CONSUMER PORTFOLIO SERVICES INC

Previous wording

We were incorporated and began our operations in March 1991. From inception through June 30, 2024, we have originated a total of approximately $22.1 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

Current wording

We were incorporated and began our operations in March 1991. From inception through September 30, 2024, we have originated a total of approximately $22.6 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

Previous wording

In May 2021 we began purchasing some contracts for immediate sale to a third-party to whom we refer applications that don’t meet our lending criteria. We service all such contracts on behalf of the third-party. We earn fees for originating the receivable and also servicing fees on active accounts in the third-party portfolio. For the six months ended June 30, 2024, we originated $23.4 million under this third-party program. As of June 30, 2024, our managed portfolio includes $205.6 million of such third-party receivables.

Current wording

In May 2021 we began purchasing some contracts for immediate sale to a third-party to whom we refer applications that don’t meet our lending criteria. We service all such contracts on behalf of the third-party. We earn fees for originating the receivable and also servicing fees on active accounts in the third-party portfolio. For the nine months ended September 30, 2024, we originated $29.5 million under this third-party program. As of September 30, 2024, our managed portfolio includes $191.5 million of such third-party receivables.

Previous wording

Since 1994 we have conducted 102 term securitizations of automobile contracts that we originated. As of June 30, 2024, 18 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. However, we completed only three securitizations in 2020. In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through June 2024.

Current wording

Since 1994 we have conducted 103 term securitizations of automobile contracts that we originated. As of September 30, 2024, 18 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. However, we completed only three securitizations in 2020. In April 2020 we postponed our planned securitization due to the onset of the pandemic and the effective closure of the capital markets in which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020.

Previous wording

Revenues. During the three months ended June 30, 2024, our revenues were $95.9 million, an increase of $11.0 million, or 13.0%, from the prior year revenue of $84.9 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended June 30, 2024 include a $5.5 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $5.5 million. There was no mark up or mark down to the fair value portfolio in the prior year period.

Current wording

Revenues. During the three months ended September 30, 2024, our revenues were $100.6 million, an increase of $8.5 million, or 9.2%, from the prior year revenue of $92.1 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended September 30, 2024 include a $5.5 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $5.5 million. There was a $6.0 million mark up to the fair value portfolio in the prior year period.

Previous wording

Interest income for the three months ended June 30, 2024 increased $5.7 million, or 6.9%, to $88.4 million from $82.6 million in the prior year. The primary reason for the increase in interest income is the 7.5% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreased from 11.4% in the prior year period to 11.3% in the current year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the three months ended June 30, 2024 and 2023:

Current wording

Interest income for the three months ended September 30, 2024 increased $9.9 million, or 11.9%, to $93.2 million from $83.3 million in the prior year. The primary reason for the increase in interest income is the 11.7% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the three months ended September 30, 2024 and 2023:

Previous wording

Other income was $2.0 million forthe three months ended June 30, 2024 compared to $2.2 million for the comparable period in 2023. This 9.4% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $1.7 million for the quarter ended June 30, 2024 compared to $1.9 million in the prior year period.

Current wording

Other income was $1.9 million forthe three months ended September 30, 2024 compared to $2.8 million for the comparable period in 2023. This 31.8% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $1.6 million for the quarter ended September 30, 2024 compared to $2.5 million in the prior year period.

Previous wording

Total operating expenses were $174.4 million for the six months ended June 30, 2024, compared to $130.9 million for the prior period, an increase of $43.5 million, or 33.2%. The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses. To a lesser extent, increases to employee costs and general and administrative expenses also contributed to the increase in operating expenses during the period.

Current wording

Total operating expenses were $93.7 million for the three months ended September 30, 2024, compared to $77.9 million for the prior period, an increase of $15.8 million, or 20.4%. The increase is primarily due to increases in interest expense and to a lesser extent, increases to employee costs.

Previous wording

Employee costs were $23.7 million during the three months ended June 30, 2024 compared to $21.1 million for the same quarter in the prior year, an increase of $2.6 million, or 12.2%. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended, June 30, 2024 and 2023:

Current wording

Employee costs were $24.2 million during the three months ended September 30, 2024 compared to $21.8 million for the same quarter in the prior year, an increase of $2.4 million, or 10.8%. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended, September 30, 2024 and 2023:

Previous wording

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $13.3 million, an increase of $1.5 million from $11.8 million in the prior year period.

