Consumer Portfolio Services Inc (CPSS) 2016 Q1 法說會逐字稿

Good day, everyone, and welcome to the Consumer Portfolio Services' 2016 first-quarter operating results conference call. Today's call is being recorded.

Before we begin, management has asked me to inform you that 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 and 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 thank you everyone for joining us on our first-quarter conference call. This is sort of the quarter where we have already spoken to you rather recently, so there's not a whole lot of different, but some interesting things to discuss. First, the quarter went very well. It came in line pretty much exactly where we thought it would be, so that is sort of the good easy part.

Some interesting things are originations in marketing, I think probably the previous two years, we have said it looks like there is a different dynamic in terms of tax refunds, and what we usually look at is the growth cycle, being at the beginning of the year. And then, of course, I said, a couple more years we would say that the big growth period in the beginning of the year isn't really there anymore, and then, of course, this year it was.

And so we had a very strong first quarter in terms of originations growth. It started in about February, continued through March, and it's continuing into April, though it's beginning to ebb some. Whether that is because they come up different way to distribute the tax refunds, or they did it sooner or faster, it's really hard to figure out, and to be honest, I don't know that we really care.

What we care is we got a nice little kick in the first quarter, which we didn't have in the previous two years. That enabled us to have strong originations. Strong originations. We actually got back to our 2007 levels.

March was a record month in terms of originations in one month. So overall, that part worked very, very well.

Collection continues to be a challenge, though we are starting to figure a few things out, a few more things out. And so, as much as the numbers don't reflected, we think we are getting where we want to go, and hopefully the results will improve over the next few quarters.

Probably the more interesting thing is the ABS market. It has gotten much more difficult. Not difficult, but the pricing and cost of funds has gone up significantly over the last few quarters. It's certainly a different world than a year ago, in terms of what it cost to get a securitization done.

Having said that, it's not like you can get one done. It's more like it's just going to be a little more expensive. Interestingly enough, in the past quarters, or even a year ago, the top part of our bond, the AAA, the AA, a year ago we didn't have AAA, but the top part of the bonds, the AA, single-A, were harder to sell, and we used to get lots of orders for lower end of the bonds, BB, the B, and the BBB, it's almost reversed now.

We have lots of interest in the high end, and it's much more difficult to sell the low-end. And so certainly the word on the Street is the flight to quality. And I think, overall that might push the overall costs up, and it has, but I don't know, we obviously had a lot of room in terms of cost of funds. So what we are sort of hearing in the world is it will probably affect other people a lot more than it might affect CPS.

That's a good thing. We don't really want the higher cost funds, but we certainly knew at some point it would get back to those historical levels. Having said that, the cost of funds is still below what we looked at as our historical average, in terms of what it cost to get deals done.

There's still lots of appetite, but the people in the market and Wall Street want to get paid a little more, and so, it is sort of an interesting new dynamic in that market, that might be somewhat challenging, as we go forward, so we will see. Overall though, we also celebrated the 25th year as a Company, and I don't know there is much of anyone out there who can say that. And with 25 years in the industry, we certainly have the experience.

We know what we are doing at this point, and we will start into our cycle where it looks a few people might be having a few problems, or not. So I think that 25 years certainly is going to come into play as we go forward. With that, I will turn it over to Jeff to run through financials.

Thank you Brad, welcome everybody. We will begin with the revenues. $100.6 million for the quarter, that is a 6% increase over the December quarter last year of $95.3 million, and a 17% increase over a year ago, with revenues of $86 million for the first quarter of 2015. Obviously, all our revenues are growing, pretty much consistent with the portfolio. We originated $312 million in the first quarter of 2016, and the consolidated portfolio grew about 6% for the quarter, and 25% year-over-year.

On the expenses, $88.4 million for the quarter, that's an 11% increase over the fourth quarter of 2015, and a 24% increase over $71.2 million for a year ago. Most of our expenses, growing putting much consistent with the portfolio. Although not as -- not quite at the same rate, and so we continue to see the operating leverage that we have been promising for some time, and we will talk a little but more about that metric as we get further down on the call.

