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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark one)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 333-126538
 
 TRIAD FINANCIAL CORPORATION
 (Exact name of registrant as specified in its charter)
 California(State of Incorporation)
    
    33-0356705(IRS Employer Identification No)7711 Center Avenue, Suite 100
Huntington Beach, California(Address of principal executive offices)
    
    92647(Zip Code)
 (714) 373-8300  (Registrants telephone number, including area code)
 
 þ o
  o o þ
 o þ




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##### 



TRIAD FINANCIAL CORPORATION
INDEX TO FORM 10-Q
 PagePART I
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    2CONSOLIDATED STATEMENTS OF OPERATIONS
    
    
    3CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    4NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    5ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    20ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    37ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    38PART II
    
    OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    39ITEM 1A.
    
    RISK FACTORS
    
    
    39ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECUITIES AND USE OF PROCEEDS
    
    
    39ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
    
    
    39ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    39ITEM 5.
    
    OTHER INFORMATION
    
    
    39ITEM 6.
    
    EXHIBITS
    
    
    40SIGNATURES
    
    
    43EXHIBIT 10.15EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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Forward-Looking Statements
  
    
    our ability to make payments of principal and interest on, or refinance, our substantial
indebtedness;
    
    our reliance on our warehouse facilities, 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;
    
    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;
    
    general economic conditions, including wholesale auction values and interest rates;
    
    our ability to successfully compete in our industry; and
    
    our ability to maintain the material licenses and permits required for our operations.
  1




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Part I. FINANCIAL INFORMATION
 
 Item 1. FINANCIAL STATEMENTS
 TRIAD FINANCIAL CORPORATION
 
 Consolidated Balance Sheets
 September 30, 2007
    
    
    December 31, 2006(Dollars in thousands)(Unaudited)ASSETSCash and cash equivalents
    
    $
    55,954
    
    
    $
    60,367Cash  restricted
    
    
    285,336
    
    
    
    274,059Finance receivables held for investment, net
    
    
    3,570,251
    
    
    
    3,781,469Retained interest in securitized assets, net
    
    
    40,586
    
    
    
    102,531Accounts receivable, net
    
    
    44,999
    
    
    
    50,918Fixed assets, net of accumulated depreciation of $20,932 in
2007 and $13,913 in 2006
    
    
    14,803
    
    
    
    19,294Collateral held for resale, net
    
    
    19,148
    
    
    
    17,072Capitalized financing costs, net of accumulated amortization
of $20,377 in 2007 and $20,826 in 2006
    
    
    11,094
    
    
    
    15,031Deferred tax asset, net
    
    
    84,315
    
    
    
    63,731Goodwill
    
    
    30,446
    
    
    
    30,446Other assets
    
    
    3,483
    
    
    
    3,617Total assets
    
    $
    4,160,415
    
    
    $
    4,418,535LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesRevolving credit facilities
    
    $
    599,959
    
    
    $
    529,131Securitization notes payable
    
    
    2,948,636
    
    
    
    3,258,215Senior notes payable
    
    
    149,233
    
    
    
    149,167Taxes payable
    
    
    5,310
    
    
    
    3,499Other liabilities
    
    
    70,846
    
    
    
    72,364Total liabilities
    
    
    3,773,984
    
    
    
    4,012,376Commitments and contingencies (Note 12)Stockholders EquityPreferred stock, no par value; authorized 3,000,000 shares;
issued and outstanding none at September 30, 2007 and
1,500,000 shares at December 31, 2006
    
    
    
    
    
    
    30,000Common stock, no par value; authorized 9,069 shares; issued
and outstanding 9,069 shares at September 30, 2007 and
December 31, 2006
    
    
    
    
    
    
    Additional paid in capital
    
    
    345,000
    
    
    
    345,000Retained earnings
    
    
    35,866
    
    
    
    22,075Accumulated other comprehensive income
    
    
    5,565
    
    
    
    9,084Total stockholders equity
    
    
    386,431
    
    
    
    406,159Total liabilities and stockholders equity
    
    $
    4,160,415
    
    
    $
    4,418,535
  2




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TRIAD FINANCIAL CORPORATION
 
 Consolidated Statements of Operations
 Three Months
    
    
    Three Months
    
    
    Nine Months
    
    
    Nine MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedSeptember 30, 2007
    
    
    September 30, 2006
    
    
    September 30, 2007
    
    
    September 30, 2006(Dollars in thousands)(Unaudited)Financing and other interest income
    
    $
    155,264
    
    
    $
    162,011
    
    
    $
    474,968
    
    
    $
    411,253Interest expense
    
    
    54,771
    
    
    
    55,482
    
    
    
    165,345
    
    
    
    144,259Net interest margin
    
    
    100,493
    
    
    
    106,529
    
    
    
    309,623
    
    
    
    266,994Provision for credit losses
    
    
    70,146
    
    
    
    68,154
    
    
    
    193,001
    
    
    
    163,196Net interest margin after
provision for credit losses
    
    
    30,347
    
    
    
    38,375
    
    
    
    116,622
    
    
    
    103,798Servicing income
    
    
    1,754
    
    
    
    4,782
    
    
    
    6,802
    
    
    
    18,063Other income
    
    
    573
    
    
    
    (3,257
    )
    
    
    9,169
    
    
    
    13,041Total other revenues
    
    
    2,327
    
    
    
    1,525
    
    
    
    15,971
    
    
    
    31,104Operating expenses:Compensation and employee
benefits
    
    
    21,487
    
    
    
    20,744
    
    
    
    65,144
    
    
    
    59,430Occupancy and equipment
    
    
    4,081
    
    
    
    3,705
    
    
    
    12,130
    
    
    
    11,423Systems and data processing
    
    
    3,333
    
    
    
    3,655
    
    
    
