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Consumer Portfolio Services (NASDAQ:CPSS)

Q1 2013 Earnings Call

April 17, 2013 1:00 pm ET

Executives

Charles E. Bradley - Chairman, Chief Executive Officer and President

Jeffrey P. Fritz - Chief Financial Officer, Principal Accounting Officer and Senior Vice President

Robert E. Riedl - Chief Investment Officer and Senior Vice President

Analysts

Kirk Ludtke - CRT Capital Group LLC, Research Division

John Hecht - Stephens Inc., Research Division

Operator

Good day, everyone, and welcome to the Consumer Portfolio Services 2013 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 within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements made during this call that are not statements of historical fact may be deemed to be forward-looking statements.

Such forward-looking statements are subject to certain risks that could cause actual results to differ materially from those projected. I refer you to the company's SEC filings for further clarification. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

With us here now is Mr. Charles Bradley, Chief Executive Officer; Mr. Jeff Fritz, Chief Financial Officer; and Mr. Robert Riedl, Chief Investment Officer of Consumer Portfolio Services.

I'll now turn the call over to Mr. Bradley.

Charles E. Bradley

Thank you, and welcome to our first quarter earnings call. I think you can see from the press release, we had a very good quarter. We're very pleased with the results in terms of the earnings both -- almost throughout both top line, the expenses, the bottom line earnings, they've all been what we would have expected and are certainly in line with our expectations, and so for us, it's a very good start to the new year, just about in line with everything we talked about.

I think originations were -- they went up substantially, in line with what we'd expect for the year. They probably didn't quite peak to where we thought they might, but I think part of that's just because of the sort of slow roll this year with the tax refunds, and so we grew substantially, but not quite as much as we might usually grow. But again, I think we'll touch on that a little bit later, but there's a little more competition and again you can't really chase the loans.

In terms of collections, our collections continue to perform very well. Our portfolio is now growing, so we're in fact adding new collectors what with very strong results there as well. We did another securitization. It was the lowest cost of funds ever achieved in a securitization by our company. We keep saying the rates keep getting lower, and it's surprisingly that they continue to still go down. I guess, at some point, they've got to bottom out, but our margins have remained strong, and so we have plenty of room in terms of going-forward margin.

We actually had a stronger discount in the first quarter than we would have expected, and our coupons have remained strong throughout. So in terms of our cost of funds, we've done very well. We did, in fact, renew one of our warehouse lines, the Goldman/Fortress line was renewed, as we announced during the quarter. And we continue to work on strengthening our balance sheet as we go forward. And we'll talk a little bit more about the sort of the industry results in a minute. I'll turn it over to Jeff Fritz to go through the financials.

Jeffrey P. Fritz

Thanks, Brad. Welcome, everybody. Beginning with the revenues. Revenues for the quarter were $54.6 million, that's an 8% increase over the previous quarter, the fourth quarter of 2012, and a 23% increase over the first quarter of 2012 of $44.5 million. The revenues, of course, were tied to -- indirectly tied to our consolidated portfolio. It was aided by originations of $180 million here in this first quarter and the consolidated portfolio is up 9% for the quarter, quarter to quarter, and 31% compared to year ago.

Moving to the expenses. $48.1 million for the quarter, that's an increase of 5% over the previous quarter and an increase of 9% over the year-ago quarter. We're really kind of falling into a pattern now on expenses over the recent quarters. We've had slight growth in the core operating expenses reflecting the growth in the business, but somewhat offset by realizing some economies of scale. And we've had, generally, decreases in interest expense over the last, I think, 5 quarters now as a result of the runoff of the higher cost ABS and those being replaced by newer -- lower cost ABS financings.

And then the other pattern we've seen regularly is an increase in our provision expense for our credit losses, which have increased, but are in line with our expectations and based on originations and portfolio growth.

Looking at the loss provision specifically, $15.1 million for the quarter, that's a 31% increase over the previous quarter and a whopping 200% increase over the first quarter of 2012. Again, those increases are very much in line with our expectations and forecast of budgets based on the growth in the originations volume and the growth in the consolidated portfolio.

