Good day, everyone and welcome to the Consumer Portfolio Services 2015 Fourth Quarter Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any statements made during this call that are not statements of historical facts may be deemed to be forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. I refer you to the company's SEC filings for further clarification.

The company assumes no obligation to update publicly any forward-looking statements whether as a result of new information, future events, or otherwise. With us here now is Mr. Charles Bradley, Chief Executive Officer and Mr. Jeff Fritz, Chief Financial Officer of Consumer Portfolio Services. I'll now turn the call over to Mr. Bradley..

Thank you and welcome everyone to our fourth quarter year end conference call. Let's see, so it's good quarter. Overall, sort of the results we expected. I think couple of the highlights of the quarter, we set up a new credit facility, $100 million with Aeris Capital, that now brings our credit facilities to three, at $100 million each.

With $300 million capacity we think we're pretty well set. In terms of going forward, we may yet -- I think as times run by, we may increase some of those volumes. I don't know that we would add any more players at this point. Other positive of the quarter, we launched while we -- I think our eight program which is the Bravo Program in marketing.

It's a deeper cut than most of all of our programs. It has a higher coupon, a less lower advance, it seems to be being well received in the marketplace, so that will yet again expand our reach in the overall marketplace which we look as a very positive thing.

The other thing we're doing was that we've launched our direct lending program, there is lots other folks who do that but we've started to do that, and that also looks like it's gaining ground.

And these are just a couple of different areas where we're pursuing to sort of widen our available targets in the market and how we can expand and continue to grow. Another highlight was the managed portfolio past $2 billion. We in turn view that as an important part of our overall strategy getting to that critical mass.

$2 billion is a big portfolio, it's getting us where we want to go, so again it's a milestone that's worth noting. So on the negative side, collections remain a challenge, I guess the good news for that I think it remains a challenge for everybody in the industry.

We've spend a lot of time as I mentioned in the previous calls in sort of revamping how we collect. And so it's -- whether that's going to be the trend or whether this is more of an overall economic thing, it's still up in the air. But again, collections is a continuing challenge and we're hopeful it will improve but at the moment that's what it is.

Auction rates also continue to disappoint. Then we're continuing the downward slide. I think the good news there is that at some point that should turnaround and probably they won't slide much further. But again, it's just something to note that we're not particularly happy about but there is nothing we can really do about it.

And lastly, what we're truly not happy about the stock price continues to languish, presently all sorts of rumors around that. The subprime auto industry has fallen into disfavor on Wall Street, I'm not quite sure why given the industry's track record has been very resilient, very strong.

But nonetheless, that certainly seems to reflect a continuing reflection in our stock price. We'll go into some of these things in more detail but first I'll turn it over to Jeff to go through the financial results..

Thanks, Brad. Welcome everybody. We'll start with the revenues. $95.3 million for the quarter represents a 1% increase compared to our third quarter this year, and a 14% increase over the fourth quarter of 2014. The year-to-date revenue is -- the full year revenue is $363.7 million, that's a 21% increase over $300 million for the full year of 2014.

Generally all of this is of course driven by the portfolio growth. We originated $269 million in the quarter and the consolidated portfolio grew 4% for the quarter and 24% year-over-year.

Moving on to the expenses, $79.5 million for the quarter, that is up 2% compared to the third quarter this year, $78.3 million, and up 15% compared to $69.1 million in the fourth quarter of 2014. Full year expenses $302.3 million, a 22% increase over the full year 2014.

For the most part, those expenses are consistent with the portfolio in originations growth.

The interest expense which we'll probably talk about a little bit more is generally widened out a little bit as cost of funds has increased gradually due to spread widening in the ABS deals and some of the cheaper deals running off a little bit as somewhat more expensive deals were getting on the books.

Our provision for losses, $36.1 million for the quarter, actually down about a $1 million or 3% from the third quarter, and up 15% from the fourth quarter of last year. Full year provision for credit losses, $142.6 million, that's up 32% from $108.2 million of last year.

And if you've been tracking this you can see that the provisions have been running pretty consistently between 7% and 8% of the average portfolio balance for the quarter. Pre-tax earnings for the quarter were $15.8 million, that's a 1% increase over the sequential quarter and a 10% increase over the fourth quarter of 2014.

Pre-tax earnings for the full year is $61.4 million, an 18% increase over pre-tax earnings of $52 million in 2014. Net income for the quarter was $9 million, a 2% increase over the third quarter of this year and a 13% increase over $8 million in the fourth quarter of 2014.

Net income for the full year $34.7 million, an 18% increase over the full year of 2014. Diluted earnings per share, $0.29 this quarter, that's a $0.01 more than the third quarter this year, and $0.04 more or 16% more than fourth quarter of 2014. For the full year $1.10, a 20% increase over the $0.92 we've posted in 2014.

Moving onto the balance sheet, the thing that might have popped off the balance sheet for you -- pointing that looks a little unusual, maybe a couple of things relate to how we handle our ABS deals in the fourth quarter. Restricted cash is $106 million, a $100 million less than we showed in September of this year.

You may have already noticed that we didn't do a fourth quarter ABS deal, the warehouse line -- the new warehouse line that Brad mentioned that we acquired in November gave us the flexibility to postpone what would have normally been our December transaction and conduct that transaction in January.

December has typically been kind of a lackluster response in the ABS market. So getting back to the restricted cash, almost every other previous quarter end for several years now. We've had a restricted cash deposit that represented the pre-funding amount for that period in deal.

Essentially we were selling bonds for the last month of the quarter and that big, big restricted cash balance represented that pre-sale amount. Anyway, so not having done a sale in the securitization in the fourth quarter, we don't have what otherwise been about $100 million of additional restricted cash on the balance sheet.