    9,961
    
    
    
    10,433Professional services
    
    
    2,020
    
    
    
    2,403
    
    
    
    4,627
    
    
    
    5,424Telecommunications
    
    
    954
    
    
    
    811
    
    
    
    2,772
    
    
    
    2,425Advertising
    
    
    1,106
    
    
    
    387
    
    
    
    3,028
    
    
    
    1,467Other
    
    
    3,700
    
    
    
    4,173
    
    
    
    10,225
    
    
    
    13,157Total operating expenses
    
    
    36,681
    
    
    
    35,878
    
    
    
    107,887
    
    
    
    103,759Income (loss) before income taxes
    
    
    (4,007
    )
    
    
    4,022
    
    
    
    24,706
    
    
    
    31,143Provision for income taxes
    
    
    (1,538
    )
    
    
    1,588
    
    
    
    10,128
    
    
    
    12,185Net income (loss)
    
    $
    (2,469
    )
    
    $
    2,434
    
    
    $
    14,578
    
    
    $
    18,958
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TRIAD FINANCIAL CORPORATION
 
 Consolidated Statements of Cash Flows
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30, 2007
    
    
    September 30, 2006(Dollars in thousands)(Unaudited)Cash flows from operating activitiesNet income
    
    $
    14,578
    
    
    $
    18,958Adjustments to reconcile net income to net
cash provided by operating activities:Depreciation and amortization
    
    
    21,171
    
    
    
    16,157Provision for credit losses
    
    
    193,001
    
    
    
    163,196Deferred income tax benefit
    
    
    (18,286
    )
    
    
    (33,146
    )Accretion of present value discount
    
    
    (15,270
    )
    
    
    (20,379
    )Amortization of purchase premium
    
    
    24,222
    
    
    
    45,369Loss on repurchase of receivables from gain
on sale trusts
    
    
    2,864
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    5,919
    
    
    
    (13,575
    )Other assets
    
    
    (653
    )
    
    
    1,884Other liabilities
    
    
    (1,259
    )
    
    
    12,247Current tax receivable/payable
    
    
    1,811
    
    
    
    (10,893
    )Net cash provided by operating activities
    
    
    228,098
    
    
    
    179,818Cash flows from investing activitiesDistributions from gain on sale trusts
    
    
    71,242
    
    
    
    134,386Repurchases from gain on sale trusts
    
    
    (93,712
    )
    
    
    (131,005
    )Purchases of finance receivables held for
investment
    
    
    (1,054,897
    )
    
    
    (2,223,083
    )Collections on finance receivables held
for investment
    
    
    1,130,180
    
    
    
    941,258Change in restricted cash
    
    
    (11,277
    )
    
    
    (103,123
    )Purchases of fixed assets
    
    
    (2,788
    )
    
    
    (8,545
    )Net cash provided by (used in) investing
activities
    
    
    38,748
    
    
    
    (1,390,112
    )Cash flows from financing activitiesNet change in warehouse credit facilities
    
    
    127,828
    
    
    
    287,127Net change in residual credit facilities
    
    
    (57,000
    )
    
    
    4,000Net change in due to Ford Motor Credit
Company
    
    
    
    
    
    
    (35,334
    )Issuance of securitization notes
    
    
    775,100
    
    
    
    1,737,882Payment on securitization notes
    
    
    (1,084,679
    )
    
    
    (800,254
    )Capitalized finance costs
    
    
    (2,508
    )
    
    
    (5,644
    )Issuance of preferred stock
    
    
    
    
    
    
    30,000Redemption of preferred stock
    
    
    (30,000
    )
    
    
    Net cash (used in) provided by financing
activities
    
    
    (271,259
    )
    
    
    1,217,777Net (decrease) increase in cash and cash
equivalents
    
    
    (4,413
    )
    
    
    7,483Cash and cash equivalentsBeginning of period
    
    
    60,367
    
    
    
    45,295End of period
    
    $
    55,954
    
    
    $
    52,778Non-cash ActivityPreferred Stock dividend declared
    
    $
    788
    
    
    $
    788Supplemental DisclosureInterest paid
    
    $
    165,775
    
    
    $
    139,679Income taxes paid
    
    $
    26,603
    
    
    $
    56,220
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Triad Financial Corporation
 
 Notes to Consolidated Financial Statements
 1. Organization and Nature of Business
      2. Accounting Policies
 Basis of Presentation
    Cash Equivalents
  5




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Restricted Cash
  Finance Receivables
    Sale of Receivables
    Allowance for Credit Losses
  6




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Charge-Off Policy
  Derivative Financial Instruments
  Fixed Assets
   Equipment
    
    3-5 yearsSoftware
    
    3-5 yearsFurniture and fixtures
    
    5 years
    Goodwill
  7




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Income Taxes
   Stock-Based Compensation
  Use of Estimates
  8




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3. Finance Receivables
  2007
    
    
    2006(Dollars in thousands)Finance receivables held for investment
    
    $
    3,158,667
    
    
    $
    3,045,938Premiums and discounts, net
    
    
    (4,208
    )
    
    
    (7,699
    )Deferred costs, net
    
    
    25,580
    
    
    
    26,325Finance receivables held for investment, gross
    
    
    3,180,039
    
    
    
    3,064,564Allowance for credit losses
    
    
    (222,527
    )
    
    
    (195,000
    )Finance receivables held for investment, net
    
    
    2,957,512
    
    
    
    2,869,564Predecessor finance receivables held for investment, net
    
    
    551,358
    
    
    
    849,246Finance receivables repurchased from gain on sale trusts, net
    
    
    61,381
    
    
    