Pretax earnings for the quarter, $6.5 million, a 41% increase over $4.6 million in the previous quarter, and a giant increase over the $0.5 million in the first quarter of 2012. Net income for the quarter, $3.8 million. That's -- here, we're going to get into some comparison issues comparing this quarter's net earnings after tax with the previous quarter's. You'll recall in the previous quarter, we had a reversal of our valuation allowance for deferred tax assets of $60.2 million, all in that fourth quarter. So last quarter's net income was $64.8 million, of course, significantly reflected by that tax benefit. A year ago, there was no tax income -- or income tax expense, and so the after tax is the same as the pretax.

Diluted earnings per share for the quarter was $0.12. That's a significant increase over a year ago of only $0.02 and again, the fourth quarter's was impacted significantly by that reversal of the valuation allowance under deferred tax assets.

Moving on to the balance sheet. Unrestricted cash was $13.9 million, that's up a little bit from $13 million from the previous quarter and up a little bit more from $10.6 million a year ago. Our restricted cash balance is $139.4 million. That includes, as it does almost every quarter for the last 5 quarters now, a significant deposit associated with the pre-fund of our most recent securitization. Of that $139.4 million, $68.7 million reflected the pre-fund proceeds, which were utilized in the pre-funding of the 13A securitization.

Moving on to the finance receivables. The balance of finance receivables after the allowance for loan losses was $832.5 million, an increase of 12% from the fourth quarter of last year and an increase of 53% to compare to the year-ago quarter. That does not include our fireside portfolio, which is reflected separately and recorded at fair value. That portfolio now, we've had and owned for about 18 months, it's $43 million, and that continues to amortize at now 28% from the fourth quarter of last year, down 68% from a year ago.

Looking at the debt side of the balance sheet. The warehouse lines was 28 -- $26.7 million at the end of the quarter compared to $21.7 million in December and $28.9 million a year ago. You recall, we have $200 million of aggregate warehouse capacity, but at the end of each of these quarters, we will have -- we are always completing our quarterly asset-backed securitization and generally only have nominal use of those warehouse facilities at that time.

Most of these other captions are pretty static: the residual financing, the long-term debt. The securitization of $901.7 million reflects our most recent securitization, 13A, for $185 million. But this picture did change a little bit with respect to residual financing and long-term debt after the quarter, and Robert will go through a little bit more detail on that when I'm through.

The managed portfolio, now $968.5 million, compared to -- that's an 8% increase over the fourth quarter and a 24% increase over a year ago. The sort of non-balance sheet components of the managed portfolio are really shrinking and running off. We have a not off-balance sheet securitization. That's only $12 million at the end of this quarter and a little third-party servicing portfolio down to $8 million.

Moving on to some of the performance metrics. The net interest margin for the quarter was $38.3 million, that's 16% increase over the fourth quarter of last year and a 72% increase over the first quarter of 2012, the year-ago quarter. Again, these numbers are significantly reflected by the very good cost of funds, low cost of funds that we're getting on the new ABSs, offset by the runoff of the higher cost ABS, which gets smaller and wind down and get paid off with each successive quarter.

The risk-adjusted net interest margin, which reflects the provision for loan losses, $23.1 million for the quarter, that's up 8% from the previous quarter and up 33% from the year-ago quarter. So even with the increasing provision for expenses, which I'd talked about and which are in line with our expectations, we're still seeing significant improvements in the risk-adjusted NIM.

Core operating expenses for the quarter were $16.6 million, that's down 1 percentage point from the fourth quarter and down 2 percentage points from the year-ago quarter. As I alluded to, our core operating expenses are really starting to show the economies of scale. We've seen relatively little growth in the core operating expenses, even as the portfolio and the revenues have grown significantly.

Looking at those expenses as a percentage of the managed portfolio, 7% of -- for the quarter just ended and that's a decrease of 8 percentage points compared to the fourth quarter of 2012 and a decrease of 19 percentage points from the year-ago quarter, first quarter of 2012.

