Consumer Portfolio Services Inc (CPSS) 2020 Q1 法說會逐字稿

Good day, everyone, and welcome to the Consumer Portfolio Services 2020 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. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables because dependent on estimates of future events also are forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected.

I refer to you to the company's annual report filed March 16 and its current report filed April 16 for further clarification. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, further 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, everyone, to our first quarter conference call. Certainly, these are challenging times for the company. We have a bunch to talk about. We've made a bunch of changes. It's sort of all landing in the first quarter, but we'll get through it and sort of try and address all those issues and then do the questions.

So first off, the quarter was great. We actually had a very good quarter. Certainly, the end of the quarter got interesting, but we'll go through the specifics of the quarter, but we were very pleased with how everything worked. Originations is functioning great. Collections is great. So generally -- and it was tax season. So you would expect the first quarter to be good as much as the COVID problem started sort of halfway through March, it really didn't have an effect in the first quarter, which is why the numbers were good and we had good results in terms of the operations.

The other thing -- the next thing we want to talk about or we're going to talk about are the accounting changes. We made the change to go to the CECL change as of January 1. So that's got a few parts to it. And also now we're operating with both a legacy portfolio and a fair value portfolio. So again, the accounting is getting a little more interesting, and we'll kind of walk you through all that as well. And lastly, of course, is we're going to talk about the coronavirus, the COVID, again, it's a little early to tell the total effect it's going to have on the portfolio. We're going to walk through some of the effects it will have in terms of originations, collections and performance, at least what our best estimates in those areas are. And again, there's some positives that actually come out of some of these things, which we'll address as well.

So let's get to it. Again, the first quarter, we were very happy with results. The -- just really straight across the board. Origination is very good. Our sales and marketing department is doing a great job in terms of penetration. We're buying what we want to buy. We're not buying too deeply. Collections had a very good quarter. We had very good DQ numbers, very good loss numbers. It's almost pretty much a shame that we were having this great start to the year and then we ran into this COVID thing. So again, that's -- there's nothing we can do about it. But if you try and look at just the first quarter, it was an excellent quarter for the company.

In terms of the accounting changes we had to adopt, we chose to adopt CECL. Again, when we switched to fair value at the beginning of 2018, that was in anticipation of adopting CECL in January of this year. So there was really no reason to make any changes to that. I think in the end, it will be better for the company doing it this way. I'm going to let Jeff walk through some of those changes in a minute. In terms of COVID, again, the problem with COVID, it's just too early to tell. I think, overall, the company has a very strong program on how to handle it. I think we've put a bunch of different things in place to address the different parts of it. And overall, I think we'll get through it. And in the end, we could do just fine through the whole thing, but we'll get to that in a minute as well.

So I'll turn it over to Jeff to walk through the accounting -- the financials and accounting changes.

Thank you, Brad. Welcome, everybody. We'll begin with the revenues. So the revenues for the first quarter were $70.8 million, that's a 17% decrease compared to the fourth quarter of $85.7 million and a 20% decrease compared to the first quarter of 2019. Of course, the big component and the unusual component in the revenues for this quarter is the markdown to the fair value portfolio of $10.4 million. So the fair value portfolio, as you probably know by now, the receivables we've originated since January of 2018, the manner in which we account for those doesn't include any credit losses, rather they are baked into the level yield that we recognized in the revenues. And so every quarter, whether there's a pandemic or not, every quarter, we evaluate the carrying value of the fair value portfolio to determine if it is indeed stated at fair value. And as a result of all this that happened at the end of the quarter, we undertook a process to go through the components of the fair value portfolio, estimate what the pandemic might do in terms of cash flows and defaults and severities, and through some help with our risk department and identifying all the credit demographics and characteristics of the fair value portfolio, the number that we marked it down was the $10.4 million that you see there in the revenue line. Absent that, the revenues are primarily, of course, comprised of interest income. The legacy portfolio, which now represents 33% of the total, yielded about 17.8% for the first quarter. And the fair value portfolio, which is the remaining 67% of the total portfolio, yielded about 10.5% for the quarter.

Moving on to expenses. $67.7 million for the quarter, that's down 20% from the fourth quarter of last year and down 21% from the first quarter of 2019. And the big change in the expenses is really the provision for credit losses, which I'm going to talk about in a minute here. Most of the other core operating expenses were flat sequentially, and up about -- actually up about 10% or so year-over-year. Interest expense also down sequentially, and we'll talk a little bit about that as we move down the list here.

