Consumer Portfolio Services, Inc. (NASDAQ:CPSS)
Q1 2016 Earnings Conference Call
April 26, 2016 1:00 PM ET
Charles Bradley - President and Chief Executive Officer
Jeffrey Fritz - Executive Vice President and Chief Financial Officer
David Scharf - JMP Securities
Kyle Joseph - Jefferies
Mitchell Sacks - Grand Slam Asset Management
Good day, everyone, and welcome to the Consumer Portfolio Services 2016 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 facts 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 and Mr. Jeff Fritz, Chief Financial Officer of Consumer Portfolio Services.
I’ll now turn the call over to Mr. Bradley.
Thank you, and thank you everyone for joining us in our first quarter conference call. This is sort of the quarter, where we’ve always spoken to rather recently. So there’s not a whole lot different, but some interesting things to discuss.
First quarter went very well. It came in line with pretty much exactly where we thought it would be. So that’s sort of a good – an easy part. Some interesting things are originations in marketing, I think, on the previous – probably the previous two years, we said, look back to the different dynamic in terms of tax refunds and what we usually look that is the growth cycle being in the beginning of the year. And then, of course, I said, well, a couple more years we would say that the big growth period in the beginning of the year is really there anymore, and of course, this year it was.
And so we had a very strong first quarter in terms of originations growth. It started in about February, continued through March, and it’s continuing into April, and that was beginning to add some. Now whether that’s because they come up with a different way that distribute the tax refunds, where they did it sooner or faster, it’s really hard to figure out. And to be honest, I don’t know that we really care. What we care is, we’ve got a nice little kick in the first quarter, which we didn’t have in the previous two years. That enable us to have a strong originations. strong originations, we actually got back to our 2007 levels. March was a record moth in terms of originations in one month.
So overall that works very, very well. Collection continues to be a challenge, and we’re starting to figure a few things out, a few more things out. And so as much as the numbers don’t reflect it, we think we’re getting sort of where we want to go and hopefully the results will improve over the next few quarters. Probably the more interesting thing is the ABS market. It has gotten much more difficult, not difficult, but the price and cost of funds has gone up significantly over the last few quarters. It certainly different world than a year ago in terms of what it cost to get securitization done.
Having said that it’s not like, we can get one done, it’s more like, it’s just going to be little more expensive. Interestingly enough, in past quarters or even a year ago, the top part of our bond, the AAA, the AA a year ago that we didn’t have AAA, but at top part of the bonds, the AA, A were harder to sell. And we used to get lots of orders for lower-end of the bond as the BB, B, and BBB, it’s almost reverse now. We got lots of interest in the high-end and it’s much more difficult to sell the low-end.
And so, certainly, the word on the street is the type of quality. And I think, overall that might push the – overall cost up than it has. But I don’t know we obviously have a lot of room in terms of cost of funds. So what we’re sort of hearing in the world is it probably going to affect other people lot more than it might affect CPS, that’s good thing. You don’t really want to hire cost of funds, what we certainly knew at some point, we’ll get back to the historical levels.
Having said that the cost of funds still below, but we look at it our historical average in terms of what it cost to get deals done. There’s still lots of appetite, but the people in the market mostly want to get paid a little more. And so that’s sort of an interesting new dynamic in that market that might be somewhat challenging as we go forward, so we will see.
Overall though, we also saw really [ph] the 25th year, the company. And I don’t know there’s much of anyone out there who can say that. And with 25 years in the industry, we certainly have the experience. We know what we’re doing at this point and we’re starting with our cycle, it looks like a few people might be having few problems, we’re not. So I think that 25 years certainly is going to come into play as we go forward.
With that, I’ll turn it over to Jeff to run through the financials.
Thank you, Brad. Welcome, everybody. We’ll begin with the revenues $100.6 million for the quarter, that’s a 6% increase over the December quarter last year of $95.3 million and a 17% increase over a year ago with revenues of $86 million for the first quarter of 2015, obviously all of our revenues are growing pretty much consistent with the portfolio. We originated $312 million in the first quarter of 2016 and the consolidated portfolio grew about 6% for the quarter and 25% year-over-year.