One last metric, the return on managed assets, as a percentage of our -- the return on managed assets, which is our pretax income as a percentage of our average managed portfolio, 2.8% for the quarter, and that's an increase of 32% compared to the previous quarter and a whopping increase of almost 1,000% compared to the first quarter of 2012.

And with that, I'll turn it over to Robert.

Robert E. Riedl

Thanks, Jeff. First of all, going through some of the portfolio performance metrics. On the delinquency side, we finished the quarter at 4.16%, down from 5.55% at the end of December, and up slightly from March of last year at 3.51%. We're seeing, definitely seeing some impact from the first quarter tax refund season in the improvement, sequentially. We're up slightly year-over-year. And as folks have alluded to, tax refund delays I think definitely had an impact there. We would expect our delinquencies to improve through April, which is not typically the case.

On the net loss side, annualized net losses for the first quarter were 4.23%, up slightly from the December quarter of 4%, and as well up slightly from a year-ago quarter of 3.9%. Year-over-year, we're up slightly, but compared to any of the first quarters in the last cycle, we're still at a much lower level.

At the auction market, we saw a strong seasonal uptick in the first quarter. We were at 49% in the first quarter this year compared to 46.8% in the December quarter and 48% a year ago. That's tied to tax refund season as well. We'd expect, going forward in the year, to see a little bit of softening in that, but still we would expect a strong number given the industry dynamics of lower production in the last few years.

Looking at the capital market side, Brad and Jeff have alluded that we did have a busy start of the year. We did our first securitization in March, the 13A, $185 million, lowest cost of funds ever for the company at $187 million. That deal was very similar to the last few deals where we had 5 tranches, a rate of [indiscernible] both S&P and Moody's and a pre-funding structure. And we continue to move that blended cost down from 2.05 in the December deal and 2.5 in the September deal, so we're still making strides there.

Brad mentioned, we also renewed one of our credit facilities. It's a $100 million line with Goldman/Fortress. We renewed the revolving periods, so that's -- they have 2 years that revolves. And we also added a 2-year amortization period. That will give us increased flexibility, depending upon the capital markets environment at the time of the end of the revolver.

We were also able to move the advance rate from 82% up to 88%, which enhances our liquidity.

Last week, we also did a couple of things that were important for the long-term improvement of the balance sheet. We entered into a new residual facility, $20 million, that is secured by 2 of our newer deals, the '12-C and '12-D transaction. It is able to bring down the cost on that versus our existing residual at LIBOR plus 11.75%, and we were able to extend the maturity on that also, so that's a 5-year term versus the kind of the one-year terms that we've had in our long-standing facility. We would expect to have interest-only payments on that for the first few months of the deal before we start amortizing, but we have 5 years to fully repay that.

With most of the proceeds there, we were -- we paid down $15 million of our senior secured debt and that was the $50 million that was on the balance sheet at quarter end that's due in December. As part of that repayment, we amended that transaction to decrease the interest rate from 16% down to 13% and we extended the maturity of the remainder from December of this year to June of next year. So on a blended basis with this new residual and the decrease on the -- the decrease in the interest rate on our senior secured debt, we decreased the blended cost of our corporate and residual debt on the balance sheet by over 200 basis points.

With that, let me turn it back to Brad.

Charles E. Bradley

Thanks, Robert. In terms of looking at the industry, I think everyone -- we certainly hear a lot of comments throughout that the industry has become very competitive. I don't know that it's particularly getting more competitive than we've seen in the past. I think you sort of have a combination today of a few, what we'll call overly aggressive companies out there, buying somewhat irrationally because they either need the growth or for whatever reason, but we certainly see that often and it happens every -- certainly every cycle, and we see it on a relatively frequent basis. And for the most part, you let those people run on towards the cliff, whatever they're doing, and you don't worry about it. On the other side of the spectrum, we also are seeing, and have continued to see for the last almost 18 months, lots of new small start-ups. And to the extent they're well managed and well run, then they grow very slowly, so they're not particularly a factor in terms of what we're doing. To the extent they grow really quickly, then they join that first group where they're growing too fast and they cause their own problems.