Current wording

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $13.3 million, an increase of $231,000 from $13.0 million in the prior year period.

Previous wording

Interest expense for the three months ended June 30, 2024 was $46.7 million and represented 52.4% of total operating expenses, compared to $35.7 million in the previous year, when it was 53.9% of total operating expenses.

Current wording

Interest expense for the three months ended September 30, 2024 was $50.1 million and represented 53.4% of total operating expenses, compared to $37.9 million in the previous year, when it was 48.7% of total operating expenses.

Previous wording

Interest on securitization trust debt increased by $8.8 million for the three months ended June 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,555.2 million for the three months ended June 30, 2024 compared to $2,333.0 million for the three months ended June 30, 2023. The annualized average rate on our securitization trust debt was 5.9% for the three months ended June 30, 2024 compared to 5.0% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:

Current wording

Interest on securitization trust debt increased by $11.3 million for the three months ended September 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,706.3 million for the three months ended September 30, 2024 compared to $2,349.7 million for the three months ended September 30, 2023. The annualized average rate on our securitization trust debt was 6.4% for the three months ended September 30, 2024 compared to 5.4% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:

Previous wording

Interest expense on warehouse credit line debt increased by $694,000 to $5.7 million for the three months ended June 30, 2024 compared to $5.0 million in the prior year period. The increase was primarily due to the higher utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $215.4 million during the three months ended June 30, 2024 compared to $193.4 million for the same period in 2023. The annualized average rate on our credit line debt was 10.6% for the three months ended June 30, 2024 compared to 10.4% in the prior year period.

Current wording

Interest expense on warehouse credit line debt decreased by $665,000 to $4.0 million for the three months ended September 30, 2024 compared to $4.7 million in the prior year period. The decrease was primarily due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $132.3 million during the three months ended September 30, 2024 compared to $170.9 million for the same period in 2023. The annualized average rate on our credit line debt was 12.1% for the three months ended September 30, 2024 compared to 10.9% in the prior year period.

Previous wording

Interest expense on subordinated renewable notes was $542,000 for the three months ended June 30, 2024. The average balance of the outstanding subordinated debt was $22.3 million for the three months ended June 30, 2024 compared to $22.2 million for the prior year period. The average yield of subordinated notes increased to 9.7% compared to 8.6% in the prior period.

Current wording

Interest expense on subordinated renewable notes was $581,000 for the three months ended September 30, 2024. The average balance of the outstanding subordinated debt was $23.2 million for the three months ended September 30, 2024 compared to $19.9 million for the prior year period. The average yield of subordinated notes increased to 10.0% compared to 8.8% in the prior period.

Previous wording

For the three months ended June 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $2.0 million. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $9.7 million in reductions to provision for credit losses for the three months ended June 30, 2023.

Current wording

For the three months ended September 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $994,000. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $2.0 million in reductions to provision for credit losses for the three months ended September 30, 2023.

Previous wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expense increased to $5.9 million during the three months ended June 30, 2024 from $5.5 million for the same quarter in 2023. We purchased $431.9 million of new contracts during the three months ended June 30, 2024 compared to $318.4 million in the prior year period.

Current wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expense increased to $5.7 million during the three months ended September 30, 2024 from $5.3 million for the same quarter in 2023. We purchased $445.9 million of new contracts during the three months ended September 30, 2024 compared to $322.4 million in the prior year period.

Previous wording

Occupancy expenses was $1.4 million for the three months ending June 30, 2024, which is down from the $1.6 million in the second quarter of 2023.

Current wording

Occupancy expenses was $1.3 million for the three months ending September 30, 2024, which is down from the $1.6 million in the third quarter of 2023.

Previous wording

Depreciation and amortization expenses increased to $221,000 compared to $211,000 in the previous year.

Current wording

Depreciation and amortization expenses increased to $214,000 compared to $199,000 in the previous year.

Previous wording

For the three months ended June 30, 2024, we recorded income tax expense of $2.0 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $4.6 million, representing a 25% effective tax rate.

Current wording

For the three months ended September 30, 2024, we recorded income tax expense of $2.1 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $3.8 million, representing a 27% effective tax rate.

Previous wording

Comparison of Operating Results for the six months ended June 30, 2024 with the six months ended June 30, 2023

Current wording

Comparison of Operating Results for the nine months ended September 30, 2024 with the nine months ended September 30, 2023

Previous wording

Revenues. During the six months ended June 30, 2024, our revenues were $187.6 million, an increase of $19.7 million, or 11.7%, from the prior year revenue of $168.0 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended June 30, 2024 include a $10.5 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $10.5 million. There was no mark up or mark down to the fair value portfolio in the prior year period.