On the expenses $88.4 million for the quarter that’s an 11% increase over the fourth quarter of 2015 and a 24% increase over $71.2 million for a year ago. Most of our expenses growing pretty much consistent with portfolio although not as, not quite at the same rate and so we continue to see the operating leverage that we’ve been promising for some time and I will talk a little bit more about that metric as we get further down on the call.
Provisions for credit losses $44.2 million for the quarter, a 22% increase over the December quarter last year and a 32% increase over the first quarter of 2015, obviously we’ve talked for several quarters now about the headwinds we’re facing on the credit performance side, provisions are keeping pace with that and that’s just where we are in the credit cycle and part of the challenges that we faced in the collections environment.
Pretax earnings $12.2 million for the quarter that’s a 23% reduction from the fourth quarter of 2015 and a 70% reduction of $14.7 million in pretax earnings a year ago, obviously reflective of primarily in increases in credit and provisions for credit losses and also interest expense in this period.
Net income was $7.2 million that’s a 20% reduction from the $9 million in the previous sequential quarter, the December quarter and a 13% reduction of $8.3 million for year ago. And the diluted earnings per share $0.24 for the quarter, again a 17% reduction from the $0.29 in December, and 8% reduction from $0.26 a year ago.
Moving onto the balance sheet, not very much changing going from the quarter-to-quarter in the balance sheet, one thing you may notice if you compare the cash balances from this period, compared to the March quarter a year ago, as we no longer have this big slug of restricted cash on the balance sheet at the end of the quarters, because we changed the timing of our securitization transactions to be in the first month of the quarter rather than the last months of the quarter and so the restricted cash that you see is really for the most parts of credit enhancements for the account deposits and some payments and process that are distributed to the trust in the month following the quarter.
And the finance receivables balances we’re at $2 billion net of the allowance for the quarter. At the end of this quarter that’s a 6% increase over the year-end and a 25% increase over year ago when it was $1.6 billion. The net allowance of $80 million is pretty much flat from the fourth quarter as a percentage of the portfolio and essentially we have been growing that pretty steadily throughout 2015 and it’s kind of flattened out a little bit. We’ll look forward to see what’s going to happen this year much that is tied to not only our portfolio growth, but obviously the underlying credit performance and the age of the portfolio, which is aging slightly as we go forward here.
On the debt side again nothing unusual happening here one thing you may notice tied again to our change in the timing of our securitization is at the end of these calendar quarters we’ll see higher balances of the warehouse lines, because we’re building those portfolios and better refinance with the warehouse lines. And then they’re not paid down until the first month of the calendar quarter as opposed to the last month of the calendar quarter, which we’ve been doing until the first quarter of this year.
Moving onto some of these other performance metrics, the net interest margin for the quarter was $82.8 million that’s a 4% increase over the December 2015 quarter and a 14% increase over $72.8 million from a year ago. Significant component development in this metric is just the aggregate cost of the ABS the asset-backed securitization trust debt and it was about 3% of the aggregating all the deals for the first quarter was about 3% that’s flat, compared to the fourth quarter of 2015, but its increasing from 2.75% from the first quarter of 2015 so obviously it’s starting to reflect the general rising cost of those deals throughout 2015 and through the first quarter of this year.
The risk adjusted NIM, which takes into account the provision for credit losses $38.6 million and 11% decrease compared to the fourth quarter of 2015 and a 2% decrease compared to year ago reflecting obviously as we’ve talked about the increased provisions for credit losses.
On the plus side, the core operating expenses for the quarter $26.4 million, that’s actually down 4% from the December quarter and up only 7% from a year ago. So we continued to – on the core operating expense side, we continue to realize these efficiencies and operating – improvements in operating leverage as this manifested by this next ratio, the core operating expenses as a percent of the managed portfolio down to 5% for the first quarter of 2016 that’s a significant increase from 5.5% in the fourth quarter of 2015 and also compared to 5.8% from a year ago. And we think this is an area where in spite of the other headwinds we are facing will continue to see some improvement in this metric.
So to the bottom line in terms of these ratios, the return on the managed assets as a percentage of the average managed portfolio, pretax 2.3% for the quarter that’s down from 3.2% for the fourth quarter of last year and down from 3.5% from a year ago that aggregates all those other factors and components that we’ve talked about.
