UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) October 14, 2014
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CONSUMER PORTFOLIO SERVICES, INC.
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(Exact Name of Registrant as Specified in Charter)
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CALIFORNIA
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1-11416
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33-0459135
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(State or Other Jurisdiction
of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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3800 Howard Hughes Parkway, Las Vegas, NV 89169
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(Address of Principal Executive Offices) (Zip Code)
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Registrant's telephone number, including area code (949) 753-6800
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Not Applicable
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(Former name or former address, if changed since last report)
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
On October 14, 2014, the registrant announced its earnings for the three-month and nine-month periods ended September 30, 2014. A copy of the announcement is attached as an exhibit to this report.
The registrant will host a conference call on Wednesday, October 15, 2014, at 1:00 p.m. ET to discuss its results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time. A replay of the conference call will be available between October 15, 2014 and October 22, 2014, beginning two hours after conclusion of the call, by dialing 855 859-2056 (or 404 537-3406 for international participants), with conference identification number 19927879. A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site at www.consumerportfolio.com.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
99.1 News Release dated October 14, 2014.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CONSUMER PORTFOLIO SERVICES, INC.
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Dated: October 14, 2014
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By: /s/ JEFFREY P. FRITZ
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Jeffrey P. Fritz
Executive Vice President and Chief Financial Officer
Signing on behalf of the registrant
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NEWS RELEASE
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CPS ANNOUNCES THIRD QUARTER 2014 EARNINGS
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§
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Pretax income of $13.8 million
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§
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Net income of $7.8 million, or $0.24 per diluted share
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§
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New contract purchases of $279 million
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§
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Total managed portfolio increases to $1.519 billion from $1.374 billion at June 30, 2014
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§
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Renews $100 million revolving credit agreement
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IRVINE, California, October 14, 2014 (GlobeNewswire) -- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $7.8 million, or $0.24 per diluted share, for its third quarter ended September 30, 2014. This compares to net income of $5.9 million, or $0.19 per diluted share, in the third quarter of 2013, representing a 26% increase in earnings per diluted share. Earnings for the first nine months of 2014 were $21.5 million, or $0.67 per diluted share, as compared to earnings of $14.5 million, or $0.46 per diluted share, for the same period in 2013.
Revenues for the third quarter of 2014 were $77.1 million, an increase of $13.0 million, or 20.3%, compared to $64.1 million for the third quarter of 2013. Total operating expenses for the third quarter of 2014 were $63.2 million, an increase of $9.7 million, or 18.2%, compared to $53.5 million for the 2013 period. Pretax income for the third quarter of 2014 was $13.8 million compared to pretax income of $10.6 million in the third quarter of 2013, an increase of 30.7%.
For the nine months ended September 30, 2014 total revenues were $216.8 million compared to $189.1 million for the nine months ended September 30, 2013. However, in the 2013 period, revenues included $10.9 million from a gain on cancellation of debt. Excluding that gain, revenues for the nine months ended September 30, 2014 increased $38.6 million, or 21.7%, over the prior year. Total expenses for the nine months ended September 30, 2014 were $178.9 million, an increase of $15.4 million compared to $163.5 million for the nine months ended September 30, 2013. However, in the 2013 period, operating expenses included a provision for contingent liabilities of $9.7 million. Excluding the provision for contingent liabilities, operating expenses for the nine months ended September 30, 2014 increased $25.0 million, or 16.3%, compared to the prior year period. Pretax income for the nine months ended September 30, 2014 was $37.9 million, compared to $25.6 million for the nine months ended September 30, 2013.
During the third quarter of 2014, CPS purchased $279.3 million of new contracts compared to $211.4 million during the second quarter of 2014 and $206.8 million during the third quarter of 2013. The Company's managed receivables totaled $1.519 billion as of September 30, 2014, an increase from $1.374 billion as of June 30, 2014 and $1.167 billion as of September 30, 2013, as follows ($ in millions):
1
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Originating Entity
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September 30, 2014
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June 30, 2014
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September 30, 2013
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CPS
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$1,514.6
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$1,366.6
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$1,141.1
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Fireside Bank
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3.2
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5.7
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21.7
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As Third Party Servicer
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0.8
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1.3
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4.1
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Total
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$1,518.6
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$1,373.6
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$1,166.9
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Annualized net charge-offs for the third quarter of 2014 were 6.18% of the average owned portfolio as compared to 4.89% for the third quarter of 2013. Delinquencies greater than 30 days (including repossession inventory) were 6.66% of the total owned portfolio as of September 30, 2014, as compared to 6.44% as of September 30, 2013.
