million, representing a 26% effective tax rate.

 

Credit Experience

 

Our financial results are dependent on the performance of the automobile contracts in which we retain an ownership interest. Broad economic factors such as recession and significant changes in unemployment levels influence the credit performance of our portfolio, as does the weighted average age of the receivables at any given time. The tables below document the delinquency, repossession and net credit loss experience of all such automobile contracts that we originated or own an interest in as of the respective dates shown.

 

 

 

 

 39 

 

 

Delinquency, Repossession and Extension Experience (1)

Total Managed Portfolio (Excludes Third Party Portfolio)

 

   September 30, 2024   September 30, 2023   December 31, 2023 
   Number of       Number of       Number of     
   Contracts   Amount   Contracts   Amount   Contracts   Amount 
   (Dollars in thousands) 
Delinquency Experience                              
Gross servicing portfolio (1)   194,434   $3,329,836    177,709   $2,943,332    179,198   $2,970,066 
Period of delinquency (2)   .                          
31-60 days   13,460   $219,265    12,813   $199,902    13,337   $210,200 
61-90 days   6,621    103,404    6,177    94,934    6,717    104,144 
91+ days   3,402    52,046    3,238    50,772    3,252    50,610 
Total delinquencies (2)   23,483    374,715    22,228    345,608    23,306    364,954 
Amount in repossession (3)   6,222    92,939    3,284    46,091    4,653    67,182 
Total delinquencies and amount in repossession (2)   29,705   $467,654    25,512   $391,699    27,959   $432,136 
                               
Delinquencies as a percentage of gross servicing portfolio   12.1%    11.3%    12.5%    11.7%    13.0%    12.3% 
    .                          
Total delinquencies and amount in repossession as a percentage of gross servicing portfolio   15.3%    14.0%    14.4%    13.3%    15.6%    14.5% 
                               
Extension Experience                              
Contracts with one extension, accruing   32,191   $567,435    32,763   $591,593    33,920   $610,617 
Contracts with two or more extensions, accruing   46,701    681,625    40,689    511,241    42,462    563,308 
    78,892    1,249,060    73,452    1,102,834    76,382    1,173,925 
                               
Contracts with one extension, non-accrual (4)   3,293    51,821    1,843    31,114    2,367    38,933 
Contracts with two or more extensions, non-accrual (4)   3,278    48,020    1,720    20,856    2,081    27,497 
    6,571    99,841    3,563    51,970    4,448    66,430 
                               
Total contracts with extensions   85,463   $1,348,902    77,015   $1,154,804    80,830   $1,240,355 

_________________________

(1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract. The information in the table represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold in securitization transactions that we continue to service. The table does not include certain contracts we have serviced for third parties on which we earn servicing fees only and have no credit risk.

(2) We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended within limits specified in the Servicing Agreements. The period of delinquency is based on the number of days payments are contractually past due. Automobile contracts less than 31 days delinquent are not included. The delinquency aging categories shown in the tables reflect the effect of extensions.

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

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

 

 

 

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Net Charge-Off Experience (1) 
Total Managed Portfolio (Excludes Third Party Portfolio) 
  
   Finance Receivables Portfolio 
   September 30,   September 30,   December 31, 
   2024   2023   2023 
   (Dollars in thousands) 
Average servicing portfolio outstanding  $3,278,336   $2,934,749   $2,913,571 
Annualized net charge-offs as a percentage of average servicing portfolio (2)   7.3%    6.9%    6.5% 

_________________________

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

(2) Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying interim consolidated financial statements. September 30, 2024 and September 30, 2023 percentages represent three months ended September 30, 2024 and September 30, 2023 annualized. December 31, 2023 represents 12 months ended December 31, 2023.

 

Extensions

 

In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to more than eight over the life of the contract. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In some cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest.

 

The basic question in deciding to grant an extension is whether or not we will (a) be delaying the inevitable repossession and liquidation or (b) risk losing the vehicle as a result of not being able to locate the obligor and vehicle. In both of those situations, the loss would likely be higher than if the vehicle had been repossessed without the extension. The benefits of granting an extension include minimizing current losses and delinquencies, minimizing lifetime losses, getting the obligor’s account current (or close to it) and building goodwill so that the obligor might prioritize us over other creditors on future payments. Our servicing staff are trained to identify when a past due obligor is facing a temporary problem that may be resolved with an extension. In some cases, the extension will be granted in conjunction with our receiving all or a portion of a past due payment from the obligor, thereby indicating an additional monetary and psychological commitment to the contract on the obligor’s part.

 

The credit assessment for granting an extension is initially made by our collector, who bases the recommendation on the collector’s discussions with the obligor. In such assessments the collector will consider, among other things, the following factors: (1) the reason the obligor has fallen behind in payment; (2) whether or not the reason for the delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making regular monthly payments again after the extension; (3) the obligor's past payment history, including past extensions if applicable; (4) the obligor’s willingness to communicate and cooperate on resolving the delinquency; and (5) a numeric score from our internal risk assessment system that indicating the likelihood that the extension will prove beneficial. If the collector believes the obligor is a good candidate for an extension, an approval is obtained from a supervisor, who will review the same factors stated above prior to offering the extension to the obligor. After receiving an extension, an account remains subject to our normal policies and procedures for interest accrual, reporting delinquency and recognizing charge-offs.

 

 

 

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We believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables. The table below summarizes the status, as of September 30, 2024, for accounts that received extensions from 2010 through 2023:

 

Period of Extension   # Extensions Granted   Active or Paid Off at September 30, 2024   % Active or Paid Off at September 30, 2024   Charged Off > 6 Months After Extension   % Charged Off > 6 Months After Extension   Charged Off <= 6 Months After Extension   % Charged Off <= 6 Months After Extension   Avg Months to Charge Off Post Extension
                                 
2010   26,167   12,153   46.4%   12,009   45.9%   2,005   7.7%   19
                                 
2011   18,786   10,963   58.4%   6,882   36.6%   941   5.0%   19
                                 
2012   18,783   11,315   60.2%   6,667   35.5%   801   4.3%   18
                                 
2013   23,398   11,134   47.6%   11,281   48.2%   983   4.2%   23
                                 
2014   25,773   10,432   40.5%   14,485   56.2%   856   3.3%   25
                                 
2015   53,319   22,001   41.3%   30,046   56.4%   1,272   2.4%   26
                                 
2016   80,897   35,283   43.6%   42,901   53.0%   2,713   3.4%   26
                                 
2017   133,847   56,216   42.0%   67,959   50.8%   9,672   7.2%   23
                                 
2018   121,531   58,454   48.1%   52,995   43.6%   10,082   8.3%   20
                                 
2019   71,548   43,808   61.2%   22,204   31.0%   5,536   7.7%   19
                                 
2020   83,170   57,130   68.7%   22,696   27.3%   3,344   4.0%   20
                                 
2021   47,010   34,121   72.6%   11,653   24.8%   1,236   2.6%   17
                                 
2022   56,142   40,998   73.0%   13,190   23.5%   1,954   3.5%   13
                                 
2023   83,113   69,028   83.1%   10,826   13.0%   3,259   3.9%   8

______________________

Note: Table excludes extensions on portfolios serviced for third parties

 

We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in 2019, 61.2% were either paid in full or active and performing as of September 30, 2024. Each of these successful accounts represent continued payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial loss and no interest revenue after the extension.

 

 

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For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 2018 that subsequently charged off, such charge offs occurred, on average, 20 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest.

 

Additional information about our extensions is provided in the tables below:

 

  

Nine Months Ended

September 30,

  

Nine Months Ended

September 30,

  

Year Ended

December 31,

 
   2024   2023   2023 
             
Average number of extensions granted per month   7,342    6,649    6,926 
                
Average number of outstanding accounts   186,136    175,734    176,438 
                
Average monthly extensions as % of average outstandings   3.9%    3.8%    3.9% 

____________________

Note: Table excludes portfolios originated and owned by third parties

 

   September 30, 2024   September 30, 2023   December 31, 2023 
   Number of Contracts   Amount   Number of Contracts   Amount   Number of Contracts   Amount 
           (Dollars in thousands)         
                         
Contracts with one extension   35,484   $619,256    34,606   $622,707    36,287   $649,551 
Contracts with two extensions   22,277    381,208    17,572    285,371    19,335    326,552 
Contracts with three extensions   12,614    198,602    9,511    116,087    10,109    133,207 
Contracts with four extensions   7,053    86,837    6,957    66,903    6,784    67,735 
Contracts with five extensions   4,674    40,801    5,300    43,541    5,197    42,734 
Contracts with six extensions   3,361    22,196    3,069    20,195    3,118    20,576 
    85,463   $1,348,900    77,015   $1,154,804    80,830   $1,240,355 
                               
Managed portfolio (excluding originated and owned by 3rd parties)   194,434   $3,329,836    177,709   $2,943,322    179,198   $2,970,066 

___________________

Note: Table excludes portfolios originated 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 granted.

 

 

 

 43 

 

 

Non-Accrual Receivables

 

It is not uncommon for our obligors to fall behind in their payments. However, with the diligent efforts of our Servicing staff and systems for managing our collection efforts, we regularly work with our customers to resolve delinquencies. Our staff are trained to employ a counseling approach to assist our customers with their cash flow management skills and help them to prioritize their payment obligations in order to avoid losing their vehicle to repossession. Through our experience, we have learned that once a customer becomes greater than 90 days past due, it is not likely that the delinquency will be resolved and will ultimately result in a charge-off. As a result, we do not recognize any interest income for contracts that are greater than 90 days past due.

 

If a contract exceeds the 90 days past due threshold at the end of one period, and then makes the necessary payments such that it becomes less than or equal to 90 days delinquent at the end of a subsequent period, it would be restored to full accrual status for our financial reporting purposes. At the time a contract is restored to full accrual in this manner, there can be no assurance that full repayment of interest and principal will ultimately be made. However, we monitor each obligor’s payment performance and are aware of the severity of his delinquency at any time. The fact that the delinquency has been reduced below the 90-day threshold is a positive indicator. Should the contract again exceed the 90-day delinquency level at the end of any reporting period, it would again be reflected as a non-accrual account.

 

Our policy for placing a contract on non-accrual status is independent of our policy to grant an extension. In practice, it would be an uncommon circumstance where an extension was granted and the account remained in a non-accrual status, since the goal of the extension is to bring the contract current (or nearly current).

 

Liquidity and Capital Resources

 

Our business requires substantial cash to support our purchases of automobile contracts and other operating activities. Our primary sources of cash have been cash flows from the proceeds from term securitization transactions and other sales of automobile contracts, amounts borrowed under various revolving credit facilities (also sometimes known as warehouse credit facilities), customer payments of principal and interest on finance receivables, fees for origination of automobile contracts, and releases of cash from securitization transactions and their related spread accounts. Our primary uses of cash have been the purchases of automobile contracts, repayment of amounts borrowed under lines of credit, securitization transactions and otherwise, operating expenses such as employee, interest, occupancy expenses and other general and administrative expenses, the establishment of spread accounts and initial overcollateralization, if any, the increase of credit enhancement to required levels in securitization transactions, and income taxes. There can be no assurance that internally generated cash will be sufficient to meet our cash demands. The sufficiency of internally generated cash will depend on the performance of securitized pools (which determines the level of releases from those pools and their related spread accounts), the rate of expansion or contraction in our managed portfolio, and the terms upon which we are able to acquire and borrow against automobile contracts.

 

Net cash provided by operating activities for the nine-month period ended September 30, 2024 was $165.8 million, a decrease of $16.2 million, compared to net cash provided by operating activities for the nine-month period ended September 30, 2023 of $181.9 million. 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.

 

Net cash used in investing activities was $536.8 million for the nine months ended September 30, 2024 compared to $275.8 million in the prior year period. Net cash used in investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were $1,195.9 million and $958.6 million during the first nine months of 2024 and 2023, respectively.

