Consumer Portfolio Services, Inc.

Hi everyone and welcome to the Consumer Portfolio Services fourth quarter and four year 2020 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. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical Valuations or receivables because dependent on estimates of future events also are forward-looking statements. All such forward-looking statements are subject to risk that could cause actual results to differ materially from those projected. I refer you to the company's annual report filed March the 16th and its quarterly report filed November the 3rd for further clarification. The company assumes no obligation to update publicly any forward-looking statements which as a result of new information, further 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 will now turn the call over to Mr. Bradley. You may begin.

Thank you, and thank you, everyone, for joining us on our call. I think probably the best way to look at the fourth quarter is that it's the end of 2020 and everyone, certainly us included, are glad to be done with 2020. It's been, you know, certainly an up and down year and a difficult year in many ways, but in other ways it was quite good for us. And certainly the fourth quarter reflects that. You know, we had, if you take year over year, the fourth quarter DQ was 12 versus 15 and a half last year, so that was very strong. Losses, 5% versus 8%, also very strong. And the recoveries were, you know, not unusual, but what we'll call historically high, 42% versus a normal 33%. So lots of numbers went the right way. We have lots of good things that happened in the fourth quarter. We also renewed our Citibank warehouse line. We continue to have a very strong partnership with those folks. We do a lot of deals with them and have a good working relationship with And the line continues to improve each time we renew it. So we look forward to continuing to do our business with them. One thing we didn't do in fourth quarter, we didn't do an ABS deal. Given the pandemic and the cutback in volumes, we didn't have enough volume to really make it warrant doing a deal in the fourth quarter. However, we did one pretty darn quick in the first quarter of 2021. And that deal was probably the best ABS deal in the history of the company. with an all-in cost of 1.1%. So that part worked out really well. Probably the negative of the fourth quarter, and certainly for the year, which I'll talk about a bit later, is just the struggle for volume. Given the pandemic, given the financial markets sort of closing or slowing down dramatically for a little bit, and even just the foot traffic at dealerships, the struggle in 2020, and certainly in the fourth quarter continuing, was to get volume in here. But, you know, the flip side of that is we were able to really focus on cutting some expenses. We really focused on quality. If you look at the ABS performance for literally since 2018, it is substantially better every single year. And I'm not so sure there's too many companies out there that can say that. Certainly with a lower cost of funds coming along, that's going to sort of, you know, higher tide floats all boats. It's going to help out a few of our overly aggressive competitors. But nonetheless, it's still, in the long run, probably just as good for us. So I'll get more into the year after Jeff runs through the fourth quarter financials.

