Consumer Portfolio Services Inc (CPSS) 2016 Q3 法說會逐字稿

Good day, everyone, and welcome to the Consumer Portfolio Services 2016 third-quarter earnings 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 statement whether as a result of new information, future events, or otherwise.

With us here now are Mr. Charles Bradley, Chief Executive Officer, and Mr. Jeff Fritz, Chief Financial Officer.

I will now turn the call over to Mr. Bradley.

Thank you and welcome to our third-quarter conference call. I think looking at the results, you know, it may not be the greatest numbers in the world, but they are numbers we can be happy with. And given the circumstances in our industry, it's really not a bad thing.

I think in a strange way over the last year or so, CPS has become somewhat of a spectator in our own industry. And that's a good thing and a bad thing.

The good part is everyone seems -- cares what's going on in the industry. No one seems to particularly care what CPS is doing. Everybody is happy with what CPS is doing.

We are doing well; we are making money. Our numbers look pretty good. In some ways as much as -- we're not wonderfully happy with our total overall performance. We've done pretty well. Ironically, compared to lots of people in the industry, we've done great.

So that puts us in an odd spot in that everyone is waiting to see what everyone else is going to do. How is the industry going to shake out? How are the big players going to change? What are the small people going to do -- small players going to do?

And so we sit in the middle, we are doing well, we're making money. Our results are pretty good. And so we are going to have to wait and see.

I think in terms of some of the highlights, if you can call them that: our originations shrank this quarter. We made a decision to tighten some credit, to maybe raise a little pricing.

The sort of the rumor was everyone in the industry was doing that. It doesn't seem like everyone did, but that sort of will play into some of the numbers we go through in a little while. Collections: probably the highlight or lowlight there is that our DQ has gone up a bit.

You know, the good news is our repos aren't and our losses aren't. So they are actually going the other way. So -- and as I think we've mentioned this in many calls to this point and we are sort of having to live with this higher upfront DQ.

And as long as it doesn't affect the backend results, it could be sort of the new norm. But we'll see. But again, it's a highlight or a lowlight on your point of view.

Some easier highlights: we renewed one of our credit lines with Citibank. The good news about our warehouse lines is each time we renew them, we are getting slightly better terms. So that's an improvement along the way.

And I think those terms and the things we have in those lines give us -- keep us well prepared for any eventual recession or downturn in the market, so that's a really important thing to keep rolling along and improving as we go.

And lastly, we did a third-quarter securitization. We actually just finished our fourth-quarter securitization. We'll talk about that later.

Third-quarter one went well. It sort of followed the trend of sort of increasing pricing. We'll talk about the pricing a little more in a minute. But overall, we got the securitizations done, so that's an important part. So that's good.

I'm going to let Jeff run through the financials, and then we'll go into specifics in some of these areas.

Thanks, Brad. Welcome, everybody. We'll begin with the revenues. Revenues for our third quarter were $108.5 million. That's a 3% increase over the June quarter this year and a 15% increase over the third quarter last year.

For the year to date, the 9 months ended just now: $314.1 million. That's a 17% increase over the first 9 months of 2015.

The revenues, of course, are driven by our portfolio growth. And even with sort of the lower volumes that Brad alluded to in the third quarter, our consolidated portfolio did increase 2% for the consecutive quarter and 19% compared to a year ago.

For the expenses: $96.1 million for the quarter. That's a 4% increase over the June quarter and a 23% increase over the third quarter of 2015. For the 9 months: $277.1 million, and that's a 24% increase over the 9 months ended September 2015.

For the most part, expense growth was pretty consistent with the portfolio growth. The big expense items, of course: interest expense and provisions for loan losses, which we'll talk about in a minute.

I think we've done a really good job controlling our core operating expenses and which is why we'll see that that metric continues to be pretty solid improvement as we've been progressing here.

Moving on to the loss provision: $46.3 million for the quarter. That's a 4% increase over the June quarter this year and a 24% increase compared to $37.4 million in the third quarter of 2015. For the 9 months, provisions for credit losses: $134.9 million, a 27% increase over the 9 months in 2015.

