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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 June 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
    
    33-0356705(State of Incorporation)
    
    (IRS Employer Identification No)7711 Center Avenue, Suite 100
    
    92647Huntington Beach, California
    
    (Zip Code)(Address of principal executive offices)
 (714) 373-8300  (Registrants telephone number, including area code)
 
 þ o
  o o þ
 o þ




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##### Table of Contents



TRIAD FINANCIAL CORPORATION
INDEX TO FORM 10-Q
 PagePART I
    
    FINANCIAL INFORMATIONITEM 1.
    
    FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    2CONSOLIDATED STATEMENTS OF INCOME
    
    
    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
    
    
    36ITEM 4.
    
    CONTROLS AND PROCEDURES
    
    
    38PART II
    
    OTHER INFORMATIONITEM 1.
    
    LEGAL PROCEEDINGS
    
    
    39ITEM 1A.
    
    RISK FACTORS
    
    
    39ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES 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
    
    
    42EXHIBIT 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
 June 30, 2007
    
    
    December 31, 2006(Dollars in thousands)(Unaudited)ASSETSCash and cash equivalents
    
    $
    62,297
    
    
    $
    60,367Cash  restricted
    
    
    310,828
    
    
    
    274,059Finance receivables held for investment, net
    
    
    3,634,730
    
    
    
    3,781,469Retained interest in securitized assets, net
    
    
    47,545
    
    
    
    102,531Accounts receivable, net
    
    
    43,846
    
    
    
    50,918Fixed assets, net of accumulated depreciation of $18,635 in
2007 and $13,913 in 2006
    
    
    15,948
    
    
    
    19,294Collateral held for resale
    
    
    15,275
    
    
    
    17,072Capitalized financing costs, net of accumulated amortization
of $17,922 in 2007 and $20,826 in 2006
    
    
    13,549
    
    
    
    15,031Deferred tax asset, net
    
    
    81,798
    
    
    
    63,731Goodwill
    
    
    30,446
    
    
    
    30,446Other assets
    
    
    4,066
    
    
    
    3,617Total assets
    
    $
    4,260,328
    
    
    $
    4,418,535LIABILITIES AND STOCKHOLDERS EQUITYLiabilitiesRevolving credit facilities
    
    $
    302,553
    
    
    $
    529,131Securitization notes payable
    
    
    3,336,163
    
    
    
    3,258,215Senior notes payable
    
    
    149,210
    
    
    
    149,167Taxes payable
    
    
    9,458
    
    
    
    3,499Other liabilities
    
    
    72,529
    
    
    
    72,364Total liabilities
    
    
    3,869,913
    
    
    
    4,012,376Commitments and contingencies (Note 12)Stockholders EquityPreferred stock, no par value; authorized 3,000,000 shares;
issued and outstanding none at June 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 June 30, 2007 and December
31, 2006
    
    
    
    
    
    
    Additional paid in capital
    
    
    345,000
    
    
    
    345,000Retained earnings
    
    
    38,334
    
    
    
    22,075Accumulated other comprehensive income
    
    
    7,081
    
    
    
    9,084Total stockholders equity
    
    
    390,415
    
    
    
    406,159Total liabilities and stockholders equity
    
    $
    4,260,328
    
    
    $
    4,418,535
  2




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TRIAD FINANCIAL CORPORATION
 
 Consolidated Statements of Income
 Three Months
    
    
    Three Months
    
    
    Six Months
    
    
    Six MonthsEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006(Dollars in thousands)(Unaudited)Financing and other interest income
    
    $
    158,174
    
    
    $
    138,641
    
    
    $
    319,704
    
    
    $
    249,242Interest expense
    
    
    55,711
    
    
    
    48,873
    
    
    
    110,574
    
    
    
    88,777Net interest margin
    
    
    102,463
    
    
    
    89,768
    
    
    
    209,130
    
    
    
    160,465Provision for credit losses
    
    
    60,225
    
    
    
    52,510
    
    
    