And if we continue on with this plan, lose plan of doing -- beginning of quarter securitizations rather than end of quarter securitization, we should continue with this pattern of no big restricted cash balances from prefunding amounts. Moving to the finance receivables, the portfolio grew by 4% over the quarter, as I said before, 24% for the year.

The other items of the balance sheet and how much changes in the debt will find us little higher than you're accustomed to seeing because again we postponed and didn't do this ABS deal until January. The residual facility pay continues to pay down. Securitization trust debt is down for the quarter, again because the ABS deal was postponed.

Moving on then to some of the other credit performance metrics. The net interest margin for the quarter was $79.3 million, that's essentially flat with the third quarter this year and a 12% increase over the last year. I mentioned we had some compression in the NIM.

We had no -- less cost for the quarter, the interest expense, the debt service for the ABS bonds was about 3% for the quarter compared to 2.8% in the third quarter and also 2.8% for a year ago. So you can see that we're starting to feel little bit of the impact of what has been a gradual increase in the ABS cost defense.

The risk adjusted NIM which takes into account the provision for loan losses, $43.2 million for the quarter at a 3% increase over the third quarter and a 10% increase over the last year.

That we continue to show improvement in that earlier, even with a slightly higher, in the trending higher debt cost and overall increases and provisions for credit losses. Year-to-date, risk adjusted NIM was $163.3 million, that's a 15% increase over the full year 2014.

Our core operating expenses percentage -- and it's a key metric, we've been watching this carefully and sharing with you over the last several quarters core operating expenses as a percent of the managed portfolio, 5.5% for the quarter, that's flat for the third quarter but notably that's a significant decrease from 6.2% in the fourth quarter of 2014.

Similarly for the full year, those core operating expenses as a percent of the managed portfolio, 5.5% for 2015, significant reduction from 6.3% in 2014.

So we're seeing that what we've been sort of promising I guess the improved operating leverage of controlling our operating expenses as the portfolio is growing and its breadth that has now crossed $2 billion.

The return on managed assets, for the quarter 3.2% down a bit from 3.3% in the third quarter this year, and down from 3.6% for the fourth quarter of 2014. For the full year 3.3% and that's down from 3.7% for the full year of 2014. Nevertheless, those 3% range is, generally is kind of what our business plan is called for.

Moving on to the credit performance numbers, delinquency is significantly up in the fourth quarter.

As Brad mentioned, we're continuing to see our challenges on collection side, servicing side, and of course the fourth quarter typically the most challenging of the calendar seasonal period, the full delinquency was 9.5%, that's up from 8.8% in the third quarter and up from 8.2% a year ago.

The annualized net losses for the quarter, 6.23%, that's just -- it's about flat from 6.27% in the third quarter this year, and actually down a little bit from 6.44% a year ago. And the annualized net losses for the full year 2015 was 6.42% and that's up from 5.8% a year ago.

One of the contributors to these credit performance numbers as we've been tracking on year is the continued softening erosion in the auctions. The recovery rates at the auctions for us during the quarter was 38%, and that's down significantly from 42.7% a year ago to even really down significantly from the 40% we realized in the third quarter.

And so that's just a trend we've continued to monitor and watch. I guess with that I will turn it back to Brad..

Thank you, Jeff. So going to a little more detail in the operations. In terms of marketing, our marketing staff is holding steady around 112, which is kind of where we wanted to be. I think we had sort of targeted somewhere between 110 to 120.

And I think what we'll see instead of an all-out push to continue to grow marketing staff; we'll probably just grow it in sort of fits and starts as we go along. As I said, the first part was to hire them all, the next part was to train them all.

And this point was the point where we want to see increased production across the Board, and it will appear at least from the fourth to the fourth quarter that we are seeing some improved production individually within the writing staff. So the market looks good. As I mentioned, we did launch the Bravo Program.

Our normal advance on average across all other programs is around 114% of book. The Bravo programs significantly back of book.

And so what we're doing is, we're looking for a customer who has certainly has credit challenges but we're giving ourselves a very secure position in the Viacom [ph], and yet being able to offer that package to the customers through the dealerships.

And so you're really doing as you give in the dealership a deeper spot in terms of the overall mix of the CPS programs. There are some other folks out there in the country that do program similar to this and I think we've been able to -- what we think is it's one of the best of our worlds and make this program and put it together.

We initially launched it with five dealers and we added 50 dealers. Today our currently 500 dealers are now participating in the Bravo Program. So it's not a nation-wide or 8,000 or 10,000 dealers or so but it's quickly expanding. So we think it's being very well received and we think there is lot of upside in that program.

As I mentioned in the direct lending, also is now direct complicated given the statutory things and the regulatory environment to the direct lending.

And so we had to spend a lot of time putting all that together but we launched that in the fourth quarter and again, we think we're going to see some of the results in 2016 from the direct lending program as well.

Direct lending basically means they come to our website, we basically pre-approve them, give them a cheque or it sort of looks like a cheque or an authorization to go by our car.

We generally then direct them to a dealer and so, the big rub in that sort of whole idea of direct lending is the customer goes to the dealer that you've asked him to go to and the dealer tries to get him financed somewhere else. But we've seen to be getting through those hurdles but again it's just another area where we think we can do pretty well.

The fact that we get to screen the bar first, generally the results are far better in terms of credit performance from customers that come through direct lending versus the indirect route. So that's just another way to sort of add our overall portfolio.

In terms of originations, our goal is just to add to be able to do 125 a month, they are there and ready to go. We are currently sort of in that 90 to 100 a month kind of range, so we're very well set up there.

This is the kind of time in there year when to extent there is a lot of growth potential that you wanted to be a little over staff, so we're in a perfect position there.

One of the fundamental, most important part of originations is the credit quality and it's safe to say we've maintained our credit quality, we follow lots and lots of metrics in terms of what we buy and they've changed very little year-over-year and even over the last few years.