Moving on to the credit performance, delinquency, all-in delinquency for the quarter 8.97% that’s a slight improvement over 9.53% from December and an increase from 6.86% from a year ago. The net annualized losses for the quarter 7.57%, again a slight increase from 6.2% in the December quarter and 6.6% compared to the first quarter of 2015.
We did a little better reverse the trend by doing a little bit better I have the auction, wholesale auctions of liquidation of our vehicles 39.9% for the quarter, up just a little bit an improvement from 38.3% in the December 2015 quarter, but you can see how much that changed compared 43.8% from a year ago.
Quick comment on the asset-backed securitization market, of course the deal that we did in this calendar – in the first quarter of the 2016, we actually did on January and I think we talked a little bit about that on the last – on the year-end earnings conference call, I mention and we did just at a press release for 2016 B deal, which we closed last week that was $332.7 million. It was our kind of usual structure with the two AAA ratings of the top.
Some of the highlights of that deal, we increased our unique investors, require in 22 unique investors, which is an increase compared 19 and the 16 a deal and also noticed eight new investors. It’s very interesting that even though the cost of funds arising is not indicative of a lack of liquidity and activity in these markets.
As Brad said this deal reflected what the bankers have told us to expect, which was a flight to quality, a significant demand and oversubscription on our class A and B bonds, offset somewhat unfortunately by less demand at the lower end of the cap structure were the higher rate bonds are.
And also to point out that trend that dynamic market is really across asset types, not the subprime auto type dynamic, it’s really what we’ve seen and what our investment bankers are seeing throughout the market.
And with that, I’ll turn it back over to Brad.
Okay, so I think starting with the front end of the business, we’re kind of very happy with where we sit in the market and originations end of the business. We think we’re buying, what we’re supposed to be buying and have been very consistently for long time.
If you look a lot of our metrics, the metrics in the paper buying today, don’t differ very much from the metrics a year ago or year before that. So in terms of how we are buying we are kind of doing the right stuff. Collection remains challenge, I think we had a regulatory environment as big piece of that and I think the customer themselves, we’re telling that come up with the idea that ironically customers don’t like to answer the phone as much as they use to. They like to see text messages, something like that.
And so if you think about it, year ago or whatever, we use to call people at home and the phone on the wall would ring. Today it is the phone in their pocket and not always wanting to answer that phone. And so you have to come up with new ways to do things when we have and I think as those new methods come into play, we have a good start of improving our collection results, which as I mentioned in almost every call that’s our going live.
So again it’s challenging, let’s take the regulatory environment and calm down a little bit in terms of the collection practices and such, that is a good thing, but again it’s a combination of both those things, that makes – that’s going to make it successful and so we’re diligently working on ways to improve in all those areas.
We’ve talked a little bit about the ABS market, that’s probably the most different thing in that now there are certainly is this fighter quality, people are looking more to credit cause funds going up.
Having said that, it looks like at some point that ease as we sort of get the industry comments and I think a lot of it’s just sort of rising, sort of fear the marketplace or something. But in terms of where we are, we are not having troubles getting deals done in a little more expensive.
And we probably don’t see that changing particularly, a couple things are little bit interesting and now I will get to the industry as much as we want to do better in collection results and performance results, as far as we know we are starting to hear a lot about all of our friendly competitors who are doing significantly worse.
And so there is two part, one, I think what we call our concerns credit seem to be even larger concerns, large friendly competitors and then profitability seems to be another concern a lot to our friendly competitors.
And so we’re still quite profitable making lots of money, we make assuming more money we ever made before and so we’re really doing pretty well on that. And so as much as we’re not personally all that happy with CPS’ performance on its own, if you hold this up to the rest industry, we look surprisingly great.
And so we’re quite happy with that again we’re not going to compare ourselves to everybody in terms of we want to do, we’re going to do what we are supposed to do and get it done. But it is a little interesting as point the game, so look at what other folks who join the industry and that’s relevant because, when people got to sell these bonds much like we do, people are looking at those credit performances and they’re taking – that is how somewhat causing despite quality is general performance in the industry and also the fact that lot of these big companies aren’t making enough money.