Within that environment, we've always -- it's somewhat repetitive. But in terms of our growth strategy, within that is we never affect our credit in terms of how we grow. We grow by expanding our geographic footprint and adding more marketing people. And as I've said many times in the past, you can put people in new markets and you're going to get some amount of business just because of your presence in that market as opposed to having to truly compete until you've really saturated the entire country. And even at this point, as much as we've grown quite a bit, we have not even come close to reaching that saturation point.

Today, we currently employ 75 marketing representatives. We used to have as many as 125. One of the things we mentioned in earlier calls, even last year, was our strategy of doing a lot of hiring in the spring and summer and then getting those people trained and when they hit sort of the growth period, which is usually the first 6 months of the year that they'd be well positioned to do well during that. And so we hired a whole bunch of people last year to get to 75 marketing reps, and it's turned out that, that has paid off rather well in that they're all now experienced. They're doing a very good job of growing and achieving the growth we're looking for this year because they've had 6 months of seasoning as we came into the growth season.

We will probably do exactly that strategy again this year, grow, maybe add another 25 or 30 reps, so that we'll be well positioned to grow again next year. So we really wanted to try that out. It's worked tremendously well for us, and we'll continue. And one of the real benefits of that is that sort of keeps you away from having to look at what you're doing and compete with anyone. To the extent we're just adding people, they're going to compete in those markets and achieve some foothold regardless of what the other folks are doing. So it's been our long-standing strategy. It's worked very well, and we're going to continue to employ it.

In terms of the collection branches, as everyone knows, we have 4 collection branches. When we had downsized because of the last recession, a couple of years ago, we kept all those branches in place. As I think I mentioned earlier in the call, the portfolio's now growing again. We are in a terrific position in terms of having lots of well-seasoned collectors, middle management in those branches. And so as we expand and grow and we need to hire more collectors, we're going to have a very seasoned management team to train those new people. And so we should have rather seamless growth in the collection structure or infrastructure needed to handle the growth of the overall portfolio. Again, I'm not so sure all those other companies can say that. It's one of the things we certainly planned on, and it will pay big dividends as we grow this year and in the following years.

One other interesting note is because of the high margins and the low cost of funds, we are developing a lot more cash than we've ever had on the balance sheet before. As Robert pointed out, we've done a couple of transactions to sort of bring down our cost of funds, pay down some debt. But not only do we have that, but now we're beginning to sit on significant amounts of cash, which again gives us a lot more liquidity, it gives us a lot more flexibility in terms of how we do things. That, I must admit, we may not have planned on because certainly last year or 18 months ago, we wouldn't have planned on having the cost of funds in the industry remaining so low or in Wall Street and [indiscernible] us to maintain even higher margins than we expected. So we think that's a very -- obviously, it's a very good result, and we don't see any reason why that won't continue in the future.

In terms of the overall economy. I think, Wall Street is still doing what we've talked about. The rates are exceedingly low, we're getting tremendous execution on our deals. It's also, as we pointed out in redoing our balance sheet, giving us real opportunities to bring down rates, get lower cost of funds and, in fact, pay off some more debt. And so that's real good. And I think the overall look in terms of car-buying remains strong. I think this year, we did experience a little bit of a different thing because of the fiscal cliff issues in Washington and then the slower tax season. Normally, we would see a lot of growth in sort of the February, March and April. And based a lot on the tax refunds. And also the first quarter performs very well when all that money comes in, in terms of asset performance. So this year, we think it's drifting into the second quarter, so that April and May, which usually are a little softer than the first quarter, could be much stronger in terms of portfolio performance metrics of losses and DQ [ph]. And in the same token, we may see a little more growth in the second quarter then we would in the past. So we'll sort of have to see how that goes. Either way, we've achieved enough growth this year to where we're very close to our targets anyway.

