Consumer Portfolio Services Inc (CPSS) 2008 Q2 法說會逐字稿

Good day, everyone, and welcome to the Consumer Portfolio Services second quarter 2008 earnings release conference call. Today's call is being recorded. Before we begin, management has asked me to inform you this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements are subject to certain risks that could cause actual results to differ materially from those projected. I refer you to the company's SEC filings for further clarification. The company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise. With us here now is Mr. Charles Bradley, Chief Executive Officer, and Mr. Jeff Fritz, Chief Financial Officer of Consumer Portfolio Services. I will now turn the call over to Mr. Bradley.

Thank you and welcome to our second quarter conference call. I think overall we're pleased with the results for the quarter. As everyone well knows, this has been an exceedingly difficult market and continues to be. I think this market has now dragged on for what's looking like almost a full year, both in terms of the capital markets, in terms of the auto market specifically, dealer sales are off, the financing business is off, and certainly the capital markets have been no help. But in spite of all that we put out earnings that we expected, as a company. The company is operating probably as well as it ever has. Our collections are very strong, our originations are very strong. The overall performance is just what we would expect it to be. Unfortunately, it's in a very trying environment in both our industry and the overall capital markets as a whole.

So I think the thing to focus on is what we do to sort of take advantage of all that. In some ways, for people who have been with the company for awhile, it's deja vu ten years ago; 1998 was something exactly like this. It was certainly an auto market versus the overall market. But the point being that our company has been there before. We know what we're doing. We know how to handle it and manage our way through it, and as people might remember, if you can do that, that will create lots of opportunities going forward. So our focus, as we'll talk about in a little bit, is to sort of manage our way through these difficult times, take the time we have to take it to sort of make things better, improve things, and then when things come back, whether it's three months, six months, or a year from now, to be in a position where we can take real advantage of the opportunities that present themselves. With that, I'll turn it over to Jeff to go through the finances.

Thanks, Brad. Good morning, everybody. We'll start with the revenues. The revenues for the quarter ended June 2008 were 98.8 million. That's down 4% from 103 million in the March '08 quarter and up about 3% from 95.8 million in the year-ago quarter. The first six months of 2008 had revenues of 202 million. That's up significantly from last year's six months of June of '07 of 182.3 million. And a lot of these period to period comparisons that we'll see this morning, you're going to see the outcome of what's really happened in the marketplace over the last year. So throughout '07 you recall we were able to grow originations pretty steadily up through and until the fourth quarter, and since then we've significantly reduced originations and, as a result of that, our portfolio is greater today than it was a year ago. However, it's less than it was a quarter ago. And so we're currently in a mode where the portfolio is shrinking and a lot of the things that are driven up the size of the portfolio are going to reflect that circumstance.

Moving to the expenses, the expenses for the third -- excuse me, the second quarter, 96.1 million. That's down 3% from the previous quarter, the March quarter of 99.5 and up about 7% from 90 million in the June quarter of 2007. Similarly, the six-month expenses for '08, 195.6 million. That's up about 15% from 170.6 million in the first six months of 2007. Looking at the provision for loan losses, 30.9 million for the quarter ended June of '08. That's down about 11% from 35 million in the March '08 quarter and also down about 33% from the -- excuse me, down about 6% from 33 million for the June '07 quarter. The six-month provision expense for 2008, 65.8 million. That's up about 6% from 62.2 million for the first six months of 2007.

Again, the '08 originations volume is significantly less than the same period in 2007 and even the second quarter of 2008 is significantly less than the first quarter of 2008, and a significant portion of our provision is driven by the new volume, and so I think you see the impact on some of the numbers. Pretax income for the second quarter June 2008, 2.7 million. That's down 29% from the previous quarter of 3.8 million and down 56% from the year-ago quarter of 6.2 million. The year-to-date basis through June '08, 6.5 million in pretax income, that's down about 44% from 11.6 million for the first six months of '07. You may recall in '07, really throughout '07, we had significant write-ups of our residual interest and securitizations which came to a conclusion is that most of that asset really wound down through '07. And so you had had some revenue, significant revenues, other income types of revenues in the '07 periods from the residual interest write-up. In addition, in 2007, in the second quarter, we sold the portfolio charged off receivables, so to put that a little bit in perspective, the year-to-date '07 numbers included $5.3 million of other income that doesn't have any corresponding or recurring match for 2008.