 

 

 

 44 

 

 

Net cash provided by financing activities for the nine months ended September 30, 2024 was $524.7 million compared to $73.1 million in the prior year period. Cash provided by financing activities is primarily related to the issuance of securitization trust debt, reduced by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt. In the first nine months of 2024, we issued $1,453.9 million in new securitization trust debt compared to $949.4 million for the same period in 2023. We repaid $840.5 million in securitization trust debt in the nine months ended September 30, 2024 compared to repayments of securitization trust debt of $814.5 million in the prior year period. In the nine months ended September 30, 2024, we had net repayments on warehouse lines of credit of $125.6 million, compared to net advances from warehouse lines of credit of $46.4 million in the prior year’s period.

 

We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years. We have been dependent on warehouse credit facilities to purchase automobile contracts and our securitization transactions for long term financing of our contracts. In addition, we have accessed other sources, such as residual financings and subordinated debt in order to finance our continuing operations.

 

The acquisition of automobile contracts for subsequent financing in securitization transactions, and the need to fund spread accounts and initial overcollateralization, if any, and increase credit enhancement levels when those transactions take place, results in a continuing need for capital. The amount of capital required is most heavily dependent on the rate of our automobile contract purchases, the required level of initial credit enhancement in securitizations, and the extent to which the previously established trusts and their related spread accounts either release cash to us or capture cash from collections on securitized automobile contracts. Of those, the factor most subject to our control is the rate 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 September 30, 2024, we had unrestricted cash of $8.1 million and $294.2 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of September 30, 2024, we had approximately $20.9 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 nine-month period ended September 30, 2024, we completed four securitizations aggregating $1,453.9 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 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 event of default were to be accompanied by acceleration of such other indebtedness. As of September 30, 2024, we were in compliance with all such financial covenants.

 

 

 

 45 

 

 

We have and will continue to have a substantial amount of indebtedness. At September 30, 2024, we had approximately $3,105.0 million of debt outstanding. Such debt consisted primarily of $2,875.8 million of securitization trust debt and $105.8 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $610.3 million while our warehouse lines of credit debt has decreased by $128.2 million since December 31, 2023 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had $24.3 million and $17.2 million in subordinated renewable notes outstanding at September 30, 2024 and December 31, 2023, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. On March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. As of September 30, 2024, all $100.0 million of this debt remains outstanding.

 

Although we believe we are able to service and repay our debt, there is no assurance that we will be able to do so. If our plans for future operations do not generate sufficient cash flows and earnings, our ability to make required payments on our debt would be impaired. If we fail to pay our indebtedness when due, it could have a material adverse effect on us and may require us to issue additional debt or equity securities.

 

Item 4. Controls and Procedures

 

We maintain a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. As of the end of the period covered by this report, we evaluated the effectiveness of the design and operation of such disclosure controls and procedures. Based upon that evaluation, the principal executive officer (Charles E. Bradley, Jr.) and the principal financial officer (Denesh Bharwani) concluded that the disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, material information relating to us that is required to be included in our reports filed under the Securities Exchange Act of 1934. There has been no change in our internal controls over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

 

 

 

 

 

 

 

 

 

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

The information provided under the caption “Legal Proceedings,” Note 8 to the Unaudited Condensed Consolidated Financial Statements, included in Part I of this report, is incorporated herein by reference.

 

Item 1A. Risk Factors

 

We remind the reader that risk factors are set forth in Item 1A of our report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 15, 2024. Where we are aware of material changes to such risk factors as previously disclosed, we set forth below an updated discussion of such risks. The reader should note that the other risks identified in our report on Form 10-K remain applicable.

 

We have substantial indebtedness.

 

We have and will continue to have a substantial amount of indebtedness. At September 30, 2024, we had approximately $3,105.0 million of debt outstanding. Such debt consisted primarily of $2,875.8 million of securitization trust debt and $105.8 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $610.3 million while our warehouse lines of credit debt has decreased by $128.2 million since December 31, 2023 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had $24.3 million and $17.2 million in subordinated renewable notes outstanding at September 30, 2024 and December 31, 2023, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. On March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. As of September 30, 2024, all $100.0 million of this debt remains outstanding.

 

Our substantial indebtedness could adversely affect our financial condition by, among other things:

 

·increasing our vulnerability to general adverse economic and industry conditions;

 

·requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing amounts available for working capital, capital expenditures and other general corporate purposes;

 

·limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

 

·placing us at a competitive disadvantage compared to our competitors that have less debt; and

 

·limiting our ability to borrow additional funds.

 

Although we believe we are able to service and repay such debt, there is no assurance that we will be able to do so. If we do not generate sufficient operating profits, our ability to make required payments on our debt would be impaired. Failure to pay our indebtedness when due could have a material adverse effect.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

During the three months ended September 30, 2024, we repurchased 70,000 shares from existing shareholders, as reflected in the table below.

 

 

 

 47 

 

 

Issuer Purchases of Equity Securities

 

   Total Number of   Average   Total Number of Shares Purchased as Part of Publicly   Approximate Dollar Value of Shares that May Yet be Purchased 
   Shares   Price Paid   Announced Plans or   Under the Plans or 
Period(1)  Purchased   per Share   Programs   Programs (2) 
                 
July 2024   –   $–    –   $6,949,160 
August 2024   –   $–    –   $6.949,160 
September 2024   70,000   $9.85    70,000   $6,259,660 
Total   70,000   $9.85    70,000      

____________________

(1)Each monthly period is the calendar month.
(2)In April 2024, our board of directors authorized the purchase of an additional $10 million of our common stock. Through September 30, 2024, our board of directors had authorized the purchase of up to $113.2 million of our outstanding securities, under a program first announced in our annual report for the year 2002, filed on June 26, 2003. All purchases described in the table above were under the program announced in June 2003, which has no fixed expiration date.

 

Item 5. Other Information

 

During the quarter ended September 30, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

 

Item 6. Exhibits

 

The Exhibits listed below are filed with this report.

 

4.14 Instruments defining the rights of holders of long-term debt of certain consolidated subsidiaries of the registrant are omitted pursuant to the exclusion set forth in subdivisions (b)(iv)(iii)(A) and (b)(v) of Item 601 of Regulation S-K (17 CFR 229.601). The registrant agrees to provide copies of such instruments to the United States Securities and Exchange Commission upon request.
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of the registrant.
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of the registrant.
32

Section 1350 Certifications.*

101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101).

 

* These Certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. These Certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registration statement specifically states that such Certifications are incorporated therein.

 

 

 48 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

CONSUMER PORTFOLIO SERVICES, INC.

(Registrant)

 

Date: November 7, 2024

 

  By: /s/  CHARLES E. BRADLEY, JR.    
    Charles E. Bradley, Jr.    
    Chief Executive Officer    
    (Principal Executive Officer)    

 

 

Date: November 7, 2024

 

  By: /s/  DENESH BHARWANI    
    Denesh Bharwani    
    Executive Vice President and Chief Financial Officer    
    (Principal Financial Officer)    

 

 

 

 

 

 

 

 

 

 49 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Charles E. Bradley, Jr., certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2024 of Consumer Portfolio Services, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 7, 2024

 

/s/ CHARLES E. BRADLEY, JR.    
Charles E. Bradley    
Jr. Chief Executive Officer    

Exhibit 31.2

 

CERTIFICATION

 

I, Denesh Bharwani, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2024 of Consumer Portfolio Services, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 7, 2024

 

/s/  DENESH BHARWANI    
Denesh Bharwani    
Chief Financial Officer    

 

Exhibit 32


Certification Pursuant To
18 U.S.C. Section 1350,
As Adopted Pursuant To
Section 906 of The Sarbanes-Oxley Act Of 2002

 

In connection with the Quarterly Report on Form 10-Q of Consumer Portfolio Services, Inc. (the “Company”) for the quarterly period ended September 30, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Charles E. Bradley, Jr., as Chief Executive Officer of the Company, and Denesh Bharwani, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

 

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: November 7, 2024

 

/s/  CHARLES E. BRADLEY, JR.    
Charles E. Bradley, Jr.    
Chief Executive Officer    

 

 

/s/  DENESH BHARWANI    
Denesh Bharwani    
Chief Financial Officer    

 

This certification accompanies each Report pursuant to § 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of §18 of the Securities Exchange Act of 1934, as amended.