Provisions for credit losses, $44.2 million for the quarter, a 22% increase over the December quarter last year, and a 32% increase over the first quarter of 2015. Obviously, we talked for several quarters now about the headwinds we are facing on the credit performance side, the provisions are keeping pace with that. And that's just where we are in the credit cycle, and part of the challenges that we faced in the collections environment.

Pretax earnings, $12.2 million for the quarter, that's a 23% reduction from the fourth quarter of 2015, and a 17% reduction of $14.7 million in pretax earnings a year ago. Obviously, reflective of primarily increases in credit and provisions for credit losses, and also interest expense in this period.

Net income was $7.2 million, that's a 20% reduction from the $9 million in the previous sequential quarter, the December quarter, and a 13% reduction of $8.3 million for a year ago. On the diluted earnings-per-share, $0.24 for the quarter, again a 17% reduction from the $0.29 in December, and an 8% reduction from $0.26 a year ago.

Moving onto the balance sheet, not very much changing, going from the quarter to quarter on the balance sheet. One thing you may notice, if you compare the cash balances from this period compared to the March quarter a year ago, is we no longer have this big slug of restricted cash on the balance sheet at the end of the quarters, because we have changed the timing of our securitization transactions to be in the first month of the quarter, rather than the last month of the quarter. And so the restricted cash that you see is really for the most part some credit enhancements, spread account deposits and some payments and process that are distributed to the trust in the month following the quarter.

The finance receivables balances were at $2 billion, net of the allowance for the quarter. At the end of this quarter that's a 6% increase over the year end and a 25% increase over a year ago, when it was $1.6 billion. The net allowance of $80 million is pretty much flat from the fourth quarter as a percentage of the portfolio, and essentially we have been growing that pretty steadily throughout 2015 and it's flattened out a little bit. We will look forward to see what is going to happen this year. Much of that is tied to not only our portfolio growth, but obviously the underlying credit performance and the age of the portfolio, which it is aging slightly, as we go forward here.

On the debt side, again, nothing unusual happening here. The one thing you may notice, tied again to our change in the timing of our securitizations is at the end of these calendar quarters, we will see higher balances of the warehouse lines, because we are building and building those portfolios that are financed with the warehouse lines, and then they are not paid down until the first month of the calendar quarter, as opposed to the last month of the calendar quarter, which we have been doing up until the first quarter this year.

Moving onto some of these other performance metrics, the net interest margin for the quarter was $82.8 million, that's a 4% increase over the December 2015 quarter, and a 14% increase of over $72.8 million from a year ago. A significant component development in this metric is just the aggregate cost of the ABS, the asset backed securitization trust debt. It was about 3%, aggregating all the deals for the first quarter, it was about 3%.

That's flat compared to the fourth quarter of 2015, but it's increasing from 2.75% from the first quarter of 2015. So obviously, it is starting to reflect the general rising in cost of those deals throughout 2015 and through the first quarter of this year.

The risk-adjusted NIM, which takes into account the provisions for credit losses, $38.6 million, an 11% decrease compared to the fourth quarter of 2015, and a 2% decrease compared to a year ago. Reflecting, obviously, as we talked about, the increased provisions for credit losses.

On the plus side, the core operating expenses for the quarter, $26.4 million, that's actually down 4% from the December quarter, and up only 7% from a year ago. So we continue to, on the core operating expense side, we continue to realize these efficiencies and operating -- improvements in operating leverage, as is manifested by this next ratio. The core operating expenses as a percentage of the managed portfolio down to 5% for the first quarter of 2016.

That's a significant increase from 5.5% in the fourth quarter of 2015, and also compared to 5.8% from a year ago. And we think this is an area where, in spite of the other headwinds we are facing, we will continue to see some improvement in this metric.

So the bottom line, in terms of these ratios, the return on the managed assets as a percentage of the average managed portfolio, pre-tax 2.3% for the quarter, and that is down from 3.2% for the fourth quarter of last year, and down from 3.5% from a year ago. That aggregates all those other factors and components that we've talked about.