The pre-tax earnings for the quarter: $12.5 million. That's a 2% increase over the $12.3 million in the second quarter this year and is down 20% compared to $15.6 million in the third quarter of last year. Year to date, pre-tax earnings: $37 million and that's a 19% decrease compared to $45.6 million for the 9 months of 2015.

Net income: $7.3 million. That's essentially flat with our second quarter of this year and it's down 17% compared to $8.8 million last year in the third quarter. And for the 9 months: $21.8 million, down 15% compared to the $25.7 million for the first 9 months of 2015.

Earnings per share: $0.26 for the quarter. That's up two pennies -- excuse me, up a penny from $0.25 in the second quarter this year and down compared to $0.28 in the third quarter of last year. For the full year so far, 9 months: $0.75, down 7% compared to last year.

We have continued our program of buying back our stock in the marketplace, and we have those numbers. We'll probably talk about those a little bit later.

Moving on to the balance sheet, not much difference in the balance sheet from the sequential quarters: $11.5 million of cash. Free cash on the balance sheet, and about $116 million in restricted cash. These numbers are pretty close to the June quarter.

The only comparison -- and I think I pointed this out last quarter, too. If you're looking at year-ago balance sheet, you see an extra $100 million or so on restricted cash compared to what we have now. And you will recall that we changed the timing of our securitizations so that we don't have this big pre-funding deposit in restricted cash when we get to the end of the quarter.

The finance receivables on the balance sheet: $2.160 billion. That's a 2% increase over the June quarter and an 18% increase compared to one year ago.

Looking at the debt on the balance sheet, the warehouse line usage: $81.7 million at the end of the quarter. That's down a little bit from the second quarter because the volumes were down, obviously as we talked about.

The other components of the debt securitization trust debt continues to increase as we do our quarterly securitizations. The residual interest financing continues to amortize. That facility, although it matures fairly far down the road, I think it's got a hard maturity date in 2018.

The two deals that are supporting that residual interest financing will in all likelihood be cleaned up early in 2017 and that debt will be retired at that point, if not sooner.

Looking now to some of the performance metrics, the net interest margin was $87.6 million for the quarter. That's up 3% compared to the June quarter and up 11% compared to the third quarter of last year. The year-to-date NIM: $255.7 million. That's a 13% increase compared to the first 9 months of last year.

So I think Brad is going to talk more about this, but the ABS costs over the last year or so have generally trended up. So our ABS interest expense for the quarter was 3.4% compared to 2.8% for the third quarter of 2015. However, in our last two securitizations, we reverse that trend somewhat.

Moving on to the risk-adjusted NIM, for the quarter: $41.4 million. A 1% increase over the second quarter and a 1% decrease compared to the third quarter of last year.

Our core operating expenses -- as I mentioned earlier, we've done a good job of controlling these expenses. $28.9 million, a 2% increase compared to the second quarter and an 11% increase compared to the third quarter of last year. As a percentage, those core operating expenses: 5.1% of the managed portfolio and that's a decrease compared to 5.5% in the third quarter of last year.

Return on managed assets: 2.2% for the quarter. That's a flat with the second quarter of this year and down a little bit compared to 3.3% a year ago. Most of that metric is being impacted by the higher provisions for credit losses and somewhat higher interest expenses for those periods.

The delinquency, as Brad mentioned, it is up a little bit this quarter: 10.46% for all buckets, including repo inventory. That's up from 8.6% in the second quarter and up from 8.8% a year ago.

Annualized losses for the quarter: 6.69%, down just a little from 6.94% in the second quarter and up a little bit compared to 6.27% a year ago.

At the auctions -- saw a little bit more deterioration at the auctions. 36.1% on average recovery from -- of our balances -- of our loan balances at the auctions. And that's down a little bit from 38.9% in the second quarter and down significantly from 40% a year ago.

So overall, some of these trends are higher, but not completely out of line with our expectations. The third quarter is the -- begins sort of the tougher time of year for servicing performance. And so we often see an uptick in delinquencies in the third and fourth quarters.

Just a quick comment on our third-quarter securitization, which we concluded in July earlier in the quarter. That was a $325 million transaction. The same structure as the previous transaction, with the two AAA ratings of the top of the stack.