Net income for second quarter, 1.5 million, that's down 29% from 2.1 million in the March '08 quarter and down 57% from 3.5 million in the June '07 quarter. On a year-to-date basis, for '08, 3.6 million net income, that's down 46% from 6.7 million for the first six months of 2007. Our diluted earnings per share, $0.08 for this quarter. That's down about 27% from $0.11 for the March quarter and down 47% from $0.15 for the June 2007 quarter. Year-to-date earnings per share diluted $0.18 for the first six months of '08 compared to 29% -- or $0.29 for the first six months of '07.

Moving to the balance sheet, our free cash, our unrestricted cash balance at June 30, 2008, is 21.8 million. That's up significantly from 18.5 million in March of '08 and also compared to 13.4 million a year ago. You may recall from our other announcements, and I'm sure Brad will discuss these financings further, that we raised $10 million right at June 30, just a few weeks ago, as sort of the first leg of the financing that we completed last week, and so that $10 million is reflected on the balance sheet of June 30. Restricted cash has been steady at 177 million the last two quarters. A year ago restricted cash of 261 million included about $109 million from the pre funding component and, of course, that was due to that quarter's securitization. We did not do a securitization at the end of this quarter. We did do a securitization in the quarter but not at the end of the quarter. In any case, it wasn't pre funded.

Finance receivables balances, as I indicated, are shrinking on a quarter to quarter basis. The net finance receivables of 1.8 billion is down about 5% from the previous quarter of 1.9 million, but it is up about 5% from 1.7 billion a year ago. Our debt balances, our warehouse balance at the end of the quarter here is 148 million. That's a significant reduction from 368 million at the end of the March quarter, and you recall around April 10 we did a securitization which paid down the warehouse balances and we're doing fairly nominal levels of originations to be used those warehouses. The residual interest financing at the end of the quarter was 86.8 million compared to 90 million in the previous quarter and $28 million a year ago. We recently restructured the residual interest financing subsequent to the end of the quarter and have subsequently paid that down to a level of $70 million. Securitization debt 1.7 billion at the end June of '08. That's up compared to 1.6 billion at the end of March of '08, and it's down a little bit from $1.8 billion a year ago.

Our long-term debt, 34.5 million. That includes the 10 million of debt that we've recently incurred, and as of June 30, doesn't include some additional debt that we incurred subsequent to the quarter. Our portfolio, our consolidated portfolio is just under 2 billion, 1 billion 979 million at June 30. That's down from 2.1 billion March of '08 and 1.9 billion a year ago. The portfolio a year ago still consisted -- included $10 million of off-balance sheet and serviced receivables and those receivables are all but gone now and even last quarter, so the entire managed portfolio is really our on-balance-sheet receivables. The net interest margin, which is interest income less interest expense for the quarter, 53.9 million. That's down 11% from 60.3 million in the March quarter and down about 3% from $55.7 million in the year-ago quarter. On a year-to-date basis, the NIM, 114.2 million, that's up about 7% from the first six is months of 2007 of 106.7 million. The risk adjusted NIM, which is the net interest margin less the provision for loan losses, 23 million for the quarter just ended. That's down about 9% from the first quarter of '08 and it's flat, more or less, with 23 million from the June '07 quarter. On a year-to-date basis the risk adjusted NIM, 48.4 million for the first six months of 2008. That's up about 9% from 44.6 million a year ago. The NIM, of course, is being influenced and will continue to be influenced by a general trend, increased trend in interest rates throughout '08, although interest rates have gone down somewhat in 2007, or 2008 compared to 2007, the execution of our recent securitization resulted in significantly higher cost of funds for that deal.

