Triad Financial SM 10Q 2008 Q1 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2008

Commission file number: 333-126538

TRIAD FINANCIAL CORPORATION

(Exact name of registrant as specified in its charter)


California		33-0356705
(State of Incorporation)		(IRS Employer Identification No)

7711 Center Avenue, Suite 200
Huntington Beach, California		92647
(Address of principal executive offices)		(Zip Code)

(714) 373-8300
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of Acts. o Yes þ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ(Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes þ No

As of May 12, 2008, the registrant had 9,069 shares of common stock outstanding all of which were owned by the registrant’s parent Triad Holdings Inc.

TRIAD FINANCIAL CORPORATION
INDEX TO FORM 10-Q


		Page
PART I	FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS
	CONSOLIDATED BALANCE SHEETS		2
	CONSOLIDATED STATEMENTS OF INCOME		3
	CONSOLIDATED STATEMENTS OF CASH FLOWS		4
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		5
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		21
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		35
ITEM 4.	CONTROLS AND PROCEDURES		36

PART II	OTHER INFORMATION
ITEM 1.	LEGAL PROCEEDINGS		37
ITEM 1A.	RISK FACTORS		37
ITEM 2.	UNREGISTERED SALES OF EQUITY SECUITIES AND USE OF PROCEEDS		37
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES		37
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		37
ITEM 5.	OTHER INFORMATION		37
ITEM 6.	EXHIBITS		38
SIGNATURES			40
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on the current beliefs of the company’s management as well as assumptions made by and information currently available to management. All statements other than statements of historical fact included in this quarterly report, including without limitation, statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. When used in this quarterly report, the words “anticipate,” “believe,” “estimate,” “expect” and “intend” and words or phrases of similar meaning, as they relate to the company or the management, are intended to identify forward-looking statements. Although management believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors that could cause actual results to differ materially from management’s expectations (“cautionary statements”) include, but are not limited to:

	•		our ability to make payments of principal and interest on, or refinance, our substantial indebtedness;

	•		our reliance on our warehouse and residual facilities, securitization program and credit enhancement arrangements;

	•		our ability to generate significant amounts of cash to service our debt and fund our operations;

	•		loss of contractual servicing rights;

	•		general economic and business conditions, including wholesale auction values and interest rates;

	•		our exposure to the risk of increases in defaults and prepayments of contracts purchased and held by us prior to their securitization and the subsequent performance of receivables held in securitization trusts;

	•		changes in the delinquency, default and loss rates on the receivables included in each securitization trust;

	•		failure to implement our business strategy;

	•		the high degree of risk associated with non-prime borrowers;

	•		our ability to successfully compete in our industry; and

	•		our ability to maintain the material licenses and permits required for our operations.

Based upon changing conditions, if any one or more of these risks or uncertainties materialize, or if any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. We do not intend to update these forward-looking statements.

Part I. FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

TRIAD FINANCIAL CORPORATION

Consolidated Balance Sheets


	March 31, 2008		December 31, 2007
	(Dollars in thousands)
	(Unaudited)
ASSETS
Cash and cash equivalents	$	58,045	$	52,505
Cash — restricted		314,653		295,786
Finance receivables held for investment, net		3,357,112		3,514,979
Retained interest in securitized assets, net		10,964		10,916
Accounts receivable, net		41,252		46,965
Fixed assets, net of accumulated depreciation of $25,095 in 2008 and $23,235 in 2007		14,533		15,222
Collateral held for resale, net		23,637		29,383
Capitalized financing costs, net of accumulated amortization of $15,344 in 2008 and $13,369 in 2007		10,316		11,532
Deferred tax asset, net		81,893		89,028
Goodwill		30,446		30,446
Taxes receivable		16,075		8,054
Other assets		3,193		2,736

Total assets	$	3,962,119	$	4,107,552


LIABILITIES AND STOCKHOLDER’S EQUITY
Liabilities
Revolving credit facilities	$	551,306	$	334,390
Securitization notes payable		2,821,315		3,195,489
Senior notes payable		149,280		149,256
Other liabilities		82,771		71,826

Total liabilities		3,604,672		3,750,961


Commitments and contingencies (Note 12)

Stockholder’s Equity
Common stock, no par value; authorized 9,069 shares; issued and outstanding 9,069 shares at March 31, 2008 and December 31, 2007		—		—
Additional paid in capital		345,000		345,000
Retained earnings		10,619		9,690
Accumulated other comprehensive income		1,828		1,901

Total stockholder’s equity		357,447		356,591

Total liabilities and stockholder’s equity	$	3,962,119	$	4,107,552

The accompanying notes are an integral part of these consolidated financial statements.

TRIAD FINANCIAL CORPORATION

Consolidated Statements of Income


	Three Months			Three Months
	Ended			Ended
	March 31, 2008			March 31, 2007
	(Dollars in thousands)
	(Unaudited)
Financing and other interest income	$	142,069		$	161,530
Interest expense		50,072			54,863

Net interest margin		91,997			106,667


Provision for credit losses		46,578			62,630

Net interest margin after provision for credit losses		45,419			44,037


Servicing income		702			2,977
Other income (expense)		(10,361	)		2,659

Total other revenues (expenses)		(9,659	)		5,636


Operating expenses:
Compensation and employee benefits		21,550			20,752
Occupancy and equipment		3,665			4,142
Systems and data processing		3,294			3,337
Professional services		1,918			1,534
Telecommunications		872			946
Advertising		932			779
Other		2,431			3,480

Total operating expenses		34,662			34,970


Income before income taxes		1,098			14,703
Provision for income taxes		(169	)		(5,769	)

Net income	$	929		$	8,934

The accompanying notes are an integral part of these consolidated financial statements.

TRIAD FINANCIAL CORPORATION

Consolidated Statements of Cash Flows


	Three Months Ended			Three Months Ended
	March 31, 2008			March 31, 2007
	(Dollars in thousands)
	(Unaudited)
Cash flows from operating activities
Net income	$	929		$	8,934
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,947			7,675
Provision for credit losses		46,578			62,630
Deferred income tax expense (benefit)		7,181			(6,837	)
Accretion of present value discount		(1,053	)		(6,212	)
Amortization of purchase premium		4,827			9,025
Loss on repurchase of receivables from gain on sale trusts		—			2,864
Changes in operating assets and liabilities
Accounts receivable		5,713			6,150
Other assets		(457	)		(194	)
Other liabilities		10,945			916
Current tax receivable/payable		(8,021	)		(677	)

Net cash provided by operating activities		72,589			84,274

Cash flows from investing activities
Distributions from gain on sale trusts		2,228			49,059
Payments to Ford Motor Credit		(1,341	)		—
Repurchases from gain on sale trusts		—			(93,712	)
Purchases of finance receivables held for investment		(251,592	)		(306,563	)
Collections on finance receivables held for investment		361,497			376,846
Change in restricted cash		(18,867	)		(26,550	)
Purchases of fixed assets		(1,171	)		(155	)

Net cash provided by (used in) investing activities		90,754			(1,075	)

Cash flows from financing activities
Net change in warehouse credit facilities		205,916			302,936
Net change in residual credit facilities		11,000			(45,000	)
Payment on securitization notes		(374,174	)		(343,679	)
Capitalized finance costs		(545	)		(72	)

Net cash used in financing activities		(157,803	)		(85,815	)

Net increase (decrease) in cash and cash equivalents		5,540			(2,616	)

Cash and cash equivalents
Beginning of period		52,505			60,367

End of period	$	58,045		$	57,751

Non-cash Activity
Preferred Stock dividend declared	$	—		$	788

Supplemental Disclosure
Interest paid	$	51,694		$	54,642

Income taxes paid	$	71		$	13,287

The accompanying notes are an integral part of these consolidated financial statements.

Triad Financial Corporation

Notes to Consolidated Financial Statements

1. Organization and Nature of Business

Triad Financial Corporation (the “Company”) was incorporated as a California corporation on May 19, 1989. The Company engages primarily in the business of purchasing and servicing automobile retail installment sales contracts (“Contracts”) originated by automobile dealers located throughout the United States. The Company also originates automobile loans directly to consumers. The Company specializes in providing financing to consumers with limited credit histories, modest incomes or those who have experienced prior credit difficulties, generally referred to as “non-prime” borrowers.

From June 1999 through April 29, 2005, the Company was a wholly-owned subsidiary of Fairlane Credit, LLC, a wholly-owned subsidiary of Ford Motor Credit Company (“Ford Credit”).

On April 29, 2005, a newly formed entity, Triad Holdings Inc. (“Triad Holdings”) and its wholly-owned subsidiary, Triad Acquisition Corp., acquired all of the outstanding capital stock of the Company from Fairlane Credit, LLC (the “Acquisition”). As part of the Acquisition, Triad Acquisition Corp. was merged with and into Triad Financial Corporation, with the Company being the surviving corporation. Triad Holdings is beneficially owned by Hunter’s Glen/Ford Ltd. and affiliates of Goldman, Sachs & Co. and GTCR Golder Rauner, L.L.C.

In accordance with the guidelines for accounting for business combinations, the purchase price paid by Triad Holdings, plus related purchase accounting adjustments, have been recorded in our consolidated financial statements for the period subsequent to April 29, 2005. This has resulted in a new basis of accounting reflecting the fair market value of our assets and liabilities for the successor period beginning April 30, 2005.

As of the acquisition date, we recorded our assets and liabilities at their estimated fair values. The purchase price paid by Triad Holdings plus acquisition and closing costs, exceeded the fair value of net assets acquired, resulting in approximately $30.4 million of goodwill.

2. Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, all of which are Delaware corporations, Triad Financial Special Purpose Corporation, Triad Financial Special Purpose LLC, Triad Financial Residual Special Purpose LLC, and Triad Financial Warehouse Special Purpose LLC (the “Subsidiaries”). Triad Financial Warehouse Special Purpose LLC includes its wholly-owned subsidiary, Triad Automobile Receivables Warehouse Trust, a Delaware trust.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. In the opinion of management, these financial statements include all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the results for interim periods. Results for interim periods should not be considered indicative of results for a full year.

Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

Cash Equivalents

Cash and cash equivalents include cash in transit from borrowers and investments in highly liquid securities with original maturities of 90 days or less.

Restricted Cash

Cash pledged to support securitization transactions and warehouse loan facilities is deposited into restricted accounts and recorded on the Company’s consolidated balance sheets as restricted cash.

Finance Receivables

Finance receivables are classified as held for investment and carried at amortized cost, net of an allowance for credit losses, as the Company has the ability and intent to hold these receivables until maturity. Financing income for finance receivables originated and purchased subsequent to the Acquisition is recognized using the interest method based on contractual cash flows. Premiums and discounts and origination costs are deferred and amortized as adjustments to financing income over the estimated life of the related receivables.

In connection with the Acquisition, the carrying value of our predecessor finance receivables held for investment owned as of the Acquisition was adjusted to fair market value taking into account future expected credit losses and a required rate of return commensurate with the associated risk. The carrying value of our finance receivables repurchased from gain on sale trusts was recorded at fair market value upon repurchase, taking into account future expected credit losses and a required rate of return commensurate with the associated risk. Financing income on these receivables includes interest income recognized using the interest method based on contractual cash flows and taking into account expected prepayments and is net of premium amortization.

The accrual of financing income is suspended on accounts when they are deemed impaired. Accounts are generally deemed impaired when they are 30 days past due. We generally recognize interest income on impaired contracts on a cash basis when received.

Sale of Receivables

All securitization transactions executed by the Company subsequent to April 29, 2005 have been accounted for as secured financings in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These transaction structures allow the trust to enter into interest rate derivative contracts with respect to retained interests and also allow the servicer the discretion to sell charged-off finance receivable contracts. No charged-off receivables have been sold subsequent to April 29, 2005.

Prior to April 30, 2005, finance receivables were sold in securitization transactions that were accounted for as sales of finance receivables in accordance with GAAP. These transaction structures involved the Company surrendering control over these assets by selling finance receivables to off-balance sheet securitization entities. The securitization entities issued interest-bearing securities collateralized by future collections on the sold receivables.

The Company retained certain interests in the sold receivables. These retained interests are classified as securities available for sale and are reported at fair value. If there is a decline in fair value and it is judged to be other than temporary, the individual security is written down to fair value and the amount of the write-down is included in earnings. If there is a change in fair value and it is judged to be temporary, the securities are recorded at fair value with unrealized gains and losses recorded, net of tax, as a separate component of accumulated other comprehensive income in stockholder’s equity. In securitization transactions accounted for as a sale of receivables, the Company retains the servicing rights and receives a servicing fee. Since the servicing fee adequately compensates us for retaining the servicing rights, no servicing asset or liability is recorded and the fee is recognized as collected over the remaining term of the related sold finance receivables.