Thanks, Brad. Welcome, everybody. We'll begin with the revenues. $62.4 million for the fourth quarter. That's a 12% decrease over the third quarter of this year and a 27% decrease over the fourth quarter of 2019. The full year revenues for 2020, $271.2 million is a 22% decrease compared to $345.8 million in the full year of 2019. So there's three important components when you kind of break this down, the revenues. First of all, the legacy portfolio now is around $500 million, representing 23% of the total portfolio and currently yielding 18.5%. The fair value portfolio, which is everything we've originated since January of 2018, is $1.7 billion, or 77% of the total portfolio, yielding 10.3%. And remember, too, and we've talked about this many times, obviously, the fair value portfolio yield is net of losses, which is why you see what looks like such a dramatic decrease in revenues year over year. The third component, this year anyway, is the markdowns we've taken in the fair value portfolio reflecting the COVID environment. $6.5 million markdown in the fourth quarter, $29.5 million for the full year. And so it can be a little confusing. This is a kind of a contra revenue item. So it detracts from the revenue rather than being an expense. Moving on to expenses, $56 million for the fourth quarter, That's a 14% reduction compared to 64.8 for the third quarter of this year, 34% reduction compared to 84.8 million in the fourth quarter of 2019. Full year expenses, 251 million is a 25% decrease compared to 336 million in 2019. And, you know, we've seen year-over-year reductions in almost every expense category, you know, due in part, as Brad alluded to, to lower originations volumes, but also due to some of the efficiencies that we've built in and technology investments that we made not only in 2020 but really in the last couple of years are really starting to pay dividends. And of course, the biggest decrease in expense comes from the provision for credit losses. If we look at that in a little more detail, so we actually had zero provision for credit losses in the fourth quarter compared to $7.4 million in the third quarter of 2020 and $21.5 million in the fourth quarter of 2019. For the full year, we had $14.1 million in provisions for credit losses compared to $86 million in the full year of 2019. And so remember also that we adopted CECL for the legacy portfolio in January 2020, at which time we established what we thought was a lifetime allowance for credit losses. And then, of course, the pandemic set in, and throughout the year, as you know from following this, we've been taking, except for the fourth quarter, we've been taking some additional provisions for credit losses, sort of pandemic-related provisions for credit losses, but none in the fourth quarter, as you see. Pre-tax earnings, $6.5 million for the fourth quarter. That's a 10% increase, over $5.9 million in the third quarter this year, and, well, a huge increase, over $1 million in the fourth quarter of 2019. Full-year pre-tax earnings, $20.1 million. is over 100% increase compared to 9.2 million for the full year of 2019. Net income, $4.1 million for the fourth quarter, 8% increase over the third quarter of 2020, and a huge increase over a really very small fourth quarter net income last year. Net income for the full year, $21.7 million. almost a 300% increase over the net income of $5.4 million in 2019. We've talked about this. Remember, too, that the net income for 2020 includes an $8.8 million tax benefit that we booked in Q1 of 2020 resulting from the CARES Act and how it affected our deferred tax asset. So those numbers are built in, obviously. Diluted earnings per share 17 cents for the fourth quarter. That's just a penny over the third quarter of this year and a significant increase over almost less than a penny in the fourth quarter of 2019. Full year diluted earnings per share, 90 cents for 2020 compared to 22 cents for the full year of 2019. And that tax benefit that I just alluded to that we booked in Q1 of 2020 represents 37 cents. to the bottom line for 2020. Moving on to the balance sheet, it doesn't necessarily come through when you just look at the cash numbers because we use more cash to hold receivables when we have it available, but we have a very strong liquidity position that's come about throughout 2020 as a result of better than expected credit performance in the ABS pools, which, you know, result in more releases of cash from those