Good day, everyone, and welcome to the Consumer Portfolio Services 2020 First Quarter Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements.

Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, also are forward-looking statements.

All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected. I refer to you to the company's annual report filed March 16th and its current report filed April 16th for further clarification.

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

Thank you, and welcome, everyone, to our first quarter conference call. Certainly, these are challenging times for the company. We have a bunch to talk about. We've made a bunch of changes.

It's sort of all landing in the first quarter, but we'll get through it and sort of trying to address all those issues, and then do the questions.So, first off, the quarter was great. We actually had a very good quarter, certainly the end of the quarter got interesting.

But we'll go through the specifics of the quarter, but we were very pleased with how everything worked. Originations has functioned great, collections is great. So generally it was a tax season.

So, you would expect the first quarter to be good as much as the COVID problem started sort of halfway through March, it really didn't have an effect on the first quarter, which is why the numbers were good and we had good results in terms of the operations.Other than that, next we want to talk about -- or we're going to talk about the accounting changes.

We made the change to go to the CECL change as of January 1st. So that's got a few parts to it. And also now we're operating with global legacy portfolio and a fair value portfolio. So again, the accounting is getting a little more interesting and we'll kind of walk you through all that as well.

And lastly, of course is we're going to talk about the coronavirus, the COVID. Again, it's a little early to tell the total effect it's going to have on the portfolio. We're going to walk through some of the effects it will have in terms of originations, collections and performance, at least what our best estimates in those areas are.

And again, there's some positives that actually come out of some of these things, which we'll address as well.So, let's get to it. Beginning the first quarter, we were very happy with results -- the -- just really straight across the board. Originations very good. Our sales and marketing department is doing a great job in terms of penetration.

We're buying what we want to buy. We're not buying too deeply. Collections had a very good quarter. We had very good DQ numbers, very good loss numbers. It's almost pretty much a shame that we were having this great start to the year and then we ran into this COVID thing.

So, again that, there's nothing you can do about it, but if you try and look at just the first quarter, it was an excellent quarter for the company.In terms of the accounting changes we had adopt, we chose to adopt CECL, again when we switched to fair value in the beginning of 2018 that was in anticipation of adopting CECL January of this year.

So there was really no reason to make any changes to that. I think in the end it'll be better for the company doing it this way. And I am going to let Jeff walk through some of those changes in a minute.In terms of COVID again, the problem with COVID is, it's just too early to tell.

I think overall the company has a very strong program on how to handle it.

I think we put a bunch of different things in place to address the different parts of it and overall I think we'll get through it and in the end, we can do just fine through the whole thing, but we’ll get to that in a minute as well.So I'll turn it over to Jeff to walk through the accounting or the financials and accounting changes..

Thank you, Brad. Welcome, everybody. We'll begin with the revenues. So the revenues for first quarter were $70.8 million. That's a 17% decrease compared to the fourth quarter of $85.7 million and a 20% decrease compared to the first quarter of 2019.

Of course, the big component and the unusual component in the revenues for this quarter is the markdown to the fair value portfolio of $10.4 million.

So the fair value portfolio is, as you probably know right now, the receivables we've originated since January of 2018, the manner in which we account for those doesn't include any credit losses, rather they're baked into the level of yield that we recognize in the revenues.

And so, every quarter, whether there's a pandemic or not, every quarter we evaluate the carrying value of the fair value portfolio to determine if it is indeed stated at fair value.

And as a result of all this that happened at the end of the quarter, we undertook a process to go through the components of the fair value portfolio, estimate what the pandemic might do in terms of cash flows and defaults and severities.

And through some help from our risk department and identifying all the credit demographics and characteristics of the fair value portfolio, the number that we marked down was the $10.4 million that you see there in the revenue line.Absent that, the revenues are primarily of course comprised of interest income.

The legacy portfolio, which now represents 33% of the total, yielded about 17.8% for the first quarter; and the fair value portfolio, which is the remaining 67% of the total portfolio yielded about 10.5% for the quarter.Moving on to expenses, $67.7 million for the quarter, that's down 20% from the fourth quarter of last year and down 21% from the first quarter of 2019.