Allowance for Credit Losses

The allowance for credit losses is our estimate of incurred credit losses related to held for investment receivables as of the date of the financial statements. This allowance is based on such factors as the credit quality of the portfolio, historical credit loss trends, trends in projected used car values and general economic factors. Finance receivables are charged to the allowance for credit losses when an account is deemed to be uncollectible. This charge takes into account the estimated value of any collateral. Recoveries on finance receivables previously charged off as uncollectible are credited to the allowance for credit losses.

Charge-offs on predecessor finance receivables held for investment and finance receivables repurchased from gain on sale trusts are charged against the Company’s probable future expected credit losses established as a component of the asset’s net carrying value.

Charge-Off Policy

Our policy is to charge off owned receivables in the month in which the borrowers become 120 days contractually delinquent if we have not previously repossessed the related vehicle. If a vehicle has been repossessed, and the underlying contract is an owned receivable, we charge off the underlying receivable upon repossession, taking into account the estimated value of our collateral, with a reconciliation upon liquidation. For sold receivables, the debt is charged off upon liquidation of the collateral. The net charge-off represents the difference between the actual net sales proceeds and the amount of the delinquent contract, including accrued interest, on our owned receivables. Accrual of finance charge income is suspended on accounts that are more than 30 days contractually delinquent.

Derivative Financial Instruments

In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”,our interest rate swap agreements outstanding are recognized on our consolidated balance sheet at fair value with changes in the value recorded in earnings as a component of other income. Fair value is calculated using current market values for similar instruments with the same remaining maturities.

Fair Value Disclosures

In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value Measurements” which provides enhanced guidance for using fair value to measure assets and liabilities. The Company adopted SFAS No. 157 on January 1, 2008. SFAS 157 applies to all assets and liabilities that are being measured and reported on a fair value basis.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact.

SFAS 157 requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement costs). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, SFAS 157 establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

• Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

• Level 2 Inputs — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (for example, interest rates, volatilities, prepayment speeds, loss severities, credit risks and default rates) or inputs that are derived principally from or corroborated by observable market data by correlation or other means.

• Level 3 Inputs — Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities.

The Company’s retained interest in securitized assets and derivative financial instruments are reported at fair value based on Level 3 and Level 2 Inputs, respectively. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of March 31, 2008, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:


	Fair Value Measurement at March 31, 2008
	Level 1		Level 2			Level 3		Total Fair
	Inputs		Inputs			Inputs		Value
	(Dollars in thousands)
Retained interest in securitized assets	$	—	$	—		$	10,964	$	10,964
Derivative financial instruments		—		(22,914	)		—		(22,914	)

The table below represents a reconciliation of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period from January 1, 2008 to March 31, 2008:


	Fair Value Measurement Using
	Significant Unobservable Inputs (Level 3)
	Retained Interest
	in Securitized Assets
	(Dollars in
	thousands)
Balance at December 31, 2007	$	10,916
Impact of adoption of SFAS No. 157		—
Balance at January 1, 2008		10,916
Residual interest income included in earnings		1,053
Unrealized losses included in other comprehensive income		(118	)
Settlements		(887	)

Balance at March 31, 2008	$	10,964

In February 2007, FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities including an amendment of FASB Statement No. 115” (“SFAS 159”) which provides companies with an option to report selected financial assets and liabilities at fair value. The standard’s objective is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year beginning after November 15, 2007. The Company has elected not to report any assets or liabilities at fair value in accordance with SFAS No. 159.

Fixed Assets

Fixed assets are carried at cost less accumulated depreciation. Fixed assets owned as of the acquisition date were adjusted to fair market value and are being depreciated over their remaining useful lives.

Depreciation is calculated principally on the straight-line method over their remaining useful lives of the assets as follows:


Equipment		3-5 years
Software		3-5 years
Furniture and fixtures		5 years

Depreciation expense totaled $1.9 million and $2.4 million for the three months ended March 31, 2008 and 2007, respectively.

Leasehold improvements are stated at cost and depreciated over the useful lives of the improvements or term of the lease, whichever is less.

Upon sale or retirement, the cost of assets and related accumulated depreciation is eliminated from the respective accounts, and the resulting gain or loss is included in operations. Repairs and maintenance expenses are charged to operations as incurred.

Goodwill

In accordance with Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets”, the Company reviews its goodwill for impairment annually and when events or changes in circumstances indicate the carrying amount may not be recoverable. Management evaluates the recoverability of goodwill by comparing the carrying value of the Company’s only reporting unit to its fair value.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes”, resulting in two components of income tax expense; current and deferred. Current income tax expense approximates taxes to be paid or refunded for the current period. Deferred income tax expense results from changes in deferred tax assets and liabilities between periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years which those temporary differences are expected to be recovered or settled.

The Company accounts for uncertainty in income taxes recognized in the financial statements in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, an interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 requires that a more likely than not threshold be met before the benefit of a tax position may be recognized in the financial statements and prescribes how such benefit should be measured. It also provides guidance on derecognition, measurement, classification, interest and penalties, interim accounting periods and disclosure.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Statement of Financial Accounting Standards No. 123(R), “Share-Based Payment”, revised 2004, (“SFAS 123R”). The Company utilizes the modified prospective method which is one of the methods provided in the statement. SFAS 123R, which revised Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, requires that the cost resulting from all share-based payment transactions be measured at fair value and recognized in the financial statements. The Company has also adopted Staff Accounting Bulletin No. 107 “Share-Based Payment”, which the SEC issued in March 2005 to provide its view on the valuation of share-based payment arrangements for public companies.

Use of Estimates

The preparation of the financial statements, in conformity with generally accepted accounting principles, requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based upon amounts that differ from those estimates. The primary estimates inherent within these financial statements include the market value adjustments recorded in connection with purchase accounting, the allowance for credit losses and the fair value of retained interests in securitized assets.

3. Finance Receivables

Finance receivables at March 31, 2008 and December 31, 2007 are summarized as follows:


	2008			2007
	(Dollars in thousands)
Finance receivables held for investment	$	3,048,962		$	3,124,036
Premiums and discounts, net		(3,668	)		(3,592	)
Deferred costs, net		25,550			25,767

Finance receivables held for investment, gross		3,070,844			3,146,211
Allowance for credit losses		(206,705	)		(230,500	)

Finance receivables held for investment, net		2,864,139			2,915,711


Predecessor finance receivables held for investment, net		405,255			475,296
Finance receivables repurchased from gain on sale trusts, net		87,718			123,972

Finance receivables, net	$	3,357,112		$	3,514,979

The aggregate unpaid principal balances of all owned finance receivables more than 60 days past due were $70.1 million at March 31, 2008 and $156.0 million at December 31, 2007.

The activity in the predecessor finance receivables held for investment for the periods indicated is summarized as follows:


	Contractual			Nonaccretable			Expected			Accretable			Carrying
	Payments			Discount			Payments			Discount			Value
	(Dollars in thousands)
Balance, December 31, 2007	$	639,854		$	(105,391	)	$	534,463		$	(59,167	)	$	475,296
Interest income		(18,812	)		—			(18,812	)		14,577			(4,235	)
Principal collections		(65,806	)		—			(65,806	)		—			(65,806	)
Charge-offs, net of sales proceeds and recoveries		(12,092	)		12,092			—			—			—
Reclassifications		—			90			90			(90	)		—
Change in cash flows		(8,661	)		8,661			—			—			—

Balance, March 31, 2008	$	534,483		$	(84,548	)	$	449,935		$	(44,680	)	$	405,255


	Contractual			Nonaccretable			Expected			Accretable			Carrying
	Payments			Discount			Payments			Discount			Value
	(Dollars in thousands)
Balance, December 31, 2006	$	1,246,836		$	(253,238	)	$	993,598		$	(144,352	)	$	849,246
Interest income		(33,868	)		—			(33,868	)		25,686			(8,182	)
Principal collections		(102,267	)		—			(102,267	)		—			(102,267	)
Charge-offs, net of sales proceeds and recoveries		(14,360	)		14,360			—			—			—
Reclassifications		—			1,512			1,512			(1,512	)		—
Change in cash flows		(20,795	)		20,795			—			—			—

Balance, March 31, 2007	$	1,075,546		$	(216,571	)	$	858,975		$	(120,178	)	$	738,797

The activity in the finance receivables repurchased from gain on sale trusts for the periods indicated is summarized as follows:


	Contractual			Nonaccretable			Expected			Accretable			Carrying
	Payments			Discount			Payments			Discount			Value
	(Dollars in thousands)
Balance, December 31, 2007	$	145,125		$	(12,852	)	$	132,273		$	(8,301	)	$	123,972
Interest income		(4,575	)		—			(4,575	)		3,984			(591	)
Principal collections		(35,663	)		—			(35,663	)		—			(35,663	)
Charge-offs, net of sales proceeds and recoveries		(1,428	)		1,428			—			—			—
Reclassifications		—			1,225			1,225			(1,225	)		—
Change in cash flows		(21	)		21			—			—			—

Balance, March 31, 2008	$	103,438		$	(10,178	)	$	93,260		$	(5,542	)	$	87,718


	Contractual			Nonaccretable			Expected			Accretable			Carrying
	Payments			Discount			Payments			Discount			Value
	(Dollars in thousands)
Balance, December 31, 2006	$	70,453		$	(4,137	)	$	66,316		$	(3,657	)	$	62,659
Finance receivables repurchased		103,295			(8,011	)		95,284			(5,795	)		89,489
Interest income		(4,783	)		—			(4,783	)		3,940			(843	)
Principal collections		(32,570	)		—			(32,570	)		—			(32,570	)
Charge-offs, net of sales proceeds and recoveries		(1,209	)		1,209			—			—			—
Reclassifications		—			1,469			1,469			(1,469	)		—
Change in cash flows		857			(857	)		—			—			—

Balance, March 31, 2007	$	136,043		$	(10,327	)	$	125,716		$	(6,981	)	$	118,735

During the first three months of 2008 and 2007, expected cash flows from predecessor finance receivables held for investment and receivables repurchased from gain on sale trusts were reevaluated and determined to be greater than originally expected. This resulted in a reclassification of cash flows from nonaccretable discount to accretable discount.

4. Allowance For Credit Losses

The changes in the allowance for credit losses for the periods indicated are summarized as follows:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2008			2007
	(Dollars in thousands)
Balance, beginning of period	$	230,500		$	195,000
Provision for credit losses		46,578			62,630
Charge-offs		(80,710	)		(54,828	)
Recoveries		10,337			5,275

Balance, end of period	$	206,705		$	208,077

The allowance for credit losses is maintained at a level adequate to cover incurred credit losses related to receivables originated subsequent to April 29, 2005 and classified as held for investment as of the date of the financial statements, taking into account the credit quality of the portfolio, historical credit loss trends, trends in projected used car values and general economic factors.

The carrying value of predecessor finance receivables held for investment was adjusted to fair market value taking into account future expected credit losses and a required rate of return commensurate with the associated risk.

5. Sales of Receivables

Servicing Portfolio

The Company retains servicing rights for receivables sold in securitization transactions meeting the criteria for sales of receivables. The activity in the servicing portfolio for the periods indicated is summarized as follows:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2008			2007
	(Dollars in thousands)
Balance, beginning of period	$	94,097		$	484,818
Called receivables		—			(93,712	)
Collections and charge-offs		(18,459	)		(68,527	)

Balance, end of period	$	75,638		$	322,579

The aggregate unpaid principal balances of sold finance receivables more than 60 days past due were $2.0 million at March 31, 2008 and $5.2 million at December 31, 2007. Credit losses, net of recoveries, totaled $2.4 and $6.5 million for the three months ended March 31, 2008 and 2007, respectively.

Retained Interest in Securitized Assets

The components of the retained interest in securitized assets, carried at fair value, at March 31, 2008 and December 31, 2007 are summarized as follows:


	2008			2007
	(Dollars in thousands)
Restricted cash held for the benefit of securitizations	$	14,731		$	14,731
Overcollaterization receivable		9,833			12,233
Interest-only		542			(447	)

Retained interest in securitized assets, gross		25,106			26,517


Payable to Ford Credit		(14,142	)		(15,601	)

Retained interest in securitized assets, net	$	10,964		$	10,916

The Company’s retained interests in securitization transactions includes the value associated with future cash flows generated from overcollateralization and any excess spread amounts. Overcollateralization receivable represents the difference between securitized receivables outstanding and notes outstanding.

Retained interests in securitized assets are recorded at fair value. The fair value of retained interests is determined based on calculating the present value of the projected cash flows to be received using management’s best estimates of key assumptions, including discount rate, prepayment rate and credit losses.