    122,855
    
    
    
    95,042Net interest margin after provision
for credit losses
    
    
    42,238
    
    
    
    37,258
    
    
    
    86,275
    
    
    
    65,423Servicing income
    
    
    2,071
    
    
    
    5,978
    
    
    
    5,048
    
    
    
    13,281Other income
    
    
    5,937
    
    
    
    8,769
    
    
    
    8,596
    
    
    
    16,298Total other revenues
    
    
    8,008
    
    
    
    14,747
    
    
    
    13,644
    
    
    
    29,579Operating expenses:Compensation and employee benefits
    
    
    22,905
    
    
    
    20,196
    
    
    
    43,657
    
    
    
    38,686Occupancy and equipment
    
    
    3,907
    
    
    
    3,571
    
    
    
    8,049
    
    
    
    7,718Systems and data processing
    
    
    3,291
    
    
    
    3,487
    
    
    
    6,628
    
    
    
    6,777Professional services
    
    
    1,073
    
    
    
    1,275
    
    
    
    2,607
    
    
    
    3,021Telecommunications
    
    
    872
    
    
    
    809
    
    
    
    1,818
    
    
    
    1,613Advertising
    
    
    1,143
    
    
    
    714
    
    
    
    1,922
    
    
    
    1,080Other
    
    
    3,045
    
    
    
    5,600
    
    
    
    6,525
    
    
    
    8,986Total operating expenses
    
    
    36,236
    
    
    
    35,652
    
    
    
    71,206
    
    
    
    67,881Income before income taxes
    
    
    14,010
    
    
    
    16,353
    
    
    
    28,713
    
    
    
    27,121Provision for income taxes
    
    
    5,897
    
    
    
    6,387
    
    
    
    11,666
    
    
    
    10,597Net income
    
    $
    8,113
    
    
    $
    9,966
    
    
    $
    17,047
    
    
    $
    16,524
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TRIAD FINANCIAL CORPORATION
 
 Consolidated Statements of Cash Flows
 Six Months Ended
    
    
    Six Months EndedJune 30, 2007
    
    
    June 30, 2006(Dollars in thousands)(Unaudited)Cash flows from operating activitiesNet income
    
    $
    17,047
    
    
    $
    16,524Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    14,450
    
    
    
    10,617Provision for credit losses
    
    
    122,855
    
    
    
    95,042Deferred income tax benefit
    
    
    (16,758
    )
    
    
    (20,964
    )Accretion of present value discount
    
    
    (10,396
    )
    
    
    (14,420
    )Amortization of purchase premium
    
    
    17,620
    
    
    
    35,417Loss on repurchase of receivables from gain on
sale trusts
    
    
    2,864
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable
    
    
    7,072
    
    
    
    (10,719
    )Other assets
    
    
    (1,236
    )
    
    
    (119
    )Other liabilities
    
    
    424
    
    
    
    (342
    )Current tax receivable/payable
    
    
    5,959
    
    
    
    (1,238
    )Net cash provided by operating activities
    
    
    159,901
    
    
    
    109,798Cash flows from investing activitiesDistributions from gain on sale trusts
    
    
    61,915
    
    
    
    86,282Repurchases from gain on sale trusts
    
    
    (93,712
    )
    
    
    (45,632
    )Purchases of finance receivables held for
investment
    
    
    (669,098
    )
    
    
    (1,596,461
    )Collections on finance receivables held
for investment
    
    
    762,467
    
    
    
    589,843Change in restricted cash
    
    
    (36,769
    )
    
    
    (83,331
    )Purchases of fixed assets
    
    
    (1,636
    )
    
    
    (6,269
    )Net cash provided by (used in) investing
activities
    
    
    23,167
    
    
    
    (1,055,568
    )Cash flows from financing activitiesNet change in warehouse credit facilities
    
    
    (191,578
    )
    
    
    (298,639
    )Net change in residual credit facilities
    
    
    (35,000
    )
    