And so something is going worse that could put them in a difficult position, we’re not nearly concerned like some other people might be. That’s all the new things that we’re focus on. But again we’re still 99% focused on what we’re doing and getting it done correctly, where we are and what’s going on in the marketplace.
A good news up on that is to extend, the other sort of aspect of the sort of the bigger picture is everybody is still talking about recession, [indiscernible] and so people look at our industry and there has certainly been rumors that prime autos is going to be the next big bubble and because all same problems is subprime mortgage.
People will stay that can’t possibly the aware of difference in size in those two markets and nice to say we did every be back kind of the big market. Subprime Auto on its best day is in even [indiscernible] Sub Prime mortgage was. So no it’s not a bubble, it’s not going to cause some recession and other people still looking for the recession.
So we had now a whole bunch of little things, and not even also little. You got people worried about the credit quality of some of the players in the industry. That people worried about the profitability of some of the players in the industry. And people are worried that there is going to be a recession sooner than later. There is all reasons why people shy away from the industry, and some of them more importantly are stock, other people stock. If you look for stock performance of the people in the industry it hasn’t been very good.
So as much as [indiscernible] everybody else it is worth noting as much as our stock is going anywhere, it’s not going down typically. So, I think the answer there is, CPS needs to keep doing exactly what we’re doing and sort of see how the rest of the industry plays and we’ve been doing this for a long time. This kind of market generally can produce lots of opportunities. When opportunities come alone, we can try to do a lot better.
So as much the industry is not perfect in term of global thing, it does have a possibility of getting some very interesting opportunities for CPS in the future. So we’re very optimistic on both the one hand that we’re doing exactly what we should be doing at CPS and also that CPS doing quite well in comparison of the rest of the industry.
With that, we’ll open it up for questions.
The floor is now open for questions. [Operator Instructions] And our first question comes from the line of David Scharf with JMP Securities. Your line is now open.
Yes, thanks and thanks for the color Brad as always. Wonder if I can start on the origination front. I mean on the last call you were already signaling that the beginning of the year was off to a strong start and it seem like the more typical historical Q1 was shaping up. Just wondering is there any other color you can provide us that relates to maybe either things you did on the pricing front or that you saw competitors do that may have impacted the significant share you captured?
Good news is, our pricing actually went up with the volume was up and your margins go up that’s sort of a nice mix. So we didn’t do anything on pricing. We didn’t raise prices, but we did get a little higher price on what we’re doing, not this time not to make a sort of funds. I think the better part of your answer is the second part which I think it’s very hard to tell in the industry obviously, but there’s rumors going around that a few of the bigger fellows have slowdown maybe raise their prices to maybe [indiscernible] what they’re doing a little bit.
And so I think that’s certainly if you’re looking for a reason for I still on the one hand it is now that we’re seeing a little bit more of that historical first quarter jump, but it may have been aided slightly by some of our fellow competitors either slowing down a little bit or raising prices some and we’ve heard the rumors that’s true. It’s little hard to see any. We don’t have enough market in terms of what we’re seeing on the street to say that there’s if there’s a real significant move by one of the guys we would know it and we haven’t seen that so it’s much more sort of rumor mongering than anything else. But I would say it’s mostly the historical jump is back to some extent if not as good as – I don’t – I think it’s going to be not as strong and shorter than the historical mean or whatever but it’s still there. I think it probably aided a little bit or maybe people slowing down or raising prices.
And as we think about your pricing outlook or strategy for the rest of the year and given the increase in funding costs and getting a little deeper in the credit cycle, should we be thinking about the average interest rate on your book being higher for the rest of the year?
We think safe that as we assume it will be what it was in the first quarter to the extent it goes up a little bit that would be nice. That win really given that what I just understand when think it would compress at all. I think what will be interesting is if some of the rumors tend to be more true they’re not and people tend to pullback more, raise their prices more, we certainly would be tempted to push our prices up a little bit.
We’ve got kind of the market share we’re looking for maybe we will let it go up some. But we could – if it continues to really move, we would certainly try and push pricing a little bit and make up for some of the cost of fund. At the same time if you take the first quarter and kind of assume that’s the norm of the year.