And the big change in the expenses is really the provision for credit losses, which I'm going to talk about in a minute here. Most of the other core operating expenses were flat sequentially and up about actually 10% or so year-over-year.

Interest expense also down sequentially, and we'll talk a little bit about that as we move down the list here.Let's look at the provision for credit losses. For the quarter $3.6 million, that's down 83% from the December quarter and down 85% from the first quarter of 2019.

And as we've been talking about for a long time, the legacy portfolio we've adopted -- we elected to early adopt the CECL accounting method for this portfolio, which resulted in a single lifetime allowance -- establishing a single lifetime allowance for credit losses effective January 1st of this year.

And you don't see the impact of that in the P&L because it was strictly a balance sheet entry, where we established $127 million in lifetime remaining losses in the legacy portfolio, and offset that with the tax affected entry to retained earnings.

The $3.6 million that we see in this quarter is our estimate of the impact of pandemic on the legacy portfolio.

Absent the pandemic, there would have been I think zero provisions for credit losses this quarter, because we have a lifetime CECL allowance in place.Again, we worked with our risk department and just made an estimate or judgment of what the impact on our legacy portfolio will be and it's still a little early to really fully understand what the impact is, it’s something we'll continue to monitor obviously.

Pretax earnings for the quarter, $3.1 million, that's up significantly from what was essentially a flat fourth quarter of last year, and up about 15% from the first quarter of 2019. Net income for the quarter, $10.8 million, again up substantially from the flat quarter of fourth quarter of 2019, and again up substantially.

And of course, here is another unique aspect of this quarter. We have an $8.8 million tax benefit, resulting from the CARES Act that was passed about two weeks ago to help companies and individuals get through the pandemic. And when the CARES Act was passed, there's a couple of key aspects of that.

First, it allows companies like us, who happen to have, and we did an NOL carry forward in the form of deferred tax assets on our balance sheet and these would have been tax benefits that we would have used prospectively offsetting future tax liability.

But Uncle Sam said that we could file a claim which is known as a carryback claim to recover those tax benefits in a form of a refund today rather than waiting to use them in the future.And then they further said that companies -- all the companies who benefit from this can revalue those tax assets at the old 35% corporate tax rate rather than the 21% corporate tax rate that we had carried -- that we were carrying them on the books for.

So if you're still with me on that, the $8.8 million tax benefit was just writing up the tax assets to allow for the differential in the old tax rate and the current tax rate. Without the tax benefit, the net income would have been $2 million for the quarter.Diluted earnings per share $0.45 for the quarter.

That's up again, huge from the first quarter of last year, where it was $0.07 per share. Again, significantly influenced by the one-time -- or by the tax benefit. Without the tax benefit the diluted earnings per share would have been $0.08 per share, which is still up from last year’s $0.07 per share.

Going forward, we expect the tax rate not to be further influenced by this tax benefit and we're expecting a prospective tax rate on normal earnings up about 36%.Moving on to the balance sheet. Not too much changing here except the thing that jumps out is the significant allowance for losses on the finance receivables portfolio.

As I mentioned, we adopted CECL, established an allowance on January 2nd -- January 1st or 2nd, anyhow you look at it, it’s $127 million. That is intended to be a lifetime remaining allowance for that legacy portfolio.

The manner in which we -- methodology we use for that was a very data driven approach looking at all the sort of quarterly pools and made up the legacy portfolio and extrapolating out what their lifetime losses are likely to be based on past history.On the debt side of balance sheet, it might be important to mention at this time here that the warehouse credit facilities at quarter end were about 47% utilized.

So we have $300 million of capacity in our warehouse facilities and had only consumed about 47% of that or $142 million at month end and Brad will talk a little bit about the ABS market more after we're done here.Moving on to some of the other metrics.

Net interest margin for the quarter was $43.8 million, that's down 25% from the fourth quarter and 28% from last year's first quarter. This is still significantly influenced by the transition of the portfolio from the old method of accounting to the fair value of accounting.

Just a one note that we usually make at this point was the blended cost of all ABS for the quarter was about 4.4%, which is about -- which is flat compared to the first quarter of 2019.The risk adjusted net interest margin, $40.2 million for the quarter, that's up a little bit from the fourth quarter, up by 10% and it's up 9% from the previous quarter.

