I don't need it. Yeah. I'll give this to you regardless, and then this will advance the slides if you want to use this clicker right here.
Oh, yeah, I'll flip the slides. I'm not going to really use it, but yeah.
Which one's?
Just there.
Yeah, there and this, and then this will give you the time, but they'll also give you cues.
Okay.
And-
Enjoy.
Yeah. Testing. Give people a few moments. Good to go. Okay, good morning, everyone. Our next presenting company is Consumer Portfolio Services, or CPS, trading under the ticker symbol CPSS on NASDAQ. Consumer Portfolio Services is a leader in the subprime auto lending space, providing financing options to individuals with limited credit histories or past credit issues. So far this year, CPS has reported solid growth in loan originations and continues to leverage its proprietary AI-driven underwriting model to drive credit performance. The company recently reported its fifty-first consecutive profitable quarter. I'm going to hand it over to Chief Operating Officer, Chief Legal Officer, and President, Mike Lavin. Take it away, Mike.
The man of many hats. Well, thanks for being here. We are Consumer Portfolio Services, otherwise known in the industry as CPS. We are, we've been in business for thirty-three years. We went public, thirty-two years ago. CPS is known in the subprime auto space, pretty well. In fact, in some states, we have to go by Consumer Portfolio Services because our customers complain all the time that we're calling to get their children, CPS. But, no. So, we've been around for thirty-three years, which is, quite long in our business. We were formed in 1991, went public in 1992. We have about a thousand employees spread across five branch offices. We are currently located in Las Vegas, Nevada. We have a great, call center and executive office space right off the Strip.
If you've heard of the Sphere, if you go to my guest office and you look outside, all day long, it's the Sphere, and it changes patterns all day long. And then, after daylight saving time, at night, when you're working late, it's a pretty cool, pretty cool effect. We've originated close to $21 billion in subprime auto finance over the years. We are a monoline business. All we do is subprime auto finance, and if you're not familiar with subprime auto finance, we are an indirect lender, which means that we buy contracts from dealers every single day. So our business model is, we've got a sales force of about 150 salespeople in the field. They call on automobile dealers, whether it be franchise dealers or independent dealers.
We get them to submit their customer applications to us. That application hits our buy box, and within seconds, we give an approval or a decline, and hopefully, the dealer picks us as the lender, and we ultimately buy the contract from the dealer. We're looking to buy between $100 million-$200 million a month in auto contracts. Like I said, we've done $21 billion of this type of business over 33 years. We currently our auto portfolio size is $3.5 billion, which is our all-time high in our history. Interestingly enough, I do these types of conferences. A big part of our business model is we tap into the auto, the ABS market.
So we take our quarterly originations, and we bundle that up every quarter, and we do an ABS transaction on the market and sell our originations as bonds and retain the servicing. We do four ABS deals a year. We've done a hundred and three ABS deals in our history. I didn't realize the scale and the scope of doing that many ABS transactions until I was at the ABS conference in February in Las Vegas, and I mentioned to one of our bond investors that we've done a hundred and three deals, and their jaw dropped to the floor. Thirty-three years, four deals a year. We've only missed one deal in our history, and that was during the Great Recession of 2008. We missed one securitization, and that actually was quite a hiccup to our business.
But we've done 103 deals. But probably, you know, the people that come to those conferences are the pension plans, insurance companies, the hedge funds, the private equity firms that buy our bonds, and they always say the biggest thing that they love about CPS is our long history in the industry, 33 years. Along with that is our management tenure. We have a management team of about 25 vice presidents and above, and the average tenure for that team is 24 years. If you add up the 24 years, that's over 300 years of combined experience in the industry. None of our competitors can say that. And when people are buying our bonds, people are buying into our performance.
They're really buying into our risk management and our 24 years of managing risk. We're led by our CEO, who's been CEO for 33 years. Our CFO has been CFO for 26 years, and like Alex said, I'm the President, COO, and CLO. I've been there 22 years, and I am the rookie of the management team, the rookie. I'm the one with all the energy to drive the company forward. Everyone else is tired and old. We've posted 53 straight profitable quarters. When we measure our company, typically we've measured it by profitability and not growth. That's been a purposeful strategy for CPS. We're not owned by a private equity firm or a hedge fund, therefore, we're self-funded.