We got a very good reception in the marketplace for that deal. We had 22 unique investors, 6 new investors, the top of the stack. The Class A and B bonds were oversubscribed by 2.9 and 3.8 times, respectively. And so we achieved a really good execution in that deal with an all-in blended cost of funds of -- I think it was 4.49%.

And so with that, I'll turn it back over to Brad.

Thanks, Jeff. In terms of walking through some of the areas, focusing first on marketing, we made an effort to grow marketing. Currently, we now have 87 marketing reps versus I think a peak of about 114.

Given that we've made a conscious decision to sort of slow down a little bit in the market, we've focused on sort of building the reps we have rather than continue to grow. That doesn't mean we won't grow them, but we are going to grow them slower and trying to find qualified individuals we can get up to speed a little quicker.

It's really -- the thing to take away from that is in some ways, you'd rather have 87 well-seasoned reps who are really doing a great job than 114 where you have to keep sort of hiring new ones and getting rid of old one -- or getting rid of the weaker ones.

So as mentioned, the numbers are slightly different. I think the results are probably just as good if not better. As we sort of move into next year, we'll probably start hiring again. With a strong base like that, it should be rather easy for us to expand when we see the opportunity. As you probably can guess so far from the call that we don't really see the opportunity for growth today.

Looking at originations, we did make a decision, of course to sort of tighten credit. Ironically, the rumor in the industry was everyone was going to slow down and tighten credit and sort of improve their portfolio performance. And as I mentioned at the top of the call, that probably would be a very good idea for a lot of folks in the industry.

So following along, we thought, well, we might as well do it, too, because we can make a little bit more money by raising the price and probably a little bit of results if we tighten the credit. And sort of a funny thing happened on the way to that project, which was it doesn't seem like anybody else did it.

We did, in fact, tighten our credit. We sort of looked at some of the LTVs and some of the programs. We looked at some of the -- how we are buying in independents. We fine-tuned some of the credit criteria.

And I think overall what we were looking to do is sort of cut back about 10% on our origination volumes. And in the end, we cut back or we ended up with about a 20% cutback, which sort of surprised us a little bit.

It could be a couple things. As I mentioned, I think a lot of folks in the industry are still being rather aggressive. They don't appear from what we see to have cut price as much or to improve credit much. And also I think there is a hint of a slowing economy in there.

As I've always said, our customers are very close to the front edge of that project. And so to the extent the economy is in fact sort of sputtering yet again or anything like that, our customers are the first to feel it.

So maybe they are not buying quite as many cars now. That car buying market has been very robust for the last couple years. And then it's possible we'll see a slowdown there.

So the net-net is we dropped about 20% versus 10%, which was our target. Again, since everything else seems to be going quite well, we are not overly worried we are slowing down a little bit in this time frame.

We did have a chance to increase our fees a bit, so that always helps. Our target APR is about 19.5 and we are sitting right on that target. We had dropped almost down to 19% flat. So that's a good thing.

Our fees, our target there is about 25 basis points to maybe 50 basis points. Again, we dropped down to almost zero fees. So again, we've gathered some of our -- a little bit of margin there and then we've improved credit, which you won't see for a while, but it will be there eventually. As I said, that's probably more in contrast to what we are seeing in an industry where we haven't seen much change.

Moving onto questions, you have the DQ moving up a bit. It is almost as important that the repos aren't going up and the losses aren't going up and in fact coming down a little bit.

The portfolio is aging as we go. That accounts for a little bit of it. You know, Jeff pointed out that it's a separate quarter. We're getting a little bit of a lower option return. So there's a bunch of little things affecting it.

At some level, I think that higher funding delinquency is going to be the new normal, and we've mentioned that many times. So I think we're just going to have to live with it. And as long as it doesn't flow to the back, it really doesn't matter.

I think our texting initiatives and some of the other things we are doing might eventually affect that. I think we've done a lot of different things in collections to sort of attack this problem at different angles and hopefully we'll see some results.

But the easy answer is: since this is where it sits, we are probably fine with that. They extended this at the bottom and we improve from there -- that's great.

