Good day everyone and welcome to the Consumer Portfolio Services 2015 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 will 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. I will now turn the call over to you Mr. Bradley.

Thank you and welcome everyone to our first quarter 2015 results conference call. I think overall, as everyone can see in the press release we put out last night, that we had very good quarter. It’s probably pretty much give or take – expectations that we would do in terms of the earnings. I think in looking at the quarter, it’s a little different, generally in over 20 years or so, the time company’s grow was in the first quarter and this is the second year in a row that that really hasn’t happened. And so I think it’s – whether this is a new normal or not, it would seems that maybe the new normal as some of the large banks being rather aggressive in the first quarter to get their numbers. We’re not really quite sure, but what seems to be now having reduced of two in a row is very aggressive buying in the first quarter, whether that’s because people need to achieve their earnings or people are overly aggressive during tax season, it’s hard to tell. As a result of since we’re not, we never have been, and never will be, the people that chase the crowd, our business grew but not to the extent we might have thought and as we thought be what used to be the big first quarter search. Now, having said all that what’s interesting is last year I probably said something very similar to that in this call is being dependent on that twice. Last year, we didn’t know that we’re going to have a big growth in the summer. So, what’s – what may be the trend, it’ll be interesting to see is that the first quarter sort of aggressive in the banks and they all back off, then…

Thanks, Brad. Welcome everybody. We’ll begin with the revenues. The revenues for the first quarter were $86 million at a 3% increase over the fourth quarter of 2014 revenues, and a 26% increase over the first quarter of 2014 revenues of $68.1 million. And that’s not really news there in terms of anything being different. The managed portfolio grew to over $1.7 billion during the quarter that’s about a 6% increase from the fourth quarter of last year, and about a 37% increase over the first quarter at the end of the first quarter a year ago. So obviously that’s driving the revenues almost all that is interest income. The expenses – operating expenses were $71.2 million for the quarter, again a 3% increase over the December quarter and a 26% increase over the $56.4 million for a year ago. Actually many of our expense categories in the sequential quarter were pretty close to being flat and then compared to a year ago, obviously their increase is due to size of the portfolio, an increase in the portfolio. Our interest expense is actually down this first quarter of 2015, compared to the first quarter of 2014 due to the lower blended cost ABS debt, and you may recall that we repaid some expense of senior subordinated debt at the end of the first quarter of last year. One expense category that is not decreasing and is increasing in a predictable and organized way is our provisions for credit losses, $33.4 million for the first quarter that’s a 6% increase over the December quarter of $31.4 million and a 40% increase over $23.9 million in the first quarter of 2014. Again, these provisions are increasing more or less at the rate that we’ve been predicting in line with the originations, volume,…

Thank you, Jeff. So, if you look at the financials, all good numbers just spreads across the board, so we’re very happy with that. I’ve been looking at sort of the operations, marketing, the focus continues to be on training and we probably support the base hiring new market reps a little bit. We now have a fairly large group. So, we’ve spent a lot of time in the last couple of quarters in terms of training them and getting sort of the new guys, who are doing pretty good to get them up to doing as good as the old veterans. And so, sort of an example of that, as you know our marketing reps who have joined the company and getting that 20 loans to 30 loans per month origination level relatively quickly over a few months, the trick is you get the guys are doing 30 loans per month will get up to 70 loans or 80 loans per month. And so, we do a lot of focus on that in terms of training and really getting into that level because obviously the more they do, the better we are going to do. So as mentioned we had a lot of new people over the last 18 months or so, now they’ve had a lot of the training and so we would expect that to bear fruit in the coming year. Originations hasn’t changed a whole lot. We’re well staffed to do what we want. One of the nice benefits if you don’t grow a ton, you get to give very good service to the dealers and that’s became one of our benchmarks in terms of how we work with the dealers. We can contact the dealers. We can work on any given deal. So we have…

The floor is now open for questions. [Operator Instructions]. Our first question comes from the line of John Heck from Jefferies. Your line is now open.