So let's look at the provision for credit losses. For the quarter, $3.6 million, that's down 83% from the December quarter and down 85% from the first quarter of 2019. And as we've been talking about for a long time, the legacy portfolio, the -- we've adopted -- we've elected to early adopt the CECL accounting method for this portfolio, which resulted in a single lifetime allowance -- establishing a single lifetime allowance for credit losses effective January 1 of this year. And you don't see the impact of that in the P&L because it was strictly a balance sheet entry, where we established $127 million in lifetime remaining losses on the legacy portfolio and offset that with the tax-affected entry to retained earnings. The $3.6 million that we see in this quarter is our estimate of the impact of the pandemic on the legacy portfolio. Absent the pandemic, there would have been, I think, 0 provisions for credit losses this quarter because we have a lifetime CECL allowance in place. Again, we worked with our risk department and just made an estimate, a judgment of what the impact on that legacy portfolio will be. And it's still a little early to really fully understand what the impact is. It's something we'll continue to monitor, obviously.

Pretax earnings for the quarter, $3.1 million. That's up significantly from what was essentially a flat fourth quarter of last year and up about 15% from the first quarter of 2019. Net income for the quarter $10.8 million, again up substantially from the flat quarter of fourth quarter of 2019 and again up substantially. And of course, here is another unique aspect of this quarter: we have an $8.8 million tax benefit resulting from the Cares Act that was passed about 2 weeks ago to help companies and individuals get through the pandemic. And when the Cares Act was passed, there's a couple of key aspects of that. First, it allows companies, like us, who happen to have and we did, an NOL carryforward in the form of deferred tax assets on our balance sheet. And now these would have been tax benefits that we would have used prospectively offsetting future tax liability. But Uncle Sam said that we could file a claim, what's known as a carryback claim, to recover those tax benefits in a form of a refund today rather than waiting to use them in the future. And then they further said that companies -- all the companies who benefit from this can revalue those tax assets at the old 35% corporate tax rate rather than the 21% corporate tax rate that we had carry -- that we were carrying them on the books for. So if you're still with me on that, the $8.8 million tax benefit was just writing up the tax assets to allow for the differential in the old tax rate and the current tax rate. Without the tax benefit, the net income would have been $2 million for the quarter.

Diluted earnings per share of $0.45 for the quarter. That's up, again, huge from the first quarter of last year, where it was $0.07 per share. Again, significantly influenced by the onetime or by the tax benefit. Without the tax benefit, the diluted earnings per share would have been $0.08 per share, which is still up from last year's $0.07 per share. Going forward, we expect the tax rate not to be further influenced by this tax benefit. And we're expecting a prospective tax rate on normal earnings of about 36%.

Moving on to the balance sheet. Not too much changing here, except the thing that jumps out is the significant allowance for losses on the finance receivables portfolio. As I mentioned, we adopted CECL, established an allowance on January 2, January 1 or 2, you look at it, it's $127 million. That is intended to be a lifetime remaining allowance for that legacy portfolio. The manner in which we -- the methodology we use for that is -- was a very data-driven approach, looking at all the sort of quarterly pools that made up the legacy portfolio and extrapolating out what their lifetime losses are likely to be based on past history.

On the debt side of the balance sheet, it might be important to mention at this time here that the warehouse credit facilities at quarter end were about 47% utilized. So we have $300 million of capacity in our warehouse facilities and had only consumed about 47% of that or $142 million at month end. And Brad will talk a little bit about the ABS market more after we're done here.

Moving on to some of the other metrics. Net interest margin for the quarter was $43.8 million. That's down 25% from the fourth quarter and 28% from the -- from last year's first quarter. This is still significantly influenced by the transition of the portfolio from the old method of accounting to the fair value of accounting. Just one note that we usually make at this point was the blended cost of all ABS for the quarter was about 4.4%, which is about -- which is flat compared to the first quarter of 2019. The risk-adjusted net interest margin, $40.2 million for the quarter. That's up a little bit from the fourth quarter, up by 10% and it's up 9% from the previous quarter. This is largely being contributed as benefits from a reduction -- significant reduction in the provisions for credit losses.