    
    3,000Net change in due to Ford Motor Credit
Company
    
    
    
    
    
    
    (26,752
    )Issuance of securitization notes
    
    
    775,100
    
    
    
    1,737,882Payment on securitization notes
    
    
    (697,152
    )
    
    
    (491,495
    )Capitalized finance costs
    
    
    (2,508
    )
    
    
    (5,685
    )Issuance of preferred stock
    
    
    
    
    
    
    30,000Redemption of preferred stock
    
    
    (30,000
    )
    
    
    Net cash (used in) provided by financing
activities
    
    
    (181,138
    )
    
    
    948,311Net increase in cash and cash equivalents
    
    
    1,930
    
    
    
    2,541Cash and cash equivalentsBeginning of period
    
    
    60,367
    
    
    
    45,295End of period
    
    $
    62,297
    
    
    $
    47,836Supplemental DisclosureInterest paid
    
    $
    111,553
    
    
    $
    86,374Income taxes paid
    
    $
    22,468
    
    
    $
    32,793
  4




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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
    
    $
    3,108,893
    
    
    $
    3,045,938Premiums and discounts, net
    
    
    (5,031
    )
    
    
    (7,699
    )Deferred costs, net
    
    
    24,302
    
    
    
    26,325Finance receivables held for investment, gross
    
    
    3,128,164
    
    
    
    3,064,564Allowance for credit losses
    
    
    (219,501
    )
    
    
    (195,000
    )Finance receivables held for investment, net
    
    
    2,908,663
    
    
    
    2,869,564Predecessor finance receivables held for investment, net
    
    
    639,375
    
    
    
    849,246Finance receivables repurchased from gain on sale trusts, net
    
    
    86,692
    
    
    
    62,659Finance receivables, net
    
    $
    3,634,730
    
    
    $
    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
    
    
    (63,537
    )
    
    
    
    
    
    
    (63,537
    )
    
    
    48,034
    
    
    
    (15,503
    )Principal collections
    
    
    (194,368
    )
    
    
    
    
    
    
    (194,368
    )
    
    
    
    
    
    
    (194,368
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (25,057
    )
    
    
    25,057
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    1,817
    
    
    
    1,817
    
    
    
    (1,817
    )
    
    
    Change in cash flows
    
    
    (36,975
    )
    
    
    36,975
    
    
    
    
    
    
    
    
    
    
    
    Balance, June 30, 2007
    
    $
    926,899
    
    
    $
    (189,389
    )
    
    $
    737,510
    
    
    $
    (98,135
    )
    
    $
    639,375
 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
    
    
    (109,557
    )
    
    
    
    
    
    
    (109,557
    )
    
    
    75,945
    
    
    
    (33,612
    )Principal collections
    
    
    (318,135
    )
    
    
    
    
    
    
    (318,135
    )
    
    
    
    
    
    
    (318,135
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (33,707
    )
    
    
    33,707
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    102,268
    
    
    
    102,268
    
    
    
    (102,268
    )
    
    
    Change in cash flows
    
    
    (84,124
    )
    
    
    84,124
    
    
    
    
    
    
    
    
    
    
    
    Balance, June 30, 2006
    
    $
    1,674,669
    
    
    $
    (304,611
    )
    
    $
    1,370,058
    
    
    $
    (253,395
    )
    
    $
    1,116,663
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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
    
    
    (9,420
    )
    
    
    
    
    
    
    (9,420
    )
    
    
    7,304
    
    
    
    (2,116
    )Principal collections
    
    
    (63,340
    )
    
    
    
    
    
    
    (63,340
    )
    
    
    
    
    
    
    (63,340
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (2,155
    )
    
    
    2,155
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    4,180
    
    
    
    4,180
    
    
    
    (4,180
    )
    
    
    Change in cash flows
    
    
    2,279
    
    
    
    (2,279
    )
    
    
    
    
    
    
    
    
    
    
    Balance, June 30, 2007
    
    $
    101,112
    
    
    $
    (8,092
    )
    