The core operating expenses for the quarter, 24.2 million. That's up about 5% from the March '08 quarter and up about 4% from the year-ago quarter. On a year-to-date basis, the core operating expenses, 49.8 million. That's up about 10% from 45.3 million for the first six months of '07. And one of our metrics to kind of measure the efficiency of our operation, the core operating expenses as a percent of the average managed portfolio, 4.8% for the quarter. That's flat with the March of '08 quarter and down about 5% from 5% -- or 5% for the 2007 June quarter. And, lastly, our return on managed assets is 0.54% for the quarter just ended. That's down about 24% for the March of '08 quarter and down 60% from 1.35% for the June 2007 quarter. On a year-to-date basis, 0.63% for the first six is months of 2008 and that's down about 53% from 1.33% for the first six months of 2007. I'll turn it back over to Brad.

Thanks, Jeff. In talking about the credit, credit performance. It's still well within what we would expect. The DQ numbers for this quarter were 6.12%, the June quarter. That's up a little bit from 4.8%, or 4.82% in March of the previous quarter and 4.85 from the year-ago quarter. In terms of delinquency, we now have a declining portfolio and so there's probably two effects. One is that the portfolio is now starting to decline. Also that the '06 and '07 vintages, which all along were not quite as good as sort of the earlier years, the '04 and '05, those are now reaching their peak loss periods. So we would expect the delinquency plus it's a summer, but overall the delinquencies are certainly where we would expect it to be and well within reason given the portfolio.

In terms of the losses, the losses were 6.85 for the quarter. That compares to 6.66 for the previous quarter and 4.13 for the year-ago quarter. Again, it's the same thing in that the portfolio is beginning to age those two large year originations, '06 and '07, are now reaching their peak loss periods so we would expect the losses to go up some. But, again, this is exactly where we would expect them to be. If anything, given the overall environment, we're probably rather pleased with the performance in terms of collections, given the economy and everything. Talking about how bad it is, I think our portfolio has done rather well. Certainly compared to our peers, I mean, our '06-'07 vintages are only up about 10 or 15% from where we might have expected them to be over the '05-'06 vintages. The rest of the industry is somewhere between 25 and 50% increases on a comparative basis. So certainly in some levels we don't really care what everybody else is doing, and we're happy with our numbers, if you compare them to everybody else we're probably exceedingly happy with our numbers. In looking at the auction values, they're basically flat quarter to quarter.

On year-over-year, they're down about 10 to 12%. I think, though, the part that concerns most people is sort of the exposure in terms of the SUVs and large trucks. Our portfolio tends to lean significantly away from that. We only have 6 to 7% of our auction are the large trucks and SUVs. Whether we can take credit for designing the program to stay away from those cars or say that just by the way our program works, we do not have a lot of those cars or trucks. Either way, our exposure in terms of the large vehicles, gas guzzlers, is significantly less, and at 6 to 7% should not have much of an effect on the overall performance. So, again, that would be a component that we think is very healthy in terms of how the company should operate on a collection basis going forward.

Looking at the operations, we have spent some time slowing originations down in this market. This isn't the market where growing is probably a real great thing to do. In uncertain terms, the thing to do is be conservative. Given our past history and expectations in terms of what happened last time this sort of happened, we were able to cut production very significantly, very quickly. As a result, we're in a very strong position in terms of where we stand with carrying loans on the balance sheet and we're not -- we don't have to get back to the capital markets as much as other folks might need to. We have some real staying power along those lines. But also the other thing we did is probably equally important, we spent -- we very quickly did two really important things which I think we mentioned in the last call, which was we -- we tightened credit significantly. In the paper we're originating today is arguably the best paper and probably will burn out to be the best paper we've originated in at least 10 years. The paper should perform very well given the credit criteria we tightened, the different metrics we've tightened, and the early result and even the late '07 paper and the early '08 paper has been very positive.