This is largely being contributed -- or it benefits from the reduction -- a significant reduction in the provisions for credit losses.Moving on to core operating expenses, as I said earlier, operating expenses -- core operating expenses are largely flat sequentially and just up slightly about 8% year-over-year.

That percentage that we monitor closely of operating expenses as a percentage of the managed portfolio is 6.1% for the quarter compared to 5.9% in the fourth quarter of last year and 5.7% for the first quarter of 2019. And that leads us to the return on managed assets.

Pretax income as a percent of the managed portfolio is 0.5% for the first quarter and that compares favorably to 0.1% for the fourth quarter of last year and 0.4% for the first quarter of 2019.

Remember too that these results reflect the aggregate of $14 million in charges to the earnings for the quarter that we would attribute to the pandemic.A couple of credit performance metrics. The delinquency for the quarter ended at 12.4%.

That's an improvement over the fourth quarter of 15.5%, which is a seasonal improvement we typically see going from Q4 to Q1 every year and the delinquency is up just a little bit compared to 12.1% in the March quarter of last year.

Annualized losses for the quarter were up basically 7%, which is down from the fourth quarter of 7.9% and the first quarter of last year where they were closer to 8%. And as Brad mentioned, we really had a good credit performance quarter, and not really materially impacted by the pandemic.

And we did as we do every year at this time, receive some benefits from the tax refund season, both on the credit performance side and on the origination side.Just one comment on ABS market, we did do our first quarter ABS transaction 2020-A in January and this was long before the markets were affected by the pandemic.

The blended cost of funds of that deal was 3.8%, which is up slightly from 2.95% for the 2019-D deal we did in October. But it's interesting to note that the benchmarks had risen significantly and we got significantly tighter spreads on all the investment grade rated tranches compared to the 2019-D deal.

So the asset backed market was really on fire and very receptive to our bond offerings for that first quarter transaction. And obviously there's a -- it has to rebound from where it is right now.With that, I'll turn it back over to Brad..

Thanks, Jeff. Alright, let's talk about the coronavirus and COVID and how it affects and what we're doing. One of the first things we did, I think most people did, is we tightened in credit. We wanted higher income, a higher payment income.

We pretty much stopped making any exceptions to any of our programs and we raised the score across the board.Obviously we think there's going to be an effect and people who don't aren’t silly, but -- so tightening the credit was an obvious thing to do.

Originations volume, we did around $100 million in March originations, it has dropped off significantly since then. We would expect probably that number to settle in about half for the next month or two or three, depending on how long the social isolation lasts or social distancing.

That doesn't really -- it affects us sort of in the long-term because we are poised for a very good growth here. But again, that's about what we would expect.And as Jeff mentioned in terms of warehouse lines, we have plenty of room on those lines to handle that volume. In terms of the workforce, we do qualify as an essential industry.

However, we have sensed very early on, I think sort of the beginning, middle of March, we sent everyone who could work from home to work from home. So that happened then. We also have the ability to send all the collections people home and work from home as well. However, for the moment, most of the collection people are working from the offices.

We did have one office where someone did catch the virus and that office now works from home, and that work -- it’s -- I'm sure we'll lose some small amount of effectiveness from working from home, but overall it seems fine.

And the fact of the matter is that the volumes are going to be lower, there's going to be enough people to sort of get the job done.So having technology so everyone can do their jobs from home is very important to making this all work. And like I said before, the fact that all of our people are still working, no one is sitting at home doing nothing.

In many ways our company can function just as well in the state that’s in, as just as it never happened. So that part is good.In terms of expected losses, as Jeff pointed out, the fair value loss is $10.4 million. The legacy loss is $3.6 million. We looked at a lot of different things within our risk department.

To be fair, no one knows exactly how long and the extent of what the effects on the portfolio is going to be. So, those are estimates of what we think is going to happen over the next 6 to 10 months. Again, as the time goes forward, we will have a better idea.

But since we're in the midst of it, there's no reason not to be cautious.We do know -- what's a little bit interesting is, on the one hand, depending on how long this takes and when people go back to work, all people have been getting their $1,200 check and the good news is every one of our customers qualifies for that check.