    62,659Finance receivables, net
    
    $
    3,570,251
    
    
    $
    3,781,469
   Contractual
    
    
    Nonaccretable
    
    
    Expected
    
    
    Accretable
    
    
    CarryingPayments
    
    
    Discount
    
    
    Payments
    
    
    Discount
    
    
    Value(Dollars in thousands)Balance, December 31, 2006
    
    $
    1,246,836
    
    
    $
    (253,238
    )
    
    $
    993,598
    
    
    $
    (144,352
    )
    
    $
    849,246Interest income
    
    
    (89,280
    )
    
    
    
    
    
    
    (89,280
    )
    
    
    67,473
    
    
    
    (21,807
    )Principal collections
    
    
    (276,081
    )
    
    
    
    
    
    
    (276,081
    )
    
    
    
    
    
    
    (276,081
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (40,247
    )
    
    
    40,247
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    1,838
    
    
    
    1,838
    
    
    
    (1,838
    )
    
    
    Change in cash flows
    
    
    (48,519
    )
    
    
    48,519
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2007
    
    $
    792,709
    
    
    $
    (162,634
    )
    
    $
    630,075
    
    
    $
    (78,717
    )
    
    $
    551,358
 Contractual
    
    
    Nonaccretable
    
    
    Expected
    
    
    Accretable
    
    
    CarryingPayments
    
    
    Discount
    
    
    Payments
    
    
    Discount
    
    
    Value(Dollars in thousands)Balance, December 31, 2005
    
    $
    2,220,192
    
    
    $
    (524,710
    )
    
    $
    1,695,482
    
    
    $
    (227,072
    )
    
    $
    1,468,410Interest income
    
    
    (154,717
    )
    
    
    
    
    
    
    (154,717
    )
    
    
    111,395
    
    
    
    (43,322
    )Principal collections
    
    
    (456,874
    )
    
    
    
    
    
    
    (456,874
    )
    
    
    
    
    
    
    (456,874
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (55,773
    )
    
    
    55,773
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    57,278
    
    
    
    57,278
    
    
    
    (57,278
    )
    
    
    Change in cash flows
    
    
    (118,215
    )
    
    
    118,215
    
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2006
    
    $
    1,434,613
    
    
    $
    (293,444
    )
    
    $
    1,141,169
    
    
    $
    (172,955
    )
    
    $
    968,214
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Contractual
    
    
    Nonaccretable
    
    
    Expected
    
    
    Accretable
    
    
    CarryingPayments
    
    
    Discount
    
    
    Payments
    
    
    Discount
    
    
    Value(Dollars in thousands)Balance, December 31, 2006
    
    $
    70,453
    
    
    $
    (4,137
    )
    
    $
    66,316
    
    
    $
    (3,657
    )
    
    $
    62,659Finance receivables repurchased
    
    
    103,295
    
    
    
    (8,011
    )
    
    
    95,284
    
    
    
    (5,795
    )
    
    
    89,489Interest income
    
    
    (12,776
    )
    
    
    
    
    
    
    (12,776
    )
    
    
    10,362
    
    
    
    (2,414
    )Principal collections
    
    
    (88,353
    )
    
    
    
    
    
    
    (88,353
    )
    
    
    
    
    
    
    (88,353
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (3,878
    )
    
    
    3,878
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    5,172
    
    
    
    5,172
    
    
    
    (5,172
    )
    
    
    Change in cash flows
    
    
    2,676
    
    
    
    (2,676
    )
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2007
    
    $
    71,417
    
    
    $
    (5,774
    )
    
    $
    65,643
    
    
    $
    (4,262
    )
    
    $
    61,381
 Contractual
    
    
    Nonaccretable
    
    
    Expected
    
    
    Accretable
    
    
    CarryingPayments
    
    
    Discount
    
    
    Payments
    
    
    Discount
    
    
    Value(Dollars in thousands)Balance, December 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Finance receivables repurchased
    
    
    145,203
    
    
    
    (12,018
    )
    
    
    133,185
    
    
    
    (7,663
    )
    
    
    125,522Interest income
    
    
    (6,434
    )
    
    
    
    
    
    
    (6,434
    )
    
    
    4,388
    
    
    
    (2,046
    )Principal collections
    
    
    (39,426
    )
    
    
    
    
    
    
    (39,426
    )
    
    
    
    
    
    
    (39,426
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (3,683
    )
    
    
    3,683
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    1,499
    
    
    
    1,499
    
    
    
    (1,499
    )
    
    
    Change in cash flows
    
    
    398
    
    
    
    (398
    )
    
    
    
    
    
    
    
    
    
    
    Balance, September 30, 2006
    
    $
    96,058
    
    
    $
    (7,234
    )
    
    $
    88,824
    
    
    $
    (4,774
    )
    
    $
    84,050
  4. Allowance For Credit Losses
  Three Months Ended
    
    
    Three Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    219,501
    
    
    $
    119,623Provision for credit losses
    
    
    70,146
    
    
    
    68,154Charge-offs, net of sales proceeds
    
    
    (73,566
    )
    
    
    (38,509
    )Recoveries
    
    
    6,446
    
    
    
    1,268Balance, end of period
    
    $
    222,527
    
    
    $
    150,536
 Nine Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    195,000
    
    
    $
    51,259Provision for credit losses
    
    
    193,001
    
    
    
    163,196Charge-offs, net of sales proceeds
    
    
    (183,412
    )
    
    
    (66,382
    )Recoveries
    
    
    17,938
    
    
    
    2,463Balance, end of period
    
    $
    222,527
    
    
    $
    150,536
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5. Sales of Receivables
 Servicing Portfolio
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    269,908
    
    
    $
    778,782Called receivables
    
    
    
    
    
    
    (85,373
    )Collections and charge-offs
    
    
    (47,034
    )
    
    
    (117,192
    )Balance, end of period
    
    $
    222,874
    
    
    $
    576,217
 Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    484,818
    
    
    $
    1,130,352Called receivables
    
    
    (93,712
    )
    