Moving onto the credit performance, delinquency, all-in delinquency for the quarter 8.97%. That's a slight improvement over 9.53% from December, and an increase from 6.86% from a year ago.

The net annualized losses for the quarter, 7.57%, again a slight increase from 6.2% in the December quarter, and 6.6% compared to the first quarter of 2015. We did a little better, reversed the trend by doing a little bit better at the wholesale auctions in liquidations of our vehicles, 39.9% for the quarter, that's up just a little bit in improvement from 38.3% in the December 2015 quarter, but you can see how much that has change compared to 43.8% from a year ago.

A quick comment on the asset-backed securitization market. Of course, the deal that we did in this -- in the first quarter of 2016 we actually did in January, and I think we talked a little bit about that on the last -- on the year-end earnings conference call. I'll mention, we just did a press release for our 2016 B-deal which we closed last week. That was $332.7 million, it was our usual structure, with the two AAA ratings at the top.

Some of the highlights of that deal, we increased our unique investors, acquiring 22 unique investors, which is an increase compared to 19 in the 2016 A deal, and also of note is eight new investors. Very interesting that even though the cost of funds are rising, it's not indicative of a lack of liquidity and activity in these markets.

As Brad said, this deal reflected what the bankers had told us to expect, which was a flight to quality, a significant demand, and over subscription on our class A and B bonds, offset somewhat unfortunately by less demand at the lower end of the cap structure where the higher rate bonds are. And also to point out, that trend and that dynamic in the market is really across asset types, it's not just subprime auto type of dynamic, it's really what we've seen, and what our investment bankers have seen throughout the market. And with that, I'll turn it back over to Brad.

Okay, so I think on the front end of the business, we are happy where we sit in marketing and originations end of the business. We think we are buying what we are supposed to be buying, and have been, very consistently for a long time.

If you look at a lot of our metrics, the metrics and the paper we're buying today don't differ very much from the metrics we bought a year ago, or a year before that. So in terms of how we are buying, we are doing the right stuff.

Collections remains challenged. I think you have the regulatory environment is a big piece of that, and I think the customer themselves tried to come up with the idea that ironically, customers don't like to answer the phone is much as they used to, they like to see text messages, and things like that. And so if you think about it, years ago or whatever, you used to call these people at home and the phone on the wall would ring.

Today it's the phone in our pocket, and they're not always wanting to answer that phone. So you have to come up with new ways to do things, and we have, and I think as those new methods come into play we have a good shot of improving our collection results, which as I have mentioned in almost every call, that's our goal in life.

Again, it's challenging, looks the regulatory environment has calmed down a little bit in terms of the collection practices and such, so that's a good thing. But again, it's a combination of both those things that makes -- that's going to make us successful, and so we are diligently working on ways to improve in all those areas.

We've talked a little bit about the ABS market, that's probably the most different thing in that now there certainly is this flight to quality, people are looking more to credit, cost of funds are going up. Having said that it looks like at some point that's eased. As we get to the industry comments, I think a lot of it is just sort of a rise and fear of the marketplace or something.

But in terms of where we are, we're not having trouble getting deals done, it's more they're just a little more expensive. And we probably don't see that changing, particularly.

A couple things that are a little bit interesting, and now we get to the industry, as much as we want to do better in collection results and performance results, surprisingly to us, we are starting to hear a lot about all of our friendly competitors are doing significantly worse. And so, there are two parts. One, I think what we call our concerns, credit seems to be even larger concerns to lots of our friendly competitors, and then profitability seems to be another concern of lots of our friendly competitors.

And so we're still quite profitable, we're making lots of money, we are still making more money than we've ever made before, so we are really doing pretty well in that. And so as much as we are not personal and happy with CPS' performance on its own, if you hold us up to the rest of the industry, we look surprisingly great. And so we are quite happy with that.

Again, we're not going to compare ourselves to everybody in terms of what we want to do, we are going to do what we're supposed to do and get it done. It is a little interesting at this point in the game to look at what other folks are doing in the industry.