As previously reported, during September CPS closed its third term securitization transaction of 2014 and the 14th transaction since April 2011. In the senior subordinate structure, a special purpose subsidiary sold five tranches of asset-backed notes totaling $273.0 million. The notes are secured by automobile receivables purchased by CPS and have a weighted average effective coupon of approximately 2.71%. The transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance. The final enhancement level requires accelerated payment of principal on the notes to reach overcollateralization of 4.00% of the then-outstanding receivable pool balance. The transaction was CPS's second consecutive senior subordinate securitization to receive a triple "A" rating on the senior class of notes.
"We are pleased with our operating results for the third quarter of 2014," said Charles E. Bradley, Jr., Chairman and Chief Executive Officer. “We significantly increased our new contract purchases and managed portfolio, and recorded our 12th consecutive quarter of earnings growth. During the quarter we also completed an early renewal of our $100 million revolving credit agreement with Citibank, extending the revolving period of that facility to August 2015.”
Conference Call
CPS announced that it will hold a conference call on Wednesday October 15, 2014, at 1:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time.
A replay of the conference call will be available between October 15, 2014 and October 22, 2014, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 19927879. A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site at www.consumerportfolio.com.
About Consumer Portfolio Services, Inc.
Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems, low incomes or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis primarily through the securitization markets and service the contracts over their lives.
Forward-looking statements in this news release include the Company's recorded revenue, expense and provision for credit losses, because these items are dependent on the Company’s estimates of incurred losses. The accuracy of such estimates may be adversely affected by various factors, which include (in addition to risks relating to the economy generally) the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect the Company’s ability to service its portfolio; possible increases in the rate of consumer bankruptcy filings, which could adversely affect the Company’s rights to collect payments from its portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect the Company’s realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. All of such factors also may affect the Company’s future financial results, as to which there can be no assurance. Any implication that the results of the most recently completed quarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to the provision for credit losses may affect future performance.
Investor Relations Contact
Jeffrey P. Fritz, Chief Financial Officer
844 878-2777
2
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Consumer Portfolio Services, Inc. and Subsidiaries
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| Condensed Consolidated Statements of Operations | |||||||||||||
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(Unaudited)
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|||||||||||||
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Three months ended
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Nine months ended
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||||||||||||
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September 30,
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September 30,
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||||||||||||
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2014
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2013
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2014
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2013
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Revenues:
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Interest income
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$ |
73,865
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$ |
60,462
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$ |
207,082
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$ |
167,426
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|||||
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Servicing fees
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278
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700
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1,158
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2,484
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|||||||||
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Other income
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2,907
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2,904
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8,550
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8,284
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Gain on cancellation of debt
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-
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-
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-
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10,947
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77,050
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64,066
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216,790
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189,141
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Expenses:
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Employee costs
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12,733
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11,199
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35,397
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31,675
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General and administrative
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5,804
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4,074
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14,482
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12,346
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Interest
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12,239
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13,853
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37,562
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44,800
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Provision for credit losses
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27,287
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20,220
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76,795
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52,739
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Provision for contingent liabilities
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-
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-
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-
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9,650
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Other expenses
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5,183
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4,161
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14,658
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12,298
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|||||||||
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63,246
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53,507
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178,894
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163,508
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Income before income taxes
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13,804
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10,559
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37,896
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25,633
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Income tax expense
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6,028
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4,686
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16,390
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11,150
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Net income
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$ |
7,776
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$ |
5,873
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$ |
21,506
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$ |
14,483
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Earnings per share:
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Basic
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$ |
0.31
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$ |
0.27
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$ |
0.86
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$ |
0.69
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Diluted
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$ |
0.24
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$ |
0.19
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$ |
0.67
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$ |
0.46
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Number of shares used in computing earnings
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per share:
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Basic
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25,290
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21,795
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24,895
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20,959
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Diluted
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32,040
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31,217
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32,021
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31,550
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Condensed Consolidated Balance Sheets
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|||||||||||||
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| (Unaudited) | |||||||||||||
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September 30,
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December 31,
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||||||||||||
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2014
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|
2013
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|||||||||||
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Assets:
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|||||||||||||
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Cash and cash equivalents
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$ |
13,136
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$ |
22,112
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Restricted cash and equivalents
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174,634
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132,284
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Total cash and cash equivalents
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187,770
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154,396
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Finance receivables
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1,462,430
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1,155,063
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|||||||||||
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Allowance for finance credit losses
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(54,621)