Also, we've taken the opportunity to increase our pricing very significantly. We've raised our overall average coupon almost 200 basis points, not quite two full percent, and we've raised our discount or increased our discount almost 700 basis points. You take the combination of those three things, increased coupon, increased discount, and much tighter credit, the paper we're originating or in position to originate today should be absolutely far and away the best performing paper we've ever had. And the results of that we won't see for it another year or 18 months. But when those results come in, they should be very significant and very positive. Having said that, we've now got originations down to only around 16 or 20 million month. But when this market turns and we have the opportunity to grow again, given the footprint or the way we've changed the model, again it could be very is pleasing results.

The other thing we've done, besides those things, is given the market, and as much as everybody looks at the financial companies and the capital markets, the dealers aren't doing all that well either. We've started to initiate some programs to work with the dealers to help them really rebuild their special finance and figure out ways to drive their business and sort of create some partnerships with those dealers, teaching them how this all works while we have the time, for lack of a better word, so that when this market does come around we're going to have even stronger relationships with our dealer base and be a real opportunity to grow very quickly and take advantage of the market.

Moving on to the financing, as Jeff pointed out, we did do two very significant financings in the last 60 days. One, we raised 25 million of new capital from one of our -- from a senior lender we've worked with in the past. Given the market, I think that's a very significant accomplishment or achievement in terms of raising money in this market. I think that shows what the company is capable of. It also shows the staying power of the company that people are willing to back us in this market knowing that we will work our way through and be able to take advantage of it when the capital markets come around. We've also restructured our residual financing. We paid some of it down. We have the opportunity if some of our targets are met to extend that debt for an extra year. Being able to do that, what we've done is sort of re-established our balance sheet during these difficult times to be able to make it through the times. And I think those are the first two steps in sort of a somewhat multi-step process to sort of firm up the company, in terms of the financing, put the company in an operating position to sort of go through the current tough times but also to be in a position to really excel when these tough times clear, and we've now done both of those things. Our balance sheet is very strong, our operating model is very strong, and so now all we need is the goofy capital markets to come back and give us the opportunity to really take off. But getting those two things done is very significant for where we sit today.

Looking at that time capital markets, a year ago I think everyone in our industry thought, gee, we'll wait until the new year, and everything will be better. Obviously things didn't get better, they got worse. We certainly, since January, have known that things weren't going to get better or might not get better. In terms of running the company, the object here is not to sit here and say, well, it will get better in three months or six months and then get in a position where we're stuck. That obviously is something we haven't done nor is it something we're going to do. As a result of that, what we're trying to do is develop other things we can do. Like I said, working with the dealers, coming up with different ways to move our paper off balance sheet and, of course, slowing things down so we have the staying power to get to the next level. We're in the process of looking at that. We are trying to wean our dependence in the capital markets somewhat and the securitization market. I think the way things tend to work is when you don't need the securitization market, it will come back. I think planning on not having it with the anticipation that it will come back is probably the smart play. We're, in fact, doing exactly that. I think the securitization market should come back. There's a lot of capital on the sidelines. When it comes back in, we're going to be looking for assets to buy and finance and I think we're going to be in a very good spot to really access that market given that what they're going to be looking for at that time is companies that are -- have strong balance sheets, that have a good working model, and have performed through these difficult times. We certainly is have done all of those things.

Our portfolio is performing very well from a capital market point of view. It might even be performing extremely well given the conditions and given what other companies are doing. I think in terms of touching on the equity markets, that certainly hasn't been any fun. Our stock, much like all the other stocks, have gotten pummeled. Given everything I'm saying, we don't think that's really the right thing to be doing, but there's really nothing we can do about it particularly. We think as time goes forward that should correct itself.