In terms of the future. I think, ironically, if you sort of look at how the company performed in 2005, 2006, 2007, that was a nice big growth cycle for us, and it wouldn't be hard to imagine us doing very much the same sort of thing, with the exception that because of the low cost of funds and the better capital structures, we're going to probably become less leveraged significantly in this run than in that run. But in terms of us growing and moving along, it's not hard, given we've done this a few times to look at those sort of years as sort of a template for how we might achieve in the future.

Generally, overall, as I said, originations have been very good, the collections remain strong. In terms of our infrastructure, everything's terrific. In terms of our balance sheet, it's better than we expected, and we'll continue that trend. So we're very pleased with how this year started off and certainly expect it to continue as we go through the next few quarters.

With that, we'll open it up for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Kirk Ludtke of CRT Capital Group.

Kirk Ludtke - CRT Capital Group LLC, Research Division

You mentioned in the -- in your remarks that there are pockets where the market's becoming more competitive. And yet you're not -- your underwriting standards haven't changed. You may have mentioned this, but I missed it. Can you talk a little bit about pricing trends?

Charles E. Bradley

Sure. I think we're willing to compete on pricing not on credit. And so we've been a little surprised that this year we were able to maintain our growth strategy goals without really having to change the pricing. And that's probably much more because of the expansion of our marketing group. As I said, we added 30 or so people between spring and summer of last year until now. And so those people really gained their footing in the last 6 months of last year to where they were able to do lots of good things this quarter and, hopefully, in the quarters coming along. And so we really haven't had to compete, particularly, on pricing. We have kept their numbers about where we thought. I think we thought our discount could drip down to 3%. It's maintained closer to 4%. Our APR has sat around 20% the entire time, so we really haven't changed anything in pricing. And like I sort of mentioned, we've actually done a little bit better on the discounts, so we're very pleased with how that's happened. And again, I think in some certain places, there is more competition. Pick some place like Texas. We tend to see a lot more start-ups in Texas. There are a lot of bigger companies in Texas, so to pick a place where maybe they have been competitive, we've lost a little market share, it would be there, but based on the overall geographics, it wouldn't -- it doesn't really matter to us.

Kirk Ludtke - CRT Capital Group LLC, Research Division

That's helpful. You mentioned that you're building more cash than you may actually need to run the business. Is there a level of cash above which you'd start using that cash to pay down debt, or do you have a target cash level?

Charles E. Bradley

For a minute, I thought you were going to say we're going to have a dividend. That's really not on the horizon. But yes, I think to the extent we build up more cash, that we continue on the trend line of building up, not excessive amounts of cash but more cash than expected, yes, we would continue to look for ways to pay down our debt. Our dividends are a little in the future.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Is there a level of cash that we should think about as a target level?

Charles E. Bradley

Well, I think sort of an easy way to think about it is, we have to have a minimum amount of cash on balance sheet, about $8.5 million. And for a long time, particularly during the lean years a few years ago, we would be skating right around that $9 million, $10 million range. Today, we probably carry something closer to $20 million to $25 million in cash, and so it's hard to say right off. One of the things you can do when you're sitting on cash is use it to supplement your warehouse lines. And so that's one area that we sort of get an advantage. In terms of how we're going to pay down debt, it's really when it comes due, the residual, the old residual, as we'll call it, is due in October. So there's a good chance we could pay that off if the cash continues to exceed what we expected. We have the remainder of our senior lender debt due next April. We would expect to pay that off as well.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Do you think you can pay that down with internally generated cash, or would that be -- would some portion of that need to be refinanced?

Charles E. Bradley

If trends continue, we'd probably do some portion of it refinancing. Certainly, to be safe, that's what we assume. If the cash continues to do what it's been doing, there'd be an interesting decision to make next April. We certainly could pay the debt this fall with cash. Next April, we have to see how we do the rest of this year.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Great. The share count moves around with the share price, and could you remind us the total number of shares and warrants and options that are in the money?

