Good day, everyone, and welcome to the Credit Acceptance Corporation second quarter 2018 earnings call. Today's call is being recorded. A webcast and transcript of today's earnings call will be made available on Credit Acceptance's website. At this time, I would like to turn the call over to Credit Acceptance Senior Vice President and Treasurer, Doug Busk.
Thank you. Good afternoon, and welcome to the Credit Acceptance Corporation second quarter 2018 earnings call. As you read our news release posted on the investor relations section of our website at creditacceptance.com, and as you listen to this conference call, please recognize that both contain forward-looking statements within the meaning of federal securities law. These forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control and which could cause actual results to differ materially from such statements. These risks and uncertainties include those spelled out in the cautionary statement regarding forward-looking information included in the news release. Consider all forward-looking statements in light of those and other risks and uncertainties.
Additionally, I should mention that to comply with the SEC's Regulation G, please refer to the financial results section of our news release, which provides tables showing how non-GAAP measures reconcile to GAAP measures. At this time, Brett Roberts, our Chief Executive Officer, Ken Booth, our Chief Financial Officer, and I will take your questions.
Thank you. Ladies and gentlemen, if you have a question at this time, please press the star and the number one key on your touch-tone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from Moshe Orenbuch with Credit Suisse. Your line is open.
Great, thanks. Obviously, the quarter had a big benefit from a smaller loan loss provision. Actually smaller, probably the second smallest of quite some time. How should we think about that going forward? Obviously, you had some good performance in your expected collections in the quarter, but how can we kind of think about that in terms of the impact on future?
I think the way we think about it is we focus on adjusted results where there is no provision for credit losses. That's, I think, the clearest way to view the financial performance. That's the way we look at it internally.
Got it. You did expand your disclosures relating to the potential application of CECL, both for the existing portfolio and future loans. I was hoping you could kind of just expand a little bit. It sounded like that you talked a little bit about how CECL would be applied to purchased loans but not to dealer loans, and then the potential for using the fair value option. Could you maybe just kind of flesh that out a little bit?
Yeah. We have quite a bit of disclosure on this point, in the 10-Q. To be clear, certain loans outstanding prior to whatever date we would adopt CECL. Basically, inactive dealer loans and all purchase loans would qualify for transition relief. Without getting into the details, we think the accounting for those loans would do a decent job of reflecting the underlying economics of our business. We have not determined how active dealer loans outstanding prior, but what the adoption date would be accounted for under CECL. Situation's a little bit different, though, as we disclose in the 10-Q for future loans that we would originate under CECL.
As we disclose in the Q, we don't think that this method of accounting would reflect the underlying economics of our loans, primarily because it would require us to recognize a significant provision for credit losses at the time of originations for amounts that we never expected to collect in the first place, and then recognize finance charge yield revenue over time at a yield that's higher than that of which we actually expect to attain. As a result, as we say in the Q, we are closely evaluating fair value.
Okay, thank you. I'll get back in the queue.
Thank you. As a reminder, to ask a question at this time, please press star then one. Your next question comes from Kyle Joseph with Jefferies. Your line is open.
Afternoon, guys, thanks for taking my questions. Going to Moshe's questions on credit, it did look like the forecasted collections did improve for the vast majority, if not all, of your vintages. Just wondering if you guys could comment on the health of your underlying borrower and are they seeing the impacts of wage growth? What is driving that specifically?
We had a small positive change in our forecast during the quarter. It is disclosed in terms of net cash flows, $28.2 million. Again, it is a positive number. That is nice. It is very small relative to the cash flows that we are trying to project. I would look at that similar to prior releases as basically our forecast was very consistent during the quarter.
All right. If you could give us an update on competitive trends and demand for your products. Obviously, we are seeing very good volume growth in the quarter, if you could just update us on what you are seeing competitively.
Yeah. As we have said in prior quarters, I think the best number to look at in the release is the change in volume per active dealer. It was up 5.9% for the quarter. That is certainly a positive mark. Loan growth was very solid for the quarter. I think deciding how much of that is internal and how much that is external is always difficult. Maybe we got a more favorable environment. Maybe the expansion of our sales force had something to do with it. It is hard to tell. It was a strong quarter nonetheless.
Got it. Thanks very much for answering my questions.
Thank you. Your next question comes from David Scharf with JMP Securities. Your line is open.
Hey, guys. This is Jeff dialing in for David. I just have a question related to the provision expense for this quarter. Was there any material allowance reversal that led to the only around $2 million provision for the quarter?
The provision was calculated the same way it has been every quarter. In every quarter, including this one, some of that provision is a reversal of prior provisions. It's no different this quarter than any other quarter.
Okay, thanks.
Thank you. With no further questions, I want to thank you. I would like to turn the conference back over to Mr. Busk for any additional closing remarks.
We'd like to thank everyone for their support and for joining us on our conference call today. If you have any additional follow-up questions, please direct them to our investor relations mailbox at ir@creditacceptance.com. We look forward to talking to you again next quarter. Thank you.
Once again, this does conclude today's conference. We thank you for your participation.