In terms of the future we think the rest of this year, given the current state of of the environment, could be very difficult. We think that nothing is going to really improve. I think, like I said, it's better to plan for the worst and hope for the best. That's the way we're going to play it. We think the rest of this year could be soft in the capital markets. We think it could be soft in the auto industry. Nonetheless, we think our performance on the portfolio should continue to do very well. We think with capital markets or the capital raising we've done it puts us in very strong position, certainly for the rest of the year and beyond. So then you get to the last part, which is, of course, now that we've gotten to where we're doing fine in a very difficult environment, what opportunities are there. As people may recall, 10 years ago there were significant opportunities to be had if you could get yourself in the right position, which we think we have. And so along those lines, we are exploring other opportunities to see what we can do in terms of strengthening the company either through acquisitions or other opportunities. And I think they are going to be plentiful, given this environment. We think the rest of the year is going to be tough. We don't know when the market is going to come back. Our real plan is to, again, be prepared, so that when they do come back we're really in a good position to take advantage of it, and between now and then see what opportunistic things we can develop. With that, we'll open it up to questions.

(OPERATOR INSTRUCTIONS) Our first question is coming from John Hecht of JMP Securities. Please go ahead.

Good mornings, guys. Thanks for taking my questions. Just a couple of modeling questions. What should -- you issued some new shares to (inaudible) or a group associated with (inaudible). I think there are some [warrants]. What should we consider for pro forma share count in terms of additional shares that we need to include in the diluted share count?

In the aggregate -- hi, John. In the aggregate, the new shares, the new potential shares from the financings are an additional 5.5 million that would you want to put into the diluted, starting with this quarter's diluted share count. Now, on a year-to-date basis, they will be sort of averaged in, but the aggregate new shares are 5.5 million.

Okay. And the -- subsequent to the quarter you raised more senior debt. It was 5 and change at the end of the quarter. How much will that be at the end of the third quarter?

Well, the face amount of the new debt that was on the balance sheet at June 30 was 10 million.

Okay.

Subsequent is, just last week, we finished oaf that deal with an additional 15 million.

Okay. And then can you tell me -- just remind me, I guess, the Citi Corp, I think there were two pieces to that, a financing line, a revolver and a permanent. Can you remind me when you have given the updated terms of when things reset and have to be renegotiated again and which pieces fall into which bucket?

Sure. The old deal was a $60 million revolver and a $60 million term at the time we had drawn half the revolver in the full term. The revolver was due about a week or ten days ago, and then the term was due a year from now. And so what we've done is we've -- we've eliminated the revolver, we've increased the term from 60 to 70 million, and then a year from now we have the option or if we've met certain conditions we can extend that debt an additional year. And so net-net of all that, we have at least a year where we don't have to do anything, and then to the extent everything goes the way it is supposed to, it is two years before that 70 is due, and there's some amortization between now and then. Fundamental part of what we wanted to do was, given the current economic environment, we didn't really want to have to -- hopefully by next year everything will be great, but if it's not we wanted to be in a position where we could leave that debt alone for yet another year.

Yes, understood. Do you have some commentary on the capital markets? You expect and you're planning the business strategically around them continuing to be tough. But can you give us a sense more about just over the next few months, would deals have to be done in senior sub fashion, for instance, pricing, everybody in the industry has to address warehouse lines in the next future, what do you expect with respect to changes associated with covenants and details associated with those and how you're planning your business strategically around those developments?

That's a good question. I think America did a deal I think a month or so ago that went really well. So the capital markets are a little bit fickle in terms of when they're strong and when they're weak. Some people think they could be strong in the fall. Some people think it could be a whole other year. Our current strategy is to plan for the worst and hope for the best. I think personally another company did a securitization this week, so I think the market should begin to open up between now and the end of the year. Whether it will be a stronger market than it was when America did their deal or hopefully stronger than when we did our deal in April, it's a little tough to pick, but one might guess you can get securitizations done hopefully before the end of the year. Whether they're done in the senior sub fashion or with a wrap, my guess at the moment might lean toward senior sub. But, again, a lot will depend on sort of what's happening in the industry.