    
    (131,005
    )Collections and charge-offs
    
    
    (168,232
    )
    
    
    (423,130
    )Balance, end of period
    
    $
    222,874
    
    
    $
    576,217
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Retained Interest in Securitized Assets
  2007
    
    
    2006(Dollars in thousands)Restricted cash held for the benefit of securitizations
    
    $
    35,225
    
    
    $
    57,751Overcollaterization receivable
    
    
    28,974
    
    
    
    63,026Interest-only
    
    
    1,424
    
    
    
    2,257Retained interest in securitized assets, gross
    
    
    65,623
    
    
    
    123,034Payable to Ford Credit
    
    
    (25,037
    )
    
    
    (20,503
    )Retained interest in securitized assets, net
    
    $
    40,586
    
    
    $
    102,531
     12




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##### Table of Contents



Retained
    
    
    
    
    
    
    RetainedInterest in
    
    
    
    
    
    
    Interest inRestricted
    
    
    Over-
    
    
    Interest-
    
    
    Securitized
    
    
    Payable to
    
    
    SecuritizedCash
    
    
    Collateralization
    
    
    Only
    
    
    Assets, Gross
    
    
    Ford Credit
    
    
    Assets, Net(Dollars in thousands)Balance, December 31, 2006
    
    $
    57,751
    
    
    $
    63,026
    
    
    $
    2,257
    
    
    $
    123,034
    
    
    $
    (20,503
    )
    
    $
    102,531Distributions
    
    
    (22,526
    )
    
    
    (21,091
    )
    
    
    (5,442
    )
    
    
    (49,059
    )
    
    
    
    
    
    
    (49,059
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    6,795
    
    
    
    6,795
    
    
    
    (583
    )
    
    
    6,212Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    (2,108
    )
    
    
    (2,108
    )
    
    
    (433
    )
    
    
    (2,541
    )Balance, March 31, 2007
    
    $
    35,225
    
    
    $
    41,935
    
    
    $
    1,502
    
    
    $
    78,662
    
    
    $
    (21,519
    )
    
    $
    57,143Distributions
    
    
    
    
    
    
    (6,847
    )
    
    
    (6,009
    )
    
    
    (12,856
    )
    
    
    
    
    
    
    (12,856
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    5,056
    
    
    
    5,056
    
    
    
    (872
    )
    
    
    4,184Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    197
    
    
    
    (1,123
    )
    
    
    (926
    )Balance, June 30, 2007
    
    $
    35,225
    
    
    $
    35,088
    
    
    $
    746
    
    
    $
    71,059
    
    
    $
    (23,514
    )
    
    $
    47,545Distributions
    
    
    
    
    
    
    (6,114
    )
    
    
    (3,213
    )
    
    
    (9,327
    )
    
    
    
    
    
    
    (9,327
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    5,827
    
    
    
    5,827
    
    
    
    (953
    )
    
    
    4,874Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    (1,936
    )
    
    
    (1,936
    )
    
    
    (570
    )
    
    
    (2,506
    )Balance, September 30, 2007
    
    $
    35,225
    
    
    $
    28,974
    
    
    $
    1,424
    
    
    $
    65,623
    
    
    $
    (25,037
    )
    
    $
    40,586
 Retained
    
    
    
    
    
    
    RetainedInterest in
    
    
    
    
    
    
    Interest inRestricted
    
    
    Over-
    
    
    Interest-
    
    
    Securitized
    
    
    Payable to
    
    
    SecuritizedCash
    
    
    Collateralization
    
    
    Only
    
    
    Assets, Gross
    
    
    Ford Credit
    
    
    Assets, Net(Dollars in thousands)Balance, December 31, 2005
    
    $
    80,298
    
    
    $
    150,283
    
    
    $
    (7,556
    )
    
    $
    223,025
    
    
    $
    (6,073
    )
    
    $
    216,952Distributions
    
    
    (9,360
    )
    
    
    (32,121
    )
    
    
    (10,151
    )
    
    
    (51,632
    )
    
    
    
    
    
    
    (51,632
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    8,295
    
    
    
    8,295
    
    
    
    (124
    )
    
    
    8,171Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    3,021
    
    
    
    3,021
    
    
    
    (1,745
    )
    
    
    1,276Balance, March 31, 2006
    
    $
    70,938
    
    
    $
    118,162
    
    
    $
    (6,391
    )
    
    $
    182,709
    
    
    $
    (7,942
    )
    
    $
    174,767Distributions
    
    
    
    
    
    
    (17,853
    )
    
    
    (16,798
    )
    
    
    (34,651
    )
    
    
    
    
    
    
    (34,651
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    6,571
    
    
    
    6,571
    
    
    
    (322
    )
    
    
    6,249Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    24,081
    
    
    
    24,081
    
    
    
    (11,862
    )
    
    
    12,219Balance, June 30, 2006
    
    $
    70,938
    
    
    $
    100,309
    
    
    $
    7,463
    
    
    $
    178,710
    
    
    $
    (20,126
    )
    
    $
    158,584Distributions
    
    
    (13,187
    )
    
    
    (25,401
    )
    
    
    (9,591
    )
    
    
    (48,179
    )
    
    
    
    
    
    
    (48,179
    )Residual interest income
    
    
    
    
    
    
    
    
    
    
    6,611
    
    
    
    6,611
    
    
    
    (651
    )
    
    
    5,960Realized losses
    
    
    
    
    
    
    
    
    
    
    152
    
    
    
    152
    
    
    
    (76
    )
    
    
    76Unrealized gains (losses)
    
    
    
    
    
    
    
    
    
    
    (2,830
    )
    
    
    (2,830
    )
    
    
    1,220
    
    
    