And so as much as I mentioned earlier, there seems to be ongoing credit problems in the industry.

What we're buying upfront is very close to what we've always bought in terms of how we advance, in terms of the term and length of loan which is a big thing out there today, we're always significantly behind everyone else and so not -- if everything else is doing super quarterly then that's not great to be behind them but nonetheless, we're not leaving any charge.

We generally look and we'll take the length of term as an example. It used to be that pretty much American made cars barely made 100,000 miles, today they do substantially better. And so what's supposing us to some extent have increased the term and what kind -- how long we'll do alone for those kind of cars.

Our experience after all these years if those cars can hang in there just much better than they could ten years ago. And so we're willing to go longer terms on those cars. Having said that we're probably 20% behind the high end of anyone else.

And so we're sort of like what we said, we're confident of what we do, but that sort of a glimpse of how we do move in terms of expanding how we buy. We look at what we've done, we look at very carefully and generally we lag the rest of the group until we're sure some of the water saved the plant.

So we're not particularly worried of what we buy, we do have concerns that we collect these days as we move into the collections. Because of the regulatory environment and sort of having to redo everything, that's provided a long list of challenges in terms of how you can collect papers these days.

We've been working on those challenges for over three or four years now and we think we have the programs put together and we have the infrastructure in place and the guidelines in place for everybody to collect successfully. As I've said in many calls, we've been working on all of that and we're expecting to see results.

At this point we've not seen those results. A couple of interesting things have come out of the ongoing analysis of why we can't get this paper to perform better. Now we still think and all of that it will but some interesting things have come about such as, customers these days don't want to talk on the phone.

That seems to be a big negative for companies like us that really need to talk to them. So we now switched over to only text message very often and that proves to be very effective.

And so part of this is the dynamic kind of set up, both with the new regulatory environment and with global call, the changing culture of the way people like to connect with lenders and creditors.

The last one thing in line, it turns out that more things are going to be done from smartphones and so we're doing many things to access that end of the market along with our continued efforts on talking things to our customers.

And so what you've seen is this increased delinquency and as much as we would like the delinquency to coming down, we could live with it if we really thought that was in the norm [ph] it wasn't going to produce future losses.

So we are attacking this with everything we've got and coming up with new innovative ways to get to our customers and get them to pay. So far the delinquency that doesn't look very good will also seem okay.

And so again, when we do something, this is probably one of the most important things we work on every day and we'll continue to work on knowing that we think the credits we buy are just fine. And so that sort of -- the best we can say about collections in the ongoing numbers you'll see.

It certainly doesn't help that the ARD are the recovering end of it sort of flipped off the cliff, and the rumor is or the consensus is that with all these cars coming off lease, it puts tremendous pressure in terms of the auction. Now that should change.

The offset to that would be that cars still are the oldest they've ever been out on the road and so at some point that number of cars being out there, whatever it is, ten years or so, should come down. And when that number comes down, you're going to have more cars, you'll have a better used car market.

And so as much as we're not particularly happy with it, there is nothing we can do about it. We certainly do everything we can to maximize results of the auctions but nonetheless, I think we could sort of run through a long list of historical numbers and the auction results do change sort of cyclically.

So we're in a down cycle now but we're not overly concerned that eventually won't sort of normalize or go back to where it was. But again, it really doesn't help that we have time to deal with that along everything else. In terms of the industry, the competition seems about the same.

There really haven't been a lot of new players, certainly not a new -- there has certainly haven't been any new big players. There is always going to be lots of new guys coming in, lots of them are small and trying to get a foot up or leg up in the industry, and that does include and quite concern us.

New big players to do something crazy does, and that just hasn't happened in over a year, does it appears some of the big fellas might be pulling back a little bit here and there, might be sort of working on different things. And so market seems pretty good that way.

I think everyone is -- the rumors around the market are that collections is an issue for everyone. And whether that's a collection issue like ours or collection issue like -- they brought that paper, we don't know. Obviously we wouldn't mind there was a god pact paper but nonetheless that's delay in the land is that everyone is having some struggles.

Now what I think that's lead to is sort of a loss read issue. As Jeff pointed out in our cost of funds, I mean we thought we have a gradual, we always build in a gradual rise in ABS cost as we go forward, the rise in ABS cost over the last nine months has been somewhat extraordinary.

We went from doing a 3% cost of funds around a year ago to our deal most recently was 4.3%, and so that's a very significant upward trend and that 4.3% is off of 3.8% in the previous deal and 3.2% the deal before that. So Wall Street clearly has got something going on with how they sort of appreciate or don't appreciate subprime auto.

There is lots of rumors that they think it's the next big mortgage mess which doesn't make sense and the last big mortgage mess we did very well, the auto industry in general and certainly everyone as individually in terms of reforms.

That doesn't make sense but that seems to be -- why there seems to be more short interest across the industry, in the stocks but more importantly for the way we go forward is that the ABS cost have gone up dramatically.

So now again, that could come down but the extent we have with ongoing trend in ABS cost, that's the challenge, we don't have much control over but it does have a significant in terms of how we can money going forward.

There is probably three areas that assuming that we know what we're doing and we can control our cost, and our operational cost which we can. Then the three operational issues or areas are growth, cost of funds and credit performance.

And these sort of adjusted credit performance, we think we've bought very well but working on the collection issues involved with sort of the new regulatory environment and we think in end we'll collect this paper just fine though it's been uncharged [ph]. Growth, we haven't seen that growth in a couple of years.

Over the last two years after growing very substantially last few years before that and our growth last year was only around 12%, and so it's hard for us to forecast a big up shoot in growth. Having said that, I mentioned in previous calls that we didn't have what we'll call the spring tax refund season in 2015 or 2014.