Even though we're publicly traded, there's a lot of, quote, unquote, "family business," end quote, that goes into our decision making. Our growth is conservative, because we're managing risk in the subprime space. It's very purposeful. For example, in twenty twenty-two, we did our best growth year in our history, which was $1.85 billion in originations. In twenty twenty-three, we actually pulled back $500 million. Actually, I'm gonna ditch this PowerPoint. I'm not really a PowerPoint guy. In twenty twenty-three, we pulled back to $1.3 billion, so that's a $500 million dollar pullback. In any normal industry, you might say, "Oh, they're contracting.
Oh, they're having business problems." Actually, that was a sign of our management team being risk-averse in a tough environment for the subprime customer. So that $500 million pullback was purposeful. Now, on the other hand, we've seen improved performance with the subprime customer, so we've decided to grow again, and this year, in 2024, we're actually pacing for another growth year similar to 2022. So the last three years have been the best three years in the company's history, and so really, from a sort of the turtle in the race in subprime auto, which we've always been and we've been known for, which is a real reason for our longevity, we've kinda turned into a semi-hare in the subprime auto space, in that we've had three growth years in a row.
You know, we're publicly traded. I can't get into projections, but I will tell you that I've personally worked on the projections for 2025 and 2026, and we're continued to be a growth company going forward. We do expect to remain profitable. Another interesting thing about CPS, I mentioned we're not owned by a private equity firm or hedge fund. The insiders own about 48% of CPS. That's somewhat rare for a public company. Most investors do like to hear that because not only are we tenured, but we have a lot of skin in the game when it comes to CPS. We are not going to... You know, I said we're trying to do $100 million-$200 million a month.
We're not gonna all of a sudden bounce to $500 million a month to get crazy growth, because then we're gonna be unprofitable, and because we own 48% of CPS, that would be bad for the company. That would be bad for the shareholders. By the way, a lot of us are fairly good shareholders in the company. Another interesting thing about subprime auto is it's very small. Most businesses will tell you at a conference like this, "Oh, my God, it's so competitive. It's so competitive!" I'm here to tell you that in subprime auto, it's not. The market, according to Experian, is $1.4 trillion in auto finance. 14% of that $1.4 trillion is subprime. 14% is subprime. There are six major competitors in our space. We are one of them.
We are probably right around 3-5 with our $3.5 billion portfolio. The subprime business is strong. I know that there's a lot of micro, or I'm sorry, macroeconomic headwinds with inflation, with high interest rates, with slow wage growth, and all of that seems like it would be bad for the subprime customer, but all I can tell you is the data. And when we did $1.85 billion in 2022, we were getting about 8,000 applications a day. When we pulled back in 2023, we were getting 9,000 applications a day. And this year, when we're growing again, we're getting 10,000 applications a day. So subprime auto is very strong. The demand is very strong, and there's only six competitors in our space.
A couple of things that sets us apart from the other five competitors is definitely our experience. I covered that. But also our technology stack. Even though we've been around for so long, and some people think we're dinosaurs, the fact is, we were one of the first to the AI game, 10 years ago. We all, in our space, like to think we have the best buy box, the best algorithm, the best AI machine that judges the risk when we get the application. We obviously think we have the best AI in the business. We certainly have the most data in the business with which to build our AI machine. We've been around 33 years. We have 33 years of subprime collection data, and we've used that through machine learning to build, you know, our originations model.
That model judges the risk within seconds and spits back to the dealer the structure of the deal, term, APR, down payment, et cetera, et cetera. We've expanded our use of AI over the last five years to our servicing side of our business. We now have collection scorecards. So when the collector comes in in the morning, they turn on their screen, the AI has sort of looked at the collection behavior of the customers and now tells the collector who to call, when to call, what time of the day to call them, and how to make contact, whether it be a text, an email, a call, a call after five, a call at twelve o'clock, et cetera, et cetera. So now we're digging deep on how to collect that debt.
We've also expanded our AI to our sales team. Similarly, when our sales team sits down to work every day, the AI goes through the dealer list and tells them, you know, what deals are high on the list, what deals need to be worked. You know, does the F&I guy work between 9:00 A.M. and 12:00 P.M.? And if he does, call at 12:00 P.M. There's all kinds of AI that's working in the sales team. We do business in 50 states. The biggest states for us are Texas, California, the great swing state of Pennsylvania, Ohio, and Florida. We offer eight programs. Typically, we're targeting franchise auto dealerships, which is Mike Lavin Ford. That's 70% of our business.