Good morning, guys. Thanks for taking my questions. First for Brad, you did talk a little bit about some of the competition you mentioned as well you talked about little bit rationalizing environment. But I’m wondering if you can give us more color, I mean are coupons stabilized or is general pricing in the market stabilizing? Are people still – are they still some bad actors maybe pushing term out to ridiculous levels and does that effect you at all at this point of cycle?

Good question. It was a little interesting thing about it is, if I had a gas, I had a put it out there, I will say that the competition in the first quarter was based much more on credit. Because if anything our prices stay the same and that we would have felt some significant pricing pressure if people were truly just competing on price and we think our margins got little better. So, [indiscernible] and I guess our freedom in terms of, we can compete on price, we can’t compete on credit and so incentives we are buying aggressively and certainly, I don’t know about bad actors, but there are people out there, that you hear about people waiving POI, which is group income, and just doing a few things that we would never do. Whether there is a rationale behind that or not, I’m not really sure, but they certainly gets the dealer’s attention and they don’t have to worry about whether their customer is making any money. I think the other thing with the extended term, there has been a little bit of a interest in people moving from 72 months to 84 months, not something we’re doing. I mean if I had to, I can even rationalize that a whole lot better than doing a no POI, but you are having these people or some of the players out there are taking some amount of liberty to absorb the credit, a few of them are extending their term. Again, you’re going to extend term fine by saying, somebody with a 72-month loan has got a $400 payment, you can give them a 84-month loan and cut their payment $400 or $300. Unfortunately, that’s not the way it works, somebody has a $400 payment, and then you tell a dealer you go 84 months, but the customer is still going to have a $400 payment, the dealer is going to make more money. So again, this is not really the right thing to do in terms of the long-term look for a higher volume [indiscernible], but yes, if you are going to point out a few things, one would be that people have looked at these terms. Two, people are buying more aggressively on credit, either by waiving POIs and other things, it does not appear that people are particularly competing on price. Having said that, the very high end, and actually the area we don’t really play in, what we call the bank area with low teens interest rates. Those guys view those prices and normally they would lend 11% coupon range, so a bunch of those guys going down at 8% or 9%, but again, that and you are talking about, the really high end credit that we don’t really participate in, and probably generally we’ll be considering all

That’s very helpful. And then moving to credit, and Keith either Jeff or you on this one is, so do you look at it, yeah, it is credit some – the trends are very consistent with what we’d expect and in a lot of we kind of evaluate this as a period of normalization where we’re coming from probably unsustainably low rates of charge-offs to more normal rates of charge-offs. And I’m wondering, a) is that an accurate statement to where you see it? And if that’s the case, what point do you kind of you see guys see, at what level do you kind of hit the average level of charges-offs and what timeframe does that occur, and what’s the right ALL, if that – if trend is going forth?

I think I know again, I think you’re right, I think they’re in normalized whether it’s supposed to be. I think the real trick to that question is, so now you collect a little differently given the regulatory interest and all. Does that mean there is a new norm of maybe call it an extra percentage point for cumulative loss? Or can you figure out a way to do better? And certainly, our goal is figure out a way to do better. So to give you an answer to the question, I’m in for the way, people needed credit loans today, and then hopefully it’s not all just us, it’s all the vendors. It’s probably you might have a little bit of a higher cumulative loss number, maybe by a point or so as your new norm, because of the way you’re supposed to collect these days. On the other hand, if you teach your collectors how to do it the right way, and really focus on it, which we are, there is no reason you couldn’t get it back to the old number. So again, that’s not the best of the answers, right. In the short-term, I think yes, this is probably you’re looking at new norm, in terms of looking at our cumulative large numbers. On other hand, some people don’t do it right and keep training and keep working on it, because there is a reason that that number can improve. The easy goal for us and anyone else is interested is obviously the better performance – more money in May. So that’s certainly our way to look at it.