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(39,626)
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|||||||||||
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Finance receivables, net
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1,407,809
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1,115,437
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|||||||||||
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Finance receivables measured at fair value
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3,202
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14,476
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|||||||||||
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Residual interest in securitizations
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135
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854
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Deferred tax assets, net
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46,587
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59,215
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Other assets
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59,413
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51,988
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|||||||||||
| $ |
1,704,916
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$ |
1,396,366
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Liabilities and Shareholders' Equity:
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|||||||||||||
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Accounts payable and accrued expenses
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$ |
22,873
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$ |
24,839
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|||||||||
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Warehouse lines of credit
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59,442
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9,452
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|||||||||||
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Residual interest financing
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12,767
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19,096
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|||||||||||
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Debt secured by receivables measured at fair value
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3,170
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13,117
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|||||||||||
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Securitization trust debt
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1,469,670
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1,177,559
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|||||||||||
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Senior secured debt, related party
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--
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38,559
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|||||||||||
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Subordinated renewable notes
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15,493
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19,142
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|||||||||||
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1,583,415
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1,301,764
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||||||||||||
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Shareholders' equity
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121,501
|
94,602
|
|||||||||||
| $ |
1,704,916
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$ |
1,396,366
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Operating and Performance Data ($ in millions)
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|||||||||||||
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At and for the
|
At and for the
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||||||||||||
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Three months ended
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Nine months ended
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||||||||||||
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September 30,
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September 30,
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||||||||||||
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2014
|
2013
|
2014
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2013
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||||||||||
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Contracts purchased
|
$ |
279.30
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$ |
206.77
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$ |
680.57
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$ |
590.67
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|||||
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Contracts securitized
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256.34
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203.32
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631.14
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574.22
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|||||||||
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Total managed portfolio
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$ |
1,518.66
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$ |
1,166.87
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$ |
1,518.66
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$ |
1,166.87
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|||||
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Average managed portfolio
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1,468.19
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1,134.57
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1,362.15
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1,037.73
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|||||||||
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Allowance for finance credit losses as % of fin. receivables
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3.73%
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3.19%
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|||||||||||
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Aggregate allowance as % of fin. receivables (1)
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4.94%
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4.21%
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Delinquencies
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|||||||||||||
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31+ Days
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4.59%
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4.63%
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|||||||||||
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Repossession Inventory
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2.07%
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1.81%
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|||||||||||
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Total Delinquencies and Repo. Inventory
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6.66%
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6.44%
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|||||||||||
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Annualized net charge-offs as % of average owned portfolio
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6.18%
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4.89%
|
5.59%
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4.21%
|
|||||||||
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Recovery rates (2)
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44.6%
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45.5%
|
47.3%
|
47.7%
|
|||||||||
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For the
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For the
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|||||||||
|
Three months ended
|
Nine months ended
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|||||||||
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September 30,
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September 30,
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|||||||||
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2014
|
2013
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2014
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2013
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| $ |
(3)
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% (4)
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$ (3)
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% (4)
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$ (3)
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% (4)
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$ (3)
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% (4)
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||
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Interest income
|
$ |
73.87
|
20.1%
|
$ 60.46
|
21.3%
|
$ 207.08
|
20.3%
|
$ 167.43
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21.5%
|
|
|
Servicing fees and other income
|
3.19
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0.9%
|
3.60
|
1.3%
|
9.71
|
1.0%
|
10.77
|
1.4%
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||
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Interest expense
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(12.24)
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-3.3%
|
(13.85)
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-4.9%
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(37.56)
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-3.7%
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(44.80)
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-5.8%
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||
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Net interest margin
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64.81
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17.7%
|
50.21
|
17.7%
|
179.23
|
17.5%
|
133.39
|
17.1%
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||
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Provision for credit losses
|
(27.29)
|
-7.4%
|
(20.22)
|
-7.1%
|
(76.80)
|
-7.5%
|
(52.74)
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-6.8%
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||
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Risk adjusted margin
|
37.52
|
10.2%
|
29.99
|
10.6%
|
102.43
|
10.0%
|
80.66
|
10.4%
|
||
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Core operating expenses
|
(23.72)
|
-6.5%
|
(19.43)
|
-6.9%
|
(64.54)
|
-6.3%
|
(56.32)
|
-7.2%
|
||
|
Provision for contingent liabilities
|
-
|
0.0%
|
-
|
0.0%
|
-
|
0.0%
|
(9.65)
|
-1.2%
|
||
|
Gain on cancellation of debt
|
-
|
0.0%
|
-
|
0.0%
|
-
|
0.0%
|
10.95
|
1.4%
|
||
|
Pre-tax income
|
$ |
13.80
|
3.8%
|
$ 10.56
|
3.7%
|
$ 37.90
|
3.7%
|
$ 25.63
|
3.3%
|
|
|
(1) Includes allowance for finance credit losses and allowance for repossession inventory.
|
||||||||||||||
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(2) Wholesale auction liquidation amounts (net of expenses) for CPS portfolio as a percentage of the account balance at the time of sale.
|
||||||||||||||
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(3) Numbers may not add due to rounding.
|
||||||||||||||
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(4) Annualized percentage of the average managed portfolio. Percentages may not add due to rounding.
|
||||||||||||||