    (1,610
    )Balance, September 30, 2006
    
    $
    57,751
    
    
    $
    74,908
    
    
    $
    1,805
    
    
    $
    134,464
    
    
    $
    (19,633
    )
    
    $
    114,831
   13




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##### Table of Contents



6. Revolving Credit Facilities
  2007
    
    
    2006(Dollars in thousands)Warehouse loan facilities
    
    $
    561,959
    
    
    $
    434,131Residual loan facilities
    
    
    38,000
    
    
    
    95,000Total revolving credit facilities
    
    $
    599,959
    
    
    $
    529,131
  Facility
    
    
    Collateral
    
    
    AdvancesAmount
    
    
    Pledged
    
    
    Outstanding(Dollars in thousands)Warehouse loan facility, due April 2009
    
    $
    625,000
    
    
    $
    325,599
    
    
    $
    291,709Residual loan facility, due April 2009
    
    
    125,000
    
    
    
    196,383
    
    
    
    19,000Warehouse loan facility, due October 2007(a)
    
    
    625,000
    
    
    
    302,777
    
    
    
    270,250Residual loan facility, due October 2007(a)
    
    
    125,000
    
    
    
    196,383
    
    
    
    19,000$
    599,959
 
 (a)
    
    Warehouse and residual loan facilities provided by Goldman Sachs Mortgage Company, an
affiliate of one of our equity investors.     14




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##### Table of Contents



7. Securitization Notes Payable
  OriginalWeighted
    
    
    Collateral
    
    
    NoteOriginal
    
    
    Average
    
    
    Pledged
    
    
    BalanceNote
    
    
    Interest
    
    
    at
    
    
    atTransaction
    
    Amount
    
    
    Rate
    
    
    September 30, 2007
    
    
    September 30, 2007(Dollars in thousands)2005-A, due June 12, 2012(a)
    
    $
    1,104,000
    
    
    
    4.09
    %
    
    $
    370,475
    
    
    $
    343,2892005-B, due April 12, 2013(a)
    
    $
    905,303
    
    
    
    4.32
    %
    
    $
    337,476
    
    
    $
    312,1112006-A, due April 12, 2013(a)
    
    $
    822,500
    
    
    
    4.88
    %
    
    $
    427,008
    
    
    $
    389,1062006-B, due November 12, 2012(a)
    
    $
    915,500
    
    
    
    5.50
    %
    
    $
    558,843
    
    
    $
    511,1272006-C, due May 13, 2013(a)
    
    $
    1,092,200
    
    
    
    5.37
    %
    
    $
    793,084
    
    
    $
    725,5062007-A, due February 12, 2014(a)
    
    $
    775,110
    
    
    
    5.34
    %
    
    $
    735,849
    
    
    $
    667,497$
    2,948,636
 
 (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.     15




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##### Table of Contents



8. Senior Notes Payable
    9. Preferred Stock
   10. Derivative Financial Instruments
  11. Income Taxes
  16




---



##### Table of Contents



12. Commitments and Contingencies
       17




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##### Table of Contents



(Dollars in thousands)Year ending December 31,2007
    
    $
    1,0032008
    
    $
    3,3422009
    
    $
    3,2812010
    
    $
    3,3532011
    
    $
    2,5352012 and thereafter
    
    $
    2,173
 13. Comprehensive Income
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Net income
    
    $
    14,578
    
    
    $
    18,958Other comprehensive income (loss), netUnrealized holding gains on
available for sale securities
(net of tax of $902 and $4,893)
    
    
    1,380
    
    
    
    7,494Net unrealized holding gains reclassified
into earnings (net of tax of $3,199, and $198)
    
    
    (4,899
    )
    
    
    (303
    )Total other comprehensive income (loss), net
    
    
    (3,519
    )
    
    
    7,191Comprehensive income
    
    $
    11,059
    
    
    $
    26,149
  Nine Months
    
    
    Nine MonthsEnded
    
    
    EndedSeptember 30,
    
    
    September 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    9,084
    
    
    $
    1,849Current period change
    
    
    (3,519
    )
    
    
    7,191Balance, end of period
    
    $
    5,565
    
    
    $
    9,040
 14. Stock-Based Compensation
   18




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##### Table of Contents



Weighted-AverageExerciseShares
    
    
    Price(Amounts in thousands exceptweighted-averageexercise price )Outstanding at June 30, 2007
    
    
    2,975
    
    
    $
    7.63Granted
    
    
    112
    
    
    
    8.46Canceled
    
    
    (142
    )
    
    
    7.54Forfeited
    
    
    (114
    )
    
    
    7.57Outstanding at September 30, 2007
    
    
    2,831
    
    
    $
    7.67Outstanding at December 31, 2006
    
    
    2,988
    
    
    $
    7.58Granted
    
    
    324
    
    
    
    8.36Canceled
    
    
    (217
    )
    
    
    7.54Forfeited
    
    
    (264
    )
    
    
    7.58Outstanding at September 30, 2007
    
    
    2,831
    
    
    $
    7.67Exercisable at September 30, 2007
    
    
    1,398
    
    
    $
    7.60Weighted-average remaining contractual life in years
    
    
    
    
    
    
    8.27Outstanding at June 30, 2006
    
    
    3,000
    
    
    $
    7.58Granted
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at September 30, 2006
    
    
    3,000
    
    
    $
    7.58Outstanding at December 31, 2005
    
    
    2,000
    
    
    $
    7.50Granted
    
    
    1,000
    
    
    
    7.73Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at September 30, 2006
    
    
    3,000
    
    
    $
    7.58
 19




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##### Table of Contents



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
    20




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##### Table of Contents



Critical Accounting Policies and Use of Estimates
  Components of Revenues and Expenses
   Results of Operations
 Three Months Ended September 30, 2007 as Compared to Three Months Ended September 30, 2006
  Net Interest Margin
  For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,809,512
    