Retained interests in securitized assets are net of an estimated amount owed to Ford Credit pursuant to a contractual agreement entered into with Ford Credit at the closing of the Acquisition. We made payments to Ford Credit totaling $1.3 million during the three months ended March 31, 2008 pursuant to the agreement. The estimated present value of the remaining payments that will be due to Ford Credit pursuant to the agreement is approximately $14.1 million. The exact amount of these remaining payments will not be known until the last of five securitizations entered into by the Company prior to the Acquisition are called. The Company anticipates that these payments will continue through the second quarter of 2008 when the last of the five securitizations is called in May 2008. The exact amount of the remaining payments to Ford Credit will be dependent upon, among other things, the performance of the contracts and loans in the respective pools and the net collections ultimately received on those loans.

Accrued servicing fees due from the securitization trusts are included in accounts receivable in our consolidated balance sheets. The amount of accounts receivable representing receivables from securitization trusts totaled $8.8 million at March 31, 2008 and $8.6 million at December 31, 2007.

The activity in the retained interest in securitized assets for the periods indicated is summarized as follows:


										Retained						Retained
										Interest in						Interest in
	Restricted			Over-			Interest-			Securitized			Payable to Ford			Securitized
	Cash			Collateralization			Only			Assets, Gross			Credit			Assets, Net
	(Dollars in thousands)
Balance, December 31, 2007	$	14,731		$	12,233		$	(447	)	$	26,517		$	(15,601	)	$	10,916
Distributions		—			(2,400	)		172			(2,228	)		—			(2,228	)
Residual interest income		—			—			1,053			1,053			—			1,053
Unrealized gains (losses)		—			—			(236	)		(236	)		118			(118	)
Payment to Ford Credit		—			—			—			—			1,341			1,341

Balance, March 31, 2008	$	14,731		$	9,833		$	542		$	25,106		$	(14,142	)	$	10,964

Balance, December 31, 2006	$	57,751		$	63,026		$	2,257		$	123,034		$	(20,503	)	$	102,531
Distributions		(22,526	)		(21,091	)		(5,442	)		(49,059	)		—			(49,059	)
Residual interest income		—			—			6,795			6,795			(583	)		6,212
Realized losses		—			—			(311	)		(311	)		156			(155	)
Unrealized gains (losses)		—			—			(1,797	)		(1,797	)		(589	)		(2,386	)

Balance, March 31, 2007	$	35,225		$	41,935		$	1,502		$	78,662		$	(21,519	)	$	57,143

At March 31, 2008, the key assumptions utilized in determining fair value of our retained interest in securitized assets include a discount rate of 16%, an ABS rate, which represents the average monthly total reduction of principal, of 1.20 and an expected cumulative lifetime loss of 11.4%.

The Company has not presented the expected weighted average life assumption used in determining the gain on sale and in measuring the fair value of retained interest in securitized assets due to the stability of this attribute over time. A significant portion of the Company’s prepayment experience relates to defaults that are considered in the cumulative lifetime loss assumption. The Company’s voluntary prepayment experience on its gain on sale receivables portfolio typically has not fluctuated significantly with changes in market interest rates or other economic or market factors.

6. Revolving Credit Facilities

Amounts outstanding under our warehouse and residual loan facilities at March 31, 2008 and December 31, 2007 are summarized as follows:


	2008		2007
	(Dollars in thousands)
Warehouse loan facilities	$	486,306	$	280,390
Residual loan facility		65,000		54,000

Total revolving credit facilities	$	551,306	$	334,390

Facility amount advances outstanding and collateral pledged under our warehouse and residual loan facilities at March 31, 2008 are summarized as follows:


	Facility		Collateral		Advances
	Amount		Pledged		Outstanding
	(Dollars in thousands)
Warehouse loan facility, due April 2009	$	625,000	$	541,491	$	486,306
Residual loan facility, due April 2009		125,000		375,096		65,000
Warehouse loan facility, due January 2009		500,000		—		—

	$	1,250,000	$	916,587	$	551,306

Our warehouse loan facility with Citibank Global Markets Realty Corp. provides for borrowings up to $750.0 million less amounts drawn on our corresponding residual facility. Our residual loan facility provides for borrowings up to $125.0 million. Our warehouse and residual loan facilities bear interest at a floating rate. At March 31, 2008, the interest rate on our warehouse loan facility was 3.15% and the interest rate on our residual loan facility was 5.20%.

The Company’s warehouse and residual loan facilities with Goldman Sachs Mortgage Company, due October 2007, were paid off on October 26, 2007. The funds necessary to pay off these facilities were obtained through the transfer of collateral to, and simultaneous additional advances on the Company’s other warehouse and residual facilities, due April 2009.

On January 10, 2008, we entered into a warehouse facility with Barclays Bank PLC. This facility provides up to $500.0 million of funding for automobile retail installment sales contract receivables originated or purchased by us. The facility has a two year commitment but may expire after 364 days if the liquidity facility is not renewed.

The Company will provide a guarantee under each warehouse facility equal to 10% of the amount outstanding at the time the guarantee is drawn on by the lender.

Under the terms of our revolving credit facilities, the Company transfers eligible collateral, including finance receivables and retained interests in securitized assets, to special purpose finance subsidiaries of the Company. These subsidiaries pledge collateral to secure advances under the facilities, pursuant to advance formulas and available credit. These subsidiaries then forward funds to the Company in consideration for the transfer of eligible collateral. While these subsidiaries are included in the Company’s consolidated financial statements, they are separate legal entities and the collateral and other assets they hold are legally owned by these subsidiaries and are not available to creditors of the Company or its other subsidiaries.

The Company’s warehouse and residual loan facility agreements also contain various covenants requiring minimum financial ratios, asset quality and portfolio performance ratios, including net loss, delinquency and repossession ratios. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interest against collateral pledged under these agreements or restrict the Company’s ability to obtain additional borrowings under these agreements. As of March 31, 2008, the Company was in compliance with all covenants under its warehouse and residual loan facility agreements.

Capitalized financing costs with an unamortized balance of $0.5 million at March 31, 2008 are being amortized over the contractual terms of the corresponding warehouse loan facility. Interest expense for the three months ended March 31, 2007 includes $4.9 million of expense incurred to Goldman Sachs Mortgage Company.

7. Securitization Notes Payable

Securitization notes payable represent debt issued by the Company in securitization transactions accounted for as secured financings. Securitization notes payable outstanding at March 31, 2008 are summarized as follows:


			Original
			Weighted			Collateral		Note
	Original		Average			Pledged		Balance
	Note		Interest			at		at
Transaction	Amount		Rate			March 31, 2008		March 31, 2008
(Dollars in thousands)
2005-A, due June 12, 2012(a)	$	1,104,000		4.09	%	$	271,732	$	256,535
2005-B, due April 12, 2013(a)		905,303		4.32	%		251,388		237,339
2006-A, due April 12, 2013(a)		822,500		4.88	%		330,227		305,400
2006-B, due November 12, 2012(a)		915,500		5.50	%		434,713		403,342
2006-C, due May 13, 2013(a)		1,092,200		5.37	%		619,465		568,046
2007-A, due February 12, 2014(a)		775,110		5.34	%		583,598		527,493
2007-B, due July 14, 2014(a)		598,330		5.70	%		589,670		523,160

	$	6,212,943				$	3,080,793	$	2,821,315


(a)		Maturity date represents final legal maturity of securitization notes payable. Securitization notes payable are expected to be paid based on amortization of the finance receivables pledged to the Trusts.

Under the terms of our securitization transactions, the Company transfers finance receivables to special purpose finance subsidiaries of the Company. While these subsidiaries are included in the Company’s consolidated financial statements, these subsidiaries are separate legal entities and the collateral and other assets held by these subsidiaries are legally owned by these subsidiaries and are not available to creditors of the Company or its other subsidiaries.

Capitalized financing costs with an unamortized balance of $6.0 million at March 31, 2008 are being amortized over the expected term of the securitization transactions. Capitalized financing costs include $1.2 million in remaining unamortized underwriting fees paid to Goldman, Sachs & Co., an affiliate of one of our equity investors.

All of the Company’s securitization transactions are covered by financial guaranty insurance policies, which agreements provide that if certain portfolio performance ratios (delinquency or cumulative net loss triggers) in a Trust’s pool of receivables exceed certain targets, the specified credit enhancement levels will increase by increasing the required spread account level and the premiums paid to the guarantee insurance providers will increase as defined in the agreements. At March 31, 2008, the cumulative net loss ratio for the Company’s 2006-B and 2006-C securitization trusts each exceeded one of their target ratios. As a result, the credit enhancement requirement to maintain cash reserves as a percentage of the portfolio immediately increased from 2% to 3%, resulting in a delay in cash distributions to the Company. This requirement will remain at 3% until the trusts are back in compliance with their targets for three consecutive months.

Agreements with the Company’s guarantee insurance providers contain additional specified targeted portfolio performance ratios. If, at any measurement date, the targeted portfolio performance ratios with respect to any insured Trust were to exceed these additional levels, provisions of the agreements permit the Company’s guaranty insurance providers to terminate the Company’s servicing rights to the receivables sold to that Trust. These financial guaranty insurance policies also contain minimum financial ratio requirements. Except as discussed above, the Company was in compliance with its agreements with its guarantee insurance providers at March 31, 2008.

8. Senior Notes Payable

On April 29, 2005, Triad Acquisition Corp. issued $150.0 million of Senior Notes in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act, to certain accredited investors pursuant to Rule 501 under the Securities Act, and to non-U.S. persons in reliance on Regulation S under the Securities Act. The Notes also included a registration rights agreement requiring the Company to file a registration statement under the Securities Act and to consummate an exchange offer after the effective date of the registration statement. The exchange offer was consummated on January 9, 2006. In connection with the Acquisition, Triad Acquisition Corp. was merged with and into Triad Financial Corporation.

The Notes have a stated coupon of 11.125% and were issued at a discount to yield 11.25%. The Notes mature on May 1, 2013 but can be redeemed, in whole or in part, on or after May 1, 2010, at specified redemption prices, and on or after May 1, 2012, at par value.

Capitalized financing costs with an unamortized balance of $3.8 million at March 31, 2008 are being amortized over the contractual term of the notes. Capitalized financing costs include $2.6 million in remaining unamortized fees paid to Goldman, Sachs & Co., an affiliate of one of our equity investors.

9. Preferred Stock

On June 30, 2006, the Company sold 1,500,000 shares of Non-Voting Preferred Stock to Triad Holdings for an aggregate purchase price of $30,000,000 in cash. No underwriting discounts or commissions were paid. The Non-Voting Preferred Stock was issued without registration under the Securities Act in reliance on Section 4(2) of the Securities Act based on Triad Holdings investment intent, financial and business matters sophistication and other typical investment representations. To the extent declared by the board of directors of the Company, quarterly dividends were payable at an annual rate of 10.5%. Triad Holdings pledged its Non-Voting Preferred Stock of Triad Financial Corporation to secure its loan with Citigroup Global Markets Realty Corp. The Non-Voting Preferred Stock was redeemed at par on April 27, 2007.

For the three months ended March 31, 2007, the Company declared and settled through intercompany transactions dividends of $787,500 based on an annual rate of 10.5% to Triad Holdings.

10. Derivative Financial Instruments

At March 31, 2008, the Company had derivative financial instruments with external third parties with underlying notional amounts of $1.6 billion. These agreements were valued at a loss of $22.9 million at March 31, 2008. Other income (expense) for the three months ended March 31, 2008 included $15.0 million in losses on our derivative financial instruments. Other income (expense) for the three months ended March 31, 2007 included $0.8 million in losses on our derivative financial instruments. At March 31, 2008 and December 31, 2007, the Company had $9.5 million and $2.9 million, respectively, in collateral on deposit with the counterparties to the derivative financial instruments. These amounts are included in restricted cash on our balance sheets.

11. Income Taxes

The Company accounts for uncertainty in income taxes recognized in the financial statements in accordance with FIN 48. The Company has identified certain tax positions for which deductibility is highly certain, but for which there is uncertainty as to the timing of such deductibility. As of March 31, 2008, the Company had reclassified approximately $3.9 million of tax benefit from its deferred tax liability to its FIN 48 current tax liability. If recognized, the $3.9 million unrecognized tax benefit would have no impact on the Company’s effective tax rate.

The Company’s policy is to recognize interest and/or penalties related to income tax matters as a component of income tax expense. At of March 31, 2008, the Company has accrued $0.4 million, net of tax benefit, for the potential payments of interest in accordance with FIN 48.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. All tax periods subsequent to the Acquisition are open to examination by the Internal Revenue Service and the states to which we are subject to tax.