So, everyone has been getting that check. Obviously our collection folks are focused getting some portion of that check sent to us for our payments. What you might expect as we go forward is a greater use of extensions to extend our customers, have a problem and they have been good paying customers. We would probably use an extension.

So again, depending on how long this lasts between the check from the government and the cautious use of extensions, we could go through a few months without having a dramatic effect on the portfolio performance.

Now the longer it takes, that number could change.Also, we've been going through our job titles and where our folks work and we probably don't have that much exposure in terms of generally speaking if you pick sort of the restaurant industry, most waiters and waitresses and such don't qualify for our programs.

So those kind of industries that are going to be dramatically hurt by this probably don't carry over too much over into our portfolio, certainly there will be some, but not really to the extent we're probably overly worried about. Take something like the airline industry, which will be dramatically affected.

We probably don't have any loans to people working in the airline industry because they're all in unions. So, there is different ways to look at it. But we've spent some time on it and we think, generally speaking, most of our job titles should be okay.

Construction workers and if you compare it to 2008 when loads of folks who were financed were in the construction industry or in construction industry related businesses, that was a dramatic hit when that business just stopped. That shouldn't be the case this time.

And so, we're optimistic and certainly getting those checks certainly helps too.And moving on -- in terms of the repos, there aren't a lot of repos going on. The easy answer is we're going to try and run our business as effectively as we can and as normally as we can. So collections continue, originations continue.

But things like the auctions, the legal part, the backend of the business in terms of questions, those things will all slow dramatically. We're not doing a lot of repos, in many states, you can't do repos. Obviously we're following those guidelines.

But even things like bankruptcies and the trustees, none of them are working either.So we would expect the backend of the business to slow somewhat, if not dramatically. Again, that'll stretch the timeline out a little bit, but we hope it won't affect us overall.

What we really -- one of the things we probably are sure we'll be affected with is when the auctions open again, there'll be lots of used cars and repossessed cars stacked up at those auctions. So we would expect a hit in terms of the liquidation value and the recoveries we get once we go to auction.

And again, a lot of those numbers are built into the reserves we've taken this quarter.And looking at Wall Street, as Jeff pointed out our warehouse lines are only half full, all of our lines are 2-year lines. None of them expires -- one of them expires at the end of this year. So we're probably in a very strong position. We learned a lot from 2008.

Having your lines expire right about now would be a very bad thing, ours don’t. Having the lines full would be a very bad thing, ours are not.And interesting though is we used to do our securitizations at the end of a quarter. So we would've been trying to do a securitization at the end of March and we would not have been able to get one done.

By doing securitization in January and beginning of the quarter, we were able to get our securitization off at a very good price and put us in a position to weather this problem much more easily.As Jeff pointed out, the fact that the government decided to send out, let us use our NOLs backwards, we're going to have an influx of capital of $23 million.

Again, very timely and gives us even more runway. We weren't really in a liquidity issue, but with a check coming from the government that gives us even more room.

So we think we can run with the lines and the reduced volumes are running at for as long as we need to.At this point probably, I mean we would like to do a securitization that we probably, because we would normally do one in the beginning of April, but we're in a position where we could wait probably depending on what it looks like, we could wait as long as July or longer if we needed to, but probably our target now would be to just do the normal July securitization.

Currently in the market, GMAC and Santander are both in the market this week doing deals. Both of those deals are investment grade and above. Santander is subprime. So we would normally sell down a double B or single B. We would probably like this sell down to double B in a normal situation.

So the fact that triple B and above is all being sold already probably bodes well that the market will get there in the next month or so. So we think the timing works for us there. Again, I think liquidity is super important right now. So we're going to manage what we buy. I don't think we're going to have a problem.

There's not a lot of people buying cars currently with all people staying home. So I think the whole thing sort of dovetails out.Again some of the benefits are, the $1,200 checks to all of our customers is a hugely great thing. The $23 million of liquidity is a great thing.

So we got a lot of good things, even though, overall this is not the perfect thing.In terms of looking at the industry, this is where it gets more interesting.

I think isn't the recession we were talking about and this isn't how we ever thought it would happen, but you probably very likely have had that arrive.We said for multiple years that a recession would have an interesting effect on the industry, this will probably fill that bill. We've already heard lots of other companies are slowing down.