Current wording

Revenues. During the nine months ended September 30, 2024, our revenues were $288.2 million, an increase of $28.2 million, or 10.8%, from the prior year revenue of $260.0 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the nine months ended September 30, 2024 include a $16.0 million mark up to the recorded value of the finance receivables measured at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $16.0 million. There was $6.0 mark up to the fair value portfolio in the prior year period.

Previous wording

Interest income for the six months ended June 30, 2024 increased $10.0 million, or 6.1%, to $172.7 million from $162.7 million in the prior year. The primary reason for the increase in interest income is the 6.2% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio is 11.3% in the current year period and prior year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the six months ended June 30, 2024 and 2023:

Current wording

Interest income for the nine months ended September 30, 2024 increased $19.8 million, or 8.1%, to $265.8 million from $246.0 million in the prior year. The primary reason for the increase in interest income is the 8.0% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio is 11.3% in the current year period and prior year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the nine months ended September 30, 2024 and 2023:

Previous wording

Other income was $4.5 million forthe six months ended June 30, 2024 compared to $5.3 million for the comparable period in 2023. This 15.0% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $3.8 million for the six months ended June 30, 2024 compared to $4.6 million in the prior year period.

Current wording

Other income was $6.4 million forthe nine months ended September 30, 2024 compared to $8.1 million for the comparable period in 2023. This 20.9% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $5.5 million for the nine months ended September 30, 2024 compared to $7.2 million in the prior year period.

Previous wording

Total operating expenses were $89.2 million for the three months ended June 30, 2024, compared to $66.3 million for the prior period, an increase of $22.9 million, or 34.6%. The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses. To a lesser extent, increases to employee costs and general and administrative expenses also contributed to the increase in operating expenses during the period.

Current wording

Total operating expenses were $268.1 million for the nine months ended September 30, 2024, compared to $208.8 million for the prior period, an increase of $59.3 million, or 28.4%. The increase is primarily due to increases in interest expense and a decrease in the reduction to provision for credit losses. To a lesser extent, increases to employee costs and general and administrative expenses also contributed to the increase in operating expenses during the period.

Previous wording

Employee costs were $48.1 million during the six months ended June 30, 2024 compared to $43.2 million for the same period in the prior year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the six-month periods ended, June 30, 2024 and 2023:

Current wording

Employee costs were $72.3 million during the nine months ended September 30, 2024 compared to $65.0 million for the same period in the prior year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the nine-month periods ended, September 30, 2024 and 2023:

Previous wording

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $27.0 million for the six months ended June 30, 2024, an increase of $3.8 million from $23.2 million in the prior year period.

Current wording

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $40.3 million for the nine months ended September 30, 2024, an increase of $4.1 million from $36.2 million in the prior year period.

Previous wording

Interest expense for the six months ended June 30, 2024 was $88.7 million, compared to $68.5 million in the previous year, an increase of $20.2 million.

Current wording

Interest expense for the nine months ended September 30, 2024 was $138.7 million, compared to $106.4 million in the previous year, an increase of $32.3 million.

Previous wording

Interest on securitization trust debt increased by $18.3 million for the six months ended June 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,471.7 million for the six months ended June 30, 2024 compared to $2,308.1 million for the six months ended June 30, 2023. The annualized average rate on our securitization trust debt was 6.0% for the six months ended June 30, 2024 compared to 4.8% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:

Current wording

Interest on securitization trust debt increased by $29.6 million for the nine months ended September 30, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,549.9 million for the nine months ended September 30, 2024 compared to $2,322.0 million for the nine months ended September 30, 2023. The annualized average rate on our securitization trust debt was 6.1% for the nine months ended September 30, 2024 compared to 5.0% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:

Previous wording

Interest expense on warehouse credit line debt increased by $166,000 to $10.0 million for the six months ended June 30, 2024 compared to $9.9 million in the prior year period. The increase was due to higher rates on the debt during the six month period compared to last year. The average balance of our warehouse debt was $190.1 million during the six months ended June 30, 2024 compared to $194.2 million for the same period in 2023. The annualized average rate on our credit line debt was 10.5% for the six months ended June 30, 2024 compared to 10.2% in the prior year period.