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

v3.24.3
Cover - shares
 9 Months Ended
Sep. 30, 2024
Oct. 31, 2024
Cover [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Quarterly Report true  
Document Transition Report false  
Document Period End Date Sep. 30, 2024  
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2024  
Current Fiscal Year End Date --12-31  
Entity File Number 001-11416  
Entity Registrant Name CONSUMER PORTFOLIO SERVICES, INC.  
Entity Central Index Key 0000889609  
Entity Tax Identification Number 33-0459135  
Entity Incorporation, State or Country Code CA  
Entity Address, Address Line One 3800 Howard Hughes Parkway  
Entity Address, Address Line Two Suite 1400  
Entity Address, City or Town Las Vegas  
Entity Address, State or Province NV  
Entity Address, Postal Zip Code 89169  
City Area Code 949  
Local Phone Number 753-6800  
Title of 12(b) Security Common Stock, no par value  
Trading Symbol CPSS  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   21,405,198
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
ASSETS    
Cash and cash equivalents $ 8,071 $ 6,174
Restricted cash and equivalents 270,981 119,257
Finance receivables measured at fair value 3,132,310 2,722,662
Finance receivables 8,274 27,553
Less: Allowance for finance credit losses (486) (2,869)
Finance receivables, net 7,788 24,684
Furniture and equipment, net 1,078 1,372
Deferred tax assets, net 1,565 3,736
Other assets 40,899 25,861
Total assets  3,462,692 2,903,746
Liabilities    
Accounts payable and accrued expenses 72,626 62,544
Warehouse lines of credit 105,783 234,025
Residual interest financing 99,127 49,875
Securitization trust debt 2,875,777 2,265,446
Subordinated renewable notes 24,288 17,188
Total liabilities 3,177,601 2,629,078
COMMITMENTS AND CONTINGENCIES
Shareholders' Equity    
Common stock, no par value; authorized 75,000,000 shares; 21,405,198 and 21,174,856 shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively 25,043 28,678
Retained earnings 261,915 247,857
Accumulated other comprehensive loss (1,867) (1,867)
Total shareholders' equity 285,091 274,668
Total liabilities and shareholders' equity 3,462,692 2,903,746
Preferred Stock [Member]    
Shareholders' Equity    
Preferred stock, value 0 0
Series A Preferred Stock [Member]    
Shareholders' Equity    
Preferred stock, value 0 0
Series B Preferred Stock [Member]    
Shareholders' Equity    
Preferred stock, value $ 0 $ 0
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares
Sep. 30, 2024
Dec. 31, 2023
Preferred stock, par value $ 1 $ 1
Preferred stock, shares authorized 4,998,130 4,998,130
Preferred stock, shares issued 0 0
Common stock, par value $ 0 $ 0
Common stock, shares authorized 75,000,000 75,000,000
Common stock, shares issued 21,405,198 21,174,856
Common stock, shares outstanding 21,405,198 21,174,856
Series A Preferred Stock [Member]    
Preferred stock, par value $ 1 $ 1
Preferred stock, shares authorized 5,000,000 5,000,000
Preferred stock, shares issued 0 0
Series B Preferred Stock [Member]    
Preferred stock, par value $ 1 $ 1
Preferred stock, shares authorized 1,870 1,870
Preferred stock, shares issued 0 0
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)
shares in Thousands, $ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Revenues:        
Interest income $ 93,158 $ 83,261 $ 265,812 $ 245,960
Mark to finance receivables measured at fair value 5,500 6,000 16,000 6,000
Other income 1,922 2,818 6,391 8,077
Total revenues 100,580 92,079 288,203 260,037
Expenses:        
Employee costs 24,162 21,812 72,303 64,991
General and administrative 13,276 13,045 40,288 36,224
Interest 50,056 37,889 138,735 106,354
Provision for credit losses (994) (2,000) (4,579) (20,700)
Sales 5,723 5,330 16,476 16,517
Occupancy 1,292 1,586 4,250 4,756
Depreciation and amortization 214 199 650 642
Total expenses 93,729 77,861 268,123 208,784
Income before income tax expense 6,851 14,218 20,080 51,253
Income tax expense 2,055 3,839 6,022 13,097
Net income $ 4,796 $ 10,379 $ 14,058 $ 38,156
Earnings per share:        
Basic $ 0.22 $ 0.49 $ 0.66 $ 1.83
Diluted $ 0.20 $ 0.41 $ 0.58 $ 1.51
Number of shares used in computing earnings per share:        
Basic 21,343 21,154 21,250 20,815
Diluted 24,153 25,218 24,340 25,331
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Income Statement [Abstract]        
Net income $ 4,796 $ 10,379 $ 14,058 $ 38,156
Other comprehensive income/(loss); change in funded status of pension plan 0 0 0 0
Comprehensive income $ 4,796 $ 10,379 $ 14,058 $ 38,156
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Cash flows from operating activities:    
Net income $ 14,058 $ 38,156
Adjustments to reconcile net income to net cash provided by operating activities:    
Net interest income accretion on fair value receivables 164,394 143,949
Depreciation and amortization 650 642
Amortization of deferred financing costs 7,740 7,264
Mark to finance receivables measured at fair value (16,000) (6,000)
Provision for credit losses (4,579) (20,700)
Stock-based compensation expense 2,368 2,634
Changes in assets and liabilities:    
Deferred tax assets, net 2,171 4,414
Other assets (15,126) 4,671
Accounts payable and accrued expenses 10,082 6,888
Net cash provided by operating activities 165,758 181,918
Cash flows from investing activities:    
Payments received on finance receivables held for investment 21,475 56,986
Purchases of finance receivables measured at fair value (1,195,886) (958,587)
Payments received on finance receivables at fair value 637,844 625,715
Change in repossessions held in inventory 88 411
Purchase of furniture and equipment (356) (277)
Net cash used in investing activities (536,835) (275,752)
Cash flows from financing activities:    
Proceeds from issuance of securitization trust debt 1,453,921 949,385
Proceeds from issuance of subordinated renewable notes 8,784 0
Payments on subordinated renewable notes (1,684) (6,100)
Net proceeds from (repayments of) warehouse lines of credit (125,566) (46,407)
Net Proceeds from (repayment of) residual interest financing debt 50,000 0
Repayment of securitization trust debt (840,480) (814,473)
Payment of financing costs (14,274) (5,984)
Purchase of common stock (12,828) (19,116)
Exercise of options and warrants 6,825 15,833
Net cash provided by financing activities 524,698 73,138
Increase in cash and cash equivalents 153,621 (20,696)
Cash and restricted cash at beginning of period 125,431 162,789
Cash and restricted cash at end of period 279,052 142,093
Supplemental disclosure of cash flow information:    
Interest 129,335 97,812
Income taxes 9,552 4,389
Non-cash financing activities:    
Right-of-use asset, net (21,008) (3,983)
Lease liability 22,944 4,307
Deferred office rent $ (1,936) $ (324)
v3.24.3
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($)
shares in Thousands, $ in Thousands
Common Stock [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Beginning balance, shares at Dec. 31, 2022 20,131      
Beginning balance, value at Dec. 31, 2022 $ 28,906 $ 202,514 $ (3,031)
Pension benefit obligation    
Common stock issued upon exercise of options and warrants, shares 2,832      
Common stock issued upon exercise of options and warrants $ 15,833      
Repurchase of common stock, shares (1,850)      
Repurchase of common stock $ (19,116)      
Stock-based compensation $ 2,634      
Net income   38,156   38,156
Ending balance, shares at Sep. 30, 2023 21,113      
Ending balance, value at Sep. 30, 2023 $ 28,257 240,670 (3,031) 265,896
Beginning balance, shares at Jun. 30, 2023 21,152      
Beginning balance, value at Jun. 30, 2023 $ 27,937 230,291 (3,031)
Pension benefit obligation    
Common stock issued upon exercise of options and warrants, shares 27      
Common stock issued upon exercise of options and warrants $ 155      
Repurchase of common stock, shares (66)      
Repurchase of common stock $ (652)      
Stock-based compensation $ 817      
Net income   10,379   10,379
Ending balance, shares at Sep. 30, 2023 21,113      
Ending balance, value at Sep. 30, 2023 $ 28,257 240,670 (3,031) 265,896
Beginning balance, shares at Dec. 31, 2023 21,175      
Beginning balance, value at Dec. 31, 2023 $ 28,678 247,857 (1,867) 274,668
Pension benefit obligation    
Common stock issued upon exercise of options and warrants, shares 1,700      
Common stock issued upon exercise of options and warrants $ 6,825      
Repurchase of common stock, shares (1,470)      
Repurchase of common stock $ (12,828)      
Stock-based compensation $ 2,368      
Net income   14,058   14,058
Ending balance, shares at Sep. 30, 2024 21,405      
Ending balance, value at Sep. 30, 2024 $ 25,043 261,915 (1,867) 285,091
Beginning balance, shares at Jun. 30, 2024 21,305      
Beginning balance, value at Jun. 30, 2024 $ 25,062 257,119 (1,867)
Pension benefit obligation    
Common stock issued upon exercise of options and warrants, shares 272      
Common stock issued upon exercise of options and warrants $ 910      
Repurchase of common stock, shares (172)      
Repurchase of common stock $ (1,656)      
Stock-based compensation $ 727      
Net income   4,796   4,796
Ending balance, shares at Sep. 30, 2024 21,405      
Ending balance, value at Sep. 30, 2024 $ 25,043 $ 261,915 $ (1,867) $ 285,091
v3.24.3
Pay vs Performance Disclosure - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Pay vs Performance Disclosure [Table]        
Net Income (Loss) $ 4,796 $ 10,379 $ 14,058 $ 38,156
v3.24.3
Insider Trading Arrangements
 3 Months Ended
Sep. 30, 2024
Insider Trading Arrangements [Line Items]  
Rule 10b5-1 Arrangement Adopted false
Non-Rule 10b5-1 Arrangement Adopted false
Rule 10b5-1 Arrangement Terminated false
Non-Rule 10b5-1 Arrangement Terminated false
v3.24.3
Summary of Significant Accounting Policies
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

(1) Summary of Significant Accounting Policies

 

Description of Business

 

We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts."

 

Basis of Presentation

 

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the nine-month period ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.

 

Finance Receivables Measured at Fair Value

 

Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter, we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value of the receivables.

 

We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required.

 

Anticipated credit losses are included in our estimation of cash to be received with respect to receivables.  In accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.

 

Other Income

 

The following table presents the primary components of Other Income for the three-month and nine-month periods ending September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Origination and servicing fees from third party receivables  $1,647   $2,546   $5,485   $7,207 
Sales tax refunds   254    256    803    780 
Other   21    16    103    90 
Other income for the period  $1,922   $2,818   $6,391   $8,077 

 

Leases

 

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

 

The following table presents the supplemental balance sheet information related to leases:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Operating Leases          
Operating lease right-of-use assets  $51,093   $29,575 
Less: Accumulated amortization right-of-use assets   (30,419)   (26,651)
Operating lease right-of-use assets, net  $20,674   $2,924 
           
Operating lease liabilities  $(22,601)  $(3,220)
           
Finance Leases          
Property and equipment, at cost  $3,794   $3,474 
Less: Accumulated depreciation   (3,460)   (3,385)
Property and equipment, net  $334   $89 
           
Finance lease liabilities  $(343)  $(93)
           
Weighted Average Discount Rate          
Operating lease   5.0%    5.0% 
Finance lease   6.5%    6.5% 

 

Maturities of lease liabilities were as follows:

        
(In thousands)  Operating   Finance 
Year Ending December 31,  Lease   Lease 
2024 (excluding the nine months ended September 30, 2024)  $1,216   $33 
2025   5,233    128 
2026   5,084    118 
2027   5,242    61 
2028   5,408    30 
Thereafter   4,747    10 
Total undiscounted lease payments   26,930    380 
Less amounts representing interest   (4,329)   (37)
Lease Liability  $22,601   $343 

 

The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Operating lease cost  $1,311  $1,410   $3,996   $4,181 
Finance lease cost   34    18    82    144 
Total lease cost  $1,345  $1,428   $4,078   $4,325 

 

The following table presents the supplemental cash flow information related to leases:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Cash paid for amounts included in the measurement of lease liabilities:  (In thousands)   (In thousands) 
Operating cash flows from operating leases  $1,311   $1,410   $3,996   $4,181 
Operating cash flows from finance leases  $29   $17   $70   $139 
Financing cash flows from finance leases  $6   $1   $13   $5 

 

Stock-based Compensation

 

We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”.

 

For the three and nine months ended September 30, 2024, we recorded stock-based compensation costs in the amount of $727,000 and $2.4 million, respectively. These stock-based compensation costs were $816,000 and $2.6 million for the three and nine months ended September 30, 2023. As of September 30, 2024, unrecognized stock-based compensation costs to be recognized over future periods equaled $3.7 million. This amount will be recognized as expense over a weighted-average period of 1.3 years.

 

The following represents stock option activity for the nine months ended September 30, 2024:

             
           Weighted
   Number of   Weighted   Average
   Shares   Average   Remaining
   (in thousands)   Exercise Price   Contractual Term
Options outstanding at the beginning of period   8,125   $5.11   N/A
Granted   –    –   N/A
Exercised   (1,700)   4.01   N/A
Forfeited   (270)   5.30   N/A
Options outstanding at the end of period   6,155   $5.41   2.91 years
              
Options exercisable at the end of period   5,145   $4.75   2.63 years

 

The following table presents the price distribution of stock options outstanding and exercisable for the years ended September 30, 2024 and December 31, 2023:

                    
   Number of shares as of   Number of shares as of 
   September 30, 2024   December 31, 2023 
   Outstanding   Exercisable   Outstanding   Exercisable 
   (In thousands)   (In thousands) 
Range of exercise prices:                    
$2.00 - $2.99   1,205    1,205    1,410    1,082 
$3.00 - $3.99   2,046    2,046    2,473    2,473 
$4.00 - $4.99   1,262    972    2,539    1,929 
$10.00 - $10.99   1,642    922    1,703    578 
Total shares   6,155    5,145    8,125    6,062 

 

At September 30, 2024 the aggregate intrinsic value of options outstanding and exercisable was $25.9 million and $24.6 million, respectively. There were 1.7 million options exercised for the nine months ended September 30, 2024 compared to 2.8 million for the comparable period in 2023. The total intrinsic value of options exercised was $8.0 million and $13.5 million for the nine-month periods ended September 30, 2024 and 2023. There were 2,954,000 shares available for future stock option grants under existing plans as of September 30, 2024.

 

Purchases of Company Stock

 

The table below describes the purchase of our common stock for the nine-month ended September 30, 2024 and 2023:

                    
   Nine Months Ended 
   September 30, 2024   September 30, 2023 
   Shares   Avg. Price   Shares   Avg. Price 
Open market purchases   473,202   $8.67    625,887   $11.20 
Shares redeemed upon net exercise of stock options   876,456    8.66    1,224,673    13.56 
Other   120,000    9.49    –    – 
Total stock purchases   1,469,658   $8.73    1,850,560   $11.80 

 

Reclassifications

 

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity.

 

Financial Covenants

 

Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of September 30, 2024, we were in compliance with all such covenants. 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.

 

Provision for Contingent Liabilities

 

We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

 

Recent Accounting Pronouncements

 

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280)," which is intended to enhance the disclosures on reportable segments. This new standard will be effective for annual reporting periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)," which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 
v3.24.3
Finance Receivables
 9 Months Ended
Sep. 30, 2024
Finance Receivables  
Finance Receivables

(2) Finance Receivables

 

Our portfolio of finance receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on a portfolio basis according to delinquency status. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. We report delinquency on a contractual basis. Once a contract becomes greater than 90 days delinquent, we do not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days delinquent. Any payments received on a contract that is greater than 90 days delinquent are first applied to accrued interest and then to principal reduction.

 

In January 2018 the Company adopted the fair value method of accounting for finance receivables acquired after 2017. Finance receivables measured at fair value are recorded separately on the Company’s Balance Sheet and are excluded from all tables in this footnote.