Lots of companies have had layoff -- layoffs, a few companies have ceased to originate already. It'll be very interesting to see the overall effect on the competitors in the industry. Now the good news is we're here for the long haul, we don't have any of those issues, so we'll see.

But as longer it lasts, I think the more painful it would be for a lot of our friendly competitors. And you know, who knows, but I think this is something that the industry needed, I think in the end it'll probably be beneficial to all the people who are hanging around.

But again, it'll be sort of, we'll have to see how that affects everything.Hopefully we've covered most of the topics and I will open it now for questions..

[Operator Instructions]. Our first question is coming from David Scharf with JMP Securities..

Thanks for all the color, Brad, Jeff, and I hope everybody stays safe. Hey, Brad, I'm wondering as we look forward and you highlighted there are more unknowns than knowns at this point. For the next couple months it sounds like your expectations are the dislocations are going to lead to kind of having origination volume.

But since we really don't know A, when social distancing, sheltering and home is going to end, kind of the pace at which it all ultimately phases out, since we're not just going to flip a switch in a couple of months by any means.

Any sense for sort of, how many months of 50% or greater reduction in demand -- origination volume demand? Like at what point do you sort of readdress maybe the fix cost base of the company and sort of the size of the business? Because it may be more than just a couple of months of reduced capacity, obviously..

Certainly we're looking at all that. We've -- there's probably, I don't know, maybe three things we care about. Number one is liquidity. If you don't have any liquidity, you get all sorts of problems. Our liquidity is fine. Even before the tax refund our liquidity was fine for the next three to five months. With the tax refund it's much longer.

So we're not really worried about liquidity, but the way you manage the liquidity is by how fast you originate. We think origination volumes are going to be depressed for at least three months, maybe longer.

What we will do -- and initially our whole goal is to manage our originations based on liquidity.What we would like to do is originate enough loans each month to keep our loan portfolio at a static basis. To the extent that is impossible because this thing drags out. Yes, we would look at reducing fixed overhead. We reduce costs everywhere we can.

If nothing else, we've done this multiple times, two big times to be sure.

So it's not -- the good news is, and hopefully we learned from 2008, but if we had to, we could go back to doing exactly what we did in 2008 and make all sorts of changes and all sorts of cuts and make sure everything survives.We think we're probably in a far better position this time around. I agree with you. We don't know how long this will last.

Dealerships are open. They are selling cars online. We're actually surprised the volumes haven't dropped further and they might. So, we'll see. But I think the real trick here is to be able to sort of react and move in a dynamic situation. If this lasts too long or longer, we'll have to play along with that.

The most important thing for us is we have liquidity to manage through it, almost no matter how long it takes. If we have to cut cost, we will do it. We think in the end, it's probably more of a three to a five month problem than a 6 to a 12 month problem. But we'll see. The easy answer is, it's early in the whole process.

I think when people go back to work, that'll be a big step. When they start coming up with different ways to do the social distancing, that'll be a big step. We just don't know when those two dates are.

I guess the most important date for us is when the Wall Street markets will start being normalized.Having a couple of deals in the market this week is already a nice step. Like I said, we're not even really focused on the next month or two.

But given the next couple of months, we might think Wall Street markets will improve and get something more to a functioning level where we can access them if we need to. So, I could put a number on it, but that's what we can do..

Yes. No, listen, I mean, I kind of appreciate all the planning that's going around on your end given so many unknowns. Maybe one on the -- just the forecasting side and then I'll get in queue. I mean, so many variables have to go into the provisioning on the legacy and the mark-to-market on the fair value.

I'm wondering, what kind of broad assumptions about used car values, job loss, I mean, can you give us a little color on how you would characterize the over provisioning and marks that you've made, if you feel they were just overly conservative, a little on the aggressive side or just kind of best guess given current data in hand.

I'm just trying to understand sort of what went into the forward outlook at this point?.

Sure. I mean, the easy part is, experience helps. We can look at the 2008 pools and the pools originated in that timeframe and how they performed, if we use that, it’s hopefully the worst case, that's a good place to start.

And so, we assume that this shouldn't -- I mean we really think the whole job loss thing, I mean for us -- as I said numerous times, unemployment is the most important thing to have an effect on how our portfolio performs.