And that's relevant, because when people go to sell these bonds, much like we do, people are looking at those credit performances, and they are taking -- somewhat causing this flight to quality is general performance in the industry, and also the fact that a lot of these big companies aren't making enough money, and so as these same things get worse, that could put them in a difficult position. We are not nearly concerned like some other people might not be.

So that's sort of a new thing that we are focusing on, but again we're still 99% focused on what we are doing and getting it done correctly, with a wary eye on what is going on in the marketplace.

Now, good news following that, to the extent, the other aspect and the bigger picture is everybody is still talking about a recession, there's going to be a recession any time. So people look at our industry, and there certainly have been rumors that subprime auto is going to be the next big bubble, and cause all the same problems as subprime mortgage, people say that can't possibly be aware the difference in size in those two markets.

And it's nice to say we could ever be that kind of a big market, subprime auto on its best day isn't even a tenth of what subprime mortgage was. So no, it's not a bubble, it's not going to cause a recession. However, people are still looking for the recession, so what you have now is you have a whole bunch of little things, and not even all so little.

You have people worried about the credit quality of some of the players in the industry. And people worried about the profitability of some of the players in the industry. And people worry that there will be a recession sooner than later.

There's all reasons why people shy away from the industry, and somewhat more importantly, our stock, other people's stock. If you look at the stock performance of people in the industry, it hasn't been very good.

So as much as we don't wish much on everybody else, it is worth noting that as much as our stock isn't going anywhere, it is not going down particularly. So I think the answer there is, CPS needs to keep doing exactly what we are doing, and we'll see how the rest of the industry plays out.

We have been doing this for a long time. This kind of market generally can produce lots of opportunities, when opportunities come along, we can do a lot better.

As much as the industry is not perfect in terms of the global thing, it does have a possibility of creating some very interesting opportunities for CPS in the future. So we are very optimistic on both the one hand that we are doing exactly what we should be doing at CPS, and also, that CPS is doing quite well in comparison to the rest of the industry. With that, we will open it up for questions.

(Operator Instructions)

David Scharf with JMP Securities.

Yes, thanks, and thanks for the color, Brad. As always.

Wonder if I could start on the originations front. On the last call, you were already signaling that the beginning of the year was off to a strong start, and it seemed like the more typical historical Q1 was shaping up. Just wondering -- is there any other color you can provide us that relates to either things you did on the pricing front or that you saw competitors do, that may have impacted the significant share you captured?

The good news is, our pricing actually went up, which the volume goes up, and your margins go up. That is a nice mix. So we didn't do anything on pricing. We didn't raise prices, but we did get a little higher price on what we are doing. Not a ton, but enough to make it sort of fun. I think the better part of the answer is, the second part, which I think -- it's very hard to tell in the industry, obviously. But there is rumors going around that a few of the bigger fellows have slowed down, maybe raised their prices some, to maybe rejigger what they are doing a little bit.

So I think that's certainly, if you were looking for a reason for -- I still, on the one hand, it is now, we're seeing a little but more of that historical first-quarter jump, but it may have been aided slightly by some of our friendly competitors either slowing down a little bit, or raising prices some, and we have heard the rumors that, that's true. It's a little hard to see -- you don't have enough market intel in terms of what we are seeing on the street to say that there is, if there was a real significant move by one of the guys, we would know it. And we haven't seen that.

So it's much more rumor-mongering than anything else. But I would say, it's mostly the historical jump is back to some extent. I think it's going to be -- it's not as strong and shorter than the historical mean or whatever, but it's still there. And I think it's probably aided a little bit by maybe people slowing down or raising prices some.

And as we think about your pricing outlook or strategy for the rest of the year, and given the increase in funding costs, and getting a little deeper in the credit cycle, should we be thinking about the average interest rate on your book being higher for the rest of the year?

I would think a safe bet is to assume it will be what it was in the first quarter. To the extent it goes up a little bit, that would be nice. I wouldn't really, given what I just finished saying, I wouldn't think it would compress at all. I think what will be interesting is, if some of the rumors tend to be more true than not, and people tend to pull back more and raise their prices more, we certainly would be tempted to push our prices up a little bit. We've got the market share we are looking for; maybe we let it go up some. But if it continues to really move, we would certainly try and push pricing a little bit, and make up for some of that cost of funds. For the safe bet, just take the first quarter and assume that is the norm for the year.