Okay. And then last question is your – your funding cost have dropped substantially as you guys kind of work through the balance sheet and taken out the little hanging fruit if you will, how much lower does it have to go, I mean assuming stable rate environment, I guess just to make things little earlier, that may or may not be the case, how much lower can it go. Do you have any kind of higher cost debt that still can be addressed or we kind of bottoming out here?

Well, we have that sort of the highest cost that we have in the balance sheet is the renewable notes John, and we’ve gradually as those have come up for individually those come up for renewal, we often renew them but we renew them at significantly lower rates than most of them were out there. So that will trend downward, but that’s such a small part of the overall interest cost picture that doesn’t really move the needle right. So you really have to look at the [indiscernible] and realistically, we’ve enjoyed this in a terrific line of these low benchmarks which are ultimately going to drive it. So if the benchmarks and who knows what the Fed is going to do, whether its later this year, early next year, whatever, but as those benchmarks go up, we’ll see those rigs actually go the other way, and there is some things that can possibly do down the road as our deal sizes continue to get bigger. We’ve looked at the possibility of doing a variable rate tranche which we’ve never done before, it hasn’t really made sense with our deals sizes, but if we did that, and the very short – of the curve, maybe a couple of bucks and deals get bigger and bigger potential we will look at, maybe doing it publicly, place deal which has sort of others think, which has sort of other springs attached cost wise and administratively, but we’ve potentially again offer an opportunity to lower the spreads, and then ultimately something we prefer to do is also getting that second AAA rating, at the top of the stack which, we feel is just a matter of time.

Okay. Appreciate that color, thanks very much guys.

Thank you.

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

Yeah. Good afternoon guys, thanks for taking my questions. Brad, kind of building on the competitive set that John was speaking to, I’m wondering if, you saw any of that pulling back towards the latter half of the quarter and given we’re 15 days, 16 days into April, have you kind of seen your, what you call kind of an irrational aggressive buyer, have you got more opportunity to paper, than you did in the first quarter?

So, I’d say it’s still about the same. We might and again it’s almost like last quarter where we said, gee, it’s still too early to tell how the quarter looks, and we’re almost in the exact same place in that. It’s only 15 days into the new quarter. If I really guess, I would say it’s moderating, I wants the things change a bit, but I think, the easy answer is I was one of the aggressive players, I’d probably ride the wave a little bit further in April, just hoping from a little more than a tax refund season that’s hang in there. We’re beginning to see signs is actually if a season is kind of over. And so that would be the sign that we’ll see people pulling back, but if you look at this compared to last year, we certainly so far have started out. We didn’t really see real significant movement until about June. And so, you’re sort of in that middle April, May being sort of the end of the first part and the beginning of the second part. So, you know, the great answer is nothing – there is nothing really evidently out there right now or that’s evidence to show there is a change yet.

Right. And building on that, given you’ve kind of pointed that out, the monthly origination goal, I know we hit on it every single. Is it safe to assume that that $100 million a month we’re maybe looking for in the back half, is it more realistic to kind of pull the range back now and kind of think more in that range of $80 million to $90 million as we move throughout the year?

Yeah well, again here’s a good way to look at it, at least sort of maybe how I might look at it. It seems like no matter what we do we’ve got $80 million in the back. So that’s sort of not a bad spot in that. If you’re going to reach $80 million a month, you do pretty darn well. So having said that, what I’d like to do $1 in a quarter, sure. How do I get there? I can’t be aggressive, but that’s out. Can I wait and see how the wind blows, it’s probably what we do, but I think an easy sort of maybe a way to look at it is I don’t think it would take all that much to go back to a $100 million a month. And so, that would be the easy part. We need this summer jump to get to the $125 million, which is almost exactly what I said about the first quarter saying, we need the normal growth – so the easy – the way I look at is our goals have been changed. We’re sitting around $80 million, we’d like to be at $100 million. We think that’s very attainable for the rest of the year. $125 million would be reach, we’d love to see that maybe this summer at this point. But I think yeah, you’re safe in saying, you’re going to tag us to do between $80 million and $100 million on a monthly basis, you would be doing the right thing.