So, to the extent unemployment doesn't spike -- and obviously it's spiking, there's a different perception today with unemployment going up. But lots of people are just being furloughed and then having them come back.

So we would -- we're probably making one assumption that unemployment won't end up being as bad as 2008; and two, that it won't last as long.And so, if we make that assumption and say 2008 performance is the worst it’s going to be, at least for the moment, you probably provision along those lines in terms of how the pools will perform.

As the quarter goes by and it gets better or worse, we'd have to readdress those levels. But I think we're making what we hope to be a relatively safe bet, that our pool performance, and this again be the pools from sort of 2019 and 2020 won't perform any worse than the pools originated in 2007 and 2008.

And if we use that as a guideline it’s probably a pretty fair guess. It may end up being conservative, we don't know yet. But we'd rather be conservative than aggressive..

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

When you say, we're going to originate enough to keep our portfolio stable.

Does that -- is that just a summation of both the fair value and legacy portfolio or are we talking about fair value remaining stable while the legacy continues to amortize off?.

Well legacy is going to amortize off anyway. So what we in that comment were sort of saying, if our portfolio is 2.4 billion or 2.5 billion we would like it to stay there and try and lose a little ground on that number as possible. So that would be the level we're trying to maintain.

And for us that would be something in a 70 million and maybe a little bit more range. So right now we're going to give something -- we're going to be giving up a little if we do 50 million or so. But again, it's a little hard to tell.

But the real trick is we're going to give up a little bit for three months, four months, six months, we just don't know. So we’d like to keep that number..

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

That's correct. Yes. I mean all new originations go into fair value portfolio anyway..

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

Yes, absolutely right..

Can you tell me what the charge-off -- the dollar value charge-offs were in the quarter from the legacy portfolio? Usually they back into it, but I think with the one -- with the day one adjustment to CECL, I'm not sure I can actually back really back into it..

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

That's what I had gotten to. So I mean just, if we were to back out all the CECL adjustments, all of the tax benefit, the fair value adjustment, the change in the provision for the fair value portfolio and just took the charge-off figure as a provision. I mean you guys would be losing money at this point.

Correct me, is it safe to say that CECL is really the main reason why you're actually remaining profitable at this point?.

I mean the CECL provides -- really actually CECL provides this kind of odd or unusual transition, where when you're recognizing the net losses for maybe the next four years and you take that out of the provision expense, yes, then you have this sort of a revenue windfall from those receivables.

And we didn't do like a pro forma and I don't think we would do a pro forma that shows what the results would be without CECL, because you’d have to put in some other provision expense and it's really kind of a moot point.I mean, so, we want to help people understand the results obviously and what they represent.

And the CECL standard is just the cards that we were dealt and we managed it I think in the best way we could buy two years ago being proactive and adopting fair value. So we minimized the impact of having adopted in this quarter..

I think it’s also worth pointing out. I mean, the business is profitable for sure. By adopting from going with CECL, and then going with fair value, you're actually hurting yourself going forward with their values.

As much as you got a little bit of a boost from some of the CECL numbers in the legacy, you're actually losing some of those numbers on the fair value. So it's much more of a push than you might think. Certainly taking the COVID adjustments we've been taking has a significant impact that certainly we would hope would be a one-time effect.

So the basics of the business haven't changed..

Okay. I mean I know obviously you talked about being able to cut costs and stuff if things go further.

But my comment here is just that, the business -- regardless of the optics of how profitable it looks under CECL, I mean your salaries and expenses and G&A were still up 12% year-over-year, which is a fairly sizable number given what's kind of a stagnant portfolio.

Can you just talk about, regardless of a wholesale shifting and cost cutting because of this pandemic, is there any reason to think that you would cut costs or just try to keep them stable as opposed to double or nearly teen growth rate year-over-year?.

No, that we did some hiring, but we've also got automation coming in. We would expect those costs to go down substantially, almost any way forgetting about cutting costs because of the COVID thing. We're in a position where we staff up expecting a big growth year and then of course this isn't going to happen. So we've got some issues to work through.