Got it, got it. Hey shifting to collections obviously the FTC settlement I mean I guess we’re probably going on a couple of years now you been working operationally on the new rules for a while, can you give a little more clarity into what you mean by collections “Getting where you want them to be.” Just trying to understand how much latitude you really have to meaningfully change collection practices?
Well, I’ll try to put some clarity on it. If you sort of look at it at, you could what we call usually more aggressive before and now there’s lots of rules to follow. On one hand I think we and probably most folks took about 16 steps backwards to make sure that they weren’t going to have a problem with that. 16 steps you’re not really doing much across your loans. So you have to find out a median for you were well within the guidelines or the new guidelines that as they were set by the FTC or the CFPB or whoever else. And those are things like can’t pester the customer you can’t call them 27 times in a lot. On the same token, you need to call them and say, hey your levels really going fine you’re going to keep [indiscernible] that’s important okay.
So there’s a happy medium in there and I think as I said in previous calls we took those 14 steps backwards we needed to get few steps backward but not quite that far. And so it took us a while to get the right sort of rules that we – we can initially do just scare the collectors of debt, but they can’t do anything and that’s just not right way. So the other thing it took them, I guess easy way to explain it, it took a long time to get the collectors to sort of learn the proper way to collect without breaking the rules, most of they try and get best results and that was part of it.
The second thing was just figuring out better ways to contact the customers since they weren’t as eager to answer a cellphone as they used be when they picked up the phone at home. And so it’s been a little harder to sort of get into a dialogue with these customers. And when they can look at the call and not really want to talk and not answer it and so you had to kind of figure out a way around that, which we’ve work on as well.
So it’s both sort of the operational way you can talk to customers, it’s also the way you get a hold of customers and you’re going to change somewhat. And so both those areas and I think you see sort of in the clips or whatever in the industry racks how everyone is learning jeez, texting is important, all these different things and how to get hold of a customer. And so that’s the other part of it and that’s probably the newest part even still. But that’s really what it’s been. You had to retrain all your collectors, that’s what we talked about for several years and now we also found out we have to kind of come up with some more slightly and better ways to get guys answer their cellphones. And so those are the two main parts of that today.
All right. But it sounds like the main takeaway is that there’s probably not a – there’s no further drop off in productivity to be expected. You kind of have things fine tune to where they need to be?
I’m not sure fine tune is the right word, but we’re getting there.
I think that a matter of this is that the delinquency tends to run higher than local arm. We’re not really seeing – in order to get higher delinquency, you see much higher losses and they pay once you get a hold of them, but we’re not terrific, we’re happy about running the higher trend delinquency, but at the moment that’s what they never resolve, as we have to live with it, but that’s what seems to be coming out, sort of what we call as dynamic in collections.
And on the loss side, just a follow-up, starting the year I mean Q1 is seasonally typically the strongest collection period. Just based on the seasoning of the portfolio with the loss rate up about a 100 bps year-over-year, should we think about that as the trend line throughout the year, maybe closing out the year at about 8% or so in the fourth quarter a little higher?
The easy answer, again, is to say, yeah, let’s just roll the first quarter and then hope we’ll surprise you. I think we wanted to be better whether we can get there in this year or next quarter, it’s a little hard to tell. So again the safe guide is to assume the worse, but assume whatever we just did and then with luck we can improve on that. Our goal is to certainly improve each time and so we’re working on that. It may take couple of quarters yet. But yes, assumption say if we roll with this quarter forward and then hopefully we can surprise.
Got it and then just last, quick one for Jeff, the tax rate, is that down at 41%, should we think of that as a sustainable level going forward?
Yeah, David, I think in the short-term release for 2016, we’ll be using that tax rate. It’s gone down a little bit as a result of some change in the tax provision for deferred stock compensation expense and for the foreseeable future I think that’s what we’ll have for rate.
Great, thank you.
Thank you. And our next question comes from the line of Kyle Joseph with Jefferies. Your line is now open. Kyle, if could check your mute button please.