    
    $
    3,790,230
  21




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##### Table of Contents



For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Financing income
    
    $
    146,925
    
    
    $
    153,252Other interest income
    
    
    8,339
    
    
    
    8,759Interest expense
    
    
    (54,771
    )
    
    
    (55,482
    )Net interest margin
    
    $
    100,493
    
    
    $
    106,529Annualized financing income as a
percentage of average owned finance
receivables
    
    
    15.4
    %
    
    
    16.2
    %
     22




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##### Table of Contents



Provision for Credit Losses
  Servicing Income
  Other Income
  For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Customer fees
    
    $
    4,585
    
    
    $
    5,207Losses on interest rate swap agreements
    
    
    (4,295
    )
    
    
    (8,092
    )Other
    
    
    283
    
    
    
    (372
    )Other income
    
    $
    573
    
    
    $
    (3,257
    )
  Expenses
  23




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##### Table of Contents



Income Taxes
  Nine Months Ended September 30, 2007 as Compared to Nine Months Ended September 30, 2006
  Net Interest Margin
  For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,874,214
    
    
    $
    3,340,870
    For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Financing income
    
    $
    449,729
    
    
    $
    384,054Other interest income
    
    
    25,239
    
    
    
    27,199Interest expense
    
    
    (165,345
    )
    
    
    (144,259
    )Net interest margin
    
    $
    309,623
    
    
    $
    266,994Annualized financing income as a
percentage of average owned finance
receivables
    
    
    15.5
    %
    
    
    15.3
    %
 24




---



##### Table of Contents



Provision for Credit Losses
  Servicing Income
  Other Income
  For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Customer fees
    
    $
    15,118
    
    
    $
    14,978Losses on interest rate swap agreements
    
    
    (4,077
    )
    
    
    (2,528
    )Other
    
    
    (1,872
    )
    
    
    591Other income
    
    $
    9,169
    
    
    $
    13,041
 25




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##### Table of Contents



Expenses
  Income Taxes
  Credit Quality
    At September 30,
    
    
    At December 31,2007
    
    
    2006(Dollars in thousands)Finance receivables held for investment
    
    $
    3,158,667
    
    
    $
    3,045,938Allowance for credit losses
    
    
    (222,527
    )
    
    
    (195,000
    )Finance receivables held for investment, net of allowance
    
    
    2,936,140
    
    
    
    2,850,938Allowance for credit losses as a percentage of receivables
    
    
    7.0
    %
    
    
    6.4
    %Predecessor finance receivables held for investment, net
    
    
    551,358
    
    
    
    849,246Finance receivables repurchased from gain on sale trusts, net
    
    
    61,381
    
    
    
    62,659Total owned finance receivables held for investment, net
    
    $
    3,548,879
    
    
    $
    3,762,843
 26




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##### Table of Contents



At September 30,
    
    
    At December 31,2007
    
    
    2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Delinquent contracts:31 to 60 days
    
    $
    329,192
    
    
    
    8.6
    %
    
    $
    269,861
    
    
    
    6.7
    %Greater than 60 days
    
    
    138,137
    
    
    
    3.6
    
    
    
    97,332
    
    
    
    2.4467,329
    
    
    
    12.2
    
    
    
    367,193
    
    
    
    9.1In repossession
    
    
    19,148
    
    
    
    0.5
    
    
    
    17,072
    
    
    
    0.4$
    486,477
    
    
    
    12.7
    %
    
    $
    384,265
    
    
    
    9.5
    %
     At September 30,
    
    
    At December 31,2007
    
    
    2006Percent
    
    
    PercentNever extended
    
    
    76.7
    %
    
    
    83.3
    %Extended:1-2 times
    
    
    22.9
    %
    
    
    16.4
    %3-4 times
    
    
    0.4
    %
    
    
    0.3
    %Total extended
    
    
    23.3
    %
    
    
    16.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  27




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##### Table of Contents



For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Repossession charge-offs
    
    $
    98,066
    
    
    $
    82,225Less: Sales proceeds and recoveries
    
    
    (54,846
    )
    
    
    (44,777
    )Mandatory charge-offs(1)
    
    
    40,814
    
    
    
    24,018Net charge-offs(2)
    
    $
    84,034
    
    
    $
    61,466Annualized net charge-offs as a percentage of average total
owned receivables outstanding
    
    
    8.8
    %
    
    
    6.5
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    39.5
    %
    
    
    42.1
    %
 For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Repossession charge-offs
    
    $
    279,875
    
    
    $
    182,645Less: Sales proceeds and recoveries
    
    
    (171,767
    )
    
    
    (110,686
    )Mandatory charge-offs(1)
    
    
    101,491
    
    
    
    51,417Net charge-offs(2)
    
    $
    209,599
    
    
    $
    123,376Annualized net charge-offs as a percentage of average total
owned receivables outstanding
    
    
    7.2
    %
    
    
    4.9
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    45.0
    %
    
    
    47.3
    %
 
 (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.  28




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##### Table of Contents



Total Managed Information
     For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,809,512
    
    
    $
    3,790,230Average sold finance receivables
    
    
    245,637
    
    
    
    674,910Average total managed finance receivables
    
    $
    4,055,149
    
    
    $
    4,465,140
 For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,874,214
    
    
    $
    3,340,870Average sold finance receivables
    
    
    314,420
    
    
    
    844,274Average total managed finance receivables
    
    $
    4,188,634
    
    
    $
    4,185,144
 29




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##### Table of Contents



Total Managed Net Interest Margin
  For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Financing income and customer fees
    
    $
    161,541
    
    
    $
    196,356Interest expense
    
    
    (59,667
    )
    
    
    (69,100
    )Net interest margin
    
    $
    101,874
    
    
    $
    127,256
 For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Financing income and customer fees
    