trusts. And then in turn, we can rely less on the warehouse financing, which helps us save a couple bucks on interest expense. So that's a very positive standpoint for the balance sheet. Moving on to the receivables portfolio, I've already talked about a couple of these percentages. The legacy portfolio down to 23%, and its remaining life CISO allowance now represents 16% of that active portfolio. So it's pretty robust, we feel, allowance for losses on that segment of the receivables. Looking at the liabilities, I mentioned lower warehouse usage due to the lower volumes and the strong liquidity position. The other thing you may notice is this residual financing transaction is kind of in its pay down mode. It's coming up on three years. from the time we originated it. And a lot of, almost with every quarter, one of the deals that's pledged to that facility is in a situation where we call the collateral. And so it's paying down and will continue to pay down as we move along. Moving on to some of the performance metrics, the net interest margin for the quarter was $39.5 million, a 14% decrease compared to the third quarter this year. 32% decrease compared to the fourth quarter of 2019. The full year net interest margin was $169.8 million, a 28% increase compared to the $235 million in the full year of 2019. And so as, again, we talked about this, with this transition to the fair value receivables taking over the majority of the portfolio, it's driving down sort of that top line as the losses are baked into the interest earnings on the fair value portfolio. Another component of this metric is the cost of the ABS debt. So the blended cost of all of our ABS debt was 4.3% for the fourth quarter, and that's down just a little bit compared to 4.4% in Q4 of 2019. Moving on to the risk adjusted NIM, $39.5 million for Q4 this year. And that's an increase of 3% from the third quarter of this year and an increase of 8% compared to the fourth quarter of 2019. Full-year risk-adjusted NIM, $155.7 million, a 4% increase compared to the full year of 2019. And as I think I mentioned before, the risk-adjusted NIM and the NIM will converge to be the same metric as soon as the legacy portfolio becomes immaterial. Core operating expenses for the quarter, $33 million. That's a 2% increase compared to $32.5 million in the fourth quarter this year, but an 8% decrease compared to $35.8 million for the fourth quarter of 2019. Full year core operating expenses, $135.6 million is a 3% decrease compared to $140.3 million in the full year of 2019. And so, and I think I mentioned this, our operating costs, have been impacted by somewhat lower originations volumes in 2020. But as I said, we've done a lot of things to improve our efficiencies, which are also influencing these numbers. Those expenses as a percentage of managed portfolio were 6% for the fourth quarter of this year. That's just up a little bit from 5.9% compared to the fourth quarter of 2019. Full year basis, 5.9%. compared to 5.8% for the full year of 2019. And I think one positive of this metric is those ratios are nearly flat despite the shrinking portfolio, because the portfolio has shrunk a little bit during 2020. Returned unmanaged assets, pre-tax return on managed assets, 1.2% in Q4. That's up a little bit from 1% for the third quarter of this year, and up huge compared to 0.1% in the fourth quarter of 2019. Annualized return, pre-tax return on managed assets, 0.9% for all of 2020, and that's really over double the 0.4% that we recognized in the full year of 2019. So good improvement in that important metric. Brad mentioned the credit performance, and this has really been kind of the weird pandemic silver lining is the current performance has been really much better than we would have expected a year ago when all this was setting in. 12% delinquency at the end of the year is a 300 basis points decrease compared to the 15.5% that we had at the end of the year in 2019. Annualized net losses for the year, 6.5% compared to almost 8% for the full year of 2019. And Brad also mentioned the returns at the auctions. We're still at 42% in the fourth quarter. That's down a little bit from the 45% from the third quarter this year. But as Brad alluded to, the normal levels of those are close to 33%. And eventually those markets will normalize, but it's been quite a benefit to this point. Brad already mentioned the great success of the 2021A transaction in January, so I can turn it back over to him.