30% is to independent dealers, which is Mike Lavin Used Cars, so that's the sort of the independent lot on the corner. The reason why we go after the franchise dealers is because the paper performs typically better. We typically get an APR right around 20.5%, but we do mix in some of the better independents. And the independents are important to the mix because you typically get APRs around 25%, albeit the paper's a little bit more risky. But we do have a part of the AI algorithm that grades that independent paper accordingly. Our typical subprime customer has an APR right around 20.5%. The FICO right now is around 670.
Interestingly enough, historically, the FICO's been around 565, but since COVID and FICO migration, the FICO score has gone up over time, but we're right around 570. Our loan-to-value, which is a big metric that forecast losses, is right around 119. Typically, we want to be around 115, so we're trying to drive that down. Our typical term is 68 months. The average income, believe it or not, for the subprime customer, $73,000, which is higher than you would think, and then the average year in residence is 5 years. Again, higher than you would think. I've already talked about our growth. 2022 was a record year, a purposeful comeback in 2023, and this year, we're pacing for that record year again. Moving forward, we are pinching our pennies to grow again.
We're looking at maybe expanding our growth to $200-$300 million in 2025 and looking to hold that into 2026 and 2027. In terms of credit performance, this is what most of our investors look at. It's kind of the magic wand in our business. 2022, for whatever reason, coming out of COVID, was one of the toughest years for credit performance in the history of subprime auto. Most of our bankers and our bond investors did give us some anecdotes that while the market was tough, our credit performance was the best in our space. So out of those six competitors that I told you about, CPS had the best credit performance in 2022.
In 2023, the first half of 2023, we saw equally tough credit performance. But going into the second half of 2023, and so far, the first half of 2024, we're getting back to historical performance, and what that means is cumulative net losses around 14%-15%. So 2022 for us was 19.5% CNLs. That's probably one of the worst years ever. But the market CNLs at that time were 25%. We've gotten that down to 16%-18% in 2023, with the market coming back to right around 22%, and so far in 2022, we're looking to get back-- we're pacing to get back to 15% CNLs. Getting to just some back-of-the-napkin economics, we're obviously publicly traded. You can look it up.
But, again, we base our economic grading on profitability. Between the last four years, we've made between forty-five million and a hundred million net profit. In 2022, we made eighty-six million. In 2023, we made forty-six million, and this year, we're pacing between that forty-five million and eighty-six million. The biggest lever in what our net profit is, is our interest expense, and I talked about... And that's how we fund our business. It's what we borrow the money at to what we lend the money at. And those asset-backed security transactions, where we do four per year, that's where we're doing most of our capital raising for our funding. And typically, those ABS cost of funds is right around 3%.
But for the last eighteen months, we've been running between 6.5% and 8%, so that's an all-time high at cost of funds. So, for example, in 2022, when we made $86 million, our interest expense was $87 million, so that's a lot. But when that profit got cut down from $86 to $45, from 2022 to 2023, our interest expense went way up to $147 million. So you can see how that lever dramatically changes our net profit.
By the way, one of the things that's kind of frustrating to me as an operator and number two at this company is, you know, when we look at our net interest margin, and there's maybe five levers in how we determine that net interest margin, the one lever that's the most important lever, which is interest expense and cost of funds, is totally out of our control... and that's what makes it frustrating. So when I read that maybe there'll be a rate cut, I think this month, maybe? I think this month, that should help. The last three ABS transactions has gone down from 8% all the way down to 6.5%. So we have seen a 150 basis point reduction in interest expense over the last three deals.
We just put another deal out in the market. We're hoping that we can get the cost of funds down to 6%. What we're projecting, and this isn't Mike Lavin projecting, this is, you know, Citibank and Cap One are two investment bankers that do these ABS transactions. They're telling us that we think we can get to 4% next year in cost of funds. And so, when you sort of look at where we're headed going forward, we're looking at going from 8% cost of funds, and we're still profitable, way profitable, down to 4% cost of funds next year.
We're talking about more growth, so from $100-$200 million a month, to $200-$300 million a month, and we're also talking about our APR holding strong at 20.5%, because demand is so strong in subprime auto, and there's only six competitors. We don't have to lower our prices to get business. So we're getting more business, keeping the same or raising the price, lower interest rates, higher volume equals more net profit. And so that's kind of where we're headed. That's all I got. So, any questions? Do you guys take questions here, or...? Okay. Questions. Yes, sir.