 

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, as extended where applicable. Automobile contracts less than 31 days delinquent are not reported as delinquent. In certain circumstances we will grant obligors one-month payment extensions. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In certain limited cases, a two-month extension may be granted. There are no other concessions, such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments. The following table summarizes the delinquency status of finance receivables as of September 30, 2024 and December 31, 2023:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status          
Current  $4,687   $17,771 
31-60 days   1,900    5,626 
61-90 days   1,316    3,087 
91 + days   371    1,069 
   $8,274   $27,553 

 

Finance receivables totaling $371,000 and $1.1 million at September 30, 2024 and December 31, 2023, respectively, have been placed on non-accrual status as a result of their delinquency status.

 

Allowance for Credit Losses – Finance Receivables

 

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of finance receivables to present the net amount expected to be collected. Charge offs are deducted from the allowance when management believes that collectability is unlikely.

 

Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions and, reasonable and supportable forecasts. We believe our historical credit loss experience provides the best basis for the estimation of expected credit losses. Consequently, we use historical loss experience for older receivables, aggregated into vintage pools based on their calendar quarter of origination, to forecast expected losses for less seasoned quarterly vintage pools.

 

We measure the weighted average monthly incremental change in cumulative net losses for the vintage pools in the relevant historical period. For the pools in the relevant historical period, we consider each pool’s performance from its inception through the end of the current period. We then apply the results of the historical analysis to less seasoned vintage pools beginning with each vintage pool’s most recent actual cumulative net loss experience and extrapolating from that point based on the historical data. We believe the pattern and magnitude of losses on older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages.

 

Our contract purchase guidelines are designed to produce a homogenous portfolio. For key credit characteristics of individual contracts such as obligor credit history, job stability, residence stability and ability to pay, there is relatively little variation from the average for the portfolio. Similarly, for key structural characteristics such as loan-to-value, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. Consequently, we do not believe there are significant differences in risk characteristics between various segments of our portfolio.

 

Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment.

 

In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. Throughout our history we have observed how events such as extreme weather, political unrest, and other qualitative factors have influenced the performance of our portfolio. Consequently, we have considered how such qualitative factors may affect future credit losses and have incorporated our judgement of the effect of those factors into our estimates.

 

The following table presents the amortized cost basis of our finance receivables by annual vintage as of September 30, 2024 and December 31, 2023.

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Annual Vintage Pool        
2014 and prior  $93   $370 
2015   435    1,788 
2016   2,101    7,673 
2017   5,645    17,722 
   $8,274   $27,553 

 

The following table presents a summary of the activity for the allowance for finance credit losses for the three-month and nine-month periods ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $684  $5,721   $2,869   $21,753 
Provision for credit losses on finance receivables   (994)   (2,000)   (4,579)   (20,700)
Charge-offs   (544)   (1,477)   (1,976)   (6,391)
Recoveries   1,340    1,984    4,172    9,566 
Balance at end of period  $486  $4,228   $486   $4,228 

 

The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month and nine-month ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Annual Vintage Pool                    
2014 and prior  $69   $43   $249   $251 
2015   60    129    242    870 
2016   145    568    790    2,602 
2017   446    948    972    3,548 
Applied against repos in inventory (net)   (176)   (211)   (277)   (880)
   $544   $1,477   $1,976   $6,391 

 

Excluded from finance receivables are contracts that were previously classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle securing the Contract. The following table presents a summary of such repossessed inventory together with the allowance for losses in repossessed inventory that is not included in the allowance for finance credit losses:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Gross balance of repossessions in inventory  $233   $597 
Allowance for losses on repossessed inventory   (195)   (472)
Net repossessed inventory included in other assets  $38   $125 

 
v3.24.3
Securitization Trust Debt
 9 Months Ended
Sep. 30, 2024
Securitization Trust Debt  
Securitization Trust Debt

(3) Securitization Trust Debt

 

We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:

                      Weighted 
                       Average 
   Final   Receivables       Outstanding   Outstanding   Contractual Debt 
   Scheduled   Pledged at       Principal at   Principal at   Interest Rate at 
   Payment   September 30,   Initial   September 30,   December 31,   September 30, 
Series  Date (1)   2024 (2)   Principal   2024   2023   2024 
   (Dollars in thousands)     
CPS 2019-B   June 2026   $–   $228,275   $–   $15,742    – 
CPS 2019-C   September 2026    –    243,513    –    19,725    – 
CPS 2019-D   December  2026    –    274,313    –    27,445    – 
CPS 2020-A   March 2027    –    260,000    –    26,382    – 
CPS 2020-B   June 2027    22,376    202,343    14,713    24,197    7.38% 
CPS 2020-C   November 2027    32,459    252,200    27,676    43,487    4.68% 
CPS 2021-A   March 2028    36,454    230,545    25,947    39,039    2.14% 
CPS 2021-B   June 2028    47,359    240,000    36,486    55,684    3.07% 
CPS 2021-C   September 2028    72,712    291,000    56,495    85,563    2.34% 
CPS 2021-D   December  2028    99,030    349,202    82,400    126,059    3.09% 
CPS 2022-A   April 2029    111,547    316,800    90,679    137,479    3.23% 
CPS 2022-B   October 2029    175,458    395,600    149,736    213,779    5.46% 
CPS 2022-C   April 2030    206,276    391,600    160,019    230,273    6.35% 
CPS 2022-D   June 2030    174,044    307,018    150,809    205,583    8.57% 
CPS 2023-A   August 2030    207,876    324,768    164,803    231,906    6.64% 
CPS 2023-B   November 2030    228,550    332,885    193,019    268,172    6.85% 
CPS 2023-C   February 2031    218,498    291,732    194,436    257,568    6.82% 
CPS 2023-D   May 2031    235,473    286,149    212,009    271,939    7.45% 
CPS 2024-A   August 2031    249,646    280,924    227,163    –    6.16% 
CPS 2024-B   November 2031    305,382    319,871    283,906    –    6.32% 
CPS 2024-C   March 2032    435,745    436,310    406,350    –    6.19% 
CPS 2024-D   June 2032    295,408    436,310    416,816    –    5.16% 
    –   $3,154,293   $6,691,358   $2,893,462   $2,280,021      

_________________

(1)The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $262.7 million in 2024, $1,003.5 million in 2025, $686.9 million in 2026, $460.9 million in 2027, $288.5 million in 2028, $134.8 million in 2029, and $38.5 million in 2030.
(2)Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

 

Debt issuance costs of $17.7 million and $14.6 million as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the Securitization trust debt on our Consolidated Balance Sheets.

 

All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets.

 

The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of September 30, 2024, we were in compliance with all such covenants.

 

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of September 30, 2024, restricted cash under the various agreements totaled approximately $271.0 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

 

Our wholly-owned bankruptcy remote subsidiaries were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors.

 
v3.24.3
Debt
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Debt

(4) Debt

 

The terms and amounts of our other debt outstanding at September 30, 2024 and December 31, 2023 are summarized below:

                
         Amount Outstanding at 
         September 30,   December 31, 
         2024   2023 
         (In thousands) 
Description  Interest Rate  Maturity        
               
Warehouse lines of credit  3.00% over CP yield rate (Minimum 3.75%) 8.27% and 8.58% at September 30, 2024 and December 31 2023, respectively  July 2026  $109,059   $165,628 
                 
   4.50% over a commercial paper rate (Minimum 7.50%) 9.60% and 9.63% at September 30 2024, and December 31 2023, respectively  March 2026   –    68,997 
                 
Residual interest financing  7.86%  June 2026   50,000    50,000 
                 
Residual interest financing  11.50%  March 2029   50,000    – 
                 
Subordinated renewable notes  Weighted average rate of 9.22% and 8.45% at September 30, 2024 and December 31, 2023, respectively  Weighted average maturity of October 2026 and February 2026 at September 30, 2024 and December 31, 2023, respectively   24,288    17,188 
                 
         $233,347   $301,813 

 

On July 11, 2024, we renewed our two-year $200 million revolving credit agreement with Citibank, N.A. The revolving period for this facility was extended to July 2026 followed by an amortization period through July 2027 for any receivables pledged at the end of the revolving period. There was $109.1 million outstanding under this facility at September 30, 2024.

 

On March 29, 2024, we renewed our two-year $200 million revolving credit agreement with Ares Agent Services, L.P. The revolving period for this facility was extended to March 2026 followed by an amortization period through March 2028 for any receivables pledged at the end of the revolving period. There was no amount outstanding under this facility at September 30, 2024.

 

On March 22, 2024, we completed a $50 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023. The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. At September 30, 2024 there was $50.0 million outstanding under this facility.

 

Unamortized debt issuance costs of $873,000 and $125,000 as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $3.3 million and $599,000 as of September 30, 2024 and December 31, 2023, respectively, have been excluded from the Warehouse lines of credit amounts in the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets.

 
v3.24.3
Interest Income and Interest Expense
 9 Months Ended
Sep. 30, 2024
Interest Income And Interest Expense  
Interest Income and Interest Expense

(5) Interest Income and Interest Expense

 

The following table presents the components of interest income:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Interest on finance receivables  $1,516   $3,769   $5,634   $12,809 
Interest on finance receivables at fair value   89,942    77,848    255,546    228,641 
Other interest income   1,700    1,644    4,632    4,510 
Interest income  $93,158   $83,261   $265,812   $245,960 

 

The following table presents the components of interest expense:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
    (In thousands)    (In thousands) 
Securitization trust debt  $42,998   $31,734   $116,859   $87,258 
Warehouse lines of credit   4,000    4,665    14,022    14,521 
Residual interest financing   2,477    1,050    6,225    3,149 
Subordinated renewable notes   581    440    1,629    1,426 
Interest expense  $50,056   $37,889   $138,735   $106,354 

 
v3.24.3
Earnings Per Share
 9 Months Ended
Sep. 30, 2024
Earnings per share:  
Earnings Per Share

(6) Earnings Per Share

 

Earnings per share for the three-month and nine-month periods ended September 30, 2024 and 2023 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month and nine-month periods ended September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Weighted average number of common shares outstanding during the period used to compute basic earnings per share   21,343    21,154    21,250    20,815 
                     
Incremental common shares attributable to exercise of outstanding options and warrants   2,810    4,064    3,090    4,516 
                     
Weighted average number of common shares used to compute diluted earnings per share   24,153    25,218    24,340    25,331 

 

If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and nine-month periods ended September 30, 2024 would have included an additional 1.6 million and 1.7 million shares, respectively, attributable to the exercise of outstanding options and warrants. For the three-month and nine-month periods ended September 30, 2023, 1.5 million shares, would be included in the diluted earnings per share calculation.

 
v3.24.3
Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

(7) Income Taxes

 

We file numerous consolidated and separate income tax returns with the United States and with many states. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015.

 

As of September 30, 2024 and December 31, 2023, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

 

The Company and its subsidiaries file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

 

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $1.6 million as of September 30, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $1.6 million consists of approximately $667,000 of net U.S. federal deferred tax assets and $898,000 of net state deferred tax assets.

 

Income tax expense was $2.1 million and $6.0 million for the three months and nine months ended September 30, 2024, representing effective income tax rates of 30%, compared to income tax expense of $3.8 million and $13.1 million for the three months and nine months ended September 30, 2023, and representing effective income tax rates of 27% and 26% respectively.

 
v3.24.3
Legal Proceedings
 9 Months Ended
Sep. 30, 2024
Commitments and Contingencies Disclosure [Abstract]  
Legal Proceedings

(8) Legal Proceedings

 

Consumer Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate. For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case.

 

Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019 alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. The complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. In April 2024, a motion for certification of a class was filed but has not been ruled upon. It is reasonable to expect that resolution of these claims will be on a class basis.

 

Wage and Hour Claim. On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. In August 2023, the parties settled by agreement the claims of the plaintiff and a California settlement class for $1.1 million. The settlement was approved by the court on October 9, 2024. Under the settlement, the Company paid, after September 30, 2024, $1.1 million to the settlement administrator.

 

In General. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of September 30, 2024, our best estimate of probable incurred losses for legal contingencies, including the matters identified above. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of September 30, 2024 is $2.3 million, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of September 30, 2024 does not exceed $4.3 million.

 

Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.

 
v3.24.3
Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements

(9) Fair Value Measurements

 

ASC 820, "Fair Value Measurements" clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.

 

ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter.