So collections will always be an ongoing project and somewhat of a struggle to get the best possible results. But again, if you take our results against others, they look pretty darn good.

Moving on to the industry, as I mentioned, it doesn't seem like there's a lot of easing. The competition is still out there. It doesn't look like a lot of people have tightened.

So we have a tough environment with -- you have a lot of small companies that sort of entered the market to take advantage of it a few years back. They are all struggling. And even more importantly, some of the very large companies in our industry are struggling.

And so between that, we sort of sit in the middle. And as I said again in the beginning, we're not being ignored. But somewhat, everyone wants to know what's going to happen with the small guys that just got in the industry. Are they going to survive? Are they going to go out? Is someone going to buy them?

But they also want to know what's going to happen to the big guys. Some of these guys who were supposed to go public and haven't. You know, some guys have gone public, and everybody wants to know what's going to happen there.

So they sort of bypass us because we're already public, everything's going fine, and we actually make more money than lots of other folks. So again, we are sort of like lots of people waiting to see what happens in our industry.

Maybe -- as I said, it's probably not a bad thing. If we are sitting on the sidelines doing pretty darn well and other people are jumping around doing other things, it's not a bad spot to be. It's certainly different than our normal operating strategies of growing whenever we can and growing aggressively and taking advantage of all the markets.

Today, we are not. This is probably the first time in the 25-year-history of the Company where we are actually in a real good strong spot to sort of wait and see how the rest of it shakes out. So, though it's interesting and new, it's sort of not a bad place to be.

Good news is the securitization market continues to roll on. We did our third-quarter securitization that Jeff mentioned. It's a little bit interesting, and I think most people know, the pricing of our cost of funds in securitizations has been a very significant upward trend, giving up almost 200 basis points over the last 3 years.

And I think a lot was the market said: Gee, we want to be paid for the potential risk in the industry. Which is fair enough, but ironically in the last two quarters, we've actually seen that trend certainly peak and maybe start to come down.

And so if that trend continues, that would be a very significant development in terms of our cost of funds if we can get back some of those 200 basis points over time. So that's certainly a very good highlight in terms of where we sit today.

We continue with our stock repurchase. We bought 421,000 shares this quarter. That's down a little from the 850,000 we bought the previous quarter, but we've now bought over 3 million shares.

So it's not as many as some people think we should buy. But we are definitely taking a piece out of at each time, and we will continue to buy it as often as we can. There's lots of rules, but we will buy it as opportunistically as possible.

And I think sort of the good news is our book value as of today is now $7.54 a share. That's versus $6 a year ago, give or take. I mean, as much as we would love to see the stock price go up, it's not such a bad second prize that our book value continues to go up.

When the economy clears up, plus we get into the overall, which is -- I look at the overall economy now in sort of three pieces. Everybody still wonders about the regulatory environment in our industry.

I think after the election, at least we'll find some stabilization of the regulatory environment. It certainly seems to have eased quite a bit over the last six to nine months. Let's just see what happens next year, but I think when people see that the regulatory environment is stable and isn't going to be subject to a lot of change, that will give a lot of people confidence in our industry or about our industry.

Secondarily, there's always the threat of recession. It would be very nice to have a really quick recession just to get that off the table so people would stop worrying about having another severe recession.

I think the recession will show up. I don't know if it's tomorrow, but again, we are very well prepared for it. So that's a good thing. We want it to get done and over with so people can stop worrying about buying at the end of the cycle versus the beginning.

I think to the extent we could get through a few of these pieces, and CPS is a sitting there doing rather well at the beginning of a cycle, you could see lots of improvement in the stock.

And like I said, the third part is what's going to happen in the industry. We need some sort of result in what's going to happen with the big guys or what's going to happen to the small guys.

Personally in our experience in 25 years, I think our industry is well suited to pick up any of the small guys. I don't think there will be a big bunch of crashes. I think the industry itself will absorb anybody who has any problem whatsoever. But, you know, we just need all that to happen.

And then I think you get some closure on those three areas, CPS will be well positioned to take advantage of the market, both in terms of our size, in terms of our growth potential, and certainly we're making lots of money in our stock price. So it's a painful thing for everyone here to have to wait, but nonetheless, we are in a good spot.