In terms of credit lines, credit lines aren't due until September or November. I think we're going to be in position where we should be able to work with those lenders. They might be -- the relevant thing is we probably wouldn't need as large lines at that time. To the extent when we renew them we would probably scale them back some. I think they might be slightly more expensive, depending on the market, but that's sort of the plan for now. We would expect that the capital markets hopefully will strengthen this fall but, again, it's much more sort of my personal feeling than either the way we're going to plan for the company or the way that it really may happen. I think there's lots of opportunities. There seems to be an appetite for people looking for assets, so that creates other ways to sell things. I think we're going to be opportunistic and take advantage of what we can see. The important thing is all those people, whether you are doing capital markets, doing securitization or other loan sales or whatever they are, senior sub or otherwise, what people are going to look for is performance and that's going to be our strong suit for the rest of this year and all next year is that our portfolio is going to do well. So we're going to have to see, but I think given the economic environment and how well our portfolio has performed so far, that should be something that leads the way in terms of how we do things. Again, it's a little hard to guess given current events and how the market is going to shape up.

Okay. Just as a follow-up to that, there was a deal during this week. I was unaware of that. Was that a senior sub deal, and was it a subprime auto financed pool?

It was U.S.A. Auto and they did a senior sub.

I appreciate. Thanks for answering my questions.

Thank you.

Thank you. Our next question is coming from Daniel Furtado with Jefferies.

Thank you. Good afternoon. Can you tell me what the current age of the portfolio is right now?

It's about 18 months at June 30, and I think Brad mentioned the portfolio is current 18 and that compares to 14 months at December 31 of 2007.

Okay. What's the cumulative loss on that portfolio to date?

Well, you wouldn't think of it as a cumulative loss of the whole portfolio. We would look at in quarterly or monthly pools, but our target losses for really everything except the '08 originations would be in the 12% range, and then for the '08 originations we'd expect cumulative net losses to be significantly less, maybe in the 10 or 11%.

Okay. I'm just trying to figure out of that 12% what's been recognized -- or what the experience has been to date. Are you in the 8% of that 12, assuming no more originations and you let this thing run off, do you think you're at 8 of 12 or 6 of 12 or 10 of 12? What do you think cumulative loss is in the portfolio right now?

We'd probably have have to look at that and get you a better number rather than just guess at one now, but we can do that for you.

Okay. I appreciate that. How should I think about allowance for losses? Should I think of it as a percentage of the portfolio or some other metric? What do you suggest to outsiders looking in?

Well, again, you'd have to consider sort of as the portfolio ages, the allowance as a percentage of the portfolio is it not necessarily going to stay at a fixed or -- amount. In fact, it's decreased somewhat over the last few quarters and we'd attribute that somewhat to the lack of significant new originations and the aging of the portfolio. As the portfolio ages and moves out in the cumulative net loss curve, as the portfolio ages and moves up the curve from 14 to 18 and maybe some higher number of months, the cumulative net loss curve tends to flatten out a little bit and so, therefore, looking forward say to the next 12 months losses, you have potentially a decreasing number. And so -- and that will impact the amounts.

I'm sorry.

Although the allowances as a percent of the portfolio has shrunk somewhat, if we also maintain a separate allowance for the repo inventory portion of the portfolio, and when you aggregate those numbers together, it's been pretty flat over the last few quarters.

Okay. And usually your net charge-offs increase about 200 basis points from the second to the third quarter over -- since you've been predominantly on balance sheet. Is there anything to suggests that this third quarter will deviate from that typical increase?

We might want to do a little more analysis on that, but probably not would be my guess off the top of my head.

Okay. How about economic stimulus checks? Is that something that you think that been beneficial or you can't track it? What's your gut feeling on that?

Our gut feeling is they should have showed up two months ago, and they don't seem to have showed up yet. I think ironically, this month looks like it might be getting some effect from that.

Okay.

I think that you know, probably question will be answered next quarter, but July generally is not a great month, and it's only half over, give or take, but it seems to be sort of having an interesting perk to it.