Got it.

Shifting to collections -- obviously the FTC settlement -- I guess probably we are going on a couple years now. You have been working operationally on the new rules for a while. Can you give a little more clarity into what you mean by collections, quote, getting where you want them to be? Just trying to understand how much latitude you really have to meaningfully change collection practices.

Well, try to put some clarity on it -- if you look at it -- what we will call loosely more aggressive before, and now there is lots of rules to follow, on one hand, I think we, and probably most folks, took about 16 steps backwards to make sure that they weren't going to have a problem with that. And 16 steps -- you are not really doing much to collect your loans. You have to find a happy medium, where you were well within the guidelines, or the new guidelines as they are set by the FTC, or the CFPB or whoever else.

And those are things like, you can't pester the customer, you can't call them 47 times, and all of that. By the same token, you need to call them and say your loan is really delinquent and if you want to keep driving your car, then it's important that you pay. There is a happy medium in there, and I think, as I have said in previous calls, we took these 14 steps backwards, and needed to get a few steps backwards, but not quite that far. It took us a while to get the right sort of rules, because initially we just scared the collectors to death that they can't do anything, and that's just the not the right way.

The other thing, it took them -- the easy way to explain it, it took a long time to get the collectors to learn the proper way to collect without breaking the rules, and also trying to get the best results, and that was part of it. The second thing was, just figuring out better ways to contact the customers, since they weren't as eager to answer a cell phone as they used to be, when they picked up the phone at home. And so it's been a little harder to get into a dialogue with these customers, and when they can look at the call and not really want to talk and not answer it, and so you had to figure out a way around that, which we worked on as well.

So it's both the operational way you can talk to customers; it's also the way you get a hold of customers that has changed somewhat. So both those areas -- and I think you see in the clips or whatever in the industry rags, how everyone is learning, gee, texting is important, all these different things on how to get a hold of the customer. And so that is the other part of it, and that's probably the newest part, even still. But that's really what it's been. You've got to retrain all your collectors -- that's what we talked about for several years; and now we also find out you have to come up with some more slightly inventive ways to get guys to answer their cell phones. And so those are the two main parts of that today.

It sounds like the main takeaway is -- there is probably not a further -- there's no further drop off in productivity to be expected? You have things fine tuned to where they need to be.

I'm not sure fine-tuned is the right word, but we are getting there. What's come out of this is that the delinquency tends to run higher than before. We're not really seeing -- normally with those higher delinquencies, you see much higher losses, and they pay once you get a hold of them, but we are not terrifically happy about running the higher delinquency. But at the moment, that's what the net result is. We can probably live with it, but that's what seems to be coming out of what we will call this new dynamic in collections.

And on the loss side, just to follow-up -- starting the year, Q1 is seasonally typically the strongest collection period. Just based on the seasoning of the portfolio, with the loss rate up about 100 bps year over year, should we think about that as the trend line throughout the year? Maybe closing out the year at about 8% or so in the fourth quarter, or a little higher?

The easy answer, again, is to say, let's just roll with the first quarter, and then hopefully we will surprise you. But I think we want it to be better. Whether we can get there this year or next quarter is a little hard to tell. So again, the safe bet is to assume -- not assume the worst, but assume whatever we just did, and then with luck, we can improve on that. Our goal is to certainly improve each time, and so we are working on that. It may take another couple quarters yet. But your assumption says to roll with this quarter forward, and hopefully we can surprise.

Got it. And last, a quick one for Jeff -- the tax rate, is that down to 41%? Should we think of that as a sustainable level going forward?

Yes, David, I think in the short term, or at least for 2016, we will be using that tax rate. It's gone down a little bit as a result of some change in the tax provision for deferred stock compensation expense, and for the foreseeable future, I think that's what we will have for a rate.

Great, thank you.

Kyle Joseph with Jefferies.