 

Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process.

 

Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.

 

For the quarter ended September 30, 2024, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value and did not record a mark down to that portfolio.

 

The table below presents a reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $2,960,375   $2,618,420   $2,722,662   $2,476,617 
Finance receivables at fair value acquired during period   442,126    300,539    1,195,886    958,587 
Payments received on finance receivables at fair value   (217,945)   (203,775)   (637,844)   (625,715)
Net interest income accretion on fair value receivables   (57,746)   (49,644)   (164,394)   (143,949)
Mark to fair value   5,500    6,000    16,000    6,000 
Balance at end of period  $3,132,310   $2,671,540   $3,132,310   $2,671,540 

 

The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:

                    
   September 30, 2024   December 31, 2023 
   Contractual   Fair   Contractual   Fair 
   Balance   Value   Balance   Value 
   (In thousands) 
Finance receivables measured at fair value  $3,321,329   $3,132,310   $2,941,915   $2,722,662 

 

The following table provides certain qualitative information about our level 3 fair value measurements:

                       
Financial Instrument  Fair Values as of      Weighted Avg. Inputs as of 
   September 30,   December 31,      September 30,   December 31, 
   2024   2023   Unobservable Inputs  2024   2023 
   (In thousands)            
Finance receivables measured at fair value  $3,132,310   $2,722,662   Discount rate   11.36%    11.35% 
             Cumulative net losses   15.44%    15.25% 

 

The following table summarizes the delinquency status of these finance receivables measured at fair value as of September 30, 2024 and December 31, 2023:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status        
Current   $2,857,495   $2,520,158 
31 - 60 days   217,365    204,574 
61 - 90 days   102,088    101,057 
91 + days   51,675    49,541 
Repo   92,706    66,585 
   $3,321,329   $2,941,915 

 

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended September 30, 2024 and 2023.

 

The estimated fair values of financial assets and liabilities at September 30, 2024 and December 31, 2023, were as follows:

                         
   As of September 30, 2024 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $8,071   $8,071   $–   $–   $8,071 
Restricted cash and equivalents   270,981    270,981    –    –    270,981 
Finance receivables, net   7,788    –    –    6,201    6,201 
Accrued interest receivable   91    –    –    91    91 
Liabilities:                         
Warehouse lines of credit  $105,783   $–   $–   $105,783   $105,783 
Residual interest financing   99,127              99,127    99,127 
Accrued interest payable   9,589    –    –    9,589    9,589 
Securitization trust debt   2,875,777    –    –    2,897,538    2,897,538 
Subordinated renewable notes   24,288    –    –    24,288    24,288 

 

                          
   As of December 31, 2023 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $6,174   $6,174   $–   $–   $6,174 
Restricted cash and equivalents   119,257    119,257    –    –    119,257 
Finance receivables, net   24,684    –    –    20,848    20,848 
Accrued interest receivable   292    –    –    292    292 
Liabilities:                         
Warehouse lines of credit  $234,025   $–   $–   $234,025   $234,025 
Accrued interest payable   7,928    –    –    7,928    7,928 
Securitization trust debt   2,265,446    –    –    2,183,331    2,183,331 
Subordinated renewable notes   17,188    –    –    17,188    17,188 

 
v3.24.3
Subsequent Events
 9 Months Ended
Sep. 30, 2024
Subsequent Events [Abstract]  
Subsequent Events

(10) Subsequent Events

 

On November 1, 2024, we amended our revolving credit agreement with Citibank, N.A., to add a subordinate third party lender that increases the rate at which we receive advances secured by automobile contracts pledged to this credit facility. The amendment allows us to advance up to 96% of the purchase price of the automobile contracts. This amendment also increases the capacity for this facility from $200 million to $225 million.

 
v3.24.3
Summary of Significant Accounting Policies (Policies)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Description of Business

Description of Business

 

We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts."

 
Basis of Presentation

Basis of Presentation

 

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the nine-month period ended September 30, 2024 are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

 
Use of Estimates

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.

 
Finance Receivables Measured at Fair Value

Finance Receivables Measured at Fair Value

 

Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter, we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value of the receivables.

 

We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required.

 

Anticipated credit losses are included in our estimation of cash to be received with respect to receivables.  In accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.

 
Other Income

Other Income

 

The following table presents the primary components of Other Income for the three-month and nine-month periods ending September 30, 2024 and 2023:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Origination and servicing fees from third party receivables  $1,647   $2,546   $5,485   $7,207 
Sales tax refunds   254    256    803    780 
Other   21    16    103    90 
Other income for the period  $1,922   $2,818   $6,391   $8,077 

 
Leases

Leases

 

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

 

The following table presents the supplemental balance sheet information related to leases:

          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Operating Leases          
Operating lease right-of-use assets  $51,093   $29,575 
Less: Accumulated amortization right-of-use assets   (30,419)   (26,651)
Operating lease right-of-use assets, net  $20,674   $2,924 
           
Operating lease liabilities  $(22,601)  $(3,220)
           
Finance Leases          
Property and equipment, at cost  $3,794   $3,474 
Less: Accumulated depreciation   (3,460)   (3,385)
Property and equipment, net  $334   $89 
           
Finance lease liabilities  $(343)  $(93)
           
Weighted Average Discount Rate          
Operating lease   5.0%    5.0% 
Finance lease   6.5%    6.5% 

 

Maturities of lease liabilities were as follows:

        
(In thousands)  Operating   Finance 
Year Ending December 31,  Lease   Lease 
2024 (excluding the nine months ended September 30, 2024)  $1,216   $33 
2025   5,233    128 
2026   5,084    118 
2027   5,242    61 
2028   5,408    30 
Thereafter   4,747    10 
Total undiscounted lease payments   26,930    380 
Less amounts representing interest   (4,329)   (37)
Lease Liability  $22,601   $343 

 

The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Operating lease cost  $1,311  $1,410   $3,996   $4,181 
Finance lease cost   34    18    82    144 
Total lease cost  $1,345  $1,428   $4,078   $4,325 

 

The following table presents the supplemental cash flow information related to leases:

                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Cash paid for amounts included in the measurement of lease liabilities:  (In thousands)   (In thousands) 
Operating cash flows from operating leases  $1,311   $1,410   $3,996   $4,181 
Operating cash flows from finance leases  $29   $17   $70   $139 
Financing cash flows from finance leases  $6   $1   $13   $5 

 
Stock-based Compensation

Stock-based Compensation

 

We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”.

 

For the three and nine months ended September 30, 2024, we recorded stock-based compensation costs in the amount of $727,000 and $2.4 million, respectively. These stock-based compensation costs were $816,000 and $2.6 million for the three and nine months ended September 30, 2023. As of September 30, 2024, unrecognized stock-based compensation costs to be recognized over future periods equaled $3.7 million. This amount will be recognized as expense over a weighted-average period of 1.3 years.

 

The following represents stock option activity for the nine months ended September 30, 2024:

             
           Weighted
   Number of   Weighted   Average
   Shares   Average   Remaining
   (in thousands)   Exercise Price   Contractual Term
Options outstanding at the beginning of period   8,125   $5.11   N/A
Granted   –    –   N/A
Exercised   (1,700)   4.01   N/A
Forfeited   (270)   5.30   N/A
Options outstanding at the end of period   6,155   $5.41   2.91 years
              
Options exercisable at the end of period   5,145   $4.75   2.63 years

 

The following table presents the price distribution of stock options outstanding and exercisable for the years ended September 30, 2024 and December 31, 2023:

                    
   Number of shares as of   Number of shares as of 
   September 30, 2024   December 31, 2023 
   Outstanding   Exercisable   Outstanding   Exercisable 
   (In thousands)   (In thousands) 
Range of exercise prices:                    
$2.00 - $2.99   1,205    1,205    1,410    1,082 
$3.00 - $3.99   2,046    2,046    2,473    2,473 
$4.00 - $4.99   1,262    972    2,539    1,929 
$10.00 - $10.99   1,642    922    1,703    578 
Total shares   6,155    5,145    8,125    6,062 

 

At September 30, 2024 the aggregate intrinsic value of options outstanding and exercisable was $25.9 million and $24.6 million, respectively. There were 1.7 million options exercised for the nine months ended September 30, 2024 compared to 2.8 million for the comparable period in 2023. The total intrinsic value of options exercised was $8.0 million and $13.5 million for the nine-month periods ended September 30, 2024 and 2023. There were 2,954,000 shares available for future stock option grants under existing plans as of September 30, 2024.

 
Purchases of Company Stock

Purchases of Company Stock

 

The table below describes the purchase of our common stock for the nine-month ended September 30, 2024 and 2023:

                    
   Nine Months Ended 
   September 30, 2024   September 30, 2023 
   Shares   Avg. Price   Shares   Avg. Price 
Open market purchases   473,202   $8.67    625,887   $11.20 
Shares redeemed upon net exercise of stock options   876,456    8.66    1,224,673    13.56 
Other   120,000    9.49    –    – 
Total stock purchases   1,469,658   $8.73    1,850,560   $11.80 

 
Reclassifications

Reclassifications

 

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity.

 
Financial Covenants

Financial Covenants

 

Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of September 30, 2024, we were in compliance with all such covenants. 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.

 
Provision for Contingent Liabilities

Provision for Contingent Liabilities

 

We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

 
Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280)," which is intended to enhance the disclosures on reportable segments. This new standard will be effective for annual reporting periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)," which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 
v3.24.3
Summary of Significant Accounting Policies (Tables)
 9 Months Ended
Sep. 30, 2024
Accounting Policies [Abstract]  
Schedule of other income
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Origination and servicing fees from third party receivables  $1,647   $2,546   $5,485   $7,207 
Sales tax refunds   254    256    803    780 
Other   21    16    103    90 
Other income for the period  $1,922   $2,818   $6,391   $8,077 
Schedule of supplemental balance sheet information related to leases
          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Operating Leases          
Operating lease right-of-use assets  $51,093   $29,575 
Less: Accumulated amortization right-of-use assets   (30,419)   (26,651)
Operating lease right-of-use assets, net  $20,674   $2,924 
           
Operating lease liabilities  $(22,601)  $(3,220)
           
Finance Leases          
Property and equipment, at cost  $3,794   $3,474 
Less: Accumulated depreciation   (3,460)   (3,385)
Property and equipment, net  $334   $89 
           
Finance lease liabilities  $(343)  $(93)
           
Weighted Average Discount Rate          
Operating lease   5.0%    5.0% 
Finance lease   6.5%    6.5% 
Schedule of maturities of lease liabilities
        
(In thousands)  Operating   Finance 
Year Ending December 31,  Lease   Lease 
2024 (excluding the nine months ended September 30, 2024)  $1,216   $33 
2025   5,233    128 
2026   5,084    118 
2027   5,242    61 
2028   5,408    30 
Thereafter   4,747    10 
Total undiscounted lease payments   26,930    380 
Less amounts representing interest   (4,329)   (37)
Lease Liability  $22,601   $343 
Schedule of lease cost
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Operating lease cost  $1,311  $1,410   $3,996   $4,181 
Finance lease cost   34    18    82    144 
Total lease cost  $1,345  $1,428   $4,078   $4,325 
Schedule of supplemental cash flow information related to leases
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
Cash paid for amounts included in the measurement of lease liabilities:  (In thousands)   (In thousands) 
Operating cash flows from operating leases  $1,311   $1,410   $3,996   $4,181 
Operating cash flows from finance leases  $29   $17   $70   $139 
Financing cash flows from finance leases  $6   $1   $13   $5 
Schedule of stock option activity
             
           Weighted
   Number of   Weighted   Average
   Shares   Average   Remaining
   (in thousands)   Exercise Price   Contractual Term
Options outstanding at the beginning of period   8,125   $5.11   N/A
Granted   –    –   N/A
Exercised   (1,700)   4.01   N/A
Forfeited   (270)   5.30   N/A
Options outstanding at the end of period   6,155   $5.41   2.91 years
              
Options exercisable at the end of period   5,145   $4.75   2.63 years
Schedule of price distribution of stock options outstanding and exercisable
                    