Given your steady profitability, why don't you initiate a dividend? It might discourage insider selling because they would get income from something other than selling stock. Thanks.
Speaking of a fairly decent shareholder myself, and I would love to get a dividend. My wife would love us to give a dividend. It would be nice to get a check for $400,000 every quarter, if we had a dollar dividend, but we don't. We've never given a dividend in our 33-year history. We have a board. We do think about giving back to shareholders, and instead of a dividend, we have an aggressive share buyback program, and that's kind of how we think we're giving back to shareholders. I don't know. I think we've been doing the share buybacks for four to five years.
I think the only time we stopped doing the buyback was COVID, 'cause we were pinching pennies, obviously, like everybody was. I mean, the stock went down to $1 during COVID and then shot back up to $14, and now we're settled in around $9. I mean, dividend's great. We have. I think we've got, like, 8 board members. I think one has constantly asked for a dividend, but he keeps getting outvoted. But a lot of the extra cash we have, since we're self-funded, you know, even doing a share buyback program when you're self-funded in this space is a little risky with your cash, but we do it anyway. Yeah. One question on that. Sorry.
I have two questions.
I can hear you.
I have-
You don't need the microphone.
I have two questions on the-
Yeah
... the share repurchases. The share repurchases haven't really moved the needle that much because I'm just looking at some of the old numbers, and it's been pretty flat, but that might just be something new that you guys are like, "Hey, we get it." And I sort of see it from, like, like your number one competitor, Credit Acceptance. And so, you guys see it as one of the competitors, but. So I guess my question is: how come the share repurchases haven't actually made a dent, or is that just something you guys are revamping right now? That's number one. Number two, because I got the idea from Credit Acceptance, how do you guys compete against them? Because I see that they're still gaining market share in the subprime auto loan, whereas it seems like you're pretty stable.
It's pretty, you're not losing or winning, but it's pretty stable, so two questions.
Yeah, let's take the second question first. Credit Acceptance. Get this question all the time. They are not one of the six competitors. They're not. They are not. The reason why people always bring up Credit Acceptance is because they're publicly traded, and we're publicly traded, and nobody else is publicly traded in our space. And so, you know, the information that's out there is really CPS and Credit Acceptance. They're in subprime auto, and so are we, but their business model is completely different than ours. And so we're an indirect lender that simply buys the contract from the dealer. Credit Acceptance, they. It's so complicated. They are partners with the dealer in pools of loans, and they have a piece of participation in the performance of those loans with the dealers. And so the businesses, it's like apples and oranges, right?
I mean, I wish we had the growth of Credit Acceptance. I wish our stock price was $300 a share, like Credit Acceptance. But the fact is, you know, they do really well, we do really well. We have Salesforce as a CRM at CPS, and every month I get a list of who we lose deals to in terms of our competitors and why. I've been doing this for three years, every single month, and I have never seen us lose a deal to Credit Acceptance, ever. So they're not a competitor of ours. But I do track them because they are a barometer in the industry, and they are publicly traded. The share buyback problem?
It doesn't necessarily move the needle because our volume – we trade very thin, our volume is low, and the rules say you can only buy so many shares a day. You can't buy within the first hour, you can't buy within the last hour, and you're limited to a percentage of shares you can buy. And because of that, because there's a formula to that, there's math on that. It can't really move the needle unless we get our trading volume up, and we can buy more shares. So it's simply a volume issue. Yes, sir?
I'm curious about the situation, excuse me, with electric vehicles, which I realize the price of them is probably an oxymoron for subprime. But then again, I'm thinking, well, there are people that are subprime credit, but they still want an electric vehicle. So do you have many electric vehicles? Is it expanding? Is it contracting?
So that's a good question. The effect of EV on subprime auto, and how we deal with it. We will finance an EV, but typically we have caps on the amount financed for a subprime customer, right around $30,000, and most EVs are higher than the caps we have on amount financed. Even if we were to raise the caps and finance an EV, the problem with the EVs is the recoveries at auction on EVs. You have to be very, very, very risk-averse because you're talking about a five-year, six-year, seven-year Tesla, and guess what? Their batteries are getting ready to go. And if you have to replace a battery, it's $5,000, and all the auctions know that, so they're only paying pennies on a dollar for a seven-year-old Tesla at auction.
The lower the recoveries, the bigger the losses for us. You have to fit in a very, very narrow channel to get an EV from us. It's really the EV for subprime auto is not the disruptor at all.