    $
    93,020
    
    
    $
    (6,328
    )
    
    $
    86,692
 Contractual
    
    
    Nonaccretable
    
    
    Expected
    
    
    Accretable
    
    
    CarryingPayments
    
    
    Discount
    
    
    Payments
    
    
    Discount
    
    
    Value(Dollars in thousands)Balance, December 31, 2005
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Finance receivables repurchased
    
    
    49,846
    
    
    
    (6,028
    )
    
    
    43,818
    
    
    
    (2,179
    )
    
    
    41,639Interest income
    
    
    (3,219
    )
    
    
    
    
    
    
    (3,219
    )
    
    
    1,414
    
    
    
    (1,805
    )Principal collections
    
    
    (20,191
    )
    
    
    
    
    
    
    (20,191
    )
    
    
    
    
    
    
    (20,191
    )Charge-offs, net of sales proceeds and recoveries
    
    
    (1,525
    )
    
    
    1,525
    
    
    
    
    
    
    
    
    
    
    
    Reclassifications
    
    
    
    
    
    
    2,455
    
    
    
    2,455
    
    
    
    (2,455
    )
    
    
    Change in cash flows
    
    
    355
    
    
    
    (355
    )
    
    
    
    
    
    
    
    
    
    
    Balance, June 30, 2006
    
    $
    25,266
    
    
    $
    (2,403
    )
    
    $
    22,863
    
    
    $
    (3,220
    )
    
    $
    19,643
  4. Allowance For Credit Losses
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    208,077
    
    
    $
    82,962Provision for credit losses
    
    
    60,225
    
    
    
    52,510Charge-offs, net of sales proceeds
    
    
    (55,018
    )
    
    
    (16,577
    )Recoveries
    
    
    6,217
    
    
    
    728Balance, end of period
    
    $
    219,501
    
    
    $
    119,623
 10




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Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    195,000
    
    
    $
    51,259Provision for credit losses
    
    
    122,855
    
    
    
    95,042Charge-offs, net of sales proceeds
    
    
    (109,846
    )
    
    
    (27,873
    )Recoveries
    
    
    11,492
    
    
    
    1,195Balance, end of period
    
    $
    219,501
    
    
    $
    119,623
   5. Sales of Receivables
 Servicing Portfolio
  Three Months
    
    
    Three MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    322,579
    
    
    $
    917,878Collections and write-offs
    
    
    (52,671
    )
    
    
    (139,096
    )Balance, end of period
    
    $
    269,908
    
    
    $
    778,782
 Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    484,818
    
    
    $
    1,130,352Called receivables
    
    
    (93,712
    )
    
    
    (45,632
    )Collections and write-offs
    
    
    (121,198
    )
    
    
    (305,938
    )Balance, end of period
    
    $
    269,908
    
    
    $
    778,782
  11




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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
    
    
    35,088
    
    
    
    63,026Interest-only
    
    
    746
    
    
    
    2,257Retained interest in securitized assets, gross
    
    $
    71,059
    
    
    $
    123,034Payable to Ford Credit
    
    
    (23,514
    )
    
    
    (20,503
    )Retained interest in securitized assets, net
    
    $
    47,545
    
    
    $
    102,531
      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 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 losses
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    197
    
    
    
    (1,123
    )
    
    
    (926
    )Balance, June 30, 2007
    
    $
    35,225
    
    
    $
    35,088
    
    
    $
    746
    
    
    $
    71,059
    
    
    $
    (23,514
    )
    
    $
    47,545
 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, 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 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 losses
    
    
    
    
    
    
    
    
    
    
    24,081
    
    
    
    24,081
    
    
    
    (11,862
    )
    
    
    12,219Balance, June 30, 2006
    
    $
    70,938
    
    
    $
    100,309
    
    
    $
    7,463
    
    
    $
    178,710
    
    
    $
    (20,126
    )
    