And so I said last year and other calls that we would have to see what happened to 2016, whether we would revert back to having a big growth trend from tax season or whether the new norm would be that it was stretched out. Shockingly, application volume and calls and everything else is up almost 50% in the last couple of months.

So we're very pleasantly surprised that we seem to be having the old spring growth spurt. And that would be very helpful, if we could have a lot of growth that would offset a lot of those ABS costs going forward. So we're very interested to see whether this is just a quick growth thing or whether it is actually being growth push here.

We would certainly welcome the big growth push and that would be great but again that would help us with the ABS struggles and collection struggles. So those are the three components to drive this trend and again, we don't control all of them. And we only kind of do -- manage what we control and we're doing a very good job of that.

Lastly, of course where stock price continues to languish, we've sort of look just for fun. I mean, we made $61 million pre-tax this year, cease [ph] tax and take out the tax noise. And the most we've ever made previous -- post the gain on sale days was only about $24 million. So that's tripled where we were back in the day.

So in terms of what CPS has done in the market, we've done a ton. We've tripled the best numbers we ever produced ever, and yet our stock is languishing.

So lot of people have asked us question, so what are we doing about the stock? There is no way we can do, I mean we are buying back shares, in the last two quarters we brought -- well, I see in total we bought over 1 million shares.

We bought 285,000 shares three quarters ago, 180,000 shares two quarters ago, we bought 600,000 shares in the fourth quarter for a total of little over $1 million. So we're buying back as many shares as we can using the NASDAQ rules, that is all you can do. And we will continue to buyback those shares because we think the stock is really underpriced.

Given the way the industry sets, everybody is getting tumbled, everybody is getting shorted, it's very hard to sort of things that we're the ones causing this problem, we're more suffering from -- whatever group problem that the industry seems to have. Now whether -- why is our promoters falling into this, we don't know.

I mean I must admit, there is some aspects to all this in terms of the overall economy, in terms of some of our credit -- our customer performance that makes it feel little recession like in terms of people pay you but only when they have to as opposed to trying to be timely with their debt obligations which again smacks over recession.

And certainly the numbers are the overall economy and we say it's not a recession but in terms of our customer performance, since the feel in the marketplace certainly it feels a bit like one. So we're doing everything we can. I think the fourth quarter was again a real good quarter for us.

I think the overall results have been very good and I think we're managing everything as best as we possibly can. So all we can do is wait and get those future results we're looking for in terms of stock appreciation. With that we'll open it up for questions..

[Operator Instructions] Our first question comes from the line of John Rolin of JNE [ph]. Your line is now open..

Good afternoon, guys. I want to go into the Bravo Program a little bit. Can you maybe give us a comparison to another product or we might have a little bit more information on; who you're lending to? Whether or not you or the dealer is participating in the risk? I just want to understand how bad product sits in competitively..

I think it's not a huge risk to think our product will flaw like a few other lenders out there. I think for fun we can take either a Westlake or a CACC to both run programs with a lend back of book.

They had the dealer participate in the risk and the upside, and they do different things in terms of -- I guess, CACC had some inventory stuff they did and then they had some pools where they had to have a certain number of loans and things like that. I'm not sure whether what's like this or something like that but they might.

We don't do any of that but we do like the idea of lending back a book. We like the idea of having the dealer participate in the risk on the upside, which are both aspects of our program. We do not require a 100 loan pool or anything like that.

This program was starting just like all the rest and I think one of the reasons we're not overly concerned with maybe dealer concentration is because we have a ready broad dealer base and so sort of the good Bravo loans will offset the bad Bravo loans as such. Having said that, we haven't bought 50 of these things yet.

So we're not lighting anything on fire in terms of how successful it's going to be. But it is being very well received and it's working very well in terms of being added across the board to our dealer programs..

Just staying with this for one moment. I mean, this is kind of the first time we've heard about the Bravo Program, and then also coincidentally the quarter in which CACC lost the patent on their Cap System for which they sued many competitors including the other one that you mentioned, Westlake in your comments.

I mean, is this time to try to exploit a GAAP, an opportunity in the market to go in with something maybe more attractive to the dealers or that 100 loan pool cap and put your brand on a similar type of program?.

It was sort of interesting that legal thing came out because obviously we have this over for a long time, so we weren't overly concerned, and you couldn't generate anything up fast enough to say, gee, they lost their patent or whatever, let's go play. So no, it's not really what we were doing.

Having said that, certainly the aspect of having that lowered to your program, CACC has been a very successful company for a long, long time, and so much like when one of the things we did, I don't know, five years ago as we said, gee, the independent market is really good.

There is a part of the independent market that performs very well and they seem to get to charge and offer a lot more money, and so we made a big move to go in the independent market. Before we are about an 80:20 franchise versus independent, now we are about 60:40. And so, that was a big move for us and it has been very, very successful.

I think looking at Bravo you might want to look at it in the same sort of light. We lend, we barely tick up into what you call the maybe the non-prime guys. I mean 2% to 5% of our business even remotely near those folks.

On the other side, you go shorter down the spectrum fairly far, but in all of that we would still be turned to credit lender because we are advancing booker better and therefore we need the guys to perform.

This would be going into that other end of the woods a little bit where now you got to bug about you can take risk of your credits and you could be very well paid for it. And so, yes, obviously much likely to be a good example so CACC had a good program and sort of wanted to do something along those lines, not to say that we don't watch too.

And so I think anybody's smart, it's one of our advantages one of the things CACC did is they wrote their programs very slowly. We were sort of shocked to find that they had a very small dealer base even overall, whereas we have a very large, fairly large dealer base.

So, one the benefits we have is by offering our program sort of not quickly, but sort of quickly across our entire dealer base spectrum, we may get some nice results quickly, but that's one of, sort of our advantages.