Okay. Then I heard earlier you're thinking 15 to 20 million in originations on monthly basis going forward. That's fair for me to use in my model?

Sure that would be fine.

Awesome. Thanks a lot for your time, guys.

Thank you.

Thank you. (OPERATOR INSTRUCTIONS) Our next question is coming from [Cheryl] (inaudible) with Wells Capital. Please go ahead.

Hi, actually this is [Shawn] (inaudible) on [Cheryl's] line. I was kind of curious, obviously you guys are making a concerted effort to drive down your exposures. I was kind of curious to what degree just pure traffic is also having an influence on that or have you seen that because you're drawing down there aren't alternatives for your traditional customers? Just trying to get more of a macro sense for what's happening at the dealership level.

That's also a good question. I think dealerships are in tough shape. As much as people could say, gee, everybody is charging a lot for these loans, but as much as our industry now is starting to back off, the rumors we hear is that the auto dealers are having trouble, that it's hurt their business significantly, the fact that they're having trouble selling new cars isn't particularly great, and now all of a sudden they're having trouble financing used cars. So that's put an increased burden on the dealership. Then it even goes to the next step, which is the customer. A whole lot of people that used to be able to get financing here, given the tightened credit, are now going to buy here, pay here where they are literally paying significant amounts for half the car per se. Our industry is almost created as a bridge between buy here, pay here, and regular prime financing. As we've tightened and sort of drawn in, a lot of those customers are now falling in where they're actually paying more. So I think on the very basic level of people with poor credit or bad credit, it's hurt them significantly. It's hurt the dealer significantly. Obviously it's had had an effect on the finance companies. The good news to all that is, like I said, one of our current objectives is to work with the dealers to sort of give them a course in how to really get these customers in and structure their deals better so that we sort of have stronger partners as we go forward, and the other part is when the market comes along and we can offer that financing, I think that the dealers and the customers will all be there to really grow this market back to where it was, and I think the stronger companies will do very well.

To what degree do you think the captives is performing well or poorly with regards to their standards? Are they maintaining standards or is everyone just in general tightening?

I think the captives is to go that next level. The captives has really backed off in terms of what they financed a while ago and I think they're maintaining that. As much as they might be tempted to reach down the credit spectrum a little bit to try and boost their business, I think they learned three years ago that really doesn't work and so this time around they have kind of stayed away from it. I think they've maintained their discipline. We haven't seen a lot of the captives really trying that hard to -- or we haven't really seen it at all in terms of them trying to help the big companies sell more cars, which I think is the better move. There is a very steadfast rule through the history of this that prime guy should not be financing subprime and keep them where they should be and at least try to get them healthier, they shouldn't do it, and they haven't. So we have not seen them reach down.

Thank you very much.

Thank you.

Thank you. At this time I would like to turn the floor back over to Mr. Charles Bradley for any additional or closing remarks.

Thank you. Again, thank you all for attending the call. I think we're pleased with the quarter in a difficult economic environment. We think we've gotten a lot done lately that's really put us in much better position, both within our industry and in terms of where we're going to go going forward. I think we're now to the part where we can start looking at the opportunities and what we can do to sort of get us at that next level as we wait for the overall economy to sort of turn the corner, which hopefully will be sooner than later. But either way I think there's some things that will be worthwhile during that period of time. Like I said is, probably one of the most important things is, unfortunate in some ways, good in others, we've done this whole thing before. We have a lot of confidence in what we're doing. A lot of good results have come out so far. So we look to continue that as we go forward. So thank you for attending. We'll talk to you next quarter.

Thank you. This does conclude today's teleconference. A replay will be available beginning two hours from now until Wednesday, July 23, by dialing 800-642-1687 or 706-645-9291 with pin number 55619407. A broadcast of the conference call will also be available live and for 30 days after the call via the company's website at www.consumerportfolio.com and at www.streetevents.com. Please disconnect your lines at this time, and have a wonderful day.