    $
    158,584
   6. Revolving Credit Facilities
  2007
    
    
    2006(Dollars in thousands)Warehouse loan facilities
    
    $
    242,553
    
    
    $
    434,131Residual loan facilities
    
    
    60,000
    
    
    
    95,000Total revolving credit facilities
    
    $
    302,553
    
    
    $
    529,131
  Facility
    
    
    Collateral
    
    
    AdvancesAmount
    
    
    Pledged
    
    
    Outstanding(Dollars in thousands)Warehouse loan facility, due April 2009
    
    $
    625,000
    
    
    $
    146,734
    
    
    $
    126,243Residual loan facility, due April 2009
    
    
    125,000
    
    
    
    211,520
    
    
    
    30,000Warehouse loan facility, due October 2007(a)
    
    
    625,000
    
    
    
    136,582
    
    
    
    116,310Residual loan facility, due October 2007(a)
    
    
    125,000
    
    
    
    211,520
    
    
    
    30,000$
    302,553
 
 (a)
    
    Warehouse and residual loan facilities provided by Goldman Sachs Mortgage Company, an
affiliate of one of our equity investors. 13




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##### Table of Contents



7. Securitization Notes Payable
  OriginalWeighted
    
    
    Collateral
    
    
    NoteOriginal
    
    
    Average
    
    
    Pledged
    
    
    BalanceNote
    
    
    Interest
    
    
    at
    
    
    atTransaction
    
    Amount
    
    
    Rate
    
    
    June 30, 2007
    
    
    June 30, 2007(Dollars in thousands)2005-A, due June 12, 2012(a)
    
    $
    1,104,000
    
    
    
    4.09
    %
    
    $
    427,455
    
    
    $
    395,8822005-B, due April 12, 2013(a)
    
    $
    905,303
    
    
    
    4.32
    %
    
    $
    386,628
    
    
    $
    354,1552006-A, due April 12, 2013(a)
    
    $
    822,500
    
    
    
    4.88
    %
    
    $
    484,894
    
    
    $
    436,8572006-B, due November 12, 2012(a)
    
    $
    915,500
    
    
    
    5.50
    %
    
    $
    631,174
    
    
    $
    579,1222006-C, due May 13, 2013(a)
    
    $
    1,092,200
    
    
    
    5.37
    %
    
    $
    894,054
    
    
    $
    820,5472007-A, due February 12, 2014(a)
    
    $
    775,110
    
    
    
    5.34
    %
    
    $
    807,716
    
    
    $
    749,600$
    3,336,163
 
 (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. 14




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##### Table of Contents



8. Senior Notes Payable
    9. Preferred Stock
   15




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##### Table of Contents



10. Derivative Financial Instruments
  11. Income Taxes
    12. Commitments and Contingencies
    16




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##### Table of Contents



(Dollars in thousands)Year ending December 31,2007
    
    $
    1,9772008
    
    $
    2,5242009
    
    $
    2,2992010
    
    $
    2,3712011
    
    $
    2,3712012 and thereafter
    
    $
    2,174
  13. Comprehensive Income
  Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Net income
    
    $
    17,047
    
    
    $
    16,524Other comprehensive income, netUnrealized holding gains on
available for sale securities
(net of tax of $676 and $5,376)
    
    
    1,036
    
    
    
    8,231Net unrealized holding gains reclassified
into earnings (net of tax of $1,985, and $44)
    
    
    (3,039
    )
    
    
    (68
    )Total other comprehensive income, net
    
    
    (2,003
    )
    
    
    8,163Comprehensive income
    
    $
    15,044
    
    
    $
    24,687
  Six Months
    
    
    Six MonthsEnded
    
    
    EndedJune 30,
    
    
    June 30,2007
    
    
    2006(Dollars in thousands)Balance, beginning of period
    
    $
    9,084
    
    
    $
    1,849Current period change
    
    
    (2,003
    )
    
    
    8,163Balance, end of period
    
    $
    7,081
    
    
    $
    10,012
 17




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##### Table of Contents



14. Stock-Based Compensation
     Weighted-AverageExerciseShares
    
    
    Price(Amounts in thousands exceptweighted-averageexercise price)Outstanding at March 31, 2007
    