With that, I will open it up for questions.

(Operator Instructions) David Scharf, JMP Securities.

Brad, some interesting comments about how you feel like you sometimes outside looking in, observing your own industry and what some of the competitors are doing.

I'm wondering -- on that theme of sort of taking a step back, as you think about the volumes this quarter and going forward, is it entirely due to just some of the tightened underwriting and what is still very competitive lending terms out there? Or do you have any sense for just how much the consumer might be slowing down?

Obviously, we see new vehicles SAARs showing signs of topping off. Just trying to get a sense for whether we should view your outlook on volumes over the next few quarters as being entirely a competitive factor. Or do you think the consumer is losing a little gas here?

Yes, I think it's actually both. As I mentioned, we thought we were going to tighten and increase pricing little bit and maybe give up 10% of our markets -- or 10% of our growth -- or not growth, of our production. And we ended up giving up about 20%.

So the question is: Where is the other 10% going? And so it's very hard to -- and certainly, all we are going to do is guess. But sort of the safe bet is to say it's 50% because of competitiveness in the marketplace and 50% of the consumer.

Personally, I may tend to think it's more the consumer. It's funny because it's just sort of getting that feeling that things could slow down quite a bit and it's more the consumer.

Having said that, I got almost nothing in terms of empirical evidence to support it. But nonetheless, it just seems a little bit like the consumers are in fact getting a little tighter, slowing down a little bit. It will be very interesting to see what the retail sales are for the fourth quarter. If they have a lousy Christmas, it's going to get real interesting next year.

But having said all that, I would imagine things -- if I were going to guess, I think things trend along probably about where they are for us the rest of the year. Maybe they go down a little bit like they normally do, but it wouldn't surprise me at all if all of a sudden things pick up again. And you know they will in the beginning of the year because you have a tax refund basis.

So whatever we are doing as we roll into January will go up. Whether it's going to go up a ton because the market is great or because of competitiveness, it's hard to say. I think we'll just have to see. But having said that, we sort of like where we sit in terms of the production.

Got it. Got it. Subsequent to your changes to some of the fees, it looks like you raised the fee a little bit to dealers at 25 bps, 50 bps. Have you seen any other major players follow suit? I know you commented that they didn't at the time, but just in recent weeks or last month, any sense that the rest of the industry is starting to move in your direction?

It's, again, hard to tell. The way we can tell is what the margin people say in the market. To the extent they say: Oh, so-and-so is not buying it all, they've really pulled back, then you know. To the extent they say so-and-so hasn't changed a bit, you might think nothing has changed.

We are getting more of the latter than the former. We are not hearing that people are pulling back. We're not hearing that people have tightened or increased pricing.

Now, you know, I mean, at some level, they may have done it some and probably they have. It's just not a significant amount for us to actually tell in the marketplace. You know, we did it, too.

Now to the extent we all did it exactly the same, then fine, it's going to be hard to tell. But certainly the way we hear things, we haven't heard too much chatter that the market is getting easier right now.

Now, part of that, though, if you think about it, to the extent the business at the dealership has dropped down and the consumers aren't quite showing up as often, then you are actually -- the competitive nature is going to look the same because you are fighting for fewer and fewer customers.

So that could be very well the answer, because everybody did in fact tighten a little and raise price a little, but the market is a little bit bare, so people are pushing hard. And you are not going to be able to see the pricing differentials.

Got it. Got it. Just a couple quick ones that follows. Switching to recoveries, as we think about loss rate and obviously the impact that your recovery rate has on it, I seem to recall that after the big drop in used car pricing a year ago, it seemed like the recovery rate was expected to sort of settle in and stabilize around that 40% level. It looks like there was another drop this quarter in terms of what you are getting at auction.

At this point, do you feel like 36%, based on all the supply trends and forward indicators, is a trough? Or should we be expecting that to drop lower?

I'm going to vote trough. There's not too much reason for it to go lower. Now granted, to the extent that everything slows down some more, it could.

But we are getting close to real -- what's near a historical low. We are at 36% for the quarter and that's down almost 3 points from the previous quarter and a point more from the quarter before that. You know, I mean, something in the low 30s% is sort of the basement for the whole -- forever.