12. Commitments and Contingencies

Various legal actions, governmental proceedings and other claims are pending or may be instituted or asserted in the future against the Company and its subsidiaries. As a consumer finance company, the Company is subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, violations of bankruptcy stay provisions, certificate of title disputes, fraud, breach of contract and discriminatory treatment of credit applicants. Some litigation against the Company could take the form of class action complaints by consumers. As the assignee of finance contracts originated by dealers, the Company may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies but can include requests for compensatory, statutory and punitive damages.

Litigation is subject to many uncertainties, the outcome of individual litigated matters is not predictable with assurance and it is reasonably possible that some of the foregoing matters could be decided unfavorably to the Company or the subsidiary involved. Although the amount of liability at March 31, 2008 with respect to these matters cannot be ascertained, the Company believes that any resulting liability would not materially affect the consolidated financial position, results of operations or cash flows of the Company and its subsidiaries.

Under the management agreement among the Company, Triad Holdings LLC (98.9% owner of Triad Holdings), Triad Holdings and Hunter’s Glen/Ford Ltd., the parties engaged Hunter’s Glen/Ford as a financial and management consultant. During the term of the engagement, Hunter’s Glen/Ford will provide Gerald J. Ford to serve as the chief executive officer of Triad LLC and executive chairman of the Company as specified in the agreement and will provide Carl B. Webb and J. Randy Staff, or similarly qualified individuals, to furnish a portion of the services required by the management agreement. The Company agreed to pay Hunter’s Glen/Ford Ltd a management fee of $1.5 million per annum for the services described above.

During the third quarter of 2007, the Company entered into a consulting agreement with Carl B. Webb. Under the terms of the agreement, Mr. Webb will provide consulting services to the Company in return for a fee of $250,000 per annum. This consulting agreement was amended in the first quarter of 2008 to change the annual fee to $500,000.

In December 2007, the Company entered into an agreement with Kevin Harvick, Inc. regarding the sponsorship of a NASCAR team for the 2008 racing season. Under the terms of that agreement, the Company will pay $2.8 million in sponsorship fees in 2008. At March 31, 2008, the Company has a remaining obligation of approximately $2.0 million under this agreement.

The Company’s operations are conducted from leased facilities under noncancellable lease agreements accounted for as operating leases. The Company also leases certain equipment. Rental expense charged to operations amounted to $1.1 million for the three months ended March 31, 2008 and 2007.

Future minimum rental commitments under all noncancellable leases at March 31, 2008 are summarized as follows:


	(Dollars in thousands)
Year ending December 31,
2008	$	2,344
2009	$	3,351
2010	$	3,449
2011	$	2,528
2012	$	2,148

13. Comprehensive Income

Comprehensive income for the period indicated is summarized as follows:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2008			2007
	(Dollars in thousands)
Net income	$	929		$	8,934
Other comprehensive income (loss), net
Unrealized holding (loss) gains on available for sale securities (net of tax of $45 and $233)		(73	)		356
Net unrealized holding gains reclassified into earnings (net of tax of $1,175)		—			(1,798	)

Total other comprehensive loss, net		(73	)		(1,442	)

Comprehensive income	$	856		$	7,492

The changes in accumulated other comprehensive income for the three months ended March 31, 2008 and 2007 are summarized as follows:


	Three Months			Three Months
	Ended			Ended
	March 31,			March 31,
	2008			2007
	(Dollars in thousands)
Balance, beginning of period	$	1,901		$	9,084
Current period change		(73	)		(1,442	)

Balance, end of period	$	1,828		$	7,642

14. Stock-Based Compensation

Following the closing of the Acquisition, Triad Holdings adopted a stock plan under which employees, officers, directors and consultants of the Company could be granted options to purchase shares of Triad Holdings’ common stock. The maximum number of shares available for grant is equal to approximately 8% of the fully diluted shares of Triad Holdings. The stock options vest annually, generally at the rate of 20% per year, provided the grantees continue to provide services to the Company. All options not exercised expire ten years after the date of grant.

Because the Company is considered to be nonpublic under SFAS 123R, the Company elected to use the formula value (book value) method to calculate compensation expense, in which the Company remeasures its liability each period. The awards are liability-classified based on a repurchase feature of the option agreements. The Company has elected to use a straight-line vesting attribution method for awards granted upon its adoption of SFAS 123R.

The Company recorded a credit to compensation expense of $1.0 million and $76,000 for stock-based employee compensation for the three months ended March 31, 2008 and 2007, respectively. No options were granted during the three months ended March 31, 2008. The Company granted 0.2 million options during the three months ended March 31, 2007. Since the inception of the plan, no options have been exercised.

A summary of stock option activity under the Company’s stock option plan for the periods indicated is summarized as follows:


				Weighted-
				Average
				Exercise
	Shares			Price
	(Amounts in thousands except
	weighted-average
	exercise price )
Outstanding at December 31, 2007		2,867		$	7.68
Granted		—			—
Canceled		(8	)		7.73
Forfeited		(12	)		7.73

Outstanding at March 31, 2008		2,847		$	7.68

Exercisable at March 31, 2008		1,602		$	7.63

Weighted-average remaining contractual life in years					7.82


Outstanding at December 31, 2006		2,988		$	7.58
Granted		200			8.30
Canceled		—			—
Forfeited		(150	)		7.59

Outstanding at March 31, 2007		3,038		$	7.62

15. Subsequent Event

On May 6, 2008, the Company and certain of its subsidiaries agreed to amend (1) its Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, as originator and servicer, Triad Financial Warehouse Special Purpose LLC, as seller, Triad Automobile Receivables Warehouse Trust, as borrower, The Bank of New York (as successor-in-interest to JPMorgan Chase Bank, National Association, as collection account bank, the “Collection Account Bank”), and Citigroup Global Markets Realty Corp. (“CGMRC”), as lender (as amended from time to time, the “Warehouse Lending Agreement”), and (2) its Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC (“Residual LLC”), as borrower, the Collection Account Bank and CGMRC, as lender (as amended from time to time, the “Residual Loan Agreement”).

The amendments to the Warehouse Lending Agreement include, among other things, that: (1) Triad will borrow a maximum of $125 million between May 6, 2008 and June 30, 2008 to purchase newly originated contracts, in addition to the amount currently drawn under the facility, which was approximately $505 million as of May 6, 2008; (2) after June 30, 2008, there will be no additional borrowings thereunder; and (3) after June 1, 2008, all collections from contracts pledged under the Warehouse Lending Agreement will be used to pay down the loans.

The amendments to the Residual Loan Agreement include, among other things, that: (1) after May 8, 2008, there will be no new borrowings thereunder, in addition to the amount currently drawn under the facility, which is approximately $67 million as of May 6, 2008; (2) for the period from May 6, 2008 through June 30, 2008, after payments of interest and fees, 75% of remaining collections from the securitization trusts’ residual assets will be paid to the lender in respect of principal and any amounts remaining thereafter will be distributed as set forth in the Residual Loan Agreement, including for payment to Residual LLC; and (3) after June 30, 2008, after payments of interest and fees, 100% of remaining collections from the securitization trusts’ residual assets will be paid to the lender in respect of principal and any amounts remaining thereafter will be distributed as set forth in the Residual Loan Agreement.

In addition, the Company is currently in negotiations to enter into new facilities to provide alternate funding. The Company entered into a $49.5 million unsecured promissory note with one of its indirect equity holders, Hunter’s Glen/Ford Ltd., to provide interim funding on May 11, 2008. This promissory note will accrue interest at 20% and shall be payable quarterly, on the last day of each March, June, September and December while the note is outstanding. The promissory note is due and payable the earlier of one year from its issuance and fourteen days after receipt of demand for payment. The Company and Residual LLC are also in negotiations to enter in a new residual facility with Hunter’s Glen/Ford Ltd. and GTCR Golder Rauner II, L.L.C., two of the Company’s indirect equity holders, to provide funding to replace this promissory note. This new residual facility will be secured by a second priority security interest in the securitization trusts’ residual assets pledged under the Residual Loan Agreement. Once the Residual Loan Agreement is paid in full, the new residual facility will have a first priority security interest in the securitization trusts’ residual assets.

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

From June 1999 through April 29, 2005, the Company was a wholly owned subsidiary of Fairlane Credit, LLC, a wholly-owned subsidiary of Ford Motor Credit Company, or “Ford Credit”. On April 29, 2005, a newly formed entity, Triad Holdings Inc. and its wholly-owned subsidiary, Triad Acquisition Corp., acquired all of the outstanding capital stock of the Company from Fairlane Credit, LLC, or the “Acquisition”. As part of the Acquisition, Triad Acquisition Corp. was merged with and into Triad Financial Corporation with the Company being the surviving corporation.

In accordance with the guidelines for accounting for business combinations, the purchase price paid by Triad Holdings Inc. plus related purchase accounting adjustments have been pushed-down and recorded in our financial statements for the period subsequent to April 29, 2005. This has resulted in a new basis of accounting reflecting the fair market value of our assets and liabilities for the successor period beginning April 30, 2005.

The statements in the discussion and analysis regarding our expectations regarding the performance of our business, our liquidity and capital resources and other non-historical statements are forward-looking statements. These forward-looking statements are subject to numerous risks and uncertainties. Our actual results may differ materially from those contained in or implied by any of these forward-looking statements.

General

Historically, we have generated earnings and cash flow primarily from the purchase, origination, retention, subsequent securitization and servicing of retail installment contracts and loans secured by automobiles. We purchase retail installment contracts from franchised and select independent automobile dealerships and originate auto loans directly to consumers. As used in this document, “contracts” include retail installment contracts originated by dealers and purchased by us and note and security agreements evidencing loans made directly by us to consumers. To fund the purchase and origination of receivables, we rely upon warehouse and residual credit facilities. During the period from June 1999 through July 2002, we did not securitize any auto receivables and held all auto receivables in our portfolio. Since August 2002, we have completed twelve securitizations of auto receivables. Prior to our May 2005 securitization transaction, all of our securitizations were accounted for as sales in accordance with accounting principles generally accepted in the United States of America, or “GAAP”.

We periodically sell receivables to securitization trusts, or “Trusts,” that, in turn, sell asset-backed securities to investors. Beginning with our May 2005 securitization, we made a decision to alter the structure of our securitization transactions to no longer meet the criteria for sales of auto receivables, but instead to meet the criteria for on-balance sheet reporting. Accordingly, following a securitization accounted for as a secured financing, the receivables and the related securitization indebtedness will remain on our balance sheet. We recognize finance revenue and fee income on the receivables and interest expense on the securities issued in the securitization and record a provision for credit losses over the life of the securitization. The principal changes to our securitization structures that result in the differing accounting treatment include the right of the trust to enter into interest rate derivative contracts with respect to retained interests and also allows the servicer to sell charged-off finance receivable contracts. Provisions such as these preclude the use of sale treatment in accordance with Statement of Financial Accounting Standards, or “SFAS”, No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities.

For all securitizations accounted for as sales, the Company retained certain interests in the sold receivables representing the present value of the estimated future excess cash flows to be received by us over the life of the securitization. Excess cash flows result from the difference between the interest received from the obligors on the receivables and the interest paid to investors in the asset-backed securities, net of credit losses and expenses. Excess cash flows from the Trusts are initially utilized to fund credit enhancement requirements in order to attain specific credit ratings for the asset-backed securities issued by the Trusts. Once predetermined credit enhancement requirements are reached and maintained, excess cash flows are distributed to us. In addition to excess cash flows, we earn monthly base servicing fee income of 2.25% per annum on the outstanding principal balance of receivables securitized, or “sold receivables,” and collect other fees such as late charges and extension fees as servicer for those Trusts.

Critical Accounting Policies and Use of Estimates

Critical accounting policies and use of estimates are fully described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and there have been no material changes.

Components of Revenues and Expenses

Most of our revenues are generated from the purchase and origination of receivables, other interest income, and securitization and servicing of our automobile installment contracts. Our revenues include financing revenue, other interest income, income related to sales of receivables and other income. We earn financing revenue from contracts we purchase and originate. Other interest income includes: (1) residual interest income on the retained interest in securitized assets we retain from securitization transactions; and (2) income on our restricted cash accounts. Our servicing income includes: (1) the base servicing fee income we receive from the Trusts for servicing the receivables in those Trusts; and (2) the supplemental servicing fee income we receive from servicing the receivables in those Trusts. Our other income includes fees we collect on receivables, such as late charges, extension fees, proceeds from sales of gap insurance and extended service contracts, referral fees received from other lenders and payment convenience fees. Our other income also includes gains and losses on our interest rate swap agreements and gains and losses related to the repurchase of receivables from gain on sale trusts.