    $
    520,686
    
    
    $
    550,937Interest expense
    
    
    (174,935
    )
    
    
    (167,006
    )Net interest margin
    
    $
    345,751
    
    
    $
    383,931
  For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Net margin as reflected on the consolidated statements of income
    
    $
    100,493
    
    
    $
    106,529Other interest income
    
    
    (8,339
    )
    
    
    (8,759
    )Financing revenue on sold receivables
    
    
    3,429
    
    
    
    27,945Interest expense on sold receivables
    
    
    (601
    )
    
    
    (5,526
    )Losses on interest rate swaps
    
    
    (4,295
    )
    
    
    (8,092
    )Premium amortization
    
    
    6,602
    
    
    
    9,952Customer fees
    
    
    4,585
    
    
    
    5,207Total managed net interest margin
    
    $
    101,874
    
    
    $
    127,256
 For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Net margin as reflected on the consolidated statements of income
    
    $
    309,623
    
    
    $
    266,994Other interest income
    
    
    (25,239
    )
    
    
    (27,199
    )Financing revenue on sold receivables
    
    
    31,617
    
    
    
    106,536Interest expense on sold receivables
    
    
    (5,513
    )
    
    
    (20,219
    )Losses on interest rate swaps
    
    
    (4,077
    )
    
    
    (2,528
    )Premium amortization
    
    
    24,222
    
    
    
    45,369Customer fees
    
    
    15,118
    
    
    
    14,978Total managed net interest margin
    
    $
    345,751
    
    
    $
    383,931
 30




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##### Table of Contents



For the Three MonthsEndedSeptember 30,2007
    
    2006(Dollars inThousands)Annualized finance income and customer fees
    
    
    15.9
    %
    
    
    17.6
    %Annualized interest expense
    
    
    (5.9
    )
    
    
    (6.2
    )Annualized net interest margin as a percentage of average total managed receivables
    
    
    10.0
    %
    
    
    11.4
    %
 For the Nine MonthsEndedSeptember 30,2007
    
    2006(Dollars inThousands)Annualized finance income and customer fees
    
    
    16.6
    %
    
    
    17.6
    %Annualized interest expense
    
    
    (5.6
    )
    
    
    (5.3
    )Annualized net interest margin as a percentage of average total managed receivables
    
    
    11.0
    %
    
    
    12.3
    %
  Total Managed Credit Quality
   At September 30, 2007Owned
    
    
    Sold
    
    
    Total Managed(Dollars in thousands)Owned finance receivables, unpaid principal balance
    
    $
    3,829,311
    
    
    $
    
    
    
    $
    3,829,311Sold finance receivables
    
    
    
    
    
    
    222,874
    
    
    
    222,874Total managed finance receivables
    
    $
    3,824,311
    
    
    $
    222,874
    
    
    $
    4,052,185Number of outstanding contracts
    
    
    264,167
    
    
    
    29,502
    
    
    
    293,669Average principal amount of outstanding contracts
(in dollars)
    
    $
    14,496
    
    
    $
    7,555
    
    
    $
    13,798
 31




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##### Table of Contents



At December 31, 2006Owned
    
    
    Sold
    
    
    Total Managed(Dollars in thousands)Owned finance receivables, unpaid principal balance
    
    $
    4,032,551
    
    
    $
    
    
    
    $
    4,032,551Sold finance receivables
    
    
    
    
    
    
    484,818
    
    
    
    484,818Total managed finance receivables
    
    $
    4,032,551
    
    
    $
    484,818
    
    
    $
    4,517,369Number of outstanding contracts
    
    
    264,559
    
    
    
    55,802
    
    
    
    320,361Average principal amount of outstanding contracts
(in dollars)
    
    $
    15,243
    
    
    $
    8,688
    
    
    $
    14,101
  At September 30, 2007Owned
    
    
    Sold
    
    
    Total ManagedDelinquent contracts:
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)31 to 60 days
    
    $
    329,192
    
    
    
    8.6
    %
    
    $
    27,256
    
    
    
    12.2
    %
    
    $
    356,448
    
    
    
    8.8
    %Greater than 60 days
    
    
    138,137
    
    
    
    3.6
    
    
    
    10,739
    
    
    
    4.8
    
    
    
    148,876
    
    
    
    3.7467,329
    
    
    
    12.2
    
    
    
    37,995
    
    
    
    17.0
    
    
    
    505,324
    
    
    
    12.5In repossession
    
    
    19,148
    
    
    
    0.5
    
    
    
    2,439
    
    
    
    1.1
    
    
    
    21,587
    
    
    
    0.5$
    486,477
    
    
    
    12.7
    %
    
    $
    40,434
    
    
    
    18.1
    %
    
    $
    526,911
    
    
    
    13.0
    %
 At December 31, 2006Owned
    
    
    Sold
    
    
    Total ManagedDelinquent contracts:
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)31 to 60 days
    
    $
    269,861
    
    
    
    6.7
    %
    
    $
    51,827
    
    
    
    10.7
    %
    
    $
    321,688
    
    
    
    7.1
    %Greater than 60 days
    
    
    97,332
    
    
    
    2.4
    
    
    
    17,970
    
    
    
    3.7
    
    
    
    115,302
    
    
    
    2.6367,193
    
    
    
    9.1
    
    
    
    69,797
    
    
    
    14.4
    
    
    
    436,990
    
    
    
    9.7In repossession
    
    
    17,072
    
    
    
    0.4
    
    
    
    4,819
    
    
    
    1.0
    
    
    
    21,891
    
    
    
    0.5$
    384,265
    
    
    
    9.5
    %
    
    $
    74,616
    
    
    
    15.4
    %
    
    $
    458,881
    
    
    