   Number of shares as of   Number of shares as of 
   September 30, 2024   December 31, 2023 
   Outstanding   Exercisable   Outstanding   Exercisable 
   (In thousands)   (In thousands) 
Range of exercise prices:                    
$2.00 - $2.99   1,205    1,205    1,410    1,082 
$3.00 - $3.99   2,046    2,046    2,473    2,473 
$4.00 - $4.99   1,262    972    2,539    1,929 
$10.00 - $10.99   1,642    922    1,703    578 
Total shares   6,155    5,145    8,125    6,062 
Schedule of purchase of our common stock
                    
   Nine Months Ended 
   September 30, 2024   September 30, 2023 
   Shares   Avg. Price   Shares   Avg. Price 
Open market purchases   473,202   $8.67    625,887   $11.20 
Shares redeemed upon net exercise of stock options   876,456    8.66    1,224,673    13.56 
Other   120,000    9.49    –    – 
Total stock purchases   1,469,658   $8.73    1,850,560   $11.80 
v3.24.3
Finance Receivables (Tables)
 9 Months Ended
Sep. 30, 2024
Finance Receivables  
Schedule of delinquency status of finance receivables
          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status          
Current  $4,687   $17,771 
31-60 days   1,900    5,626 
61-90 days   1,316    3,087 
91 + days   371    1,069 
   $8,274   $27,553 
Schedule of finance receivables by annual vintage
          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Annual Vintage Pool        
2014 and prior  $93   $370 
2015   435    1,788 
2016   2,101    7,673 
2017   5,645    17,722 
   $8,274   $27,553 
Schedule of allowance for finance credit losses
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $684  $5,721   $2,869   $21,753 
Provision for credit losses on finance receivables   (994)   (2,000)   (4,579)   (20,700)
Charge-offs   (544)   (1,477)   (1,976)   (6,391)
Recoveries   1,340    1,984    4,172    9,566 
Balance at end of period  $486  $4,228   $486   $4,228 
Schedule of gross charge-off
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Annual Vintage Pool                    
2014 and prior  $69   $43   $249   $251 
2015   60    129    242    870 
2016   145    568    790    2,602 
2017   446    948    972    3,548 
Applied against repos in inventory (net)   (176)   (211)   (277)   (880)
   $544   $1,477   $1,976   $6,391 
Schedule of allowance for losses in repossessed inventory
          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Gross balance of repossessions in inventory  $233   $597 
Allowance for losses on repossessed inventory   (195)   (472)
Net repossessed inventory included in other assets  $38   $125 
v3.24.3
Securitization Trust Debt (Tables)
 9 Months Ended
Sep. 30, 2024
Securitization Trust Debt  
Schedule of securitization trust debt
                      Weighted 
                       Average 
   Final   Receivables       Outstanding   Outstanding   Contractual Debt 
   Scheduled   Pledged at       Principal at   Principal at   Interest Rate at 
   Payment   September 30,   Initial   September 30,   December 31,   September 30, 
Series  Date (1)   2024 (2)   Principal   2024   2023   2024 
   (Dollars in thousands)     
CPS 2019-B   June 2026   $–   $228,275   $–   $15,742    – 
CPS 2019-C   September 2026    –    243,513    –    19,725    – 
CPS 2019-D   December  2026    –    274,313    –    27,445    – 
CPS 2020-A   March 2027    –    260,000    –    26,382    – 
CPS 2020-B   June 2027    22,376    202,343    14,713    24,197    7.38% 
CPS 2020-C   November 2027    32,459    252,200    27,676    43,487    4.68% 
CPS 2021-A   March 2028    36,454    230,545    25,947    39,039    2.14% 
CPS 2021-B   June 2028    47,359    240,000    36,486    55,684    3.07% 
CPS 2021-C   September 2028    72,712    291,000    56,495    85,563    2.34% 
CPS 2021-D   December  2028    99,030    349,202    82,400    126,059    3.09% 
CPS 2022-A   April 2029    111,547    316,800    90,679    137,479    3.23% 
CPS 2022-B   October 2029    175,458    395,600    149,736    213,779    5.46% 
CPS 2022-C   April 2030    206,276    391,600    160,019    230,273    6.35% 
CPS 2022-D   June 2030    174,044    307,018    150,809    205,583    8.57% 
CPS 2023-A   August 2030    207,876    324,768    164,803    231,906    6.64% 
CPS 2023-B   November 2030    228,550    332,885    193,019    268,172    6.85% 
CPS 2023-C   February 2031    218,498    291,732    194,436    257,568    6.82% 
CPS 2023-D   May 2031    235,473    286,149    212,009    271,939    7.45% 
CPS 2024-A   August 2031    249,646    280,924    227,163    –    6.16% 
CPS 2024-B   November 2031    305,382    319,871    283,906    –    6.32% 
CPS 2024-C   March 2032    435,745    436,310    406,350    –    6.19% 
CPS 2024-D   June 2032    295,408    436,310    416,816    –    5.16% 
    –   $3,154,293   $6,691,358   $2,893,462   $2,280,021      

_________________

(1)The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $262.7 million in 2024, $1,003.5 million in 2025, $686.9 million in 2026, $460.9 million in 2027, $288.5 million in 2028, $134.8 million in 2029, and $38.5 million in 2030.
(2)Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.
v3.24.3
Debt (Tables)
 9 Months Ended
Sep. 30, 2024
Debt Disclosure [Abstract]  
Schedule of debt outstanding
                
         Amount Outstanding at 
         September 30,   December 31, 
         2024   2023 
         (In thousands) 
Description  Interest Rate  Maturity        
               
Warehouse lines of credit  3.00% over CP yield rate (Minimum 3.75%) 8.27% and 8.58% at September 30, 2024 and December 31 2023, respectively  July 2026  $109,059   $165,628 
                 
   4.50% over a commercial paper rate (Minimum 7.50%) 9.60% and 9.63% at September 30 2024, and December 31 2023, respectively  March 2026   –    68,997 
                 
Residual interest financing  7.86%  June 2026   50,000    50,000 
                 
Residual interest financing  11.50%  March 2029   50,000    – 
                 
Subordinated renewable notes  Weighted average rate of 9.22% and 8.45% at September 30, 2024 and December 31, 2023, respectively  Weighted average maturity of October 2026 and February 2026 at September 30, 2024 and December 31, 2023, respectively   24,288    17,188 
                 
         $233,347   $301,813 
v3.24.3
Interest Income and Interest Expense (Tables)
 9 Months Ended
Sep. 30, 2024
Interest Income And Interest Expense  
Schedule of interest income
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Interest on finance receivables  $1,516   $3,769   $5,634   $12,809 
Interest on finance receivables at fair value   89,942    77,848    255,546    228,641 
Other interest income   1,700    1,644    4,632    4,510 
Interest income  $93,158   $83,261   $265,812   $245,960 
Schedule of interest expense
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
    (In thousands)    (In thousands) 
Securitization trust debt  $42,998   $31,734   $116,859   $87,258 
Warehouse lines of credit   4,000    4,665    14,022    14,521 
Residual interest financing   2,477    1,050    6,225    3,149 
Subordinated renewable notes   581    440    1,629    1,426 
Interest expense  $50,056   $37,889   $138,735   $106,354 
v3.24.3
Earnings Per Share (Tables)
 9 Months Ended
Sep. 30, 2024
Earnings per share:  
Schedule of earnings per share
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Weighted average number of common shares outstanding during the period used to compute basic earnings per share   21,343    21,154    21,250    20,815 
                     
Incremental common shares attributable to exercise of outstanding options and warrants   2,810    4,064    3,090    4,516 
                     
Weighted average number of common shares used to compute diluted earnings per share   24,153    25,218    24,340    25,331 
v3.24.3
Fair Value Measurements (Tables)
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis
                    
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2024   2023   2024   2023 
   (In thousands)   (In thousands) 
Balance at beginning of period  $2,960,375   $2,618,420   $2,722,662   $2,476,617 
Finance receivables at fair value acquired during period   442,126    300,539    1,195,886    958,587 
Payments received on finance receivables at fair value   (217,945)   (203,775)   (637,844)   (625,715)
Net interest income accretion on fair value receivables   (57,746)   (49,644)   (164,394)   (143,949)
Mark to fair value   5,500    6,000    16,000    6,000 
Balance at end of period  $3,132,310   $2,671,540   $3,132,310   $2,671,540 
Schedule of finance receivables to their contractual balances
                    
   September 30, 2024   December 31, 2023 
   Contractual   Fair   Contractual   Fair 
   Balance   Value   Balance   Value 
   (In thousands) 
Finance receivables measured at fair value  $3,321,329   $3,132,310   $2,941,915   $2,722,662 
Schedule of level 3 fair value measurements
                       
Financial Instrument  Fair Values as of      Weighted Avg. Inputs as of 
   September 30,   December 31,      September 30,   December 31, 
   2024   2023   Unobservable Inputs  2024   2023 
   (In thousands)            
Finance receivables measured at fair value  $3,132,310   $2,722,662   Discount rate   11.36%    11.35% 
             Cumulative net losses   15.44%    15.25% 
Schedule of delinquency status of finance receivables measured at fair value
          
   September 30,   December 31, 
   2024   2023 
   (In thousands) 
Delinquency Status        
Current   $2,857,495   $2,520,158 
31 - 60 days   217,365    204,574 
61 - 90 days   102,088    101,057 
91 + days   51,675    49,541 
Repo   92,706    66,585 
   $3,321,329   $2,941,915 
Schedule of fair values of financial assets and liabilities
                         
   As of September 30, 2024 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $8,071   $8,071   $–   $–   $8,071 
Restricted cash and equivalents   270,981    270,981    –    –    270,981 
Finance receivables, net   7,788    –    –    6,201    6,201 
Accrued interest receivable   91    –    –    91    91 
Liabilities:                         
Warehouse lines of credit  $105,783   $–   $–   $105,783   $105,783 
Residual interest financing   99,127              99,127    99,127 
Accrued interest payable   9,589    –    –    9,589    9,589 
Securitization trust debt   2,875,777    –    –    2,897,538    2,897,538 
Subordinated renewable notes   24,288    –    –    24,288    24,288 

 

