SOUTHFIELD, Mich. -

Even though Credit Acceptance watched its second-quarter origination volume drop by 28.7%, leadership of the subprime auto finance company is committed to maintaining its underwriting strategy, which played a role in it generating healthy income gains.

Last week, Credit Acceptance announced its consolidated net income totaled $288.6 million, or $17.18 per diluted share, for the three months that ended June 30. In the same period a year earlier, the company said consolidated net income was $96.4 million, or $5.40 per diluted share.

For the first half of 2021, Credit Acceptance reported that its consolidated net income totaled $490.7 million, or $28.96 per diluted share, compared to consolidated net income of $12.6 million, or $0.70 per diluted share, for the same period in 2020.

The company also noted in a news release that its adjusted net income — a non-GAAP financial measure — for Q2 was $230.3 million, or $13.71 per diluted share, compared to $154.1 million, or $8.63 per diluted share, during Q2 of 2020.

For the first six months this year, Credit Acceptance said its adjusted net income was $395.1 million, or $23.32 per diluted share, compared to adjusted net income of $329.8 million, or $18.29 per diluted share, through the halfway mark of last year.

Other developments from the second quarter included:

— An increase in forecasted collection rates for contracts assigned in 2017 through 2021, which increased forecasted net cash flows from its portfolio by $104.5 million.

— Forecasted profitability per contract assignment consistent with its initial estimate for contracts assigned in 2021 and significantly in excess of its initial estimates for contracts assigned in 2018 through 2020.

— A decline in origination volume, as unit and dollar volumes declined 28.7% and 20.5%, respectively, as compared to the second quarter of 2020.

— Stock repurchases of approximately 598,000 shares, which represented 3.6% of the shares outstanding at the beginning of the quarter.

“Although the immediate impact of the COVID-19 virus has subsided, the impact of the COVID-19 pandemic on our business continues to be significant,” Credit Acceptance said in the news release. “Starting in mid-March 2020, we experienced a substantial reduction in demand for our product and a significant decline in cash flows from our loan portfolio that lasted through mid-April 2020, after which collections and new loan volumes improved significantly.

“Starting in late July 2020 and continuing through February 2021, we experienced another substantial reduction in demand for our product as federal stimulus and enhanced unemployment benefit payments lapsed, dealer inventories declined and used vehicle prices increased,” officials continued. “Demand for our product improved again in March and April 2021 as additional federal stimulus payments were distributed.

“Starting in May 2021 and continuing through July 2021, we experienced another significant decline in demand for our product,” company officials went on to say. “We believe that this decline is primarily due to low dealer inventories and further increases in used vehicle prices, which we believe are primarily due to the downstream impact of supply chain disruptions in the automotive industry.”

Those points intrigued investment analysts who participated in Credit Acceptance’s quarterly conference call.

In fact, one Wall Street observer said, “There is an awful lot of capital out there that is chasing loans. And often, people are being a little bit crazy to get volume. And you mentioned market share a minute ago. I’m wondering if you’re seeing any disruptive players disturbing the market where you service your customers?”

Credit Acceptance chief treasury officer Doug Busk replied first, according to the call transcript posted on the company website.

“Well, you’re certainly right that the more capital that the industry has access to, the more competitive it tends to be. I don’t really have any particular insight into the business practices of others in the industry,” Busk said.

Credit Acceptance chief executive officer Ken Booth later added, “It’s really hard to say. I mean there’s lots of participants in the market. We price our business to try to maximize the economic profit. We try to make an acceptable return on what we forecast collections for.

“So, we’ve looked at it from our perspective. We’re disappointed that volume is down, but we view this kind of as a temporary situation. How long it lasts, we don’t really know. But we think the market will stabilize at some point. We feel good about the business that we’re writing,” Booth went on to say.