Sorry about that. Good morning, guys. Thanks for taking my questions. I was hoping to wrap my hand around the cost of funds trends a little bit more. Jeff, if you could sort of tell us that securitizations are rolling off the rates you guys were paying on those versus recent new issuances and I think your deal is around 4.5%?
Well, yeah, the – right, so the deal we just did which was in economics, which aren’t reflected in these results, the 2016-B deal has an all-in coupon of 4.65%. And if you go backwards for the first quarter that was 4.12% effectively. So the problem is as you go back in time I think the lowest we ever did – the best we ever did on any of these deals was going back to Q4 or Q3 of 2014 where we were down and we’ve seen before that – Q2 of 2014, we’re down to 2.37%. So and that’s been a gradual with a couple of bumps it’s been a gradual upward trend since that time. So, we still have a lot of paper on the books, right, these really low rates, that’s why the overall blended cost this last quarter was only 3%. But it’s going to continue assuming the market stays the way it is and even if the deals go up a little bit, the trend is going to be up, but it’s going to be up in a gradual.
That’s helpful. Thank you. And then just in terms of recovery rates for the quarter, I know you saw a little uptick sequentially. But would you kind of expect the year-over-year decrease we saw in the first quarter that roll through the rest of the year?
I think, we’re of a mind that we are returning to sort of a level – a normal level of the markets, the wholesale auction markets. Last year, yes, this massive decrease throughout 2015 eroded every quarter. But our understanding and from the marketplace literature and the people who cover those market specifically attributed that to tsunami of off lease vehicles that was coming in as a result of the new car lease market having sort of rejuvenated itself approximately three or four years ago.
And so now you have that kind of a normal flow of off lease vehicles going to the market. It’s not our expectation, I believe something is that, there’s not another event like that probably going to take place in 2016. And so we would expect that these are going to be more stable. They’re gong to fluctuate a little bit always. But we would be surprised if there was another decrease during 2016 along the lines that we saw last year.
All right. And then going back to the ABS market, you guys seem some cheering there, I mean, have an equity guy, so I don’t totally have all the knowledge of the current market that you guys do. But are you starting to see, I mean, you guys have long track record of issuing in that market. Are you guys seeing in different impact on yourselves versus, say, someone who is a relatively new entrant into that market?
I wish that was true. But here’s what generally happens, which is a little bit frustrating as much as – as I said earlier, and we may compare rather favorably to some of our friendly competitors. Everybody puts their deals out and they get AA, BBB, BB so on and so forth. And so even though we might argue the underlying quality of our paper would be better than say our friendly competitor next door. The market guys there is, will they got AA and you’ve got AA, why should I differentiate. And so, I think when you have a Ford or GM or somebody, sure, you get lots of differentiation when you get huge.
When you are just from the guys down in the subprime world, it’s easy for the investors say, hey, you are not that much better than the next guy. And I can get more rates from that guys. So what happens is, as that story about it tied by these all boats once the same effect going the other way. It’s hard for us at this point to differentiate enough to get a different pricing in the market.
So it’s a little frustrating to watch some of our friends aren’t doing quite as well as we are, we get the same price in the market and sometimes even a little better. So, the answer is no. There’s no cheering at this point, sort of you being the big large bank or something like that. Maybe someday though.
That’s helpful. Thanks for the color and thanks for answering my questions.
Thank you. [Operator Instructions] And our next question comes from the line of Mitchell Sacks with Grand Slam Asset Management. Your line is now open.
Hi, guys. I was wondering about the new lending product that you started, I think it was in the last quarter or the quarter before just to see if you made any headway with that?
Actually, the Bravo program is out there in the market, I think initially we had with five years and 50 then 200. And I think it’s making progress. The fact that people aren’t running in my office somehow great it is, it’s probably slowdown somewhat. But in some ways that’s probably the way we would rather do it. To the extent, we put Bravo and also bought $40 of paper. We’d be holding our breath like to see how that did.
So I think, it’s probably going exactly the way we wanted to, which is it’s been widely accepted in the marketplace. All the dealers are signing up for it. And then we’re beginning to get some paper. I couldn’t tell you offhand how many loans we have brought. But it increases every month and we probably bought I’m going to say, I don’t know several million, $10 million, something like that. But it’s going to be – I think it’s more of a next year kind of thing to say, it’s really making the difference. But we would rather buy a few million of it to see how it works before we sort of open the gun – open the floodgate to take a lot of it. But easy answer for now is that widely accepted in the marketplace and so that to see how we do going forward.