But in the end, what you really do is you look at Bravo and we put together a bunch of criteria to put it together and we think the paper perform just fine, if not very well, then we think we can charge quite a bit out there.

And what it really does is it gives the dealer a way to extend, they're working with CPS and all of other programs, this becomes the place. For a dealer if you have a car you have setup to sort of fund in the CPS situation or one of our friendly competitors, then that doesn't fit so well with Bravo.

So Bravo would be a new market in terms of having dealers be able to fund cars that are lower dollar amounts and risk your credits because you are going to be lending back the book which will require a sort of a larger down payment from the customer. So, for us it's very additive in terms of what we're looking for.

For the dealer who said they like CPS and they like working with CPS, it gives them a way to go at that lower end of the spectrum that they can sort of deal with confidence knowing that they have us sit in there. And so that's sort of the concept of what we're doing. Sure you can certainly make comparison to what other folks are doing.

The fact that they see if you lost your patent recently, that doesn't really concern us one way or another. It is interesting that maybe that means more people will look at this area which is fine. We're certainly get there fairly quickly, so that's good for us..

Okay, then just one last question. The allowance ratio is down quite a bit, sequentially, and it hadn't been in prior fourth quarters. I'm just curious with delinquencies in repose up quite a bit.

Why are the relatively sharp drop in the allowance ratio?.

Well there is two parts of that. One, if you look back historically the allowance ratio isn't all that different than it was a year ago. It is almost exactly the same as a matter of fact. We did do a charge of sale in the fourth quarter that pushed it down a little bit, and so I think that put a little noise in there.

But generally speaking the allowance balance is anywhere from that sort of 3-7-3-8 number up to 4-2. We do a lot of analysis based on the pools themselves. And so if not, like you sit there and say we don't target a specific number for the overall allowance.

It's all done on a pool-by-pool basis and say you sort of come up with an aggregate, and so this quarter that aggregate just comes in a little bit lower. And we've got a few comments or questions on that already.

John, one of the things you pointed out, the DQ in the repo inventory were high in the fourth quarter and increased in the fourth quarter compared to the third quarter, and that repo inventory in particular will drag its share of the allowance out of the allowance or finance receivables and down another asset for the repo over classified.

And so you have, kind of a little bit of a fourth quarter event, we have some sort of high stress kind of credit performance and what you already saw which was higher levels of DQ in repos..

Okay, fair enough. Thank you..

Thank you..

Thank you..

Thank you. Our next question comes from the line of David Scharf of JMP Securities. Your line is now open..

Yes, good morning. Wondering if we can circle back to get a little more sense for how we ought to think or maybe you are thinking about volume growth this year. I mean, there are obviously a lot of moving pieces and you highlighted out.

It sounds like application volume over the last couple of months, where do that sort translating into? What historically has been a big seasonal lift in the spring, whether that comes through? But, just given the level of competition out there, what you are seeing in terms of pricing and buy rates as well as just trends in new car purchase or used car purchases.

I want to get a better feel for whether sort of an 8% to 10% growth in originations is still something that is achievable this year?.

Well to the easy part, we think 8% to 10% is a good target for us. As I said in the three areas that's somewhat the easiest because I think we grew about 12% last year to the extent it's close a little this year you could get into that 8% to 10% range hopefully pretty easily.

To ask me what's really going to happen you got to wait until April because it's just too early to tell. What's interesting is, 'cause this is almost sort of verbatim from a year ago when I said, gee, it's too early to tell whether it's going to be a flat year again or whether it's going to be a big year, and last year was a flat year.

We didn't get the big push in, sort of February, March, April timeframe. This year, the early indications are we will. And having said that, it's very hard I can't tell just yet whether we're going to do really well that or whether it's going to be mild or short lived.

So it's very hard to say, certainly wouldn't be in a position to say where going to go 25%. But I think I could feel fairly confidently say 8% to 10% is a good range given that we did 12% last year anyway. But it is interesting that things are up. In terms of competition, there is a chance out there.

We've actually increased our APR slightly in the midst of this which tells you a little bit that maybe there isn't quite as much pricing pressure or competition floating around, you might think. And again, this is very early return so it's very hard to say. But at the moment we haven't given a price to sort of get this big influx of applications.

Whether other people are being a little more conservative or slowing down, it's very hard to say. We haven't heard that per se, particularly the big guys. The smaller guys maybe they are having a little trouble. But maybe ABS market or the Wall Street market is pushing them a little harder.

I mean, I think the critical mass things is very important in terms of whether what we'll call the Wall Street not liking our industry, and so maybe that has something to do with it.

But to sort of trying to give you a short answer, yes I think 8% to 10% is not a bad number, something just off of last year is a safe bet and we'll have to see how this first quarter goes as to what that real growth number is going to look like for the rest of the year.

In terms of competition, I think we'd call flat to normal maybe it may slightly ease, we'll see..

Got it. Well you answered my next question which was on competition, but I'll raise it nevertheless because we seem to be hearing sort of conflicting commentary.

I mean obviously, large one, obviously couple of large banks throughout 2015 sort of pulled back a little bit from Subprime Lending, Santander has noted that they kind of sacrificed some market share in the fourth quarter, and at the same time anecdotally we heard comments about a little more aggressive terms out there.

But, small private lenders on the margin can't move the whole market.

In general, is your sense that this big pick up in application volume in just the last couple of months is probably most related to the fact that a lot of your dealers are seeing some of their go to lenders pulling back?.

I'd be guessing but I might say that's possible. I mean, if you sort of look at the history of the industry, Santander and some large parts has taken the role of AmeriCredit. Back in the day AmeriCredit was the gorilla, sort of, when AmeriCredit move things move.