Moving on to core operating expenses. As I said earlier, operating expenses -- core operating expenses are largely flat sequentially and just up slightly, about 8% year-over-year. That percentage that we monitor closely of operating expenses as a percentage of the managed portfolio is at 6.1% for the quarter compared to 5.9% in the fourth quarter of last year and 5.7% for the first quarter of 2019. And that leads us to the return on managed assets, the pretax income as a percent of the managed portfolio. It's 0.5% for the first quarter and that compares favorably to 0.1% for the fourth quarter of last year and 0.4% for the first quarter of 2019. Remembering, too, that these results reflect the aggregate of 10.4 -- excuse me, $14 million in charges to the earnings for the quarter that we would attribute to the pandemic.

A couple of credit performance metrics. The delinquency for the quarter ended at 12.4%. That's an improvement over the fourth quarter of 15.5%, which is a seasonal improvement we typically see going from Q4 to Q1 every year. And the delinquency is up just a little bit compared to 12.1% in the March quarter of last year. Annualized losses for the quarter were up basically 7%, which is down from the fourth quarter of 7.9% and the first quarter of last year where they were closer to 8%. And as Brad mentioned, we really had a good credit performance quarter not really materially impacted by the pandemic, and we did, as we do every year at this time, receive some benefits from the tax refund season, both on the credit performance side and on the origination side.

Just one comment on the ABS market. We did do our first quarter ABS transaction 2020-A in January, and this is long before the markets were affected by the pandemic. The blended cost of funds of that deal was 3.8%, which is up slightly from 2.95% for the 2019-D deal we did on October. But it's interesting to note that the benchmarks had risen significantly, and we got significantly tighter spreads on all the investment-grade rated tranches compared to the 2019-D deal. So the asset-backed market was really on fire and very receptive to our bond offerings for that first quarter transaction, and obviously, there's -- it has to rebound from where it is right now.

With that, I think I'll turn it back over to Brad.

Thanks, Jeff. All right. So let's talk about the coronavirus and COVID and how it affects what we're doing. One of the first things we did, and I think most people did is, we tightened credit. We wanted higher income, higher payment income. We pretty much stopped making any exceptions to any of our programs, and we raised the score across the board. Obviously, we think there's going to be an effect and people who don't aren't silly, but -- so tightening the credit is an obvious thing to do.

Originations volume. We did around $100 million in March originations. We -- it has dropped off significantly since then. We would expect probably that number to settle in at about half for the next month or 2 or 3, depending on how long the social isolation lasts or social distancing. That doesn't really -- it affects us sort of in the long term because we are poised for a very good growth here, but again, that's about what we would expect. As Jeff mentioned, in terms of warehouse lines, we have plenty of room on those lines to handle that volume.

In terms of the workforce, we do qualify as an essential industry. However, we have sent very early on, I think, sort of, in the beginning -- middle of March, we sent everyone who could work from home to work from home. So that happened then. We also have the ability to send all the collections people home and work from home as well. However, for the moment, most of the collection people are working from the offices. We did have one office where someone did catch the virus, and that office now works from home. And it works -- it's -- I'm sure we'll lose some small amount of effectiveness from working from home, but overall, it seems fine. And the fact of the matter is, if the volumes are going to be lower, there's going to be enough people to sort of get the job done. So having the technology, so everyone can do their jobs from home is very important to making this all work. And like I said before, the fact that all of our people are still working, no one is sitting at home doing nothing. In many ways, our company can function just as well in the state it's in as if this had never happened. So that part is good.

In terms of expected losses, as Jeff pointed out, the fair value loss is $10.4 million. The legacy loss is $3.6 million. We looked at a lot of different things with the risk department. And to be fair, no one knows exactly how long and the extent of what the effect on the portfolio is going to be. So those are estimates and what we think is going to happen over the next 6 to 10 months. Again, as time goes forward, we'll have a better idea. But since we're in the midst of it, there's no reason not to be cautious. We do know -- what's a little bit interesting is, on the one hand, depending on how long this takes and when people will go back to work, all -- people have been getting their $1,200 check, and the good news is every one of our customer qualifies for that check. So everyone's been getting that check. Obviously, our collection folks are focused on getting some portion of that check sent to us for our payments.

What you might expect as we go forward is a greater use of extensions, to the extent our customers have a problem and they've been good paying customers, we would probably use an extension. So again, depending on how long this lasts between the check from the government and the cautious use of extensions, we could go through a few months without having a dramatic effect on the portfolio performance. And the longer it takes till where that number could change.