Charles E. Bradley

Well, I think at this point, if all the options and such were exercised, you could have something in the sort of 33 million to 34 million share range. It's a little complicated given there's a treasury stock method in terms of how the shares are accounted for. But the easy answer is as the stock continues to go up, those shares will become much easier to sort of see on the balance sheet.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Right, right. That's helpful. And the provision for credit losses was up, as you mentioned, a little bit. Is there a normalized provision that you can -- I know you don't give guidance, but is there a normalized level of provisioning that we should think about?

Charles E. Bradley

It's really the methodology of how we achieve a provision. You got us on what the normalized level would be?

Jeffrey P. Fritz

Well, I mean, I think we'd be looking for it to settle in at around 7%.

Kirk Ludtke - CRT Capital Group LLC, Research Division

Okay. So we're pretty close to that already. Okay, so it should level off. And then lastly, Robert, you mentioned the seasonality of delinquencies. Is this the new normal? Should we expect this cadence going forward?

Robert E. Riedl

I don't think so, Kirk. I mean, there's clearly some things that were going on in that with the politicians in Washington and the budget deficits, so they didn't start accepting tax returns until 2 weeks later than typical. So for the moment, we would say this is probably a one-off, but who knows.

Operator

[Operator Instructions] Our next question comes from John Hecht of Stephens.

John Hecht - Stephens Inc., Research Division

Just a little bit more on the competitive environment. I'm just wondering, your key lending programs, where pricing and fees were, say, a year ago and where they are now. And is it across the board or is it only in a few select kind of cycle ranges that you're seeing the competition change?

Charles E. Bradley

Well, if you look back at sort of -- I think, from sort of the way we would look at it, the APR's basically been the same for the last couple of years. Our discount 3 years ago was nearly 10%, and so it's drifted from 10% down to 4%. And that's probably been distributed across all the programs in terms of what we've given up. And I think last year, our goal was to keep the discount around 5%, and we did just about that. Our goal this year was to keep the discount around 3%, and so we're expecting to give up some of that pricing, remembering that in sort of a fully normalized environment, our discount used to be 1.5 points. And so this year, we've done a little better than expected in that we're still running close to 4%, when we might have expected it to drift down into the low 3. And it may still do that. To the extent we look at our growth targets and such, we could give up 0.5 point whenever we want. But I would imagine -- again, if you're going to pick some numbers, we would expect the discount to stay around 3% this year, if not higher. But in terms of what we've given up since last year, what did the discount end last year at?

Jeffrey P. Fritz

It was 4%.

Charles E. Bradley

Right. So we really haven't given up too much since last year, but the year before it ended at?

Jeffrey P. Fritz

8% or 9%.

Robert E. Riedl

Yes, I mean I think within the last year, John, we have given up some. I mean, first quarter last year, we were around 7% on the discount, and we've strategically cut price to help volume growth.

Charles E. Bradley

Right. But I think what's interesting is that we went from 7% last year, ended the year at 4%, and we still have room to go, and we really haven't had to give up anything this year. That's a little surprising to us. But again, we have the room to go to 3% if we wanted to and still be within our targets.

John Hecht - Stephens Inc., Research Division

But on the yield side, pricing, you mentioned, what -- anything there to talk about?

Charles E. Bradley

In terms of...

John Hecht - Stephens Inc., Research Division

Other than -- I mean, you talked about discounts, but about pricing?

Charles E. Bradley

No, we're pretty firm in keeping our APR with a 20% handle on it, and it really -- it hasn't gotten close to 21%, but it certainly hasn't gone below 20% either. So we would expect to maintain that number.

John Hecht - Stephens Inc., Research Division

And just to give us context, in, say, 2007, where the environment was fairly competitive, where were yields on that at that time?

Jeffrey P. Fritz

5, 6 years ago, John, APRs were about 18%. So those were our coupons and our fees, as Brad mentioned, were between 1% and 2%.