And so Santander started calling back and changing how they buy or raising the prices, I don't know, I honestly don't know, so as we heard they haven't done too much differently, they are still there.

But the extent they do move then generally we may not be quite the first to know that we should be, but each time they do move that would have a significant impact in the industry. It's almost like, I use to reference Capital One. Capital One is a tremendous lender, they do lots of things great.

When Capital One wants to go into subprime we all know it in a minute because they buy a lot, and so they haven't really moved off to where they have been in a long time, but that's a good example. If Capital One wants to buy a little dipper, we would see it. If Santander changes their buying pattern, we'll probably see it quite soon.

And so those are sort of the things you were looking for. If we see a big thing out of Santander or if we see a big thing out of whoever else, then we'll notice it. Today, we haven't heard much. A small little noises here and there but not enough to really comment on..

Got it..

Certainly, if the big banks pull back, that certainly doesn't hurt us one bit so that's hard for us to see because you don't really get in a position where our people are reporting back that we're losing all these deals to Wells Fargo or somebody. I mean, Wells Fargo taking the top piece of the business of standard course.

So to the extent that we're getting a little more of that business because they're not buying quite as aggressively, then it must be hard for us to really see that it would happen.

And so when the big banks move marginally, it's tough to see because that's the top end and it's still only be a really sort of, not the minimums, but a smaller impact in terms of what we would actually get from what we call loosely the trickledown theory..

Got it, got it. That's helpful color. And just lastly, I'm turning to credit. I guess, Jeff, if we sort of excluded the sale or charge offs on the quarter of around $5 million which fairly unloaded some recoveries. I'm guessing the net charge off rate was probably closer to 7%.

Based on your qualitative commentary about some of the customer behavior maybe feeling like it, it was more recessionary or getting closer. Should we be, I mean is our best guess in net losses on annual basis trickling with less denominator effect if originations grow 8% to 10%.

Is north of 7% a reasonable thesis?.

Yes, I think so, we've seen levels of several percent in the past and actually that charge off sale was closer to $6million dollars and so the normalized charge off rate for the quarter would be along 7% and within our model with the spreads we're getting even with the RBS [ph] costs, that's still something that we think is just within the working basics of them all..

Got it, got it. Thank you..

Thanks..

Thank you. Our next question comes from the line of JR Bizzell of Stephens Inc. Your line is now open..

Yes, good afternoon and thanks for taking my questions. Brad, maybe, or Jeff, thinking about kind of your monthly originations. Just wondering if you could kind of give us, maybe not specific numbers that kind of a cadent throughout the quarter.

Was there a specific month that was stronger than the other?.

No, fourth quarter, generally speaking I've been looking but October is usually okay, then November and December slide off, and that was generally the same trend last quarter. And then generally recovers back to what we might think of as October level and then we wait and see how February, March and April go.

And I think that trend line is still sort of there..

Okay, great. And switching gears, I was wondering on that new third revolving credit facility that you all have. I wonder if it provides any more flexibility and underwriting that maybe the other two revolvers limited for you guys..

Well yes it did J. R. in fact a couple things for one; we carved out the ability to finance the Bravo loan. So we didn't want to get our cart before horse on the Bravo loan generally saying. I think that had a financing source for them, so we worked with those lenders, showed them, and originated a single loan at that time.

We showed them the guidelines, what we intended and so we have, I think really just a limited bucket at this time, like a $10 million bucket to finance to as receivables but we don't want that allow us to get the wheels turning and then we can expand it as the volume requires.

In addition, all these lines, all three of the lines have all kinds of concentration limits and things that protect the lender to keep us from deviating too far from our normal path of originations, and one of the areas that we were bumping up against on the other two facilities was what we refer to as extended term, basically 72-month contracts.

And so when we went to negotiate this new facility we told the lenders, this is important we want a lot more capacity on the 72-month contracts and we got that, and so now when go back and renew the existing facilities with the existing lenders we have a new template to work with and that's kind of what we've been doing all along with this facilities..

Great, and then building off that Jeff and Brad as well.

If you're going to have a little more flexibility and at least $100 million of that revolver to go after that more extended term, what does that mean for growth, maybe longer term with the current setup and similar to what you said once you renegotiate the additional? Does that limit being extended on term allow you to be a little bit, maybe not more aggressive but allow you to have more paper fall into the past?.

No. I think, I mean all we really are doing is sort of having the lines conform to what we buy. I mean we certainly are going to more aggressive, we're not going to buy anymore extended term. I think on the margin, the difference in extended term is a couple of points.

It's not, it's almost just a little bit of what we call the lines, the new line is slightly more user-friendly than the last line, and the last line was slightly more user-friendly than the line before that. So it's not nearly the difference as you might contemplate.

It certainly was never intended to get a new line to buy a bunch of deeper stuff and stuff like that. So no, none of those things.

Really the new line, we did want to have, the Bravo program is sort of a specific kind of lending and so neither of the other lines supported that, and so we didn't need to bucket that with support of Bravo and we put that in the new line, and I would guess to extend Bravo actually works and that's what it's supposed to do.

We would then go back and try and add that element to the other line. But generally speaking the lines are all fine. We just needed another one. The overriding reason to get the third line was capacity. It does, it might be slightly more user-friendly than the last one so on and so forth, but that's really the only element.

It does give us some room in some concentration areas, but not enough for us to think this should be a new focus. The only real difference between what we bought before and we buy going forward would be Bravo and maybe some direct lending as that starts going to.

And having said that, we're hoping Bravo could maybe during 2016 gets like 5% of our production on a good day. None of it is going to be sort of a game changing thing in the short term, but it does give us the ability, like I said with getting to be independent. Overtime it can be a very significant game changing event..

Great, and then last one for me. Sticking with you Brad, last quarter you kind of reference choppy consumer sentiment and your views kind of on the consumer health. Just wondering, and I know when you prepare March you made some comments.