Thank you, Jeff. So looking back at 2020, you know, certainly the big focus or the big thing was the pandemic. You know, we started off thinking it would be whatever year we might have thought it would be, and certainly by March we knew where we were going. Normally, we would have done a deal in early April. We couldn't do a deal. No one else could for that matter. So there was no ABS. For the moment, it looked like 2007 all over again with the markets closing down. But of course, they didn't, which is good. So at the moment, we had a problem there. And then when they finally started loosening up a little bit, sort of in April or May, they needed more cash. The stress levels were – the rating agencies increased the stress levels, so you needed more cash. Those kind of things normally, and certainly in 2007, would have caused us serious problems. Ironically, though, because of the stimulus and then all the things as part of the care package, we picked up $23 million in cash. The stimulus went to all of our customers. And as Jeff pointed out, all of a sudden, we had this tremendous cash flow. Now, part of that, of course, was we've tightened credit over the years. And so we now all of a sudden had stimulus, tighter credit, cash. And so we had this, you know, we were really in a great position, shockingly, coming through the pandemic. So the next hurdle, of course, was what we were going to do with people not being able to come to the office. And so we had to come up with a strategy for everyone to work from home, which we did. And, you know, so, of course, that was a problem, which we worked very diligently on and solved so that all of our folks could work from home and get their jobs done. Of course, the highlight of that was it actually worked. Everyone continued to do a superior job, even working from home. All the technical things were accomplished and all the legal parts were accomplished without any problems. And, you know, so what that really is, it sort of opens the door down the road and, you know, as our real estate leases kind of renew or expire for us to make some permanent changes in those categories, which would actually save us lots of money. So it's kind of weird, as Jeff pointed out, there's a silver lining to everything and the pandemic, you know, caused an awful lot of problems and we'll be glad to see the end of it. But, you know, it also gave us the opportunity to do lots of different things between the tighter credit, the increase in our cash. You know, we did a bunch of different things. We started a near-shore collection operation. That's proved to be very good. We've automated a lot of the collection models. We've spent time doing all these different things that should, in 2021, assuming we can put the pandemic in our rearview mirror at some point, and certainly in 2022, will all pay off a lot more. So, again, it was tough, but collections during this period of time, and I don't really think it was all because of just the stimulus. I think that the things we've been working on in the last couple years, because certainly you can see, if you look at our originations and performance, even like I mentioned earlier from 2018, 18 is better than 17, 19 is better than 18, 20 will be better than 19, and even 17 is better than 16. So this has been coming all along. It's almost like because of the pandemic and the stimulus, it got a little bit supercharged in 2020. But nonetheless, it's the program we wanted to pursue, and it is becoming more and more successful every day. As Jeff pointed out, we also were able to cut some expenses. You know, whenever you have these kind of problems, much like in 2007, a bunch of belt tightenings in order, and we did just that, and that also has paid off very well. Of course, doing all that, we didn't lose anything in terms of performance. So it was a busy year, one, just dealing with the problems, but also doing all these other things. As Jeff mentioned, we're also going to complete almost, not quite this year, but certainly by next year, the completion of our accounting change to fair value. Again, that muddles the numbers somewhat, but it's an important thing to do. In the end, it's what we needed to do. And so once we get that done, by the end of this year, it should be nearly done. So the other negative to all that is because of the pandemic and everything else, growth has been a very big problem. And so what's happening today or now, even in the fourth quarter and continuing into 2021, is because of the low cost of funds, lots of our friendly competitors are becoming exceedingly aggressive because they need the growth to continue their portfolio performance. We're not in that position. We would love to grow, but we're not going to buy super deep to do it. We're going to try and buy a little deeper now that there's low cost of funds, but at some point, maybe not this year, in 2021, the cost of funds will go back to sort of the normalized levels. So we're going to try and be a little more aggressive without banking the farm on this thing. you know, in terms of trying to grow. But between the weather lately and all these other things, it has really stifled the growth. And some of the bigger players, you know, banks in particular, have been able to sort of push real hard because, you know, if you're big enough, you can hide a little bit of aggressiveness to pick up your numbers. We're not that big yet. And so we're still trying to do both. We're trying to grow but keep our credit quality where it is today. So it's a little bit tougher to do, but we think we're doing pretty good at it. And over time, it'll really pay out. In terms of the future, I think the low cost of funds will continue. As we mentioned, that January deal was ridiculously low cost, and given what's going on today in the country and the economy, I don't really see interest rates going anywhere, and I think that will stay for a while. And again, that will help lots of other folks because with a much lower cost of funds, it's a little easier to hide problems in your credit quality and things like that. If 10 people continue to buy deep, they'll create new problems. But at the moment, it helps that way. The other thing we're going to do is we're going to roll out a new scoring model, I think this week, and that'll have another big effect. So we're continuing to do things. We're working on more strategic partnerships. We found that over the last couple of years, those are the kind of things where you can really get a little more bang for your buck in terms of getting more paper. So we have a few of those programs in the works and should come in during 2021. So we have a lot of good things going on. But again, focusing on 2020, it was all about the pandemic and how you reacted to that. I think we did a pretty darn good job. And also finding the silver linings and the thing you could do during or as a result of the pandemic, and we did that. And so, as I said at the very beginning, we're glad to put it in the rearview mirror and hopefully in the next few months or so, next quarter or so, it really will be. And then we can again focus on just running the business and growing as opposed to trying to react to the different problems in the marketplace. But again, 2020, given how it started, probably turned out way better than we expected. And again, lots of silver linings to all the things we did. So at this point, we're a little bit into 2021. We think it's gonna be a very good year, and we look forward to not having to discuss how we reacted to the problems, and instead just talk about how we've done things better and succeeded. With that, we'll open it to questions.