    
    3,038
    
    
    $
    7.62Granted
    
    
    12
    
    
    
    8.33Canceled
    
    
    (75
    )
    
    
    7.55Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2007
    
    
    2,975
    
    
    $
    7.63Outstanding at December 31, 2006
    
    
    2,988
    
    
    $
    7.58Granted
    
    
    212
    
    
    
    8.30Canceled
    
    
    (75
    )
    
    
    7.55Forfeited
    
    
    (150
    )
    
    
    7.59Outstanding at June 30, 2007
    
    
    2,975
    
    
    $
    7.63Exercisable at June 30, 2007
    
    
    1,518
    
    
    $
    7.58Weighted-average remaining contractual life in years
    
    
    
    
    
    
    8.46Outstanding at March 31, 2006
    
    
    3,000
    
    
    $
    7.58Granted
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    3,000
    
    
    $
    7.58Outstanding at December 31, 2005
    
    
    2,000
    
    
    $
    7.50Granted
    
    
    1,000
    
    
    
    7.73Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    3,000
    
    
    $
    7.58
 18




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##### Table of Contents



15. Subsequent Event
   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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Critical Accounting Policies and Use of Estimates
  Components of Revenues and Expenses
   Results of Operations
 Three Months Ended June 30, 2007 as Compared to Three Months Ended June 30, 2006
  Net Interest Margin
  For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,878,415
    
    
    $
    3,369,959
  21




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##### Table of Contents



For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Financing income
    
    $
    150,608
    
    
    $
    130,247Other interest income
    
    
    7,566
    
    
    
    8,394Interest expense
    
    
    (55,711
    )
    
    
    (48,873
    )Net interest margin
    
    $
    102,463
    
    
    $
    89,768Annualized financing income as a
percentage of average owned finance
receivables
    
    
    15.5
    %
    
    
    15.5
    %
      22




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##### Table of Contents



Provision for Credit Losses
  Servicing Income
  Other Income
  For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Customer fees
    
    $
    4,550
    
    
    $
    4,701Gains on interest rate swap agreements
    
    
    1,025
    
    
    
    3,573Other
    
    
    362
    
    
    
    495Other income
    
    $
    5,937
    
    
    $
    8,769
  Expenses
  Income Taxes
  23




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##### Table of Contents



Six Months Ended June 30, 2007 as Compared to Six Months Ended June 30, 2006
  Net Interest Margin
  For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,906,566
    
    
    $
    3,116,190
    For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Financing income
    
    $
    302,804
    
    
    $
    230,802Other interest income
    
    
    16,900
    
    
    
    18,440Interest expense
    
    
    (110,574
    )
    
    
    (88,777
    )Net interest margin
    
    $
    209,130
    
    
    $
    160,465Annualized financing income as a
percentage of average owned finance
receivables
    
    
    15.5
    %
    
    
    14.8
    %
   24




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##### Table of Contents



Provision for Credit Losses
  Servicing Income
  Other Income
  For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Customer fees
    
    $
    10,533
    
    
    $
    9,771Gains on interest rate swap agreements
    
    
    218
    
    
    
    5,565Other
    
    
    (2,155
    )
    
    
    962Other income
    
    $
    8,596
    
    
    $
    16,298
  Expenses
  25




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##### Table of Contents



Income Taxes
  Credit Quality
    At June 30,
    
    
    At December 31,2007
    
    
    2006(Dollars in thousands)Finance receivables held for investment
    
    $
    3,108,893
    
    
    $
    3,045,938Allowance for credit losses
    
    
    (219,501
    )
    
    
    (195,000
    )Finance receivables held for investment, net of allowance
    
    
    2,889,392
    
    
    
    2,850,938Allowance for credit losses as a percentage of receivables
    
    
    7.1
    %
    
    
    6.4
    %Predecessor finance receivables held for investment, net
    
    
    639,375
    
    
    