Also, we've been going through our job titles and where our folks work, and we probably don't have that much exposure in terms of -- generally speaking, if you pick sort of the restaurant industry, most waiters and waitresses and such don't qualify for our programs. So those kind of industries that are going to be dramatically hurt by this, probably don't carry over too much over into our portfolio. Certainly, there'll be some, but not really to the extent we're probably overly worried about. You take something like the airline industry, which will be dramatically affected. We probably don't have any loans to people working in the airline industries because they're all in unions. So there's different ways to look at it, but we've spent some time on it, and we think generally speaking, most of our job titles should be okay. Construction workers, and if you compare it to 2008, when loads of folks we would finance were in the construction industry or in construction industry-related businesses, that was a dramatic hit when that business just stopped. That shouldn't be the case this time, and so we're optimistic. And certainly, again, those checks certainly helps, too.

And moving on in terms of the repos, there aren't a lot of repos going on. The easy answer is, we're going to try and run our business as effectively as we can and as normally as we can. So collections continue, originations continue. But things like the auctions, the legal part, the back end of the business, in terms of collections, those things have all slowed dramatically. We're not doing a lot of repos. In many states, you can't do repos. Obviously, we're following those guidelines. But even things like bankruptcies and the trustees, none of them are working either. So we would expect the back end of the business to slow somewhat, if not dramatically. Again, that will stretch the time line out a little bit, but we hope it won't affect us overall. What we really -- one of the things we probably assure will be affected with this is when the auction is open again, there will be lots of used cars and repossessed cars stacked up at those auctions. So we would expect a hit in terms of liquidation value and the recoveries we get once we go to auction. And again, a lot of those numbers are built into the reserves we've taken this quarter.

And looking at Wall Street, as Jeff pointed out, our warehouse lines are only half full. All of our lines, our 2-year lines, none of them expired. One of them expires at the end of this year. So we're probably in a very strong position. We learned a lot from 2008. Having your lines expire right about now would be a very bad thing, ours don't. Having the lines full would be a very bad thing, ours are not. An interesting note is, we used to do our securitization until the end of a quarter. So we would have been trying to do securitization at the end of March and we would not have been able to get one done. By doing a securitization in January at the beginning of the quarter, we were able to get our securitization off at a very good price and put us in a position to weather this problem much more easily.

As Jeff pointed out, the fact that the government decided to send out -- let us use our NOLs backwards, we have -- we're going to have an influx of capital of $23 million. Again, very timely and gives us even more runway. We weren't really in a liquidity issue, but with the check coming from the government, that gives us even more room. So we think we can run with the lines and the reduced volumes we're running at for as long as we need to. At this point, probably -- I mean, we would like to do a securitization, but we -- because we would normally do one in the beginning of April, but we're in a position where we could wait probably, depending on what it looks like, we could wait as long as July or longer if we needed to, but probably our target now would be to just do the normal July securitization.

Currently in the market, GMAC and Santander are both in the market this week doing deals. Both those deals are investment-grade and above. Santander is sub prime. So we would normally sell down a BB or B. We'd probably like to sell down a BB in the normal situation. So the fact that BBB and above is all being sold, already, it probably bodes well that the market will get there in the next month or so. So we think the timing works for us there. Again, I think liquidity is superimportant right now. So we're going to manage what we buy. I don't think we're going to have a problem. There's not a lot of people buying cars currently with all of people staying home. So I think the whole thing sort of dovetails out. Again, some of the benefits are the $1,200 checks to all of our customers is a hugely great thing. The $23 million of liquidity is a great thing. So we've had a lot of good things even though, overall, this is not the perfect thing.

In terms of looking at the industry, this is where it gets more interesting. I think this isn't the recession we were talking about, and this isn't how we ever thought it would happen, but you probably very likely have had that arrived. We've said for multiple years that a recession will have an interesting effect in our industry. This will probably fill that bill. We've already heard lots of other companies are slowing down. Lots of companies have had layoffs. A few companies have ceased to originate already. It will be very interesting to see the overall effect on the competitors in the industry. Now the good news is, we're here for the long haul. We don't have any of those issues. So we'll see. But the longer it lasts, I think the more painful it would be for a lot of our friendly competitors. And who knows, but I think this is something the industry needed. I think in the end, it will probably be beneficial to all the people who hang around. But again, it will be sort of -- we'll have to see how that affects everything.

Hopefully, we've covered most of the topics, and I will open it now for questions.