Thank you. Ladies and gentlemen, at this time, if you have a question or comment, please press star then one on your touchtone telephone. If at any point your question is answered, you may remove yourself from the queue by pressing the pound key. We do ask that while you pose your question, that you pick up your handset to provide optimum sound quality. Once again, if you have a question, please press star then 1 on your touch-tone telephone. Our first question comes from the line of David Schaaf with JMP Securities. Your line is open.

David Schaaf, JMP Securities, Hey, good morning. Thanks for taking my questions and congrats for getting through a very challenging year. Brad, maybe two things. First off, I know it's difficult to predict what volumes are going to look like this year, particularly with more stimulus coming in the effects of the vaccine on just foot traffic potentially. But as we think about sort of the cost structure, I think last quarter you provided an update that as much as 20% of the workforce There may have been that much of a reduction from a combination of belt tightening and natural attrition given the lower volumes. I mean, if volumes kind of stay at current levels, will employee costs kind of remain at these levels going forward, do you think, or is there even more room to cut?

The easy answer is there's always more room to cut, but probably the safer answer is, you know, I would say they'd stay at these levels. I think you got it right. Between the belt tightening and national attrition through all this, where we've reduced the cost, I don't see us sort of rehiring up and sort of anticipating growth or something. I think with the automation, given 25 years, the automation is moving so quickly that you probably can grow and hire all you want without giving up much in terms of expanding expenses. So that part's really good. I think, you know, the growth is a tough one because on the one hand, you know, it's nice to have low cost of funds, it increases your margin, but it also opens the door for just about everybody to get super aggressive if they want to. And, you know, the problem, if you think about it, let's just take our deal we just did. We had a 1% cost of funds, and so you could say, well, we should get super aggressive because you got, you know, at least an extra two points or three points in that margin all of a sudden. But, you know, to the extent you buy a whole bunch of paper and all of a sudden the markets come back, which I don't expect to happen soon, then all of a sudden you don't have the margin you expected. And so I think a bunch of folks are doing just that. They're going, let's go, let's go fast and hard, and we'll sort of worry about the cost of funds later. Now, we would love to play in that game, and we're going to try and do it in a very specific, sort of safest possible way to get some of that growth. But between the pandemic not quite being over and the vaccinations not quite being done, and the massive weather they've had lately, it's really put a damper in terms of you know, what's out there. But what you have seen is, you know, Capital One or Santander have been quite aggressive and they can do it. So we'll see how that plays. But to answer your question, I think, you know, a straight cost line or expense line isn't a bad option. And then, you know, we'll have to figure out how to get the volume to go up with it. The problem, one of the problems with our revenue is, as Jeff pointed out, with change to fair value, it just looks like it's going down a lot. It's really not. But trying to get the volume up, is it something we need to focus on?

Got it. No, that's helpful. And maybe as a follow-up along the lines on the revenue reporting, you know, in terms of, you know, the 10.3% yield, which is really sort of a risk-adjusted yield on the fair value portfolio, I mean, using that as sort of a jumping-off point, as we think about, you know, the pretty low delinquency levels right now and what that might mean for losses this year, as well as, as you had noted, maybe going a little deeper on pricing, just given the lower cost of funding. As we think about all that netting out, since charge-offs are basically embedded in that gap revenue yield, should that 10.3 Is it likely to creep up a bit just based on the loss outlook this year or potentially creep down a little bit as you maybe dig a little deeper on the pricing front?

Well, there's a lot of moving pieces to the 10.3, David, as you know. So it's the estimation of the losses that makes it risk-adjusted, but it's also the coupon and the receivables, and it's also the fees we either pay or charge to the dealers. And so, as Brad mentioned, we're trying to pull some levers here to grow the business. And one of the levers we can pull is to maybe put a couple more dollars into the dealer's pocket to incentivize the dealer to send us the contract. And we can also, the scoring model and what our risk people do in the office is, you know, tell us when, you know, we can buy something that maybe looks a little bit deeper but doesn't have necessarily, you know, greater loss expectations. So, I mean, we think the business plan works pretty well at around that 10.5 or so percent, you know, risk-adjusted yield with the pricing. And so, you know, we're kind of – I think it's safe to say that's a target for us. It's going to fluctuate a little bit with those other levers, but we're pretty comfortable at that level.