Okay, that’s my question. Thanks.
Thank you. And our next question comes from the line of [indiscernible] with Janney Montgomery Scott. Your line is now open.
Good afternoon guys. Thanks for taking my call. Just had a quick question on credit, so year-on-year, are you guys seeing credit deterioration across the Board or is that a more localized in areas like Texas for example were slowdown in the oil industry is hurting consumers?
No it’s across the Board. We haven’t seen – we get that question quite often and we really haven’t been able to define it as a regional thing. It’s really national. We’ve looked at sort of what demographic in terms of job types we would have in Texas and sort of maybe picked in easiest or worse example.
There is some kind of a rigor down on an oil rig and you lose your job is an out run, the rig as much. We wouldn’t have finance act, anyway because you’d be moving around too much, memory that are sort of bread and butter is the guy with one year job, and lot of stability current income. So some guys happened rig to rig isn’t going to ever be financed by anyway.
So we haven’t been able to pinpoint anything in Texas per say. Texas is relatively large market for us and the performance is that as much as Texas is in a super performing today that performance hasn’t changed much longer last year.
Okay. Great, thanks. And just a quick question on about your 16 ABS deal, back in January? I remember that you guys didn’t sell the bottom rate of the trench? Is that still the case did you guys see end up selling that or not?
No, we didn’t sell it. We actually had it in the market in 16a and 18a and did not sell. We’ve been getting a price for it. So we did not included in the 16b deal and that actually sort of help the rest of the deal a little bit. So at this point in the market is probably was a wise decision because further down that stack you go more the vultures tend to see what they can get out of you and we’re not that desperate to sell it.
And so it’s wasn’t worth playing and they came right now.
Okay, great. That’s all from me. Thanks guys.
Thank you. And I’m showing no further question at this time. I would like to turn the conference back over to Mr. Charles Bradley for any closing remarks.
Okay, well said, first quarter went as expected during the year. I have been interesting here to see sort of point time or CBS is going to continue doing what we’re doing, interested to the rest of the industry does. I’m curious to see how our competitors handled a higher cost of funds, and so the little guy, over the last couple of year, lots of new guys came in and relatively small and we wouldn’t really see them on a daily basis.
The problem is, if you were new and somebody is giving 50 million bucks and say subprime company and a lot of the knee-jerk reactions to grow real fact and assume with that funds going to be good. And so you grew real fast and by real well in the cost of funds, we’re now about where lot of them seems to be, which is trouble. They’re not making enough money, you’re credit is not doing all should and so lots of little guys out there that is struggling from what we’re hearing or seeing the marketplace.
And some of the big guys is sort of made some moves to row for various different reasons were also someone struggling. So we’re very curious to see how industry turns out, and how industry turns out going forward. It’s kind of nice where you got to securitization to more to go this year.
So half of our papers already done through year, so we sort of like where we sit, like I said, as much as we’re not – we’re really happy with our credit performance to say at least. It turns out its way better than most and the fact that we’re quite profitable compared to most is also very strong things in our size book.
So it will be interesting rest of the industry does, like I said, down the road, monthly time to see and opportunity, so we’ll be looking for that, but meanwhile we’ll stick to our knitting and try to improve credit performance, improve our collection and be consistent in terms of what we are. In terms of the questions we also get about stock is very nice to get this conference call.
If you look at the bigger in the industry, people worry about the recession coming, so we don’t want to be in a sub-pricme arena, people were worried about our industry somewhat, so you can understand hopefully understand a lot of people are eagerly snapping up the staff in our industry and that of course doesn’t affect in our stock.
So the good news is we probably have a much better than average answer and much better in most chance, because through this year going forward and where we’re – way better than most. At the end, good things could happen in our stock. So we’ll see. Anyway thank you for attending the call. We’ll see you next quarter.
Ladies and gentlemen, thank you for participating on today’s conferences. This does conclude today’s program. You may all disconnect. Everyone have a great day.
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