(Operator Instructions) Our first question is coming from David Scharf with JMP Securities.

Brad, I'm wondering, as we look forward and you obviously highlighted there are more unknowns than knowns at this point, for the next couple of months, sounds like your expectations are the dislocations are going to lead to kind of a halving of origination volume. But since we really don't know, a, when social distancing, sheltering in home is going to end, kind of the pace at which it ultimately phases out, since we're not just going to flip a switch in a couple of months by any means, any sense for sort of how many months of 50% or greater reduction in demand, origination volume demand? Like, at what point do you sort of readdress maybe the fixed cost base of the company and sort of the size of the business because it may be more than just a couple of months of reduced capacity, obviously?

Certainly, we're looking at all of that. We've -- there's probably, I don't know, maybe 3 things we care about. Number one is liquidity. If you don't have any liquidity, you get all sorts of problems. Our liquidity is fine. Even before the tax refund, our liquidity was fine for the next 3 to 5 months. With the tax refund, it's much longer. So we're not really worried about liquidity, but the way you manage your liquidity is by how fast you originate. We think origination volumes are going to be depressed for at least 3 months, maybe longer. What we will do -- and initially, our whole goal is to manage our originations based on liquidity. What we would like to do is originate enough loans each month to keep our loan portfolio at a static basis. To the extent that is impossible because this thing drags out, yes, we would look at reducing fixed overhead. We would reduce costs everywhere we can. If nothing else, we've done this multiple times, 2 big times to be sure. So it's not -- the good news is, and hopefully, we learned from 2008. But if we had to, we could go back to doing exactly what we did in 2008 and make all sorts of changes and all sorts of cuts to make sure everything survives. We think we're probably in a far better position this time around. I agree with you. We don't know how long this will last. Dealerships are open. They are selling cars online. We're actually surprised, the volumes haven't dropped further and they might. So we'll see. But I think the real trick here is to be able to sort of react and move in a dynamic situation. If this lasts too long or longer, we'll have to play along with that. The most important thing for us is, we have liquidity to manage through it, almost no matter how long it takes. If we have to cut costs, we will do it. We think, in the end, it's probably more of a 3- to a 5-month problem than a 6- to a 12-month problem, but we'll see. The easy answer is, it's early in the whole process. I think when people go back to work, that will be a big step. When they start coming up with different ways to do the social distancing, that will be a big step. We just don't know when those 2 dates are. I guess the most important date for us is when the Wall Street markets will start being normalized. Having a couple of deals in the market this week is already a nice step. Like I said, we're not even really focused on the next month or 2. But given the next couple of months, you might think the Wall Street markets would improve and get something more to a functioning level where we can access them if we need to. So I'd love to put a number on it, but that's what we can do.

Yes. No, no. Listen, I mean, I kind of appreciate all the planning that's going around on year-end given so many unknowns. Maybe one on the -- just the forecasting side and then I'll get in queue. I mean, so many variables have to go into the provisioning on the legacy and the mark-to-market on the fair value. I'm wondering what kind of broad assumptions about used car values, job loss -- I mean, can you give us a little color on how you would characterize the forward provisioning and marks that you've made if you feel they were just overly conservative, a little on the aggressive side, or just kind of best guess given current data at hand? Just trying to understand sort of what went into the forward outlook at this point.

Sure. I mean the easy part is experience helps. We can look at the 2008 pools and the pools originated in that time frame and how they performed. If you use that as hopefully the worst case, that's a good place to start, and so we did it. We assume that this shouldn't -- I mean, we really think the whole job loss thing -- I mean, for us, as I've said numerous times, unemployment is the most important thing to have an effect on how our portfolio performs. So to the extent unemployment doesn't spike -- obviously, it's spiking, but there's a different perception today with unemployment going up, but lots of people just being furloughed and then having them come back. So we would -- we're probably making one assumption that unemployment won't end up being as bad as 2008; and two, that it won't last as long. And so if we make that assumption, say, 2008 performance is the worst it's going to be, at least for the moment, you probably provision along those lines in terms of how the pools will perform. As a quarter goes by and it gets better or worse, we'd have to readjust those levels. But I think we're making what we hope to be a relatively safe bet that our pool performance, and this will again be the pools from sort of 2019 and 2020 won't perform any worse than the pools originated in 2007 and 2008. And if we use that as a guideline, it's probably a pretty fair guess. It may end up being conservative? We don't know yet. But we'd rather be conservative than aggressive.