Plus we’ve put in some new technology that'll take root over the next probably quarter or two. That'll allow us to really keep the overheads down as we grow, assuming we get to grow.

So we're a little bit in a tough spot because we expected 2020 to be very good growth year and we were set up for it and we thought the technology would actually help that make it easier.

The fact that we're looking at what we're doing now, we're going to have to look at that depending on how long this lasts and whether we get some real benefits within the industry from what happens.So, you're right, I mean both ways, the numbers aren't going up 12% annually for sure. And there's room to make some changes there either way..

Okay.

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

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

Thank you. Our next question comes from Kyle Joseph with Jefferies..

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

So have you seen somewhat of an offset there from lower competition?.

That's truly I think [$1,000] question because we are beginning to hear all the rumors going around the industry of what other folks are doing. Certainly a few people, I mean a couple of originators have quit originating, a bunch of people that had layoffs. A bunch of people are tightening. I would imagine almost everyone is tightening.

So we could actually be picking up some amount of volume from that effect. To be perfectly honest, we would hope that number would be a whole lot bigger and a whole lot longer and get better. So we'll see. We just don't know. The only thing we do know is we're not set up the way a lot of the other folks are. We don't have a PE fund behind us.

We don't have different flow programs and things like that that we have to worry about, whether they're going to be there in terms of selling paper. All we care about is the Wall Street market and being able to do ABS deals when we need to.So in many ways, our life is a little bit simpler than many of our friends. We'll have to see.

I mean, it's too early to tell. We've heard rumblings of all sorts of different things in the industry. We can't really put a finger on what's going to happen. But you're right. We probably are picking up something, which is too hard to tell just yet..

Got it.

And then follow up there, just in terms of pricing and you have been able to adjust pricing at this point or is it still too early?.

Well, we're edging in pricing to see. I think once we get a handle on what the volume levels will be, again -- and obviously if we want them to go lower, we can raise the price a little bit and see whether we get the business with the price or whether it goes away.

So, remember that, the easiest way to look at this sort of issue is March was great, all the way through the end of March, we either had enough inventory or enough volumes and we couldn't even tell anything was going on. So, now we're two weeks into sort of the new world and it's just too early to tell.

But on the one hand maybe we’ll get some more volume from other folks not playing. Maybe we could get that volume with a price increase. It's that we’re just two weeks in, we just don't know yet. All we know right now is volumes have slowed significantly in the first two weeks, which is exactly what we expected.

Whether they stay that way, they go down further, they pick up, we just don't know yet..

And then one last one from me. I appreciate the color in terms of your assumptions for the fair value marked and the incremental provision you provided on unemployment.

And from a residual value perspective, are you using 2008 as a model? Obviously, it's the most recent and most relevant, but factoring that there was cash for clunkers as well, what sort of assumptions are you making on the residual value side?.

We would -- at some point, argue our residuals should be just as good as ever. I mean, but the moment you just don't know. So, you right though.

Our parameters are -- you could argue if this thing doesn't last long and everybody got a check and we do have a couple of extensions and there is no serious job loss, at least within our portfolio, we could fare this thing pretty well. If it extends like 2008 and there is real unemployment, that's a whole another game.

So, I mean I just can't say right now which end of the spectrum you have. What we want to do is, to see people go back to work and see what it does to unemployment and then see what effect on unemployment that -- what last effect unemployment has on our people and our portfolio, we just can't tell you..

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

Thank you. Thank you everybody for attending the call. Obviously, these are challenging times. I guess the good news is we're set up to do this. We've spent a lot of time working on it in the last few months to make sure everything can work. We're a little bit lucky in sort of the way our industry works, being a service industry that we can keep running.

We haven't had to close a plant or something like that. All of our job titles are functioning and on the downside, this isn't the takeoff of the year we expected. We expected 2020 to be a super strong year and it's obviously going to have a dip and some downside in the middle. Hopefully, it comes back sooner.

And maybe the silver lining is, this is disruption in our industry we've been waiting for several years. And so, you just don't know. Like I said, importantly, we can get through it. Good side, maybe this is positive changes for us.

The bad side is, this is probably hopefully no worse than 2008 and given how early we are in the cycle, it's about all we can get to. So, thanks for attending and we'll speak to you next quarter..

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

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