But just wondering, overall, 30,000 for view of the consumer and how you all are kind of thinking about that as we move into '16..

Well like I said the most interesting thing about our 30,000 for view of the consumer is the consumer seems to have changed. Nobody wants to talk on the phone.

Everybody has a smart phone, everybody wants to do things through texting and messaging, and yes I guess we should have been, or anyone in the industry should be more aware that this is the new trend and it's going to continue to evolve. The good news is we're kind of right there and following along with it, that's all good.

But, I still think, so in terms of the technology, that's interesting and new. But again, I think certainly we and most people keep up with it no problem, but there is a moment there where you're going to lose a little ground and try to get everything working the right way again.

And I can say it's almost, you can almost start putting in terms of the collection picture a few events. One, the regulatory environment was the one that we have three years ago.

And so with regulatory environment, everyone including us, have to be collected in a different way, and so we spend all our time re-educating, retraining and so on and so forth, and then sort of find out sort of late in that game that, gee, customers don't want to talk on the phone as much as they used to.

And so you have to sort of reach on things a little bit that way. And so, it's always been, it seems to be a bunch of little things change in the way these works.

Now probably the third thing is, again, it's a little interesting that whether this is the new norm of customers running their accounts to DQ and then paying when they need to pay or whether the economy is a little weak right now it's causing that.

We don't really know, but like I mentioned earlier it does seem a little different that the customer isn't as inclined to pay as quickly as they have in the past. Whether that's a technology thing, whether that's an economy thing, we just don't know.

And whether it's a fact with the regulatory environment, you can't push them quite as hard as you used to, you can sort of pick your poison but all of them are having effect of higher delinquencies, hopefully not higher losses, but potentially slightly higher losses, and so we'll have to see how it plays out.

We think the customers, they understand that working with CPS or other subprime lenders is, the number thing is re-establish your credit, now our whole educational thing with customers is that, gee, running your DQ at 20, 30 and 60 days isn't going to help your credit much. So, that's sort of the view from 30,000 feet of our customer today..

Thanks for all the detail..

Thanks JR..

Thank you. Our next question comes from the line of John Hick [ph] of Jefferies. Your line is now open..

Yes, thanks very much. We've talked about, I think we can model giving your anticipation in marketing and originations, balance sheet directionality. But I wonder given the trends with respect to delinquencies and charge offs, can you give us a sense where you think your AOL coverage might go over the course of the next year..

You mean the percentage of the allowance?.

Yes..

Yes. I mean I think we've expected the allowance percentage to continue to hover around that 4%. When we talk about the net allowance, the finance receivables allowance had been around 4% for some time, while we call the gross allowance which takes into account the repo inventory component has been hovering around 5%.

We don't see any reason at this time for any significant changes in those trends..

So then how is your AOL based on a level, or are you looking forward to some sort of period of time and charge off anticipation, how do we think about that from a modeling perspective?.

Well it's a challenge from a modeling perspective because we literally do it on a monthly static pool basis, and each monthly vintage pool gets its own schedule of provision expense and expected losses, and then those losses are charged to that pool's provision and then the whole thing, all 60 months, call it five years' worth of the existing portfolio is all aggregated to come up with any given periods, provision expense charge offs and remaining allowance.

So for you guys, from the outside, particularly we're not the only company you cover, it's pretty detailed and complicated. But if you were looking for a shortcut, I think you'd go with these two big analytical ratios, like 7.5% to 8% provision expense and then try to manage an allowance of something close to 4% on a net basis.

That's assuming that our portfolio continues to grow at something like, these intended to, well it's been higher in the past. But something like these expected growth rates..

Okay. And then, with respect to, I know I've heard tax refunds came a little later this year.

But entirely early February, are you seeing the seasonal snap back in delinquencies and charge offs at this point in time or is it too early to get I guess?.

It seems like we're doing okay, but again the quarter is not even half over. So, but it's not a negative, let's put it that way..

Okay. And then with respect to the Bravo, and I know these are early on.

Ad staff and the servicing side, or does servicing as a structure is currently well set for the kind of a more direct and deeper subprime products?.

I think we won't change the servicing at all. I think as much as we're getting a lot of questions on Bravo now. A couple of years ago or maybe a little over a year ago, we started doing title ending, and we pulled the plug on that about, I don't know, 15 minutes later.

So this isn't worth getting massively wind up, like this is going to be a huge game changer yet. But it is interesting that it's a good program, it's been very well received in the market. It's not big enough for us to do anything different in terms of staffing and such. But, yes we think it's a cool program and we think it could do really well..

Okay, I appreciate the color. Thanks very much..

Thank you..

Thank you. Our next question comes from the line of Mitch Sacks of Grand Slam. Your line is now open..

Hey guys, I wanted to extend a little bit about the comment you guys are talking about with respect to funding cost and cost of delinquencies with respect to pricing in the market for what you guys and your competitors are charging for loans. I think you started to see a little bit of firming.

Do you think if delinquencies and funding cost continue to trend the way they are that you'll be able to, you or your competitors will be able to start to raise price in the market to try to help offset the new impact?.

Yes, and started to take in a couple pieces. I think, I don't know if the delinquency has a big impact in terms of pricing.

I don't think Wall Street, I mean, yes you're selling rated bonds and so I think the fact that they're subprime is sort of what changes the price compared to a prime or something else, not I think to the extent that people started getting worried about delinquencies and charge offs and things like that.

Then as you go down the stack of bonds to the lower more riskier bonds, the pricing on those will go up. And again, that's probably not even that big a deal because the bonds you care about is the top couple, so I don't know that credit performance.

At the moment Wall Street certainly seems to have a very low opinion on our industry anyway, so I don't know that that opinion you can get a lot worse in terms of having a pricing effect. So that part doesn't particularly concern me. I think the cost of funds, there is two other parts.