    10.2
    %
    32




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##### Table of Contents



At September 30, 2007Owned
    
    
    Sold
    
    
    Total ManagedNever extended
    
    
    76.7
    %
    
    
    47.6
    %
    
    
    75.1
    %Extended:1-2 times
    
    
    22.9
    %
    
    
    46.9
    %
    
    
    24.2
    %3-4 times
    
    
    0.4
    %
    
    
    5.5
    %
    
    
    0.7
    %Total extended
    
    
    23.3
    %
    
    
    52.4
    %
    
    
    24.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 At December 31, 2006Owned
    
    
    Sold
    
    
    Total ManagedNever extended
    
    
    83.3
    %
    
    
    53.1
    %
    
    
    80.1
    %Extended:1-2 times
    
    
    16.4
    %
    
    
    43.8
    %
    
    
    19.3
    %3-4 times
    
    
    0.3
    %
    
    
    3.1
    %
    
    
    0.6
    %Total extended
    
    
    16.7
    %
    
    
    46.9
    %
    
    
    19.9
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   33




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##### Table of Contents



For the Three Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Owned:Repossession charge-offs
    
    $
    98,066
    
    
    $
    82,225Less: Sales proceeds and recoveries
    
    
    (54,846
    )
    
    
    (44,777
    )Mandatory charge-offs(1)
    
    
    40,814
    
    
    
    24,018Net charge-offs(2)
    
    $
    84,034
    
    
    $
    61,466Sold:Charge-offs
    
    $
    11,019
    
    
    $
    26,087Less: Sales proceeds and recoveries
    
    
    (6,122
    )
    
    
    (11,914
    )Mandatory charge-offs(1)
    
    
    
    
    
    
    Net charge-offs
    
    $
    4,897
    
    
    $
    14,173Total Managed:Repossession charge-offs
    
    $
    109,085
    
    
    $
    108,312Less: Sales proceeds and recoveries
    
    
    (60,968
    )
    
    
    (56,691
    )Mandatory charge-offs(1)
    
    
    40,814
    
    
    
    24,018Net charge-offs
    
    $
    88,931
    
    
    $
    75,639Annualized net charge-offs as a percentage of average total
managed receivables outstanding
    
    
    8.8
    %
    
    
    6.8
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    40.7
    %
    
    
    42.8
    %
 For the Nine Months EndedSeptember 30,2007
    
    
    2006(Dollars in thousands)Owned:Repossession charge-offs
    
    $
    279,875
    
    
    $
    182,645Less: Sales proceeds and recoveries
    
    
    (171,767
    )
    
    
    (110,686
    )Mandatory charge-offs(1)
    
    
    101,491
    
    
    
    51,417Net charge-offs(2)
    
    $
    209,599
    
    
    $
    123,376Sold:Charge-offs
    
    $
    34,152
    
    
    $
    87,809Less: Sales proceeds and recoveries
    
    
    (18,654
    )
    
    
    (45,404
    )Mandatory charge-offs(1)
    
    
    
    
    
    
    Net charge-offs
    
    $
    15,498
    
    
    $
    42,405Total Managed:Repossession charge-offs
    
    $
    314,027
    
    
    $
    270,454Less: Sales proceeds and recoveries
    
    
    (190,421
    )
    
    
    (156,090
    )Mandatory charge-offs(1)
    
    
    101,491
    
    
    
    51,417Net charge-offs
    
    $
    225,097
    
    
    $
    165,781Annualized net charge-offs as a percentage of average total
managed receivables outstanding
    
    
    7.2
    %
    
    
    5.3
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    45.8
    %
    
    
    48.5
    %
 
 (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.  34




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##### Table of Contents



Liquidity and Capital Resources
 General
       35




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##### Table of Contents



Contractual and Long-Term Debt Obligations
  Securitizations
      Off-Balance Sheet Arrangements
  36




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##### Table of Contents



Recent Accounting Pronouncements
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
 General
  Warehouse and Residual Facilities
   37




---



##### Table of Contents



Securitizations
    Interest Rate Swap Agreements
  
 ITEM 4. CONTROLS AND PROCEDURES
   38




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##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
   
 ITEM 1A. RISK FACTORS
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  39




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##### Table of Contents



ITEM 6. EXHIBITS
 
 EXHIBIT INDEX
 EXHIBITNO.
    
    DESCRIPTION2.1
    
    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)).*10.3
    
    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)).10.4
    
    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 Corporation, filed on July 12, 2005 (File No.
333-126538)).
 40




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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.5
    
    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)).10.6
    
    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)).10.7
    
    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)).10.8
    
    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)).10.9
    
    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)).10.10
    
    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)).10.11
    
    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)).10.12
    
    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)).*10.13
    
    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)).10.14
    
    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)).
 41




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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.15
    
    Consulting agreement dated as of July 31, 2007, between the Company and Carl B. Webb. +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 42




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##### Table of Contents



SIGNATURES
  Date: November 9, 2007
    /s/ Daniel D. LeonardDaniel D. LeonardPresident & Chief Executive OfficerDate: November 9, 2007
    /s/ Mike L. WilhelmsMike L. WilhelmsSenior Vice President & Chief Financial Officer 43




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##### Table of Contents



EXHIBIT INDEX
 EXHIBITNO.
    
    DESCRIPTION2.1
    
    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)).*10.3
    
    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)).10.4
    
    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 Corporation, filed on July 12, 2005 (File No.
333-126538)).




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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.5
    
    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)).10.6
    
    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)).10.7
    
    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)).10.8
    
    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)).10.9
    
    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)).10.10
    
    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)).10.11
    
    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)).10.12
    
    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)).*10.13
    
    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)).10.14
    
    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)).




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##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.15
    
    Consulting agreement dated as of July 31, 2007, between the Company and Carl B. Webb. +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