Hoping to wrap my hands around the cost of funds trends a little bit more. Jeff, if you could tell us the securitizations that are rolling off? The rates you were paying on those versus the recent new issuances? And I think your last deal was around 4.5%?

So the deal we just did, which was economics which aren't reflected in these results, the 2016 B deal, has an all-in coupon of 4.65%. And if you go backwards, for the first quarter, that was 4.12% effectively. The problem is, as you go back in time, I think the lowest we ever did, the best we ever did on any of these deals, was going back to Q3 of 2014, where we were down -- it's even before that, Q2 of 201 --, we were down to 2.37%. And it's been a gradual -- with a couple of bumps, it's been a gradual upward trend since that time. So we still have a lot of paper on the books, these really low rates, and that's why the overall blended cost this last quarter was only 3%. But it's going to continue -- assuming the market stays the way it is, and even if the deals go up a little bit, the trend is going to be up, but it's going to be up gradually.

That's helpful, thank you.

And just in terms of recovery rates for the quarter, I know you saw a little uptick sequentially, but would you expect the year-over-year decrease we saw in the first quarter to roll through the rest of the year?

I think we are of a mind that we're returning to a normal level of the markets, the wholesale auction markets. Last year, you had this massive decrease throughout 2015. It eroded every quarter, but our understanding and from the marketplace literature, and the people who cover those markets specifically, attributed that to a tsunami of off-lease vehicles that was coming in as a result of the new car lease market having rejuvenated itself approximately three or four years ago. And so now you have that normal flow of off-lease vehicles going to the market. It's not our expectation, belief, something, is that there is not another event like that probably going to take place in 2016. And so we would expect that these are going to be more stable. They are going to fluctuate a little bit always, but we would be surprised if there was another decrease during 2016 along the lines that we saw last year.

All right.

And going back to the ABS markets, are you seeing some tiering there? I'm an equities guy, so I don't totally have all the knowledge of the credit markets that you guys do. But are you starting to see -- you guys have a long track record of issuing in that market. Are you seeing a different impact on yourselves versus someone who is a relatively new entrant into that market?

I wish that was true, but here's what generally happens. It's a little bit frustrating. As much as I said earlier, we may compare rather favorably to some of our friendly competitors. Everybody puts their deals out and they get AA, BBB, BB, so on and so forth. And so, even though we might argue the underlying quality of our paper would be better than, say, our friendly competitor next door, the market guy says they've got AA and you've got AA, why should I differentiate?

And so I think when you have a Ford or GM or somebody, sure. You get lots of differentiation when you get huge. But when you just are the friendly guys down in the subprime world, it's easy for the investor to say, hey, you are not that much better than the next guy and I can get more rates from that guy. So what happens is -- you know that story about a tide rises all boats? Well, it's the same effect going the other way. It's hard for us at this point to differentiate enough to get the different pricing in the market.

So it's a little frustrating to watch some of our friends who aren't doing quite as well as we are to get the same price in the market and sometimes even a little better. So the answer is no, there is no tiering at this point, short of you being a big large bank or company like that. Maybe someday, though.

Got it. That's helpful. Thanks for the color and thanks for answering my questions.

(Operator Instructions)

Mitchell Sacks with Grand Slam Asset Management.

I was wondering about the new lending product that you had started, I think it was either last quarter of the quarter before, just to see if you made any headway with that?

Actually the Bravo program is out there on the market. I think you know initially we had 5 dealers, then 50, then 200. And I think it's making progress. The fact that people aren't running in my office to tell me how great it is, it's probably slowed down somewhat. But in some ways, that's probably the way we would rather do it. To the extent we put out Bravo and also bought $40 million worth of paper, we would be holding our breath a lot, to see how that did. So I think it's probably going exactly the way we want it to, which is, it is been widely accepted in the marketplace; all the dealers are signing up for it. And then we are beginning to get some paper.