Our costs and expenses consist of interest expense, operating expenses, provision for credit losses and provision for income taxes. Our interest expense is the amount of interest and fees we pay on borrowings used to finance our purchase and origination of receivables and working capital needs. Our operating expenses represent costs associated with operating our dealer and direct channels and servicing our receivables, including rent and occupancy expense, compensation expense and servicing costs. Our provision for credit losses represents the charge necessary to maintain our allowance for credit losses at a level considered adequate to cover probable credit losses on receivables that are held for investment and originated subsequent to April 29, 2005.

Results of Operations

Three Months Ended March 31, 2008 as Compared to Three Months Ended March 31, 2007

Our net income was $0.9 million for the three months ended March 31, 2008 as compared to $8.9 million for the three months ended March 31, 2007. The decrease in net income was primarily due to a decline in other revenues (expenses) and lower net interest margin, partially offset by a lower provision for credit losses. Our results included $15.0 million and $0.8 million in losses on our derivative financial instruments for the three months ended March 31, 2008 and 2007, respectively.

Net Interest Margin

Our revenues are primarily generated from the purchase, origination, retention, subsequent securitization and servicing of auto receivables. Our average owned finance receivables outstanding are summarized as follows:


	For the Three Months Ended
	March 31,
	2008		2007
	(Dollars in thousands)
Average owned finance receivables, carrying value	$	3,630,074	$	3,934,717

Average owned finance receivables decreased by 7.7% for the three months ended March 31, 2008 as compared to the three months ended March 31, 2007. This decrease was due to a lower level of originations, combined with repayments and charge-offs as the owned finance receivables portfolio continues to age. We purchased and originated $249.6 million of auto contracts during the three months ended March 31, 2008 as compared to $304.0 million during the three months ended March 31, 2007. This decrease in originations was primarily due to lower levels of originations in both our direct and dealer channels. In response to higher than expected losses on receivables originated during 2006, we modified our contract origination strategy to better manage our credit risk, which resulted in lower volume levels during the last quarter of 2006 and throughout 2007. Additionally, in response to problems currently being experienced in the asset-backed securitization market for non-prime loan originations, the Company further tightened its underwriting criteria and increased pricing during the first quarter of 2008, which resulted in lower volume levels during the first quarter. We have also reduced the number of dealers we buy contracts from and have ceased accepting on-line applications from some direct lending sources.

The average new contract size was $17,954 for the three months ended March 31, 2008 as compared to $18,476 for the three months ended March 31, 2007. The decline in average new contract size for the three months ended March 31, 2008 as compared to 2007 was due to modifications in our contract origination strategy. The average annual percentage rate on contracts purchased and originated was 15.9% and 15.4% during the three months ended March 31, 2008 and 2007, respectively.

Net interest margin on our owned finance receivables is summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Financing income	$	138,197		$	152,196
Other interest income		3,872			9,334
Interest expense		(50,072	)		(54,863	)

Net interest margin	$	91,997		$	106,667

Annualized financing income as a percentage of average owned finance receivables		15.2	%		15.5	%

The 13.8% decrease in net interest margin for the three months ended March 31, 2008 as compared to the three months ended March 31, 2007 was due to a decrease in financing income and other interest income, partially offset by a decrease in interest expense.

The 9.2% decrease in financing income was primarily due to the decrease in average owned finance receivables. Effective April 30, 2005, we adjusted predecessor finance receivables held for investment to fair market value, taking into account future expected credit losses and a required rate of return commensurate with the associated risk in connection with the purchase transaction. Financing income was reduced by $4.8 million and $9.0 million of premium amortization for the three months ended March 31, 2008 and 2007, respectively, related to these receivables and receivables repurchased from gain on sale trusts. Excluding the premium amortization, our average yield on receivables for the three months ended March 31, 2008 and 2007 would have been 15.8% and 16.4%, respectively.

Other interest income decreased to $3.9 million for the three months ended March 31, 2008 as compared to $9.3 million for the three months ended March 31, 2007. This decrease was mainly due to a decrease in residual interest income caused by lower retained interest in securitized asset balances combined with a decrease in interest income received on restricted cash accounts. Additionally, other interest income for the three months ended March 31, 2007 included $3.0 million in previously unrealized gains on our retained interest in securitized assets.

The decrease in interest expense was primarily due to lower average debt levels. Our effective cost of funds was 5.6% for the three months ended March 31, 2008 as compared to 5.7% in 2007. Average debt outstanding was $3,590.7 million and $3,866.7 million for the three months ended March 31, 2008 and 2007, respectively.

Provision for Credit Losses

Our provision for credit losses was $46.6 million for the three months ended March 31, 2008 as compared to $62.6 million for the three months ended March 31, 2007. Our provision for credit losses decreased as a result of the improved credit quality resulting from the modifications we have made to our contract origination strategy.

Servicing Income

Servicing income decreased to $0.7 million for the three months ended March 31, 2008 as compared to $3.0 million for the three months ended March 31, 2007. Servicing income represents servicing fees and late fees collected on sold receivables. The decrease in servicing income for the three months ended March 31, 2008 as compared to the three months ended March 31, 2007 was primarily attributable to the declining balance of our sold receivables.

Other Income

Other income is summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Customer fees	$	4,303		$	5,983
Losses on derivative financial instruments		(14,968	)		(807	)
Other		304			(2,517	)

Other income	$	(10,361	)	$	2,659

Our other income (expense) includes customer fees we collect on owned finance receivables, such as late charges and extension fees, proceeds from sales of gap insurance and extended service contracts, referral fees received from other lenders, payment convenience fees, gains and losses on our derivative financial instruments and losses related to the repurchase of receivables from gain on sale trusts.

Customer fees decreased to $4.3 million for the three months ended March 31, 2008 as compared to $6.0 million for the three months ended March 31, 2007 primarily due to the decrease in our average owned finance receivables.

of $13.2 million in losses on our interest rate swap agreements and $1.8 million in losses on our forward-starting swap agreements. These losses were a result of a declining interest rate environment throughout the first quarter of 2008. For the three months ended March 31, 2007, our $0.8 million in losses on derivative financial instruments were comprised entirely of losses on our forward-starting swap agreements.

Other increased to $0.3 million for the three months ended March 31, 2008 as compared to an expense of $2.5 million for the three months ended March 31, 2007 primarily due to a $2.9 million loss recorded on the repurchase of receivables from a gain on sale trust during the three months ended March 31, 2007.

Expenses

Operating expenses were $34.7 million for the three months ended March 31, 2008 as compared to $35.0 million for the three months ended March 31, 2007. Annualized operating expenses as a percentage of average total managed receivables were 3.7% for the three months ended March 31, 2008 as compared to 3.2% for the three months ended March 31, 2007. This increase in operating expenses as a percentage of average total managed receivables was mainly due to the decrease in average total managed receivables.

Income Taxes

Income tax expense was $0.2 million for the three months ended March 31, 2008 as compared to $5.8 million for the three months ended March 31, 2007. Our effective income tax rate was 15.3% and 39.2% for the three months ended March 31, 2008 and 2007, respectively. The decrease in our effective tax rate was due to a $0.3 million credit to tax expense resulting from recognizing the effect of changes in our state tax rate on our deferred tax assets, partially offset by $53,000 recognized for the potential payment of interest.

Credit Quality

We provide financing in relatively high-risk markets, and, therefore, anticipate a corresponding higher level of delinquencies and charge-offs.

Provisions for credit losses are charged to operations in amounts sufficient to maintain the allowance for credit losses on the balance sheet at a level considered adequate to cover our probable incurred credit losses related to impaired held for investment receivables as of the date of the balance sheet. Receivables held for investment are charged-off to the allowance for credit losses at the earlier of repossession of the collateral or when the account is otherwise deemed uncollectable. Predecessor finance receivables held for investment were adjusted to fair market value in connection with the purchase transaction taking into account future expected credit losses and a required rate of return commensurate with the associated risk.

The following table presents certain data related to our owned finance receivables:


	At March 31,			At December 31,
	2008			2007
	(Dollars in thousands)
Finance receivables held for investment	$	3,048,962		$	3,124,036
Allowance for credit losses		(206,705	)		(230,500	)

Finance receivables held for investment, net of allowance		2,842,257			2,893,536

Allowance for credit losses as a percentage of receivables		6.8	%		7.4	%

Predecessor finance receivables held for investment, net		405,255			475,296
Finance receivables repurchased from gain on sale trusts, net		87,718			123,972

Total owned finance receivables held for investment, net	$	3,335,230		$	3,492,804

The decrease in the allowance for credit losses as a percentage of receivables at March 31, 2008 as compared to December 31, 2007 was due to improved credit quality resulting from the modifications we have made to our contract origination strategy.

Finance receivables that are (1) more than 30 days delinquent, but not yet in repossession, and (2) in repossession are summarized as follows:


	At March 31,					At December 31,
	2008					2007
	Amount		Percent			Amount		Percent
	(Dollars in thousands)
Delinquent contracts:
31 to 60 days	$	256,915		7.2	%	$	377,862		10.0	%
Greater than 60 days		70,115		1.9			156,036		4.1

		327,030		9.1			533,898		14.1
In repossession		23,637		0.7			29,383		0.8

	$	350,667		9.8	%	$	563,281		14.9	%

Delinquencies in our receivables portfolio may vary from period to period based upon credit quality, the average age of the portfolio, seasonality within the calendar year and economic factors. Due to our target customer base, a relatively high percentage of accounts become delinquent at some point in the life of a contract and there is a fairly high rate of account movement between current and delinquent status in the portfolio. Total delinquencies were lower at March 31, 2008 as compared to December 31, 2007 due to normal seasonal trends and an increased emphasis on collection activities, including higher collections staffing levels.

We at times offer payment extensions, in accordance with our policies and guidelines, to consumers to assist them when temporary financial difficulties interfere with their ability to make scheduled payments. Our policies and guidelines, as well as certain contractual restrictions in our securitization transactions, limit the number and frequency of extensions that may be granted. An account for which all delinquent payments are extended is classified as current at the time the extension is granted, resulting in lower delinquencies. Thereafter, such account’s delinquency status is determined in the same manner as any other account.

We evaluate the results of our extension strategies based upon the portfolio performance on accounts that have been extended versus accounts that have not been extended over the same period of time and as a result of that evaluation, we make periodic adjustments to our extension strategy. We believe that payment extensions granted according to our policies and guidelines are an effective portfolio management technique and result in higher ultimate cash collections from the portfolio.

Payment extensions as a percentage of owned finance receivables outstanding are summarized as follows:


	At March 31,			At December 31,
	2008			2007
	Percent			Percent
Never extended		70.8	%		73.2	%
Extended:
1-2 times		28.4	%		26.1	%
3-4 times		0.8	%		0.7	%

Total extended		29.2	%		26.8	%

Total		100.0	%		100.0	%

As the finance receivables portfolio ages, more accounts become eligible for extensions. Payment extensions as a percentage of total owned finance receivables increased to 29.2% at March 31, 2008 as compared with 26.8% at December 31, 2007, mainly driven by an increase in 1-2 times payment extensions, which increased to 28.4% at March 31, 2008 as compared to 26.1% at December 31, 2007. This increase in extensions was primarily due to the continued aging of our owned finance receivables portfolio. As the owned finance receivables portfolio ages, more accounts become eligible for extensions. As of March 31, 2008 and December 31, 2007, our owned finance receivables were aged, on a weighted average basis, 20.0 months and 18.8 months, respectively. In addition, we adopted a strategy to increase the number of extensions granted as our historical data indicated that contracts extended are more likely than not to result in additional collections over the life of the contract. We continue to monitor our extension strategy, and we believe that the judicious use of payment extensions is an effective portfolio management technique.

Payment extensions do not have a direct impact on the amount of our finance receivables charged-off and the corresponding credit quality ratios. Payment extensions may, however, impact the timing of these charge-offs in the event a previously extended account is ultimately charged-off. Additionally, the impact of payment extensions is considered in determining the allowance for credit losses and the resulting provision for credit losses.

Charge-off data with respect to our average owned finance receivables is summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Repossession charge-offs	$	119,071		$	91,019
Less: Sales proceeds and recoveries		(70,206	)		(59,328	)
Mandatory charge-offs(1)		35,027			33,432

Net charge-offs(2)	$	83,892		$	65,123

Annualized net charge-offs as a percentage of average total owned receivables outstanding		9.2	%		6.6	%
Sales proceeds and recoveries as a percentage of charge-offs		45.6	%		47.7	%


(1)		Mandatory charge-offs represent accounts charged-off in full with no recovery amounts realized at time of charge-off.

(2)		Net charge-offs for our owned portfolio include charge-offs from our finance receivables held for investment, our predecessor finance receivables held for investment and our finance receivables repurchased from gain on sale trusts.