All right, thank you for the color and thanks – and congrats on the quarter.

Thank you.

Thank you. And our next question comes from the line of Kirk Ludtke with CRT Capital Group. Your line is now open.

Hello guys.

Hi, Kirk.

Good morning.

You’ve touched on this, but I was curious if you could speak specifically to potential M&A activity in subprime auto, and are there without mentioning names – are there companies for sale, are there – are there these – are there platforms – the more aggressive platforms, is there any indication that they are moving from an organic growth plan to an acquisition growth plan?

It’s almost probably usually it answers the question backwards. I don’t think anyone is out there, any of the big players are looking to make a strategic or aggressive acquisitions or competitors. Here is what – and here’s – the good news, that’s not a bad news. Well, that’s actually a good news too. I mean the fact that our big friends aren’t going after folks, who’s probably just fine. The good news side is as we’ve done a bunch of acquisitions in the past and we’re pretty good service, anyone who wants to do an acquisition, give or take calls us. So we would hear about almost anything going on, we haven’t heard of things. So that gives you a good idea, and that’s to say, so here is what I think going on in the market. I think there probably are a couple of weak companies out there, there might be a couple of big ones having problem. And but I don’t think there is any difference than it was a year ago or six months ago or whatever. The difference in today’s environment is as you’ve got a whole bunch of money in our Wall Street, who wants those companies, and so that’s sort of is going to eliminate the strategic buyer, because they are not going to much like we were, we used to pick up those companies, but we don’t achieve that’s not going to happen anytime soon. There is a strategic buyer out there – you are not going to be able to with the company. On the other hand, the Wall Street money guys will, don’t pay up because they’re going to threw that away and make the return and buy any of these guys. And so, really the buyers will see, when this begins to happen it and always does, as you’ll see some big money buyers that might couple up with someone like us or someone else we can, they can count on to do the servicing to make these acquisition. But I’ll actually go a step further and say I think before that happens, you’re going to find the weaker companies, given all those money there is going to be plenty of focusing, okay it’s having no problem so I showed you the picture, they can equity stake and I’ll give you another lifeline for another amount of time. That could be having right now and we wouldn’t see that, but my guess is that is kind of what you’re seeing today. The companies are struggling against new capital infusion at a little more rope to hang themselves or whatever. And then after that the next level will be what we call the money player acquisitions, the strategic guys – and that’s a really being a super aggressive. It’s going to be hard to see them paying up for these for what I perceive to be the company’s out there.

Kurt, to Rod’s point about our track record of sequential acquisitions over the years put us on the radar for really anybody out there who’s got something to sell or looking for a partner. In the fourth quarter, during the fourth quarter, we look very carefully at a private deal and acquisition of a sub-prime portfolio the assets for that and we passed on because it wasn’t our cup of tea, but we had an opportunity to look at. And so, we get the calls for the five or six successful deals we’ve done in the past. We probably looked at another 50 and passed on them for various reasons. So, if there is opportunities, chances are we’ll get a chance to look at them anyway.

Great. I appreciate. Thank you. That’s helpful. And then another follow-up on the regulatory environment, is there anything specific that you can point to that leads you to believe that government maybe walking back some of its regulation on sub-prime?