I couldn't tell you offhand how many loans we have bought, but it increases every month, and we probably bought -- I'm going to say, I don't know -- several million, $10 million, something like that. It's going to be -- I think it's more of a next year thing to say it's really making a difference. We'd rather buy a few million of it and see how works before we open the floodgates and take a lot of it. But the easy answer for now is, it's been widely accepted in the marketplace, and we'll have to see how we do going forward.

Okay, that's my question. Thanks.

[Manio Srivarat] with Janney Montgomery Scott.

Just had a quick question on credit. So, year on year, are you seeing credit deterioration across the board? Or is it more localized in areas like Texas, for example, where the slowdown in the oil industry is hurting consumers?

No, it's across the board. We have been seeing -- we get that question quite often. And we really haven't been able to define it as a regional thing. It's really national. We've looked at what demographics in terms of job types we would have in Texas, and maybe picked the easiest or worst example. If you're some kind of a rigger down on an oil rig, and you lose your job because they're not running the rigs as much, we wouldn't have financed that guy anyway because he's been moving around too much. Remember that our bread and butter is the guy with a one-year job and a lot of stability and current income.

So some guy hopping rig to rig isn't going to ever be financed by us, anyway. So we haven't been able to pinpoint anything in Texas, per se. But Texas is a relatively large market for us, and the performance, as much as Texas isn't a super-performing state, that performance hasn't changed much at all in the last year.

Great. Thanks.

Just a quick question about your 16-A ABS deal back in January. I remember that you didn't sell the bottom-rated F tranche. Is that still the case? Did you actually end up selling that or not?

No. We didn't sell it. We actually had it in the market in the 16-A deal, and did not sell it, because we couldn't get a decent price for it. We did not include it in the 16-B deal, and that helped the rest of the deal a little bit, up and down the stack. So I think at this point in the market, it probably was a wise decision, because the farther down that stack you go, the more the vultures tend to see what they can get out of you, and we're just not that desperate to sell it. And so it wasn't worth playing in that game right now.

Okay, great. That is all for me. Thanks.

I'm showing no further questions at this time. I would like to turn the conference back over to Mr. Charles Bradley for any closing remarks.

Like I said, first quarter went as expected. The year -- it will be an interesting year to see. We're at a point in time where CPS is going to continue doing what we are doing. It will be a little interesting to see what the rest of the industry does. I'm curious to see how our friendly competitors handle the higher cost of funds. For the little guys, the last couple of years, lots of new guys came in, and they're relatively small and we wouldn't really see them on a daily basis.

The problem is, if you were new and somebody gave you $50 million and said, set up a subprime company, a lot of the knee-jerk reactions are, grow real fast and assume the cost of funds is going to be good. And so to the extent you grew real fast and didn't buy real well, and the cost of funds went up, you are now about where a lot of them seem to be, which is trouble. They're not making enough money; their credit is not doing as well as it should; and so there's lots of little guys out there that are struggling from what we hear and/or see in the marketplace. And some of the big guys, who made some moves to grow for various different reasons, are also somewhat struggling. We are very curious to see how that industry turns out, or how the industry turns out going forward.

It's nice, we've already got two more securitizations on the books, two more to go this year, so half of our paper is already done for the year. So we like where we sit. Like I said, as much as we are not overly happy with our credit performance, to say the least, it turns out it's way better than most; and the fact that we are quite profitable compared to most is also a very strong thing on our side of the books. It will be interesting to see what the rest of the industry does. Like I said, down the road and lots of these times we have seen, opportunities pop up. So we will be looking for that, but meanwhile, we will stick to our knitting and try to improve our credit performance, improve our collections, and be consistent in terms of what we buy.

In terms of the questions you always get about the stock, it was very nice we didn't have any conference call. But if you look at the big picture in industry, people worried about a recession coming, so they don't want to be in a subprime arena. People are worried about our industry somewhat, so you can understand, or hopefully understand, that a lot of people aren't eagerly snapping up the stocks in our industry, and that, of course has an effect on our stock. The good news is, we probably have a much better than average chance, or a much better than most chance, to get through this year going forward, and whatever pitfalls pop up, way better than most. So at the end, good things could happen to our stock so we will see.

Anyway, thank you all for attending the call, and we will see you next quarter.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.