Annualized net charge-offs as a percentage of our average owned finance receivables outstanding may vary from period to period based upon the credit quality of the portfolio, average age of the portfolio and economic factors. The increase in annualized net charge-offs as a percentage of average owned finance receivables to 9.2% for the three months ended March 31, 2008 as compared to 6.6% for the three months ended March 31, 2007 was due to higher charge-offs and a decrease in recoveries as a percentage of charge-offs. The increase in charge-offs was due to an increase in the average age of our portfolio, historically high levels of receivables more than 30 days delinquent at December 31, 2007, higher than expected credit losses on receivables originated in 2006 and higher mandatory charge-offs. The increase in mandatory charge-offs was due to, among other things, historically high levels of receivables more than 60 days delinquent at December 31, 2007. The decrease in recoveries as a percentage of charge-offs was due to lower auction sale proceeds combined with a higher level of mandatory charge-offs.

Total Managed Information

We evaluate the profitability of our lending activities based partly upon our total managed auto finance receivables portfolio, including both owned finance receivables and sold finance receivables. We have historically securitized our receivables in transactions that met the criteria for a sale of such receivables. The net margin and credit quality information presented below on a total managed basis assumes that securitized and sold receivables had not been sold and are still on our consolidated balance sheet. Accordingly, no gain on sale or servicing fee income would have been recognized. Instead, finance charge and fee income would be recognized over the life of the securitized receivables as accrued, and interest expense and other costs related to the asset-backed securities would be recognized as incurred.

We use this information to analyze trends in the components of the profitability of our total managed receivables portfolio. Analysis of this data on a total managed basis helps us to determine which origination channels and finance products are most profitable, guide us in making pricing decisions for finance products and indicates if sufficient spreads exist between our revenues and cost of funds to cover operating expenses and achieve corporate profitability objectives. Additionally, total managed information facilitates comparisons of our results with other finance companies that do not securitize their receivables or other finance companies that securitize their receivables in securitization transactions that do not meet the criteria for sales of receivables. Total managed information is not a measurement of financial performance under GAAP and should not be considered as an alternative to any other measures of performance determined under GAAP.

Our average total managed finance receivables outstanding are summarized as follows:


	For the Three Months Ended
	March 31,
	2008		2007
	(Dollars in thousands)
Average owned finance receivables, carrying value	$	3,630,074	$	3,934,717
Average sold finance receivables		84,401		401,056

Average total managed finance receivables	$	3,714,475	$	4,335,773

Total Managed Net Interest Margin

Net interest margin for our total managed receivables portfolio are summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Financing income and customer fees	$	150,912		$	183,539
Interest expense		(52,343	)		(58,358	)

Net interest margin	$	98,569		$	125,001

Reconciliation of net interest margin as reflected in our consolidated statements of income to total managed net interest margin is summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Net margin as reflected on the consolidated statements of income	$	91,997		$	106,667
Other interest income		(3,872	)		(9,334	)
Financing revenue on sold receivables		3,585			16,335
Interest expense on sold receivables		(516	)		(2,868	)
Losses on forward starting swaps agreements		(1,755	)		(807	)
Premium amortization		4,827			9,025
Customer fees		4,303			5,983

Total managed net interest margin	$	98,569		$	125,001

Net interest margin as a percentage of average total managed receivables is summarized as follows:


	For the Three Months
	Ended
	March 31,
	2008			2007
Annualized finance income and customer fees		16.2	%		16.9	%
Annualized interest expense		(5.6	)		(5.4	)

Annualized net interest margin as a percentage of average total managed receivables		10.6	%		11.5	%

Annualized net interest margin as a percentage of average total managed receivables decreased to 10.6% for the three months ended March 31, 2008 as compared to 11.5% for the three months ended March 31, 2007. This decrease was mainly due to a greater volume of loans in our direct channel to customers with higher expected credit quality. The increase in our cost of funds was primarily due to higher losses on our forward-starting swap agreements. Excluding gain (losses) on our forward-starting swap agreements, annualized net interest margin as a percentage of average total managed receivables would have been 10.8% for the three months ended March 31, 2008 as compared to 11.6% for the three months ended March 31, 2007.

Total Managed Credit Quality

We have periodically sold receivables in securitization transactions to Trusts and retained an interest in the receivables sold in the form of retained interest in securitized assets. Retained interests in securitized assets are reflected on our balance sheet at fair value, calculated based upon the present value of estimated excess future cash flows from the Trusts using, among other assumptions, probable future cumulative credit losses on the receivables sold. Charge-offs of receivables that have been sold to Trusts decrease the amount of excess future cash flows from the Trusts. If such charge-offs are expected to exceed our original probable cumulative credit losses, the fair value of retained interest in securitized assets could be written down through an impairment charge to earnings.

Certain data related to our total managed receivables finance receivable portfolio are summarized as follows:


	At March 31, 2008
	Owned		Sold		Total Managed
	(Dollars in thousands)
Owned finance receivables, unpaid principal balance	$	3,584,419	$	—	$	3,584,419
Sold finance receivables		—		75,638		75,638

Total managed finance receivables	$	3,584,419	$	75,638	$	3,660,057

Number of outstanding contracts		261,266		10,582		271,848

Average principal amount of outstanding contracts (in dollars)	$	13,719	$	7,148	$	13,464


	At December 31, 2007
	Owned		Sold		Total Managed
	(Dollars in thousands)
Owned finance receivables, unpaid principal balance	$	3,774,481	$	—	$	3,774,481
Sold finance receivables		—		94,097		94,097

Total managed finance receivables	$	3,774,481	$	94,097	$	3,868,578

Number of outstanding contracts		271,384		11,886		283,270

Average principal amount of outstanding contracts (in dollars)	$	13,908	$	7,917	$	13,657

Receivables that are (1) more than 30 days delinquent, but not yet in repossession, and (2) in repossession are summarized as follows:


	At March 31, 2008
	Owned					Sold					Total Managed
	Amount		Percent			Amount		Percent			Amount		Percent
Delinquent contracts:	(Dollars in thousands)
31 to 60 days	$	256,915		7.2	%	$	7,257		9.6	%	$	264,172		7.2	%
Greater than 60 days		70,115		1.9			2,028		2.7			72,143		2.0

		327,030		9.1			9,285		12.3			336,315		9.2
In repossession		23,637		0.7			1,237		1.6			24,874		0.7

	$	350,667		9.8	%	$	10,522		13.9	%	$	361,189		9.9	%


	At December 31, 2007
	Owned					Sold					Total Managed
	Amount		Percent			Amount		Percent			Amount		Percent
Delinquent contracts:	(Dollars in thousands)
31 to 60 days	$	377,862		10.0	%	$	12,599		13.4	%	$	390,461		10.1	%
Greater than 60 days		156,036		4.1			5,168		5.5			161,204		4.2

		533,898		14.1			17,767		18.9			551,665		14.3
In repossession		29,383		0.8			1,768		1.9			31,151		0.8

	$	563,281		14.9	%	$	19,535		20.8	%	$	582,816		15.1	%

Delinquencies in our total managed receivables portfolio may vary from period to period based upon credit quality, the average age of the portfolio, seasonality within the calendar year and economic factors. Total delinquencies were lower at March 31, 2008 as compared to December 31, 2007 due to normal seasonal trends and an increased emphasis on collection activities, including higher collections staffing levels.

We at times offer payment extensions, in accordance with our policies and guidelines, to consumers to assist them when temporary financial difficulties interfere with their ability to make scheduled payments. Our policies and guidelines, as well as certain contractual restrictions in our securitization transactions, limit the number and frequency of extensions that may be granted. An account for which all delinquent payments are extended is classified as current at the time the extension is granted. Thereafter, such account is aged based on the timely payment of future installments in the same manner as any other account, resulting in lower delinquencies.

The following is a summary of payment extensions as a percentage of owned, sold and total managed receivables outstanding:


	At March 31, 2008
	Owned			Sold			Total Managed
Never extended		70.8	%		43.5	%		70.3	%
Extended:
1-2 times		28.4	%		47.6	%		28.7	%
3-4 times		0.8	%		8.9	%		1.0	%

Total extended		29.2	%		56.5	%		29.7	%

Total		100.0	%		100.0	%		100.0	%


	At December 31, 2007
	Owned			Sold			Total Managed
Never extended		73.2	%		46.1	%		72.6	%
Extended:
1-2 times		26.1	%		47.3	%		26.6	%
3-4 times		0.7	%		6.6	%		0.8	%

Total extended		26.8	%		53.9	%		27.4	%

Total		100.0	%		100.0	%		100.0	%

As of March 31, 2008 and December 31, 2007, the total managed finance receivables are aged, on a weighted average basis, 20.6 months and 19.4 months, respectively. This increase in extensions was primarily due to the continued aging of our total managed finance receivables portfolio. As the total managed finance receivables portfolio ages, more accounts become eligible for extensions. In addition, we adopted a strategy to increase the number of extensions granted as our historical data indicated that contracts extended are more likely than not to result in additional collections over the life of the contract. At March 31, 2008 and December 31, 2007, our sold receivables portfolio was more seasoned than our owned receivables and therefore, had a higher level of extensions. We continue to monitor our extension strategy, and we believe that the judicious use of payment extensions is an effective portfolio management technique.

Charge-off data with respect to our finance receivables portfolio is summarized as follows:


	For the Three Months Ended
	March 31,
	2008			2007
	(Dollars in thousands)
Owned:
Repossession charge-offs	$	119,071		$	91,019
Less: Sales proceeds and recoveries		(70,206	)		(59,328	)
Mandatory charge-offs(1)		35,027			33,432

Net charge-offs(2)	$	83,892		$	65,123

Sold:
Charge-offs	$	4,440		$	14,871
Less: Sales proceeds and recoveries		(2,063	)		(8,371	)
Mandatory charge-offs(1)		—			—

Net charge-offs	$	2,377		$	6,500

Total Managed:
Repossession charge-offs	$	123,511		$	105,890
Less: Sales proceeds and recoveries		(72,269	)		(67,699	)
Mandatory charge-offs(1)		35,027			33,432

Net charge-offs	$	86,269		$	71,623

Annualized net charge-offs as a percentage of average total managed receivables outstanding		9.3	%		6.6	%
Sales proceeds and recoveries as a percentage of charge-offs		45.6	%		48.6	%


(1)		Mandatory charge-offs represent accounts charged-off in full with no recovery amounts realized at time of charge-off.

(2)		Net charge-offs for our owned portfolio include charge-offs from our finance receivables held for investment, our predecessor finance receivables held for investment and our finance receivables repurchased from gain on sale trusts.

Annualized net charge-offs as a percentage of our average total managed finance receivables outstanding may vary from period to period based upon the credit quality of the portfolio, average age of the portfolio and economic factors. The increase in annualized net charge-offs as a percentage of average total managed finance receivables to 9.3% for the three months ended March 31, 2008 as compared to 6.6% for the three months ended March 31, 2007 was due to higher charge-offs and a decrease in sales proceeds as a percentage of charge-offs. The increase in charge-offs was due to an increase in the average age of our portfolio, historically high levels of receivables more than 30 days delinquent at December 31, 2007, higher than expected credit losses on receivables originated in 2006 and higher mandatory charge-offs. The increase in mandatory charge-offs was due to, among other things, historically high levels of receivables more than 60 days delinquent at December 31, 2007. The decrease in recoveries as a percentage of charge-offs was due to lower auction sale proceeds combined with a higher level of mandatory charge-offs.

Liquidity and Capital Resources

General

Our primary sources of cash are borrowings on our warehouse and residual loan facilities, securitization notes payable and senior notes payable. Our primary uses of cash are purchases of receivables, operating costs and expenses and funding credit enhancement requirements for securitization transactions and debt service requirements.

Net cash provided by operating activities was $72.6 million and $84.3 million during the three months ended March 31, 2008 and 2007, respectively. Cash flows from operating activities are affected by net income as adjusted for non-cash items, including depreciation and amortization, provisions for credit losses, deferred income taxes, accretion of present value discount, amortization of purchase premiums and gains and losses. The $72.6 million of cash flows provided by operating activities for the three months ended March 31, 2008 was primarily due to $0.9 million of net income adjusted by $46.6 million of provision for credit losses. The $84.3 million of cash flows provided by operating activities for the three months ended March 31, 2007 was primarily due to $8.9 million of net income adjusted by $62.6 million of provision for credit losses.

Net cash provided by (used in) investing activities was $90.8 million and ($1.1) million for the three months ended March 31, 2008 and 2007, respectively. Cash flows from investing activities are highly dependent upon purchases of and collections on finance receivables held for investment. During the three months ended March 31, 2008, net cash provided by investing activities included $361.5 million in collections on finance receivables held for investment, offset by $251.6 million related to purchases of finance receivables held for investment. During the three months ended March 31, 2007, net cash used in investing activities included $306.6 million related to purchases of finance receivables held for investment and $93.7 million in repurchases from gain on sale trusts, mostly offset by $376.8 million in collections on finance receivables held for investment and $49.1 million in distribution from gain on sale trusts.