                          
   As of December 31, 2023 
Financial Instrument  (In thousands) 
   Carrying   Fair Value Measurements Using:     
   Value   Level 1   Level 2   Level 3   Total 
Assets:                    
Cash and cash equivalents  $6,174   $6,174   $–   $–   $6,174 
Restricted cash and equivalents   119,257    119,257    –    –    119,257 
Finance receivables, net   24,684    –    –    20,848    20,848 
Accrued interest receivable   292    –    –    292    292 
Liabilities:                         
Warehouse lines of credit  $234,025   $–   $–   $234,025   $234,025 
Accrued interest payable   7,928    –    –    7,928    7,928 
Securitization trust debt   2,265,446    –    –    2,183,331    2,183,331 
Subordinated renewable notes   17,188    –    –    17,188    17,188 
v3.24.3
Summary of Significant Accounting Policies (Details - Other income) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Other income for the period $ 1,922 $ 2,818 $ 6,391 $ 8,077
Origination And Servicing Fees From Third Party Receivables [Member]        
Other income for the period 1,647 2,546 5,485 7,207
Sales Tax Refunds [Member]        
Other income for the period 254 256 803 780
Other Income [Member]        
Other income for the period $ 21 $ 16 $ 103 $ 90
v3.24.3
Summary of Significant Accounting Policies (Details - Supplemental balance sheet information related to leases) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Operating Leases    
Operating lease right-of-use assets $ 51,093 $ 29,575
Less: Accumulated amortization right-of-use assets (30,419) (26,651)
Operating lease right-of-use assets, net 20,674 2,924
Operating lease liabilities (22,601) (3,220)
Finance Leases    
Property and equipment, at cost 3,794 3,474
Less: Accumulated depreciation (3,460) (3,385)
Property and equipment, net 334 89
Finance lease liabilities $ (343) $ (93)
Weighted Average Discount Rate    
Operating lease 5.00% 5.00%
Finance lease 6.50% 6.50%
v3.24.3
Summary of Significant Accounting Policies (Details - Maturities of lease liabilities)
$ in Thousands
Sep. 30, 2024
USD ($)
Operating Lease [Member]  
2024 (excluding the nine months ended September 30, 2024) $ 1,216
2025 5,233
2026 5,084
2027 5,242
2028 5,408
Thereafter 4,747
Total undiscounted lease payments 26,930
Less amounts representing interest (4,329)
Lease Liability 22,601
Finance Lease [Member]  
2024 (excluding the nine months ended September 30, 2024) 33
2025 128
2026 118
2027 61
2028 30
Thereafter 10
Total undiscounted lease payments 380
Less amounts representing interest (37)
Lease Liability $ 343
v3.24.3
Summary of Significant Accounting Policies (Details - Lease cost) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Accounting Policies [Abstract]        
Operating lease cost $ 1,311 $ 1,410 $ 3,996 $ 4,181
Finance lease cost 34 18 82 144
Total lease cost $ 1,345 $ 1,428 $ 4,078 $ 4,325
v3.24.3
Summary of Significant Accounting Policies (Details - Lease - Cash flow) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows from operating leases $ 1,311 $ 1,410 $ 3,996 $ 4,181
Operating cash flows from finance leases 29 17 70 139
Financing cash flows from finance leases $ 6 $ 1 $ 13 $ 5
v3.24.3
Summary of Significant Accounting Policies (Details - Option activity) - $ / shares
shares in Thousands
 9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Accounting Policies [Abstract]    
Number of shares options outstanding at the beginning of period 8,125  
Weighted average exercise price options outstanding at the beginning of period $ 5.11  
Number of shares granted 0  
Weighted average exercise price granted $ 0  
Number of shares exercised (1,700)  
Weighted average exercise price exercised $ 4.01  
Number of shares forfeited (270)  
Weighted average exercise price forfeited $ 5.30  
Number of shares options outstanding at the end of period 6,155  
Weighted average exercise price options outstanding at the end of period $ 5.41  
Weighted average remaining contractual term Options outstanding at the end of period 2 years 10 months 28 days  
Number of shares options exercisable at the end of period 5,145 6,062
Weighted average exercise price options exercisable at the end of period $ 4.75  
Weighted average remaining contractual term Options exercisable at the end of period 2 years 7 months 17 days  
v3.24.3
Summary of Significant Accounting Policies (Details - Options outstanding and exercisable) - shares
shares in Thousands
Sep. 30, 2024
Dec. 31, 2023
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of shares, outstanding 6,155 8,125
Number of shares, exercisable 5,145 6,062
$2.00 - $2.99 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of shares, outstanding 1,205 1,410
Number of shares, exercisable 1,205 1,082
$3.00 - $3.99 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of shares, outstanding 2,046 2,473
Number of shares, exercisable 2,046 2,473
$4.00 - $4.99 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of shares, outstanding 1,262 2,539
Number of shares, exercisable 972 1,929
$10.00 - $10.99 [Member]    
Share-Based Payment Arrangement, Option, Exercise Price Range [Line Items]    
Number of shares, outstanding 1,642 1,703
Number of shares, exercisable 922 578
v3.24.3
Summary of Significant Accounting Policies (Details - Stock purchases) - Common Stock [Member] - $ / shares
 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Share Repurchase Program [Line Items]    
Total stock purchases, shares 1,469,658 1,850,560
Total stock purchases, average price $ 8.73 $ 11.80
Open Market Purchases [Member]    
Share Repurchase Program [Line Items]    
Total stock purchases, shares 473,202 625,887
Total stock purchases, average price $ 8.67 $ 11.20
Shares Redeemed [Member]    
Share Repurchase Program [Line Items]    
Total stock purchases, shares 876,456 1,224,673
Total stock purchases, average price $ 8.66 $ 13.56
Other [Member]    
Share Repurchase Program [Line Items]    
Total stock purchases, shares 120,000 0
Total stock purchases, average price $ 9.49 $ 0
v3.24.3
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Stock-based compensation costs $ 727,000 $ 816,000 $ 2,400,000 $ 2,600,000
Unrecognized stock-based compensation costs 3,700,000   $ 3,700,000  
Weighted average period     1 year 3 months 18 days  
Intrinsic value options outstanding 25,900,000   $ 25,900,000  
Intrinsic value of options exercisable $ 24,600,000   $ 24,600,000  
Options exercised     1,700,000  
Intrinsic value of options exercised     $ 8,000,000 $ 13,500,000
Shares available for grant 2,954,000   2,954,000  
Options Exercised [Member]        
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]        
Options exercised     1,700,000 2,800,000
v3.24.3
Finance Receivables (Details - Delinquency status) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Financing Receivable, Past Due [Line Items]    
Total finance receivables with delinquency status $ 8,274 $ 27,553
Financial Asset, 1 to 29 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Total finance receivables with delinquency status 4,687 17,771
Financial Asset, 30 to 59 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Total finance receivables with delinquency status 1,900 5,626
Financial Asset, 60 to 89 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Total finance receivables with delinquency status 1,316 3,087
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Total finance receivables with delinquency status $ 371 $ 1,069
v3.24.3
Finance Receivables (Details - Amortized cost basis) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Financing Receivable, Past Due [Line Items]    
Amortized cost basis of finance receivables $ 8,274 $ 27,553
Vintage Pool 2014 [Member]    
Financing Receivable, Past Due [Line Items]    
Amortized cost basis of finance receivables 93 370
Vintage Pool 2015 [Member]    
Financing Receivable, Past Due [Line Items]    
Amortized cost basis of finance receivables 435 1,788
Vintage Pool 2016 [Member]    
Financing Receivable, Past Due [Line Items]    
Amortized cost basis of finance receivables 2,101 7,673
Vintage Pool 2017 [Member]    
Financing Receivable, Past Due [Line Items]    
Amortized cost basis of finance receivables $ 5,645 $ 17,722
v3.24.3
Finance Receivables (Details - Summary of activity) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Finance Receivables        
Balance at beginning of period $ 684 $ 5,721 $ 2,869 $ 21,753
Provision for credit losses on finance receivables (994) (2,000) (4,579) (20,700)
Charge-offs (544) (1,477) (1,976) (6,391)
Recoveries 1,340 1,984 4,172 9,566
Balance at end of period $ 486 $ 4,228 $ 486 $ 4,228
v3.24.3
Finance Receivables (Details - Charge-offs for financed receivables) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Financing Receivable, Past Due [Line Items]        
Charge-offs $ 544 $ 1,477 $ 1,976 $ 6,391
Vintage Pool 2014 [Member]        
Financing Receivable, Past Due [Line Items]        
Charge-offs 69 43 249 251
Vintage Pool 2015 [Member]        
Financing Receivable, Past Due [Line Items]        
Charge-offs 60 129 242 870
Vintage Pool 2016 [Member]        
Financing Receivable, Past Due [Line Items]        
Charge-offs 145 568 790 2,602
Vintage Pool 2017 [Member]        
Financing Receivable, Past Due [Line Items]        
Charge-offs 446 948 972 3,548
Applied Against Repos In Inventory Member [Member]        
Financing Receivable, Past Due [Line Items]        
Charge-offs $ (176) $ (211) $ (277) $ (880)
v3.24.3
Finance Receivables (Details - Repossessed inventory) - USD ($)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Finance Receivables    
Gross balance of repossessions in inventory $ 233 $ 597
Allowance for losses on repossessed inventory (195) (472)
Net repossessed inventory included in other assets $ 38 $ 125
v3.24.3
Finance Receivables (Details Narrative) - USD ($)
Sep. 30, 2024
Dec. 31, 2023
Finance Receivables    
Finance receivables, non accrual status $ 371,000 $ 1,100,000
v3.24.3
Securitization Trust Debt (Details - Debt components) - USD ($)
$ in Thousands
 9 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1]  
Receivables Pledged [2] $ 3,154,293  
Initial Principal 6,691,358  
Outstanding Principal 2,893,462 $ 2,280,021
Securitization Trust Debt [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Securitization trust debt, payable in 2024 262,700  
Securitization trust debt, payable in 2025 1,003,500  
Securitization trust debt, payable in 2026 686,900  
Securitization trust debt, payable in 2027 460,900  
Securitization trust debt, payable in 2028 288,500  
Securitization trust debt, payable in 2029 134,800  
Securitization trust debt, payable in 2030 $ 38,500  
CPS 2019 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] June 2026  
Receivables Pledged [2] $ 0  
Initial Principal 228,275  
Outstanding Principal $ 0 15,742
Weighted Average Contractual Debt Interest Rate 0.00%  
CPS 2019 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] September 2026  
Receivables Pledged [2] $ 0  
Initial Principal 243,513  
Outstanding Principal $ 0 19,725
Weighted Average Contractual Debt Interest Rate 0.00%  
CPS 2019 D [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] December  2026  
Receivables Pledged [2] $ 0  
Initial Principal 274,313  
Outstanding Principal $ 0 27,445
Weighted Average Contractual Debt Interest Rate 0.00%  
CPS 2020 A [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] March 2027  
Receivables Pledged [2] $ 0  
Initial Principal 260,000  
Outstanding Principal $ 0 26,382
Weighted Average Contractual Debt Interest Rate 0.00%  
CPS 2020 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] June 2027  
Receivables Pledged [2] $ 22,376  
Initial Principal 202,343  
Outstanding Principal $ 14,713 24,197
Weighted Average Contractual Debt Interest Rate 7.38%  
CPS 2020 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] November 2027  
Receivables Pledged [2] $ 32,459  
Initial Principal 252,200  
Outstanding Principal $ 27,676 43,487
Weighted Average Contractual Debt Interest Rate 4.68%  
CPS 2021 A [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] March 2028  
Receivables Pledged [2] $ 36,454  
Initial Principal 230,545  
Outstanding Principal $ 25,947 39,039
Weighted Average Contractual Debt Interest Rate 2.14%  
CPS 2021 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] June 2028  
Receivables Pledged [2] $ 47,359  
Initial Principal 240,000  
Outstanding Principal $ 36,486 55,684
Weighted Average Contractual Debt Interest Rate 3.07%  
CPS 2021 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] September 2028  
Receivables Pledged [2] $ 72,712  
Initial Principal 291,000  
Outstanding Principal $ 56,495 85,563
Weighted Average Contractual Debt Interest Rate 2.34%  
CPS 2021 D [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] December  2028  
Receivables Pledged [2] $ 99,030  
Initial Principal 349,202  
Outstanding Principal $ 82,400 126,059
Weighted Average Contractual Debt Interest Rate 3.09%  
CPS 2022 A [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] April 2029  
Receivables Pledged [2] $ 111,547  
Initial Principal 316,800  
Outstanding Principal $ 90,679 137,479
Weighted Average Contractual Debt Interest Rate 3.23%  