Got it. Great. Thank you very much. Thank you.

Thank you. Our next question comes from the line of John Rowan with Jani. Your line is open.

Good afternoon, guys. Hi, John. I just want to focus in a little bit on what happens when the legacy portfolio finally matures off. Jeff, you mentioned the size of the portfolio and the 18% yield, and that would imply that there's about $24 million, and correct me if I'm wrong there, of revenue that you're booking through the legacy portfolio, which obviously is in runoff and you're not booking any provisions against it. I'm wondering if there are any other cost offsets in that number, even if that number is correct, because without that, it doesn't look like, you know, just based off of the fair value portfolio that the company is profitable.

Well, there are a couple of other nuances that come along with the legacy portfolio. For instance, as you know, we either pay or charge dealers fees in conjunction with acquiring those contracts. And so embedded into the net yield on the legacy portfolio are – additional, what's really a net fees that we've, that we charge the dealers that are being accreted into income over the life of that portfolio. So that's kind of, that's not a giant piece, but that's a piece of the revenue picture for the legacy portfolio. And, you know, I think that, I think John actually, you know, with the, as we talked about, the 10.5% yield on the fair value portfolio and our cost structures, you know, kind of coming down a little bit with some efficiencies. I mean, I think the company is profitable.

So is there a finer point that you could put on how much revenue you actually generated off of the fair value, maybe net of the dealer fees that you're talking about? Because obviously at some point in 2021, the fair value, the legacy portfolio is going to go away. Unless costs come down quite a bit off of where they are. You know, if, if there is like a 20 some odd million dollar run rate on the, on a legacy portfolio, it just doesn't, the math doesn't seem to indicate that there's much profit in 2021. Now, unless there's a big decline in funding costs, I'm just trying to foot that up because, or maybe you can just answer how much revenue came this quarter off of the legacy portfolio.

Well, and remember too, that we also had, you know, for the year, uh, you know, $29.5 million marks on the fair value portfolio, which come out of the revenue. And so, you know, and those are, you know, there's a little bit of a fair value adjustment there, but the vast majority of that is pandemic. I mean, really, it's all pandemic related. And so, that, you know, if you're trying to, you know, really look at the fair value revenue component, that's, you know, the bulk of it right there. We do a schedule in the 10K, and unfortunately I don't have it with me right now, but we do a schedule in the 10K where we break out the fair value revenue and the legacy portfolio revenue in a more tabular fashion that might be helpful for you.

Okay. And then just lastly, you know, the losses in the legacy portfolio, like 11%, yet you have, you know, 14-some-odd percent, if I'm not mistaken – allowance in that portfolio. As you get toward 16%, rather, as you get through the end of the year, if you don't materialize 16% losses, do you credit the differential back through the provision expense? Obviously, those allowances were transferred there based on CECL and were not a charge to earnings. Do they become a credit to earnings if you don't use up that 16% allowance through charge-offs as that book matures off in 21?

Yeah, I mean, that would be the mechanics, theoretically, right. So if, and in fact, I've seen, you know, where a couple of the institutions, banks, these were that filed their earnings reports already this year, had, you know, clawed back some of the provisions that they had made earlier in the year, pandemic-related provisions, and they, you know, they go back through the P&L as sort of negative provision credit, you know, losses.

Okay, I just want to make sure it was the same in a runoff portfolio, right? Those are still portfolios that are growing, so I just want to make sure that that's still the mechanics in a runoff scenario.

It wouldn't make any difference, I don't think.

Okay. All right, that's it for me. Thank you.

Thank you.

Thank you. Our next question comes from the line of Kyle Joseph with Jefferies. Your line is open.