Well, I wouldn’t go if I say, they are walking regulation as now, there has been some interesting, I guess there’s two parts, [indiscernible] everyone’s talking at this point, but not I don’t think we’ve seen too much and I think that’s also what was expected, I mean I think it’s a going to be a long process and they are going to take their time, which is good, I think that all is the right thing. But having said that, that pretty much there is no news in that site. The other one is sort of the CFPB and the disparative impact regulations and that is all of sudden, getting a lot more play in that there has been some pieces written in the Wall Street Journal, and other folks, that made you, that approach isn’t really the right one and there is an interesting ROI based around the allied settlement and so I’m not saying that, we are going to stop tomorrow, it’s more like, it’s just and I think it makes sense, I mean if you give, I mean dive in or take the time, I don’t recommend anyone except our lawyers, so to figure out the whole CFPB and the disparative impact analysis, it is enormously complicated, and some folks pointed out, it may not be particularly fair. And so we will stop, and we think it’s very complicated, and there is interesting aspects to it, but the fact that doesn’t look at a whole lot more maybe come up with something that works for everyone lot better, it certainly is an improvement in the way we look at things and certainly a positive for the whole industry, not to mention car deals.

Great. Thank you and then last question, I know that Allied is purchasing paper that’s higher quality paper than what you typically purchased, but to the extent that they get more aggressive at the up tiers of the market, could they be pushing people down into your market and could that be a reason why your markets getting more competitive?

Again an interesting question. I think it’s almost while it’s easier to rise as you well know is that Allied has to compete with us at all. I mean Allied buys significantly over our head. And so it’s a little hard for us to get a look at what they’re doing other than but what we hear about. But I think Wells Fargo is a much more interesting example, because Wells is a classic player that plays very top line and down into our level, and the fact that says they’re going to cap what their exposure is to subprime and I think it’s rather selling. And that they’re very organized, they’re very disciplined buyers, and I’ve never seen Wells in do things that I wouldn’t like to do. So I think they’re a good place to look. And so, if you take them as an example, it’s hard to imagine the banks, the big banks, Ally at some level, pushing real far down given the amount of regulation – if you think we have regulatory interest, those guys have lot. And so for them to push too far down and what’s interesting is few years ago, I would fully expect them to do that, but these days, I wouldn’t expect them to do that just because I think they can buy enough paper where they are and it’s probably a far safer thing given the environment they live in. So certainly it’s possible, particularly in Ally, and maybe Ally might try and push down a little bit, but even if Ally pushed a little bit, they probably still can reach down where we are. You know they might put some pressure – the Ally aggressive, they probably put pressure on sort of those [indiscernible] nonprime guys in those low teens kind of lending, that’s where you might see some of the pressure you’re thinking about.

Yeah. I mean I was thinking maybe to the extent those low teen guys can find paper, they move into your market.

They could but remember those low teens guys are mostly mix. And so, the law regulated and they’re very worried about having too much subprime and closure that that might bring the bank.

Got it. That’s the distinction. Okay, I appreciate it. Thank you.

Thank you. And our next question comes from the line of Ryan Zacharia, Jacobs Asset Management. Your line is now open.

Hey, guys. Thanks for taking the questions. Could you just provide some detail on the average term of the loans purchased this quarter and how that compared to the year-ago period?

Yeah, it’s pretty consistent. So the weighted average term of the receivables is as total about 56 months and that’s really been pretty consistent metric over the last several quarters.

Okay. And can you just refresh my memory, do you accrue interest on extensions?

On extensions. Well, I’m not sure I understand exactly about I’ll describe you the process of an extension. When a customer is authorized to get an extension, it’s actually they pay make a partial payment towards the outstanding interest that’s on the account and it varies a little bit from state to state, circumstance to circumstance, but it’s usually pretty nominal payment, maybe $25 or $50 to get the customer to sort of make a commitment in exchange for getting the extension. But other than that and of course the extension that moves the customer due date out one month and moves their maturity date out one month. But other than that, there would be no other changes to the mechanics of the loan. So, an answer to your question I think yes, all the other interest on the account would continue to accrue based on the terms of the account.

So, to the extent, there were a certain portion of loans that were on extension at the end of the quarter, it’s possible that there might be a months worth of interest accrued related to those loans that was not actually collected?

Well, yeah, that would be true, but it would also be true to the extent that an account didn’t get an extension, right and was past due 30 days and due to for – in the 30 day bucket of the delinquency and that account too has an extra month’s worth of outstanding of accrued interest that’s not paid.