Net cash used in financing activities was $157.8 million and $85.8 million for the three months ended March 31, 2008 and 2007, respectively. Cash flows from financing activities reflect the net change in amounts required to be borrowed under our various revolving and term borrowing facilities. The $157.8 million of cash used in financing activities for the three months ended March 31, 2008 was due to $374.2 million in payments on securitization notes, partially offset by a $205.9 million increase on our warehouse credit facilities during the three months ended March 31, 2008. The $85.8 million of cash used in financing activities for the three months ended March 31, 2007 was due to $343.7 million in payments on securitization notes partially offset by a $257.9 million net increase in our warehouse and residual credit facilities.

Throughout most of 2007, we had two warehouse lending facilities and two residual facilities. The warehouse facilities funded most of our ongoing origination and acquisition of contracts, and the residual facilities provided us with working capital. Special purpose subsidiaries are the borrowers under these facilities.

The Company’s warehouse and residual loan facilities with Goldman Sachs Mortgage Company, due October 2007, were paid off on October 26, 2007. The funds necessary to pay off the facilities were obtained through the transfer of collateral to, and simultaneous additional advances on the Company’s other warehouse and residual facilities, due April 2009 with Citigroup Global Markets Realty Corp.

The Company will provide a guarantee under each warehouse facility equal to 10% of the amount outstanding at the time the guarantee is drawn on by the lender.

Based on our anticipated level of originations, we believe our cash flow from operations, available cash and available borrowings under our warehouse and residual facilities will provide us with sufficient liquidity to fund originations on an interim basis until a sufficient amount of receivables can be pooled together for subsequent securitizations. In anticipation of continued uncertainty in the asset-backed securitization market for non-prime loan originations in the near term, we have taken steps to adjust our origination targets by, among other things, tightening our underwriting criteria, increasing pricing, reducing the number of dealers we buy contracts from and ceasing accepting on-line applications from some direct lending sources. We believe the steps we have taken to adjust our origination targets are sufficient to address the problems currently being experienced in the securitization market. In the event that the securitization market does not become more conducive to transactions, we may be forced to take additional steps to further reduce our loan originations. Subject to these market conditions, we plan to continue to access the securitization market throughout the year in order to obtain additional liquidity.

Contractual and Long-Term Debt Obligations

Contractual and long-term debt obligations are fully described in “Item 7. Management’s Discussion and Analysis of Financial Condition and Result of Operations” contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and there have been no material changes.

Securitizations

We completed twelve auto receivables securitization transactions from August 2002 through March 31, 2008. In these transactions, we securitized approximately $10.9 billion of automobile receivables, issuing $9.9 billion of class A notes. Since April 29, 2005, the proceeds from the transactions were primarily used to repay borrowings outstanding under our warehouse facilities, and prior to April 29, 2005, our intercompany credit facility with Ford Credit. During 2005, 2006 and 2007 we completed two, three and two securitizations, respectively. Our last securitization was in November 2007. Subject to market conditions and origination volume, we expect that we will continue to access the securitization markets.

We have pursued a strategy of securitizing our receivables to diversify our funding, improve liquidity and obtain a cost-effective source of funds for the purchase of additional automobile finance contracts. Historically, the securitization program has provided us with necessary working capital at rates that were much lower than we could obtain through our own unsecured or secured corporate debt obligations.

At March 31, 2008, the cumulative net loss ratio for the Company’s 2006-B and 2006-C securitization trusts each exceeded one of their target ratios. As a result, the credit enhancement requirement to maintain cash reserves as a percentage of the portfolio immediately increased from 2% to 3%, resulting in a delay in cash distributions to the Company. This requirement will remain at 3% until the trusts are back in compliance with their targets for three consecutive months.

Deterioration in the economy could cause one or more of the ratios to exceed the targeted levels, resulting in stress on our liquidity position. If that occurred, we could be required to significantly decrease contract origination activities, and implement other significant expense reductions, if securitization distributions to us are materially decreased for a prolonged period of time.

The past several months have seen unprecedented turmoil in the global credit markets in general, and the asset-backed securitization markets in particular. The well-publicized problems involving credit insurance providers may also have an impact on our ability to execute securitizations. Recently, AMBAC, Inc., which has provided credit enhancement insurance on three of our securitization transactions since May 2005, announced that they would not provide such insurance on automobile securitizations in the future. Those companies that continue to provide credit enhancement insurance may be less likely to do so at the rates and on the terms at which prior transactions were executed in 2006 and early 2007.

Anticipating the possibility that there will be limited access to the securitization markets, we have continued to revise our credit origination strategies and have increased pricing. We have continued to selectively reduce the number of dealers we buy contracts from. We have also reduced staff among our sales and underwriting departments, and have made changes to our credit underwriting criteria. In our direct channel, we have ceased accepting on-line applications from some sources, and have implemented similar changes to our credit underwriting criteria.

We believe that we will continue to require the execution of securitization transactions, along with borrowings under our warehouse and residual facilities, in order to fund our future liquidity needs. There can be no assurance that funding will be available to us through these sources or, if available, that it will be on terms acceptable to us. If these sources of funding are unavailable to us on a regular basis, we may be required to further decrease contract origination activities and implement additional expense reductions, all of which may have a material adverse affect on our ability to achieve our business and financial objectives.

Off-Balance Sheet Arrangements

Prior to our May 2005 securitization transaction, we structured our securitization transactions to meet the criteria for sales of finance receivables. Under this structure, notes issued by our unconsolidated qualified special purpose finance subsidiaries are not recorded as a liability on our consolidated balance sheets. Beginning with the securitization completed in May 2005, our securitization transactions are being structured to meet the criteria for on-balance sheet reporting.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

General

Our earnings are affected by changes in interest rates as a result of our dependence upon the issuance of fixed and variable rate securities and the incurrence of variable rate debt to fund the purchase of auto finance contracts. Fluctuations in market interest rates impact the interest payments required under our warehouse and residual facilities, as well as the interest to be paid in future securitization transactions. We may utilize several strategies to minimize the impact of interest rate fluctuations on our net interest income, including the use of derivative financial instruments and the regular securitization of auto finance contracts.

Warehouse and Residual Facilities

In our contract origination process, we purchase auto finance contracts and make loans that bear fixed interest rates and are pledged to secure borrowings under our warehouse facilities. Amounts borrowed under our warehouse facilities will bear variable interest rates. We intend to utilize our warehouse facilities to fund receivables until we accumulate a portfolio of sufficient size to securitize. To mitigate the risk of fluctuations in interest rates prior to a securitization, we have utilized forward-starting swap agreements on a periodic basis. If interest rates are above the forward-starting swap rate on the pricing date of a securitization, the purchaser of the forward-starting swap agreement will pay us for the increase in interest rates. Likewise, if interest rates are below the locked rate on the pricing date of a securitization, we will pay the purchaser of the forward-starting swap agreement for the decrease in interest rates. Therefore, regardless of whether interest rates increase or decrease between the date auto finance contracts are originated and the date these contracts are securitized, we will have locked in the cost of funds on outstanding notional amounts and the gross interest rate spread of our auto finance contracts. Unlike traditional swaps, a forward-starting swap has only one cash exchange at settlement. We may also utilize a swaption collar strategy. In this strategy, we buy a payer swaption and sell a receiver swaption, thereby limiting our cost of funds to an upper and lower bound, or strike level. We will make payment if interest rates fall below the lower strike rate and receive a payment if interest rates rise above the higher strike rate. If rates remain between the upper and lower strike rates, then no payment is made. Other derivative financial instruments may be utilized if considered advantageous by us in managing the risk of interest rate fluctuations.

Our derivative financial instruments are recognized on our consolidated balance sheet at fair value with changes in the value recorded in earnings as a component of other income. Our derivative financial instruments include forward-starting swap agreements utilized to lock in the cost of funds on outstanding notional amounts of receivables prior to their securitization. During 2007 and 2008, our derivative financial instruments also included interest rate swap agreements utilized to convert variable rate exposure on our 2007 securitization transactions to fixed rates. For the three months ended March 31, 2008, our $15.0 million in losses on derivative financial instruments was comprised of $13.2 million in losses on our interest rate swap agreements and $1.8 million in losses on our forward-starting swap agreements. These losses were a result of a declining interest rate environment throughout the first quarter of 2008. For the three months ended March 31, 2007, our $0.8 million in losses on derivative financial instruments were comprised entirely of losses on forward-starting swap agreements.

Throughout 2005, 2006 and 2007, we utilized forward-starting swap agreements to lock in the cost of funds on outstanding notional amounts of receivables prior to their securitization. We have entered into only one forward- starting swap agreement since October 2007 due to the uncertainty in the interest rate environment. This forward-starting swap agreement matured and was closed out in March 2008. We continue to evaluate this strategy and may resume the use of forward-starting swap agreements in the future.

Our residual credit facility is indexed to the one-month London Interbank Offered Rate (“LIBOR”) and is secured by residual assets pledged to the facility. Additionally, the residual facility bears a varying spread to LIBOR depending upon the amount advanced in the residual facility and the value of the pledged residual assets. The value of the pledged residual assets will be regularly assessed based on expected future cash flows. Changes in market interest rates could change the discount rate used to value the pledged residual assets and alter the value of the residual assets and cause the agreed upon spread to LIBOR to increase or decrease. We intend to utilize the residual facility to provide credit enhancements and support our working capital needs and may utilize derivative financial instruments to minimize the risk of interest rate fluctuations if deemed appropriate.

Securitizations

We plan to access the securitization market to provide for long-term funding of our contracts. The interest rates demanded by investors in our future securitization transactions will depend on prevailing market interest rates for comparable transactions and the general interest rate environment. We may utilize several strategies to minimize the impact of interest rate fluctuations on our net interest income, including the use of derivative financial instruments and pre-funding securitizations.

In our securitization transactions, we sell fixed rate contracts to Trusts that then issue either fixed rate or floating rate securities to investors. The fixed rates on securities issued by the Trusts are indexed to market interest rate swap spreads for transactions of similar duration and do not fluctuate during the term of the securitization. The floating rates on securities issued by the Trusts are indexed to LIBOR and fluctuate periodically based on movements in LIBOR. We have utilized derivative financial instruments, such as interest rate swap agreements, to convert variable rate exposures of the Trusts on these floating rate securities to fixed rates, thereby locking in the gross interest rate spread to be earned by the Trusts over the life of each securitization. Derivative financial instruments purchased by us do not impact the amount of cash flows to be received by holders of the asset-backed securities issued by the Trusts. These instruments serve to offset the impact of increased or decreased interest paid by the Trusts on floating rate asset-backed securities and, therefore, the cash flows to be received by us from the Trusts.

We may also pre-fund securitizations, thereby allowing us to lock in borrowing costs with respect to auto finance contracts subsequently delivered to the Trusts. To pre-fund a securitization, we will issue more asset-backed securities than necessary to cover contracts initially sold or pledged to the Trust. The proceeds from the pre-funded portion are held in an escrow account until additional contracts are delivered to the Trust in amounts up to the pre-funded balance held in the escrow account. We will incur an expense in pre-funded securitizations during the period between the initial securitization and the subsequent delivery of contracts equal to the difference between the interest earned on the proceeds held in the escrow account and the interest rate paid on the asset-backed securities outstanding.

Interest Rate Swap Agreements

We periodically enter into interest rate swap agreements whereby we pay a fixed interest rate and receive a variable interest rate. If interest rates increase and are above the starting-swap rate on the settlement date, the market value of the forward-starting swap is positive, and we will receive an amount from the counterparty equal to such market value. Likewise, if the market value is negative on the settlement date, we will pay an amount to the counterparty equal to such market value. These agreements are intended to ensure the economics of future securitization transactions and minimize the risk of interest rate fluctuations on our gross interest rate margin prior to the execution of securitization transactions.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information to be disclosed in the reports it files under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Such controls include those designed to ensure that information for disclosure is communicated to management, including the Chief Executive Officer (the “CEO”) and Chief Financial Officer (the “CFO”), as appropriate, to allow timely decisions regarding required disclosure.