Current wording

Interest expense on warehouse credit line debt decreased by $499,000 to $14.0 million for the nine months ended September 30, 2024 compared to $14.5 million in the prior year period. The decrease was primarily due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $170.7 million during the nine months ended September 30, 2024 compared to $186.3 million for the same period in 2023. The annualized average rate on our credit line debt was 11.0% for the nine months ended September 30, 2024 compared to 10.4% in the prior year period.

Previous wording

Interest expense on subordinated renewable notes was $1.0 million for the six months ended June 30, 2024. The average balance of the outstanding subordinated debt decreased by $1.6 million to $21.6 million for the six months ended June 30, 2024 compared to $23.2 million for the prior year. The average yield of subordinated notes increased to 9.7% compared to 8.5% in the prior period.

Current wording

Interest expense on subordinated renewable notes was $1.6 million for the nine months ended September 30, 2024. The average balance of outstanding subordinated debt was $22.1 million for the nine months ending September 30, 2024, consistent with the prior year. The average yield of subordinated notes increased to 9.8% compared to 8.6% in the prior period.

Previous wording

In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense on the residual interest financing was $3.7 million for the six months ended June 30, 2024 compared to $2.1 million for the same period in 2023.

Current wording

In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense on the residual interest financing was $6.2 million for the nine months ended September 30, 2024 compared to $3.2 million for the same period in 2023.

Previous wording

The following table presents the components of interest income and interest expense and a net interest yield analysis for the six-month periods ended June 30, 2024 and 2023:

Current wording

The following table presents the components of interest income and interest expense and a net interest yield analysis for the nine-month periods ended September 30, 2024 and 2023:

Previous wording

For the six months ended June 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $3.6 million. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $18.7 million in reductions to provision for credit losses for the six months ended June 30, 2023.

Current wording

For the nine months ended September 30, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $4.6 million. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $20.7 million in reductions to provision for credit losses for the nine months ended September 30, 2023.

Previous wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers. Sales expense decreased to $10.8 million during the six months ended June 30, 2024 from $11.2 million in the same period in 2023. We purchased $778.2 million of new contracts during the six months ended June 30, 2024 compared to $733.5 million in the prior year period.

Current wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expenses remained consistent at $16.5 million for both the nine months ending September 30, 2024, and the same period last year. We purchased $1,224.1 million of new contracts during the nine months ended September 30, 2024 compared to $1,056.0 million in the prior year period.

Previous wording

Occupancy expenses was $3.0 million for the six months ending June 30, 2024, which is down from $3.2 million for the same period in 2023.

Current wording

Occupancy expenses was $4.3 million for the nine months ending September 30, 2024, which is down from $4.8 million for the same period in 2023.

Previous wording

Depreciation and amortization expenses decreased to $436,000 compared to $442,000 in the previous year.

Current wording

Depreciation and amortization expenses decreased to $650,000 compared to $642,000 in the previous year.

Previous wording

For the six months ended June 30, 2024, we recorded income tax expense of $4.0 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $9.3 million, representing a 25% effective tax rate.

Current wording

For the nine months ended September 30, 2024, we recorded income tax expense of $6.0 million, representing a 30% effective tax rate. In the prior period, our income tax expense was $13.1 million, representing a 26% effective tax rate.

Previous wording

In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to more than six over the life of the contract. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In some cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest.

Current wording

In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to more than eight over the life of the contract. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In some cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest.

Previous wording

We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in 2019, 65.3% were either paid in full or active and performing as of June 30, 2024. Each of these successful accounts represent continued payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial loss and no interest revenue after the extension.

Current wording

We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in 2019, 61.2% were either paid in full or active and performing as of September 30, 2024. Each of these successful accounts represent continued payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial loss and no interest revenue after the extension.

Previous wording

For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 2012 that subsequently charged off, such charge offs occurred, on average, 18 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest.

Current wording

For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 2018 that subsequently charged off, such charge offs occurred, on average, 20 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest.

Previous wording

Net cash provided by operating activities for the six-month period ended June 30, 2024 was $96.0 million, a decrease of $24.7 million, compared to net cash provided by operating activities for the six-month period ended June 30, 2023 of $120.7 million. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and marks to finance receivables measured at fair value.

Current wording

Net cash provided by operating activities for the nine-month period ended September 30, 2024 was $165.8 million, a decrease of $16.2 million, compared to net cash provided by operating activities for the nine-month period ended September 30, 2023 of $181.9 million. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and marks to finance receivables measured at fair value.