John Hecht - Stephens Inc., Research Division

Okay. So you still got -- it's still a much better pricing environment than it was then?

Jeffrey P. Fritz

Absolutely.

Charles E. Bradley

Right. Both in terms of those 2 yield numbers and then when you have the overall Wall Street pricing, it's still way better so.

John Hecht - Stephens Inc., Research Division

Okay. And then with respect to the securitizations, you mentioned the 5 tranches. Where are you selling down to with the 5 tranches?

Charles E. Bradley

Single B.

John Hecht - Stephens Inc., Research Division

Single B. What's that? What's the kind of residual value that you guys hold after that in terms of the percentage of that to par?

Robert E. Riedl

We hold about 1%, John.

John Hecht - Stephens Inc., Research Division

Okay. And do you -- Bob, where do you think spreads could go in the near term? You think they're stabilizing at the low end, or do you still think you might get some release?

Robert E. Riedl

Well, for us, remember, John, we still -- our senior tranche is a AA by S&P and an A1 by Moody's. So as we continue to show improved performance on financial statements and delever the balance sheet, we'll have -- I would say, within the next year or so, we should be able to get to kind of AAA levels. If we're able -- once we're able to do that, we should be able to bring our spreads in further. In terms of, kind of, with our current structure, we're probably -- we're close. I think deals that have continued to come out are still seeing very strong demand. So I think our blended spreads today for the next year are probably going to be in the same ballpark once we get to that AAA. On the senior tranche, though, we should be able to bring the whole thing in.

Charles E. Bradley

So it's probably a safe way to look at that would be, at some point, these numbers have to go up slightly. So if we do get to AAA, that will be a cushion against it going up, say, this year. So we might look at it as much as we might -- we have some little more conservative projections. It's probably not a bad guess to think our yields, at least for the next 6 to 9 months, stays the same in terms of our cost of funds.

John Hecht - Stephens Inc., Research Division

Okay. In terms of the vintage analysis, how does -- I know it's young, but how does the '12 vintage look on a kind of static pool curve basis relative to other years?

Robert E. Riedl

It's still really strong, John. I mean, I would say you go back and you look at our 2010 vintage, it's running much, much lower than anything we've seen before in the history of the company, kind of mid- to high-single digits. 2011's a little bit higher. Maybe it gets to 10%. 2012 is a little bit higher than that, but still as good or better than anything we saw from kind of the first versus the last cycle, which '03 and '04 were 12%, 13%.

John Hecht - Stephens Inc., Research Division

Okay, got you. That's good perspective. And finally, is there any other corporate debt that you guys can refi in the next few quarters? Or are we kind of -- in terms of your corporate interest expense, are we stabilized there?

Charles E. Bradley

Well, as I mentioned a little bit ago that we do have the other residual deal, which is around $14 million coming due in October. We could pay that off.

John Hecht - Stephens Inc., Research Division

So what's that yield cost to financing?

Charles E. Bradley

About 13%. I think it's 12 7/8%. It's something like that. So we could take that piece out. But we really only have that piece, the new residual of $20 million, and then the $37 million of our senior debt that's due next April -- or not due next April, but we could pay it sometime next year. And so those would be the 3 pieces we look at. In terms of the retail notes, we probably aren't as concerned about paying those since what we can do is lower the rates as we continue to renew those.

Operator

I'm showing no further questions at this time. And I'd like to turn the conference back over to management for any closing remarks.

Charles E. Bradley

Well, thank you all for attending this call. I think as we sort of said and gone through it, we had a very nice first quarter. It's right in line with all we would expect. We also think it positions us for a very good year in 2013. We've ironically sort of been here before. And while it's nice to see that as we sort of get to repeat sort of what we've done in the past, we've been able to tweak things, improve things, so as much as this is sort of our third cycle through, we're at least starting out on the right foot to make it the best cycle we've ever had. So thank you all for attending, and we'll talk to you next quarter.

Operator

Ladies and gentlemen, this does conclude today's conference. You may all disconnect and have a wonderful day.

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