The CEO and CFO, with the participation of management, have evaluated the effectiveness of the Company’s disclosure controls and procedures as of March 31, 2008. Based on their evaluation, they have concluded that the disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

No changes were made in the Company’s internal controls over financial reporting during the quarter ended March 31, 2008, that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

As a consumer finance company, we are subject to various consumer claims and litigation seeking damages and statutory penalties, based upon, among other things, usury, disclosure inaccuracies, wrongful repossession, wrongful collection procedures, violations of bankruptcy stay provisions, certificate of title disputes, fraud and breach of contract. Some litigation against us may take the form of class action lawsuits by consumers. As the assignee of finance contracts originated by dealers, we may also be named as a co-defendant in lawsuits filed by consumers principally against dealers. The damages and penalties claimed by consumers in these types of matters can be substantial. The relief requested by the plaintiffs varies, but includes requests for compensatory, statutory and punitive damages.

We believe that we have taken prudent steps to address the litigation risks associated with our business activities. We are vigorously defending the litigation against us and, while we are unable to estimate a range of possible losses with respect to our pending litigation due to the preliminary stages of most of our proceedings, we do not believe that the outcome of these proceedings, individually or in the aggregate, will have a material effect on our financial condition, results of operations or cash flows.

ITEM 1A.RISK FACTORS

Risk factors are fully described in Item 1A contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007 and there have been no material changes.

ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

EXHIBIT INDEX


Exhibit
No.		Description
2.1		Stock Purchase Agreement, dated as of December 23, 2004, among Triad Holdings Inc., Triad Acquisition Corp. and Fairlane Credit LLC (incorporated herein by reference to Exhibit 2.1 to the Registration Statement on Form S-4/A of Triad Financial Corporation, filed on November 15, 2005 (File No. 333-126538)).

3.1		Third Amended and Restated Articles of Incorporation of Triad Financial Corporation. (incorporated herein by reference to Exhibit 3.1 on Form 10-Q of Triad Financial Corporation, filed on August 11, 2006 (File No. 333-65107)).

3.2		Third Amended and Restated Bylaws of Triad Financial Corporation (incorporated herein by reference to Exhibit 3.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.1		Indenture, dated as of April 29, 2005, among Triad Acquisition Corp. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.2		Supplemental Indenture, dated as of April 29, 2005, among Triad Financial Corporation and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.3		Exchange and Registration Rights Agreement, dated as of April 29, 2005, among Triad Acquisition Corp. and Goldman, Sachs & Co., and Citigroup Global Markets Inc., as representatives of the several Purchasers (incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.4		Form of Senior Note (attached as exhibit to Exhibit 4.1).

10.1		Employment Agreement, dated as of April 29, 2005, between the Company and James M. Landy (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).*

10.2		Employment Agreement, dated as of November 11, 2005, between the Company and Chris A. Goodman (incorporated herein by reference to Exhibit 10.2 on Form 10-K of Triad Financial Corporation, filed on March 31, 2006 (File No. 333-126538)) and Amended and Restated Employment Agreement, dated as of August 1, 2007, between the Company and Chris A. Goodman (incorporated herein by reference to Exhibit 10.2 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.3		Employment Agreement, dated as of February 15, 2007, between the Company and David A. Satterfield. (incorporated herein by reference to Exhibit 10.3 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.4		Consulting Agreement dated as of July 31, 2007, between the Company and Carl B. Webb (incorporated herein by reference to Exhibit 10.15 on Form 10-Q of Triad Financial Corporation, filed on November 9, 2007 (File No. 333-65107)) and the First Amendment to the Consulting Agreement, dated as of February 12, 2008, between the Company and Carl B. Webb (incorporated herein by reference to Exhibit 10.4 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.5		Management Agreement, dated as of April 29, 2005, among the Company, Triad Holdings, LLC, Triad Holdings Inc. and Hunter’s Glen/Ford Ltd (incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.6		Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, JPMorgan Chase Bank, as Collection Account Bank and Citigroup Global Markets Realty Corp., as lender (incorporated herein by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of Triad Financial


Exhibit
No.		Description
		Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.7		Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, JPMorgan Chase Bank, as Collection Account Bank and Goldman Sachs Mortgage Company, as lender (incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.8		Warehouse Lending Agreement, dated as of January 10, 2008, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, The Bank of New York, as Collection Account Bank, Sheffield Receivables Corporation, as Class A Lender, and Barclays Bank PLC, as Class B Lender and Agent (incorporated herein by reference to Exhibit 10.8 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)).

10.9		Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, JPMorgan Chase Bank, N.A., as Collection Account Bank and Citigroup Global Markets Realty Corp (incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.10		Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, JPMorgan Chase Bank, N.A., as Collection Account Bank and Goldman Sachs Mortgage Company (incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.11		Registration Rights Agreement dated as of April 29, 2005 among Triad Holdings Inc. and certain holders of common stock (incorporated herein by reference to Exhibit 10.7 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.12		Stockholders Agreement, dated as of April 29, 2005, among Triad Holdings Inc., Triad Holdings, LLC and James M. Landy (incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.13		Limited Liability Company Agreement of Triad Holdings, LLC (incorporated herein by reference to Exhibit 10.9 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.14		HFI Loan and Security Agreement, dated as of April 29, 2005, between the Company and Ford Motor Credit Company (incorporated herein by reference to Exhibit 10.10 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.15		Carl B. Webb Compensation Arrangement (incorporated herein by reference to Exhibit 10.11 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).*

10.16		Amendment No. 2, dated as of March 15, 2007, to the Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, The Bank of New York (as successor-in-interest to JPMorgan Chase Bank, N.A.), as Collection Account Bank, and Citigroup Global Markets Realty Corp., as lender (incorporated herein by reference to Exhibit 10.1 on Form 8-K of Triad Financial Corporation, filed on March 20, 2007 (File No. 333-65107)).

10.17		Amendment No. 1, dated as of March 15, 2007, to the Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, The Bank of New York (as successor-in-interest to JPMorgan Chase Bank, N.A.), as Collection Account Bank, and Citigroup Global Markets Realty Corp (incorporated herein by reference to Exhibit 10.2 on Form 8-K of Triad Financial Corporation, filed on March 20, 2007 (File No. 333-65107)).

21.1		Subsidiaries of the Company (incorporated herein by reference to Exhibit 21.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

31.1		Certification of Chief Executive Officer (Section 302 Certification)+

31.2		Certification of Principal Financial Officer (Section 302 Certification)+

32.		Certification of Periodic Financial Report (Section 906 Certification)+


*		Management contract or compensatory plan or arrangement.

+		Filed herewith

SIGNATURES

Pursuant to the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized:


Date: May 14, 2008		/s/ Daniel D. Leonard

		Daniel D. Leonard
		President & Chief Executive Officer

Date: May 14, 2008		/s/ Mike L. Wilhelms

		Mike L. Wilhelms
		Senior Vice President & Chief Financial Officer

EXHIBIT INDEX


Exhibit
No.		Description
2.1		Stock Purchase Agreement, dated as of December 23, 2004, among Triad Holdings Inc., Triad Acquisition Corp. and Fairlane Credit LLC (incorporated herein by reference to Exhibit 2.1 to the Registration Statement on Form S-4/A of Triad Financial Corporation, filed on November 15, 2005 (File No. 333-126538)).

3.1		Third Amended and Restated Articles of Incorporation of Triad Financial Corporation. (incorporated herein by reference to Exhibit 3.1 on Form 10-Q of Triad Financial Corporation, filed on August 11, 2006 (File No. 333-65107)).

3.2		Third Amended and Restated Bylaws of Triad Financial Corporation (incorporated herein by reference to Exhibit 3.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.1		Indenture, dated as of April 29, 2005, among Triad Acquisition Corp. and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.2		Supplemental Indenture, dated as of April 29, 2005, among Triad Financial Corporation and JPMorgan Chase Bank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.3		Exchange and Registration Rights Agreement, dated as of April 29, 2005, among Triad Acquisition Corp. and Goldman, Sachs & Co., and Citigroup Global Markets Inc., as representatives of the several Purchasers (incorporated herein by reference to Exhibit 4.3 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

4.4		Form of Senior Note (attached as exhibit to Exhibit 4.1).

10.1		Employment Agreement, dated as of April 29, 2005, between the Company and James M. Landy (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).*

10.2		Employment Agreement, dated as of November 11, 2005, between the Company and Chris A. Goodman (incorporated herein by reference to Exhibit 10.2 on Form 10-K of Triad Financial Corporation, filed on March 31, 2006 (File No. 333-126538)) and Amended and Restated Employment Agreement, dated as of August 1, 2007, between the Company and Chris A. Goodman (incorporated herein by reference to Exhibit 10.2 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.3		Employment Agreement, dated as of February 15, 2007, between the Company and David A. Satterfield. (incorporated herein by reference to Exhibit 10.3 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.4		Consulting Agreement dated as of July 31, 2007, between the Company and Carl B. Webb (incorporated herein by reference to Exhibit 10.15 on Form 10-Q of Triad Financial Corporation, filed on November 9, 2007 (File No. 333-65107)) and the First Amendment to the Consulting Agreement, dated as of February 12, 2008, between the Company and Carl B. Webb (incorporated herein by reference to Exhibit 10.4 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)). *

10.5		Management Agreement, dated as of April 29, 2005, among the Company, Triad Holdings, LLC, Triad Holdings Inc. and Hunter’s Glen/Ford Ltd (incorporated herein by reference to Exhibit 10.2 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.6		Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, JPMorgan Chase Bank, as Collection Account Bank and Citigroup Global Markets Realty Corp., as lender (incorporated herein by reference to Exhibit 10.3 to the Registration Statement on Form S-4 of Triad Financial


Exhibit
No.		Description
		Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.7		Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, JPMorgan Chase Bank, as Collection Account Bank and Goldman Sachs Mortgage Company, as lender (incorporated herein by reference to Exhibit 10.4 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.8		Warehouse Lending Agreement, dated as of January 10, 2008, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, The Bank of New York, as Collection Account Bank, Sheffield Receivables Corporation, as Class A Lender, and Barclays Bank PLC, as Class B Lender and Agent (incorporated herein by reference to Exhibit 10.8 on Form 10-K of Triad Financial Corporation, filed on March 28, 2007 (File No. 333-126538)).

10.9		Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, JPMorgan Chase Bank, N.A., as Collection Account Bank and Citigroup Global Markets Realty Corp (incorporated herein by reference to Exhibit 10.5 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.10		Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, JPMorgan Chase Bank, N.A., as Collection Account Bank and Goldman Sachs Mortgage Company (incorporated herein by reference to Exhibit 10.6 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.11		Registration Rights Agreement dated as of April 29, 2005 among Triad Holdings Inc. and certain holders of common stock (incorporated herein by reference to Exhibit 10.7 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.12		Stockholders Agreement, dated as of April 29, 2005, among Triad Holdings Inc., Triad Holdings, LLC and James M. Landy (incorporated herein by reference to Exhibit 10.8 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.13		Limited Liability Company Agreement of Triad Holdings, LLC (incorporated herein by reference to Exhibit 10.9 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.14		HFI Loan and Security Agreement, dated as of April 29, 2005, between the Company and Ford Motor Credit Company (incorporated herein by reference to Exhibit 10.10 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

10.15		Carl B. Webb Compensation Arrangement (incorporated herein by reference to Exhibit 10.11 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).*

10.16		Amendment No. 2, dated as of March 15, 2007, to the Warehouse Lending Agreement, dated as of April 29, 2005, among the Company, Triad Financial Warehouse Special Purpose LLC, Triad Automobile Receivables Warehouse Trust, The Bank of New York (as successor-in-interest to JPMorgan Chase Bank, N.A.), as Collection Account Bank, and Citigroup Global Markets Realty Corp., as lender (incorporated herein by reference to Exhibit 10.1 on Form 8-K of Triad Financial Corporation, filed on March 20, 2007 (File No. 333-65107)).

10.17		Amendment No. 1, dated as of March 15, 2007, to the Master Residual Loan Agreement, dated as of April 29, 2005, among Triad Financial Residual Special Purpose LLC, The Bank of New York (as successor-in-interest to JPMorgan Chase Bank, N.A.), as Collection Account Bank, and Citigroup Global Markets Realty Corp (incorporated herein by reference to Exhibit 10.2 on Form 8-K of Triad Financial Corporation, filed on March 20, 2007 (File No. 333-65107)).

21.1		Subsidiaries of the Company (incorporated herein by reference to Exhibit 21.1 to the Registration Statement on Form S-4 of Triad Financial Corporation, filed on July 12, 2005 (File No. 333-126538)).

31.1		Certification of Chief Executive Officer (Section 302 Certification)+

31.2		Certification of Principal Financial Officer (Section 302 Certification)+

32.		Certification of Periodic Financial Report (Section 906 Certification)+


*		Management contract or compensatory plan or arrangement.

+		Filed herewith

Positive
Negative
Uncertain
Constraining
Legalese
Litigious
Readability	H.S. sophomore Bad

Triad Financial SM Inactive 10-Q2008 Q1 Quarterly report

Content analysis