SOUTHFIELD, Mich. — A continued run of stable returns pushed Credit Acceptance Corp. to significant gains in both consolidated and adjusted net income during the fourth quarter and for all of 2010.

First looking at just the fourth quarter, Credit Acceptance's consolidated net income came in at $47.0 million or $1.69 per diluted share. In the year-ago quarter, that income level was $40.3 million or $1.27 per diluted share.

For all of 2010, the company generated $170.1 million in consolidated net income or $5.67 per diluted share. In 2009, its consolidated net income level was $146.3 million or $4.62 per diluted share

Turning over to adjusted net income — a non-GAAP financial measure — Credit Acceptance determined this fourth-quarter amount was $43.6 million or $1.57 per diluted share. During the same quarter in 2009, the company posted $35.5 million or $1.11 per diluted share in adjusted net income.

Executives reported their full-year adjusted net income amount settled at $160.5 million or $5.35 per diluted share, compared with $125.0 million or $3.95 per diluted share for 2009.

Credit Acceptance believes its increase in fourth-quarter economic profit came primarily as the result of an increase in adjusted returns on capital and an increase in adjusted average capital. The company said this increase in adjusted average capital was due to growth in the loan portfolio.

Executives explained the adjusted return on capital increased 140 basis points due to the following:

—Operating expenses declined as a percentage of adjusted average capital as a result of lower loan servicing expenses, stock compensation expenses, sales tax expenses and tax consulting expenses, partially offset by higher origination expenses. This decline positively impacted the adjusted return on capital by 110 basis points.

—Loan yields positively impacted the adjusted return on capital by 110 basis points primarily due to forecasted-collection rate improvements on loans assigned in 2009 and 2010.

—A decline in net premiums earned negatively impacted our adjusted return on capital by 50 basis points, primarily due to a decline in the size of our reinsurance portfolio, which resulted from the termination of our arrangement with one of our third party insurers during the fourth quarter of 2009.

When looking at reasons for greater economic profit for all of 2010, Credit Acceptance reiterated that growth stemmed primarily from an increase in adjusted return on capital. In this time frame, the company attributed the 310 basis points jump to a pair of reasons:

—Loan yields positively impacted the adjusted return on capital by 260 basis points primarily due to forecasted collection rate improvements on loans assigned in 2009 and 2010, as well as higher yields on loans assigned during the last three quarters of 2009 and the first quarter of 2010.

—Operating expenses declined as a percentage of adjusted average capital as a result of lower loan servicing expenses, stock compensation expenses, information technology support expenses and legal expenses, partially offset by higher origination expenses. This decline positively impacted adjusted return on capital by 80 basis points.

Moving along to other elements of Credit Acceptance's year-end report, the company posted significant year-over-year climbs in both loan volume and dollar volume.

As of Dec. 31, loan volume spiked 37.7 percent compared to the same point in 2009. Meanwhile, dollar volume soared 66.9 percent when looking at the same comparison.

Credit Acceptance emphasized that consumer loan assignment volumes depend on a number of factors, including the overall demand for its product, the amount of capital available to fund new loans and its assessment of the volume that its infrastructure can support.

"Our pricing strategy is intended to maximize the amount of economic profit we generate, within the confines of capital and infrastructure constraints," Credit Acceptance officials explained. "Our success in renewing our debt facilities and securing additional financing during 2009 and 2010 positioned us to grow year over year unit volumes.

"During the last four months of 2009, the first quarter of 2010 and the fourth quarter of 2010, we increased advance rates, which had a positive impact on unit volumes," they continued. "While the advance increases also reduced the return on capital we expect to earn on new assignments, we believe it is very likely the advance increases had a positive impact on economic profit."

Credit Acceptance added that unit volume for the one month that ended Jan. 31 increased by 35.8 percent as compared to the same period in 2010.

Delving deeper into analysis of its consumer loan performance, Credit Acceptance noted that the company forecasts future expected cash flows from the consumer loans. Based on the forecast, an advance or one-time payment is made to the related dealer-partner at a price designed to achieve an acceptable return on capital.

If consumer loan performance equals or exceeds the original expectation, management stressed that the target return on capital can be achieved.

As a result, Credit Acceptance indicated consumer loans assigned in 2002, 2003, 2008, 2009 and 2010 have performed better than initial expectations while consumer loans assigned in 2001, 2005, 2006 and 2007 have performed worse.

During the fourth quarter of 2010, management said forecasted collection rates increased for consumer loans assigned in 2009 and 2010 and were consistent with expectations at the start of the period for the other assignment years.

For the year, Credit Acceptance added that forecasted collection rates increased for consumer loans assigned in 2009 and 2010, decreased for 2007 consumer loan assignments and were generally consistent with expectations at the start of the period for the other assignment years.

One other noteworthy element was a gain in the amount of active dealers and average loan volume per dealer.

The company's number of active dealer partners climbed from 2,170 at the close of 2009 to 2,546 a year later, marking a 17.3-percent rise. The average loan volume per dealer moved up from 10.8 to 12.7, creating a 17.6-percent jump.