CPS 2022 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] October 2029  
Receivables Pledged [2] $ 175,458  
Initial Principal 395,600  
Outstanding Principal $ 149,736 213,779
Weighted Average Contractual Debt Interest Rate 5.46%  
CPS 2022 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] April 2030  
Receivables Pledged [2] $ 206,276  
Initial Principal 391,600  
Outstanding Principal $ 160,019 230,273
Weighted Average Contractual Debt Interest Rate 6.35%  
CPS 2022 D [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] June 2030  
Receivables Pledged [2] $ 174,044  
Initial Principal 307,018  
Outstanding Principal $ 150,809 205,583
Weighted Average Contractual Debt Interest Rate 8.57%  
CPS 2023 A [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] August 2030  
Receivables Pledged [2] $ 207,876  
Initial Principal 324,768  
Outstanding Principal $ 164,803 231,906
Weighted Average Contractual Debt Interest Rate 6.64%  
CPS 2023 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] November 2030  
Receivables Pledged [2] $ 228,550  
Initial Principal 332,885  
Outstanding Principal $ 193,019 268,172
Weighted Average Contractual Debt Interest Rate 6.85%  
CPS 2023 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] February 2031  
Receivables Pledged [2] $ 218,498  
Initial Principal 291,732  
Outstanding Principal $ 194,436 257,568
Weighted Average Contractual Debt Interest Rate 6.82%  
CPS 2023 D [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] May 2031  
Receivables Pledged [2] $ 235,473  
Initial Principal 286,149  
Outstanding Principal $ 212,009 271,939
Weighted Average Contractual Debt Interest Rate 7.45%  
CPS 2024 A [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] August 2031  
Receivables Pledged [2] $ 249,646  
Initial Principal 280,924  
Outstanding Principal $ 227,163 0
Weighted Average Contractual Debt Interest Rate 6.16%  
CPS 2024 B [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] November 2031  
Receivables Pledged [2] $ 305,382  
Initial Principal 319,871  
Outstanding Principal $ 283,906 0
Weighted Average Contractual Debt Interest Rate 6.32%  
CPS 2024 C [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] March 2032  
Receivables Pledged [2] $ 435,745  
Initial Principal 436,310  
Outstanding Principal $ 406,350 0
Weighted Average Contractual Debt Interest Rate 6.19%  
CPS 2024 D [Member]    
Debt Securities, Held-to-Maturity, Allowance for Credit Loss [Line Items]    
Final Scheduled Payment Date [1] June 2032  
Receivables Pledged [2] $ 295,408  
Initial Principal 436,310  
Outstanding Principal $ 416,816 $ 0
Weighted Average Contractual Debt Interest Rate 5.16%  
[1] The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $262.7 million in 2024, $1,003.5 million in 2025, $686.9 million in 2026, $460.9 million in 2027, $288.5 million in 2028, $134.8 million in 2029, and $38.5 million in 2030.
[2] Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.
v3.24.3
Securitization Trust Debt (Details Narrative) - USD ($)
$ in Millions
Sep. 30, 2024
Dec. 31, 2023
Securitization Trust Debt    
Debt issuance costs $ 17.7 $ 14.6
v3.24.3
Debt (Details - Debt outstanding) - USD ($)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Line of Credit Facility [Line Items]    
Warehouse lines of credit $ 105,783 $ 234,025
Residual interest financing 99,127 49,875
Subordinated renewable notes 24,288 17,188
Total debt outstanding $ 233,347 $ 301,813
Warehouse Lines Of Credit 1 [Member]    
Line of Credit Facility [Line Items]    
Interest rate 3.00% over CP yield rate (Minimum 3.75%) 8.27% and 8.58% 3.00% over CP yield rate (Minimum 3.75%) 8.27% and 8.58%
Maturity date description July 2026  
Warehouse lines of credit $ 109,059 $ 165,628
Warehouse Lines Of Credit 2 [Member]    
Line of Credit Facility [Line Items]    
Interest rate 4.50% over a commercial paper rate (Minimum 7.50%) 9.60% and 9.63% 4.50% over a commercial paper rate (Minimum 7.50%) 9.60% and 9.63%
Maturity date description March 2026  
Warehouse lines of credit $ 0 $ 68,997
Residual Interest Financing [Member]    
Line of Credit Facility [Line Items]    
Maturity date description June 2026  
Interest rate 7.86%  
Residual interest financing $ 50,000 50,000
Residual Interest Financing 1 [Member]    
Line of Credit Facility [Line Items]    
Maturity date description March 2029  
Interest rate 11.50%  
Residual interest financing $ 50,000 $ 0
Subordinated Renewable Notes [Member]    
Line of Credit Facility [Line Items]    
Maturity date description October 2026 February 2026
Debt Instrument, Interest Rate Terms 9.22% 8.45%
Subordinated renewable notes $ 24,288 $ 17,188
v3.24.3
Debt (Details Narrative) - USD ($)
 9 Months Ended
Jul. 11, 2024
Mar. 29, 2024
Mar. 22, 2024
Sep. 30, 2024
Dec. 31, 2023
Short-Term Debt [Line Items]          
Securitization of residual interests     $ 50,000,000    
Purchase of secured notes     $ 50,000,000    
Securitization of residual interests outstanding       $ 50,000,000  
Unamortized debt issuance costs       873,000 $ 125,000
Warehouse Lines Of Credit [Member]          
Short-Term Debt [Line Items]          
Unamortized debt issuance costs       3,300,000 $ 599,000
Citibank N A [Member]          
Short-Term Debt [Line Items]          
Line of credit revolving amount $ 200,000,000        
Line of credit outstanding facility amount       109,100,000  
Ares Agent Services L P [Member]          
Short-Term Debt [Line Items]          
Line of credit revolving amount   $ 200,000,000      
Line of credit outstanding facility amount       $ 0  
v3.24.3
Interest Income and Interest Expense (Details - Interest income) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Interest Income And Interest Expense        
Interest on finance receivables $ 1,516 $ 3,769 $ 5,634 $ 12,809
Interest on finance receivables at fair value 89,942 77,848 255,546 228,641
Other interest income 1,700 1,644 4,632 4,510
Interest income $ 93,158 $ 83,261 $ 265,812 $ 245,960
v3.24.3
Interest Income and Interest Expense (Details - Interest expense) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Debt Instrument [Line Items]        
Interest expense $ 50,056 $ 37,889 $ 138,735 $ 106,354
Securitization Trust Debt [Member]        
Debt Instrument [Line Items]        
Interest expense 42,998 31,734 116,859 87,258
Warehouse Lines Of Credit [Member]        
Debt Instrument [Line Items]        
Interest expense 4,000 4,665 14,022 14,521
Residual Interest Financing [Member]        
Debt Instrument [Line Items]        
Interest expense 2,477 1,050 6,225 3,149
Subordinated Renewable Notes [Member]        
Debt Instrument [Line Items]        
Interest expense $ 581 $ 440 $ 1,629 $ 1,426
v3.24.3
Earnings Per Share (Details) - shares
shares in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Earnings per share:        
Weighted average number of common shares outstanding during the period used to compute basic earnings per share 21,343 21,154 21,250 20,815
Incremental common shares attributable to exercise of outstanding options and warrants 2,810 4,064 3,090 4,516
Weighted average number of common shares used to compute diluted earnings per share 24,153 25,218 24,340 25,331
v3.24.3
Earnings Per Share (Details Narrative) - shares
shares in Millions
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Earnings per share:        
Antidilutive shares 1.6 1.5 1.7 1.5
v3.24.3
Income Taxes (Details Narrative) - USD ($)
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Effective Income Tax Rate Reconciliation [Line Items]        
Net deferred tax asset $ 1,600,000   $ 1,600,000  
Income tax expense $ 2,100,000 $ 3,800,000 $ 6,000,000 $ 13,100,000
Effective income tax rate reconciliation, percent 30.00% 27.00% 30.00% 26.00%
Domestic Tax Jurisdiction [Member]        
Effective Income Tax Rate Reconciliation [Line Items]        
Net deferred tax asset $ 667,000   $ 667,000  
State and Local Jurisdiction [Member]        
Effective Income Tax Rate Reconciliation [Line Items]        
Net deferred tax asset $ 898,000   $ 898,000  
v3.24.3
Legal Proceedings (Details Narrative) - USD ($)
$ in Millions
Oct. 02, 2024
Sep. 30, 2024
Subsequent Event [Line Items]    
Probable legal contingencies   $ 2.3
Maximum possible losses for legal proceedings and contingencies   $ 4.3
Subsequent Event [Member]    
Subsequent Event [Line Items]    
Settlement claims $ 1.1  
v3.24.3
Fair Value Measurements (Details - Reconciliation of finance receivables) - USD ($)
$ in Thousands
 3 Months Ended 9 Months Ended
Sep. 30, 2024
Sep. 30, 2023
Sep. 30, 2024
Sep. 30, 2023
Fair Value Disclosures [Abstract]        
Balance at beginning of period $ 2,960,375 $ 2,618,420 $ 2,722,662 $ 2,476,617
Finance receivables at fair value acquired during period 442,126 300,539 1,195,886 958,587
Payments received on finance receivables at fair value (217,945) (203,775) (637,844) (625,715)
Net interest income accretion on fair value receivables (57,746) (49,644) (164,394) (143,949)
Mark to fair value 5,500 6,000 16,000 6,000
Balance at end of period $ 3,132,310 $ 2,671,540 $ 3,132,310 $ 2,671,540
v3.24.3
Fair Value Measurements (Details - Finance receivables to their contractual balances) - USD ($)
$ in Thousands
Sep. 30, 2024
Jun. 30, 2024
Dec. 31, 2023
Sep. 30, 2023
Jun. 30, 2023
Dec. 31, 2022
Fair Value Disclosures [Abstract]            
Finance receivables contractual balance $ 3,321,329   $ 2,941,915      
Finance receivables measured at fair value $ 3,132,310 $ 2,960,375 $ 2,722,662 $ 2,671,540 $ 2,618,420 $ 2,476,617
v3.24.3
Fair Value Measurements (Details - Level 3 fair value measurements) - USD ($)
$ in Thousands
 9 Months Ended 12 Months Ended
Sep. 30, 2024
Dec. 31, 2023
Jun. 30, 2024
Sep. 30, 2023
Jun. 30, 2023
Dec. 31, 2022
Fair Value Disclosures [Abstract]            
Receivables, Fair Value Disclosure $ 3,132,310 $ 2,722,662 $ 2,960,375 $ 2,671,540 $ 2,618,420 $ 2,476,617
Discount Rate on Finance Receivables 11.36% 11.35%        
Cumulative Net Losses (Percent) on Finance Receivables 15.44% 15.25%        
v3.24.3
Fair Value Measurements (Details - Delinquency status) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Financing Receivable, Past Due [Line Items]    
Finance receivables $ 3,321,329 $ 2,941,915
Financial Asset, Not Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Finance receivables 2,857,495 2,520,158
Financial Asset, 30 to 59 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Finance receivables 217,365 204,574
Financial Asset, 60 to 89 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Finance receivables 102,088 101,057
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]    
Financing Receivable, Past Due [Line Items]    
Finance receivables 51,675 49,541
Repossessed Vehicles [Member]    
Financing Receivable, Past Due [Line Items]    
Finance receivables $ 92,706 $ 66,585
v3.24.3
Fair Value Measurements (Details - Fair values) - USD ($)
$ in Thousands
Sep. 30, 2024
Dec. 31, 2023
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Cash and cash equivalents $ 8,071 $ 6,174
Restricted cash and equivalents 270,981 119,257
Finance receivables, net 6,201 20,848
Accrued interest receivable 91 292
Warehouse lines of credit 105,783 234,025
Residual interest financing 99,127  
Accrued interest payable 9,589 7,928
Securitization trust debt 2,897,538 2,183,331
Subordinated renewable notes 24,288 17,188
Fair Value, Inputs, Level 1 [Member]    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Cash and cash equivalents 8,071 6,174
Restricted cash and equivalents 270,981 119,257
Finance receivables, net 0 0
Accrued interest receivable 0 0
Warehouse lines of credit 0 0
Accrued interest payable 0 0
Securitization trust debt 0 0
Subordinated renewable notes 0 0
Fair Value, Inputs, Level 2 [Member]    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Cash and cash equivalents 0 0
Restricted cash and equivalents 0 0
Finance receivables, net 0 0
Accrued interest receivable 0 0
Warehouse lines of credit 0 0
Accrued interest payable 0 0
Securitization trust debt 0 0
Subordinated renewable notes 0 0
Fair Value, Inputs, Level 3 [Member]    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Cash and cash equivalents 0 0
Restricted cash and equivalents 0 0
Finance receivables, net 6,201 20,848
Accrued interest receivable 91 292
Warehouse lines of credit 105,783 234,025
Residual interest financing 99,127  
Accrued interest payable 9,589 7,928
Securitization trust debt 2,897,538 2,183,331
Subordinated renewable notes 24,288 17,188
Carrying Value [Member]    
Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Line Items]    
Cash and cash equivalents 8,071 6,174
Restricted cash and equivalents 270,981 119,257
Finance receivables, net 7,788 24,684
Accrued interest receivable 91 292
Warehouse lines of credit 105,783 234,025
Residual interest financing 99,127  
Accrued interest payable 9,589 7,928
Securitization trust debt 2,875,777 2,265,446
Subordinated renewable notes $ 24,288 $ 17,188
Grafico Azioni Consumer Portfolio Servi... (NASDAQ:CPSS)
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Grafico Azioni Consumer Portfolio Servi... (NASDAQ:CPSS)
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Da Dic 2023 a Dic 2024 Clicca qui per i Grafici di Consumer Portfolio Servi...