And our next question is coming from John Rowan with Janney.

When you say we're going to originate enough to keep our portfolio stable, does that -- is that just a summation of both the fair value and legacy portfolio? Or are we talking about fair value remaining stable while the legacy continues to amortize off?

Well, legacy is going to amortize off anyway. So what we -- in that comment, we're sort of saying, if our portfolio is $2.4 billion or $2.5 billion, we would like it to stay there and try and lose a little ground on that number as possible. So that would be the level we're trying to maintain. And for us, that would be something in the $70 million, maybe a little bit more range. So right now, we're going to give something -- we're going to be giving up a little if we do $50 million or so, but again, it's a little hard to tell. But the real trick is that we're going to give up a little bit for 3 months, 4 months, 6 months, you just don't know. So we'd like to keep that number.

But that's just looking at the entire managed portfolio as one unit.

That's correct, yes. I mean all new originations are going into the fair value portfolio anyway.

No, I understand that. I just wanted to make sure because if the assumption was the fair value portfolio remains stable and the legacy portfolio continue to amortize off as obviously it will, then the portfolio actually would be going down, the average managed portfolio. So I just want to make sure I understood the distinction there. Okay.

Yes, absolutely right.

Can you tell me what the charge-off, the dollar value charge-offs, were in the quarter from the legacy portfolio?

I think we have the right...

Usually, they come back into it, but I think with the day 1 adjustment to CECL, I'm not sure I can actually back really back into it.

John, I think I can tell you, it was about -- I'm trying to visualize in my head, about $20 million of legacy portfolio net charge-offs.

Okay. That's what I had gotten to. So I mean, just if we were to back out all the CECL adjustments, all of the tax benefit, the fair value adjustment, the change in the provision for the fair value portfolio and just took the charge-off for you as a provision, I mean, you guys would be losing money at this point. Correct me. Is it safe to say that CECL is really the main reason why you're actually remaining profitable at this point?

Well, I mean, the CECL provides -- the early adoption of CECL provides this kind of odd or unusual transition where when you're recognizing the next losses for maybe the next 4 years and you take that out of the provision expense, yes, then you have this sort of a revenue windfall from those receivables. And we didn't do like a pro forma, and I don't think we would do a pro forma that shows what the results would be without CECL because you'd have to put in some other provision expense, and it's really kind of a moot point. I mean, so we want to help people understand the results, obviously, and what they represent. And the CECL standard is just the cards that we were dealt. And we managed it, I think, in the best way we could by 2 years ago being proactive and adopting fair value. So we minimized the impact of having adopted it this quarter.

I think it's also worth pointing out, I mean, the business is profitable for sure. By adopting from going with CECL and then going with fair value, you're actually hurting yourself going forward with fair value. So as much as you get a little bit of a boost from some of the CECL numbers and the legacy, you're actually losing some of those numbers on the fair value. So it's much more of a push than you might think. Certainly taking the COVID adjustments we've been taking has a significant impact that certainly we would hope would be a onetime effect. So the basics of the business haven't changed.

Okay. I mean, I know, obviously, you talked about being able to cut costs and stuff if things go further, but my comment here is just though the business -- regardless of the optics of how profitable it looks under CECL, I mean you're salaries and expenses and G&A were still up 12% year-over-year, which is a fairly sizable number given what's kind of a stagnant portfolio. Can you just talk about regardless of a wholesale shift in cost-cutting because of this pandemic, what do you -- is there any reason to think that you would cut costs or just try to keep them stable as opposed to a double -- nearly teen growth rate year-over-year?

No. That -- we did some hiring, but we've also got automation coming in. We would expect those costs to go down substantially, almost anyway, forgetting about cutting costs because of the COVID thing. We're in a position where we staffed up expecting a big growth year. And then, of course, this isn't going to happen. So we've got some issues to work through. Plus, we've put in some new technology that will take root over the next probably quarter or 2 that will allow us to really keep the overhead down as we grow, assuming we get to grow. So we're a little bit in a tough spot because we expected 2020 to be a very good growth year and we were set up for it, and we thought the technology would actually help that make it easier. The fact that we're looking at what we're doing now, we're going to have to look at that depending on how long this lasts and whether we get some real benefit within the industry from what happens. So you're right. But I mean, both ways, the numbers aren't going up 12% annually for sure. And there's room to make some changes there either way.

Okay. And what's -- did you guys touch on your plans for share repurchases at all?