Sure. And just following up on – there was a question about or there was a comment about there being an extra point of – loss potentially under the new normal. I’m trying to reconcile that with some past comments about the kinder, gentler servicing potentially being a positive impact on P&L?

I think in the long term, it could be a positive. I think in terms of the reality today is we’re seeing an increase in the overall losses a little bit. Like I said earlier, I think that’s beginning to maybe show some small signs that maybe it will go back, it could go back the way it was. I think – and so I guess the easy answer is it’s been long sure, I think the new way of collecting will benefit everybody. In the short-term, which was really I think John’s question I think people should get used to having losses a little bit higher in the interim.

Okay, great. And then just final question is just on the sub 6% OpEx level, is that sustainable? In Q1 of last year, you’ve had 6% and then saw the number rise thereafter. So, I’m just wondering if this is kind of a seasonal phenomenon or if we should expect you to stay below 6% for the entire year?

Well, I think we’d expect the trend to be – to continue to be downward. And I suppose from quarter-to-quarter, you could see a flat quarter up or down a tick, but the trend over a four quarter period, we’d expect as long as the business continues to grow, we’d expect the trend to be down certainly.

Right. So I am going to maybe even consider is as much as we did have 40% growth in originations during the quarter, but the most important thing for our company is to continue to have the portfolio grow, and we’re doing that in states. And so, doing even $80 million a month portfolio grows significantly every single month. And so, that’s the trend that pushes that overall number. So like Jeff said, it may bounce around slightly, the overall trend should be down.

Okay. And sorry, just one more, just on any update on the potential for a buyback?

We’re still working on that. We actually have a board meeting next week and that’s going to be one of the prime topics.

Okay, great. Thanks a lot guys.

Thank you.

Thank you. [Operator Instructions] And our next question comes from the line of Amy DeBone with Compass Point. Your line is now open.

Hi, thanks for taking my questions. Going back to operating leverage really quick is the 5% potentially be the next milestone or is it going to low off prior to then?

Well, I mean, that’s not realistic I mean what the right size portfolio and continued efficiencies in economies, it’s not the other question. I mean I think if you look back at our 2007 financial results, mid 2007, when the portfolio was over $2 billion and before we started to shrink, I think you’d find some periods we’re then within the lows 5s or high 4s.

Okay, great. And then were there any one-time picks up better than the other income line this quarter? I think there was one in the fourth quarter, which gave it a boost as – as it related to Fireside?

Yeah, that’s correct. In the fourth quarter, we had a one-time pickup from the cleanup of the debt of the Fireside portfolio, which we had negotiated in December, but really didn’t close until January, but we’ve booked our gain appropriately in December. Nothing similar to that that I can think of in the first quarter. I don’t think there was anything like that in the first quarter.

Okay, great. Thank you.

Thank you.

I’m showing no further questions at this time. I would now like to turn the floor back over to Mr. Charles Bradley.

Thank you. So anyways first quarter is over. Like I said, I think generally speaking that the year sets up real well. And we think it’s a good interest rate environment. It’s a very good car environment. Wall Street is real big on the industry, which provides a lots of liquidity. And so, there is all sorts of potential for this year. And so, we like where we sit in it and learning in, we’re not going to chase. We’re [indiscernible] discipline in how we do it and that serves us very, very well. So we’re – as we’ve said numerous different times, we’re very opportunistic to the extent the market changes a little bit. We could grow a bunch, we will. We’ve demonstrated this way, we’re pretty not happy with what we’re doing. And you know, again, down the road some potential M&A will be terrific too, since that’s one of our favorite thing to do as well. So thank you all and we’ll speak to you next quarter.

Thank you. This does concludes today’s teleconference. A replay will be available beginning two hours from now until April 23, 2015 at 11:59 p.m. Eastern Time by dialing 855-859-2056 or 404-537-3406 with conference identification number 24992318. A broadcast of the conference call will also be available live 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.