So if you are betting person, it's easy to take this as a trough rather than stay lower. If it's too much lower, it's going to get to the historical bottom of the industry. So -- or at least for us. So the easy answer is yes, I will say trough, but don't hold me to it.

Got it, got it. Then lastly, looking out to next year, I can't recall maybe in the past cycle how low your efficiency ratio or your OpEx per balance is -- how far below 5% it got.

But should we be thinking about that trending below 5% by next year? It sounds like you are certainly holding the line in terms of headcount and marketing reps.

We would hope so. At some point, we're going to start sort of shoring up a little overcapacity in that we still want to do $120 million, $130 million a month.

But I think the business itself is efficient enough and certainly the way we run it is quite efficient. So I think that trend should at least hold the same. If we start growing, it will do very well.

Got it, got it. Okay, I'll get back in queue. Thank you.

Kyle Joseph, Jefferies.

Thanks for taking my questions. Just to get back into the originations that Dave hit on earlier, just wondering if you can give us any color on the terms on the new deals and what you are seeing.

I know you talked about fees a little bit, but are there any changes to LTVs or the terms of the deal? Sorry, meaning like the duration of the loans?

Let's see. We mentioned that the APR is about the same as last quarter. The fees are up a little bit. LTVs up just a little bit.

We had a slight trend towards our upper tier programs, Kyle, during the quarter. And so that also coincided with a slight increase in the extended term, the 72-month contracts.

So I mean, that mix, that program mix will ebb and flow throughout the course of the year. But that was one notice this quarter. Slight trend to the upper tier.

All right. That's helpful, thanks. And then just given the level of new originations -- you guys have been doing this a lot longer than I have. Just wanted to know kind of when you anticipate that sort of impacting credit performance going forward.

We generally say a year to 18 months is the window. So to the extent, let's just broadly say over the last six months, we've tightened credit. We would want to see that come out -- a year from now or so, you might start to see it.

Okay. And then I know your securitization deals, you've seen good execution there recently. So from a cost of funds perspective, should we anticipate that sort of topping out as we go forward and being relatively flat? Or do you -- I'm not asking you to predict where securitization pricing is going, but just in the near term, at least, should we see some stabilization there?

It's been sort of a funny ride, because it was so good before. And then all of a sudden sort of out of nowhere, it went up quite a bit and now it seems to have leveled.

So I think the safe bet is to say it's leveled. If you want to see it maybe come down. But the problem is at the first hint of any kind of problem, it's going to go back up.

So I think the safe bet is to keep it level. And then if it goes down, that's good. I don't know that it would go up too much higher.

Got it. And then you talked about your expectations for volumes remaining around this level or below lower in the next quarter. Does that change your appetite for share repurchases at all?

No. We are going to buy the shares as often -- as much as we can.

All right, great. Thanks a lot for answering my questions.

John Rowan, Janney.

One question. Charles, to go back to your comment earlier about the industry having seen kind of a all-time low in recoveries in the low 30% range, maybe just give us a little bit of qualitative information around that.

Is that a good foundation to use just when you juxtapose that versus the current environment. Were loan-to-value rates the same? Were durations the same as they are now? Obviously, all those affect how much you lose at auction.

So I just wanted to understand kind of historically if we could actually even go lower than that if we are in a more aggressive lending environment. Not necessarily specific to CPSS. But the industry as a whole, given where competition has pushed loan terms.

That's an excellent question and one we are happy about. Because I think probably if you're going to pick one factor to watch in terms of auction values, it's the LTV, loan to value.

If that LTV is going up amongst our friendly competitors, yes. If that's what they are doing to sort of move the needle or whatever it takes -- and I'm not saying they are and I don't know. I can just tell you what we're doing, which I will in a sec -- you have a chance that you've got more car -- you're upside down in the car more and more.

And to the extent you have extended term and you have higher LTVs, yes, you could build a bigger problem in terms of the auction values. At CPS -- I'm just looking for the last three years, our LTV hasn't gone outside of 100 basis points.

So we are pretty much LTV conscious all the time. And so our LTV is probably well within a 2-point range for the last 5 or 10 years. So that's pretty good for us, and we are not overly worried about our changes in the auction.