Well, we can't repurchase shares today, but we would probably think about doing that given the stock price.

Our next question comes from Kyle Joseph with Jefferies.

We've talked about the demand side of your business, and it sounds like your volumes have come down about 50%. I'd like to shift the focus over to the supply side and any sort of competitive disruption you've seen as a result of ABS. Because from what I've been reading, it sounds like used car prices are off more than your volume. So have you seen somewhat of an offset there from lower competition?

That's truly the $64,000 question because we are beginning to hear all the rumors going around the industry of what other folks are doing. Certainly, a few people -- I mean, a couple of originators have quit originating. A bunch of people have had layoffs. A bunch of people are tightening. I would imagine almost everyone is tightening. So we could actually be picking up some amount of volume from that effect. To be perfectly honest, we would hope that number would be a whole lot bigger and a whole lot longer and get better. So we'll see. We just don't know. The only thing we do know is we're not set up the way a lot of the other folks are. We don't have a PE fund behind us. We don't have different flow programs and things like that, that we have to worry about, whether they're going to be there in terms of selling paper. All we care about, is the Wall Street market being able to do ABS deals when we need to. So in many ways, our life is a little bit simpler than many of our friends. We'll have to see. I mean, it's too early to tell. We've heard rumblings of all sorts of different things in the industry. We can't really put a finger on what's going to happen. But you're right, we probably are picking up something. It's just too hard to tell just yet.

Got it. And then a follow-up there, just in terms of pricing. Have you been able to adjust pricing at this point? Or is it still too early?

Well, we're edging in pricing to see. I think once we get a handle on what the volume levels will be -- again, obviously, if we want them to go lower, we can raise the price a little bit and see whether we get the business with the price or whether it goes away. So it's -- remember that the easiest way to look at this sort of issue is March was great. All the way through the end of March, we either hadn't enough inventory or enough volumes, and we couldn't even tell anything was going on. So now we're 2 weeks into sort of the new world, and it's just too early to tell. But on the one hand, maybe we'll get some more volume from other folks not playing. Maybe we could get that volume with a price increase. It's just -- we just -- with 2 weeks in, we just don't know yet. All we know right now is volumes have slowed significantly in the first 2 weeks, which is exactly what we expected. Whether they stay that way, they go down further, they pick up, we just don't know yet.

Got it. And then one last one from me. Appreciate the color in terms of your assumptions for the fair value mark and the incremental provision that you provided on unemployment. From a residual value perspective, are you using 2008 as a model? Obviously, it's the most recent and most relevant, but factoring that there was cash for clunkers as well, what sort of assumptions are you making on the residual value side?

We would, at some point, argue, our residual should be just as good as ever. I mean, but at the moment, you just don't know. So you're right though, our parameters are -- you could argue, if this thing doesn't last long and everybody got a check and we give out a couple of extensions and there is no serious job loss at least within our portfolio, we could fare this thing pretty well. To the extent it's 2008, that -- and there's real unemployment, that's a whole another game. So I mean, I just can't say right now which end of the spectrum you have. What we want to do is, see people go back to work and see what it does to unemployment and then see what effect on unemployment that -- what's left to that unemployment has in our people and our portfolio. We just can't tell you.

Thank you. And I will now turn the floor back over to Mr. Charles Bradley for any additional or closing remarks.

Thank you. Thank you, everybody, for attending the call. Obviously, there's challenging times. We're -- I guess the good news is, we're set up to do this. We've spent a lot of time working on it in the last few months to make sure everything can work. We're a little bit lucky in sort of the way our industry works, being a service industry that we can keep running. We haven't had to close a plant or something like that. All of our job titles are functioning. On the downside, this isn't the takeoff for the year we had expected. We expected 2020 to be a superstrong year and it's obviously going to have a dip and some downside in the middle. Hopefully, it comes back sooner. And maybe the silver lining is, this is the disruption in our industry we've been waiting for, for several years, and so you just don't know. Like I said, importantly, we can get through it. Good side, maybe this is positive changes for us. The bad side is, it's probably hopefully no worse than 2008. And given how early we are in the cycle, that's about all we can get to. So thanks for attending, and we'll speak to you next quarter.

Thank you. This does conclude today's teleconference. A replay will be available beginning 2 hours from now until April 23, 2020, by dialing (855) 859-2056 or (404) 537-3406 with the conference identification number 3094613. 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.