In terms of cost of funds, the fact that Wall Street is now certainly demanding a significant higher premium, it's not just us, we look around and everybody else is getting tagged just as hard. The bar is certainly going up rather quickly, and I think I mentioned this in the past.

The old cost of funds used to be around 5% and now it went down all the way down to just around 3%, and now it's getting very close to where 5%, might be just around the corner. That's going to have the most significant impact.

Now to the last part is can we raise prices? I mean we might be able to raise prices, and I think we've nudged them up a little. Are we going to be able to raise them a full point to offset that? No. Are we going to be able to cover up with growth? Maybe.

But, sort of the bottom line is if the price trend in ABS keeps going up, it's going to hurt our earnings. There is nothing we can do about it. I think the good news is you might get a little get back by price increases, maybe. But in some way I'm not so sure, I would rather take the volume if other people are hurt more by it.

And so ironically, maybe as pricing keeps going up, as much as we don't like it it's going to hurt a lot of other folks a whole lot more than us.

All the little guys, all guys that don't have that critical mass, that ABS pricing if it continues up and ramping up it could almost put them all out of business just because they're all expected to make money. If then you're trying to make money and you're not, that ABS pricing is the kiss of death because now you have a whole new bar to get over.

And so, as much as we don't like it as it would affect our future earnings and stuff like that, it's going to affect everyone else more or most people more that don't have big critical portfolios..

In history because the funds are significantly higher, was the APR that the consumer is paying much higher also?.

No. I mean if you go back to the last cycle as an example, in the last cycle the banks are the lowest cost of funds are playing. Our APR was on the 18.25, today it's 19.25 maybe a little bit more.

So from the last cycle our APR is up a full point because the banks aren't really playing in a significant way like they did before, and we have the nice part of having ABS cost way down. And so I think in past cycles we're able to charge more than before and the pricing was a lot less. I think a lot will depend on who's in the market.

I think if a couple of big guys pulled back or went away, you could raise your prices and eat the whole thing no problem. But it's a little early for us to make those kind of guesses.

But I think, like I said, pricing pressure on other folks doesn't particularly hurt the bigger folks because they said they know what they're doing and we would fall into that kind way. So I think the little guys want more than us.

And I think things sort of moved around a little bit because other folks are doing it, you might be able to recover some of your car.

But again, what I'd rather do is let other people slow down or pull out and then I just get up to $150 million a month or something great for you won't care what the price is because obviously, remember that the basis of the business is extremely profitable, and so as much as in the short term I'm hurt a little bit, in the long-term it doesn't hurt us at all..

Okay, thanks very much..

Thanks, Mitch..

Thank you. Our next question comes from the line Lucy Webster of Compass Point. Your line is now open..

Hi, thanks. Good afternoon.

Do you guys have the average price where you did share repurchases during the quarter and the remaining dollar amount on your authorization?.

The average price for the last three quarters starting with the second quarter of '15, average price is $6.21 a share, and we bought 25,000 shares give or take. In the third quarter the average price is $5.85 a share and we bought about 183,000 shares. In the fourth quarter the average price $5.18 and we bought almost 600,000 shares..

And then I can take it a step further, Lucy. We've acquired shares subsequent to year end as well. We've acquired almost 400,000 shares subsequent to year end, at something like an average price of $4.15, and we have about $3.4 million remaining on our board authorization..

Okay, great..

Yes, plenty to get us to the next board meeting, I'm sure about that..

Yes. And then just more broadly in terms of leverage. I know that you guys have historically run higher than peers perhaps, but I was wondering sort of longer term, 1-year, 5-year view, what are your thoughts there? Are you comfortable with these levels, or do you think that comes down over time? Any color there would be helpful..

I think from a debt point of view, our debt is kind of disappearing. So, we sort of look at it in terms of corporate debt that you're going to have to pay back, and then the debt that's in securitization debt is on balance sheet but the securitizations are going to pay it out.

And so, if you look from just corporate debt center we're not very leveraged at all. So instead you throw in the big securitization debt where, leverage. And so the problem we have is if we grow and we're successful that leverage is going to increase because the portfolio is going to get larger and there is going to be more and more debt to extend.

The magic answer is, gee, if the stock is $12 or something or whatever the stock price, you so much equity and you lower the leverage.

But even that would be sort of a Band-Aid because if you continue to grow and you're successful that leverage will come right back because the portfolio is just going to get bigger and bigger, and what accounts for the vast majority of the leverage is the securitization debt.

So it's a little, I think if you're going forward to try and figure out how to guess the leverage or what it would be, you can sort of run the same earnings you're looking at and you can run the same growth you're looking at and that leverage will probably increase.

On the other hand if you want to throw in a stock price of $10 down the road and sell a bunch of shares to lower the leverage you can do that too. But we're not going to swear to that..

Right. All right, thanks it's very helpful..

Thank you..

Thanks, Lucy..

Thank you. And I am showing no further questions at this time. I'll hand the call back to the management for any closing remarks..

I appreciate all the people who attended. I appreciate all the good questions. Like I said, I think the fourth quarter went very well.

2016 might prove to be a bit more interesting year in terms about the industry and Wall Street, but we've done this for a long time and whether Wall Street wants to slow down or cause more than that it's just going to be another small bump on the road.

And in the end we're going to continue in our goal to get to be very large and very successful, and that's the way it's going to go. So, again thank you all for attending and I will see you again in April..

Thank you. This does conclude today’s teleconference. A replay will be available beginning two hours from now until March 2, 2016 at 11:59 PM by dialing 855-859-2056 or 404-537-3406 with the conference identification number, 49943840.

A broadcast of the conference call will 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. You have a wonderful day..