But you are right: to the extent people are looking for ways to push the envelope in terms of getting loans, and probably, even if you ask the rating agencies, they would say that extended term, higher miles, and LTV are there three factors that people have been pushing the -- well, the two factors mostly we get asked about all the time are extended term and higher miles.

And so to the extent those are the two most operating factors in terms of what you are buying or financing, that LTV, generally speaking, is going to sneak up. And so if that's in fact what everybody is doing, yes, you could have a bigger problem at the auction. Again, I sort of said that in a good way because CPS doesn't do that.

But, you know, so that's an interesting question. I don't know exactly what the industry is doing, but if they are, yes, you would see it.

Okay, thanks.

(Operator Instructions) Michael Tarkan, Compass Point.

Thanks for taking my question. Just a little more granular on the origination volume. So you talked about $120 million, $130 million a month as a target. Obviously, we are tracking below that.

Any sense as to when we might get back there? Or is this just more of a wait-and-see approach and the third-quarter level is just a better run rate for us to think about going forward?

I think the third-quarter level is a better run rate for the rest of the year, certainly. And you'd even take -- historically, October is supposed to be good and then November, December are going to drop. And so we are sitting in the middle of October -- seems okay.

So, I mean, conservatively speaking, I wouldn't be surprised if we hung on to our levels the rest of the year just because we gave up a little bit more than we thought we did before. And again, it's a little bit of a guess, but probably fair.

Next year -- I mean, it's so hard to guess what the first six months of next year will do or any of the first six months of any new year. Like I said, if the environment seems all positive, the new presidents make all sorts of good noises, people go running out and buy a boatload of cars, and then we could go up a lot.

We're going to go up some no matter what, because you get to tax return season, which seems to have reasserted itself in the last year or so. Whether -- so that's the easy way to look at it: sort of slow through the rest of the year or flat to the rest of the year. You're going to go up some in the first quarter/second quarter. You know, if you have glad tidings or whatever, then maybe it goes further.

But -- and we'll -- the good news is we are sitting around waiting to take advantage of it. So if it's there, we will go. But we're not going to push it if it's not there.

Understood, thanks. And then just as a follow-up, do you guys disclose what your average loan terms are on the portfolio or what the average age of the cars are?

I don't think we put anything in the 10-Q filings as regarding like the age of the units. But there's a lot of that disclosure in the asset-backed transactions, obviously.

But we could talk off-line and I could give you some of that information. Or we could always expand some of that stuff in the quarterly filings, too.

That would be very helpful. Thank you.

Thank you. As there are no further questions in queue, I'd like to turn the call back over to Mr. Charles Bradley for any additional or closing remarks. Sir?

Thank you. I think given the discussion, everybody has sort of a flavor for how the third quarter went. Like I said, it's a little different than our normal, hopefully aggressive, hard pushing, do-it-has-we-can kind of approach.

What's a little bit ironic -- I went back to -- in 2007 or after we got out of 2007. So 2000 -- when we were sitting around in 2008, 2009 trying to make the whole thing work again, one of the things I said was if we can get to $50 million a month, we could sit there forever and make a lot of money.

And of course, then we did get there, and we went to $100 million, and then we kept going. And so now we are back in the $70 million, $80 million kind of range -- or $70s million and $80s million.

And you know, as much as I sort of didn't listen to myself in the 50s, I'm listening to myself a little bit now. This is a good place to be, where we are originating pretty good volumes, portfolio is growing. We're doing an awful a lot of things right. We can't control our industry and the environment.

And so I think the best approach strategically is to wait and see. It sounds strange for us, too, but it's a very nice spot to sit in, given a lot of other things going on. Thanks, everybody, for attending. We'll talk to you in the next quarter.

This does conclude today's teleconference. A replay will be available beginning two hours from now until October 25, 2016, 11:59 PM by dialing 855-859-2056 or 404-537-3406 with conference identification number 98489886.

A broadcast of the conference call will also be available live and for 90 days after the call via the Company's website at www.consumerportfolio.com. Please disconnect your lines at this time and have a wonderful day.