Hey, good morning, guys. Thanks for having me on, and congratulations on wrapping up 2020. On the legacy portfolio, it looked like a lot of the credit strength in the quarter was actually improvement on the legacy portfolio. Can you give us a sense for what specifically drove that in the quarter and the outlook for that credit performance on that portfolio going forward?

I think we'd attribute that, and particularly in the losses, I think we'd attribute it to the auction recoveries primarily, which were running at substantially better levels and Normally with a super-season portfolio like the legacy portfolio, it would be pretty rocky when it gets end of life, but I think that segment in particular did very well for what we liquidated at the auctions. And then just the overall delinquencies, even for such a seasoned portfolio, have been much better on the legacy portfolio than we would have expected.

Okay, and then I think that's a good transition. Can you guys give us kind of your sense for used car price, your outlook for used car prices in 21?

I think our recoveries are going to drop, obviously, as the manufacturers catch up. Then you'll see the demand at the auctions drop. And so our recoveries will come down. But I still think, at least for the rest of this year, that market still remains strong. And going back to the other point, If you think about the legacy portfolio, these are the guys that have been in the car for a long, long time and probably at some level are bouncing around from current to 30 days to 60 days. And so getting a stimulus check gave them a real opportunity to catch up kind of out of the blue. Rather than running their normal sort of in the bad part, in the good part, having a stimulus check, not to mention another one coming, or they've gotten two, I guess, and another third one coming. You know, that's the kind of free money they get that gives them an opportunity to sort of make a movement in that kind of an older loan. And so, you know, it's easier to see it in the legacy as much as it should have the same effect on the fair value. But since the fair value is newer, you've got to figure people are sort of, it's not so much people are buying cars with their stimulus checks, but you'd see it a little more clearly in the legacy portfolio as sort of a free money catch-up for our customers. So, but back to the used car prices or the used car market. I think you'll see – I think that market will stay strong for the rest of the year.

Got it. And then last one for me. On the value mark, you know, what triggered it in the fourth quarter? Obviously, we've seen it throughout the year, but, you know, we kind of know that there's a pandemic. The economy has been gradually recovering. You know, in what scenario do we not see fair value adjustments going forward?

That's a good question. I think, you know – Certainly one of the things we've learned through time is to be cautious. And so I think the whole 2020 and the pandemic, as much as we pointed out, lots of good things have happened as a result. You're just not sure what's going to happen next. I mean, even, you know, so that's probably the easy answer for most of 2020 and all the adjustments we took. You just weren't sure what the future holds. Now, as we move into 2021, depending on who you listen to, You know, if you listen to some twerp in the government, we've got a couple more years of this, but if you don't, it's probably over in about six months or three months, and we're going to go with that version. And so, you know, at that point, you wouldn't see any more effect on the fair value hits. I mean, we think at this point this thing should be over pretty darn quick. So I wouldn't expect, you know, don't hold me to it, but if I were going to guess, I'd say we wouldn't have any more this year going forward.

Got it. Thanks very much for answering my questions. Thank you.

Thank you. I'm sure no further questions. I will now turn the call back over to Mr. Charles Bradley for any additional or closing remarks.

Thank you. I think we've kind of summed up where we stand. Fourth quarter was a nice way to finish up the year. The year worked out, given all the things we had to deal with, really, really well. As we sort of alluded to a lot during this call, 2021, should be a significantly better year in terms of not having to deal with the pandemic. You know, we can really focus on doing what we normally do, which is running the company, growing the company, growing the portfolio, growing the profitability, and working on that stock price. So thank you all for joining us, and we'll speak to you rather soon after the first quarter.

Ladies and gentlemen, this does conclude today's conference call. A replay will be available beginning two hours from now until March 3, 2021 by dialing 855-859-2056 or 404-537-3406 with the conference identification number 399-8868. A broadcast of the conference call will also be available live and for 90 days after the call via the company's website at www.consumerportfolio.com. Please disconnect your lines at any time and have a wonderful day.