    849,246Finance receivables repurchased from gain on sale trusts, net
    
    
    86,692
    
    
    
    62,659Total owned finance receivables held for investment, net
    
    $
    3,615,459
    
    
    $
    3,762,843
  26




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##### Table of Contents



At June 30,
    
    
    At December 31,2007
    
    
    2006Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)Delinquent contracts:31 to 60 days
    
    $
    293,538
    
    
    
    7.5
    %
    
    $
    269,861
    
    
    
    6.7
    %Greater than 60 days
    
    
    129,658
    
    
    
    3.3
    
    
    
    97,332
    
    
    
    2.4423,196
    
    
    
    10.8
    
    
    
    367,193
    
    
    
    9.1In repossession
    
    
    15,275
    
    
    
    0.4
    
    
    
    17,072
    
    
    
    0.4$
    438,471
    
    
    
    11.2
    %
    
    $
    384,265
    
    
    
    9.5
    %
     At June 30,
    
    At December 31,2007
    
    2006Percent
    
    PercentNever extended
    
    
    78.6
    %
    
    
    83.3
    %Extended:1-2 times
    
    
    21.0
    %
    
    
    16.4
    %3-4 times
    
    
    0.4
    %
    
    
    0.3
    %Total extended
    
    
    21.4
    %
    
    
    16.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
  27




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##### Table of Contents



For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Repossession charge-offs
    
    $
    90,790
    
    
    $
    49,753Less: Sales proceeds and recoveries
    
    
    (57,593
    )
    
    
    (31,147
    )Mandatory charge-offs(1)
    
    
    27,245
    
    
    
    11,816Net charge-offs(2)
    
    $
    60,442
    
    
    $
    30,422Annualized net charge-offs as a percentage of average total
owned receivables outstanding
    
    
    6.2
    %
    
    
    3.6
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    48.8
    %
    
    
    50.6
    %
 For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Repossession charge-offs
    
    $
    181,810
    
    
    $
    100,421Less: Sales proceeds and recoveries
    
    
    (116,921
    )
    
    
    (65,910
    )Mandatory charge-offs(1)
    
    
    60,677
    
    
    
    27,400Net charge-offs(2)
    
    $
    125,566
    
    
    $
    61,911Annualized net charge-offs as a percentage of average total
owned receivables outstanding
    
    
    6.4
    %
    
    
    4.0
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    48.2
    %
    
    
    51.6
    %
 
 (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.  Total Managed Information
  28




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For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,878,415
    
    
    $
    3,369,959Average sold finance receivables
    
    
    296,565
    
    
    
    848,846Average total managed finance receivables
    
    $
    4,174,980
    
    
    $
    4,218,805
 For the Six Months EndedJune 30,2007
    
    
    2005(Dollars in thousands)Average owned finance receivables, carrying value
    
    $
    3,906,566
    
    
    $
    3,116,190Average sold finance receivables
    
    
    348,810
    
    
    
    993,855Average total managed finance receivables
    
    $
    4,255,376
    
    
    $
    4,110,045
 29




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Total Managed Net Interest Margin
  For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Financing and other interest income
    
    $
    175,606
    
    
    $
    184,911Interest expense
    
    
    (56,730
    )
    
    
    (52,188
    )Net interest margin
    
    $
    118,876
    
    
    $
    132,723
 For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Financing and other interest income
    
    $
    359,145
    
    
    $
    354,581Interest expense
    
    
    (115,268
    )
    
    
    (97,905
    )Net interest margin
    
    $
    243,877
    
    
    $
    256,676
  For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Net margin as reflected on the consolidated statements of income
    
    $
    102,463
    
    
    $
    89,768Other interest income
    
    
    (7,566
    )
    
    
    (8,394
    )Financing revenue on sold receivables
    
    
    11,853
    
    
    
    35,408Interest expense on sold receivables
    
    
    (2,044
    )
    
    
    (6,889
    )Gains on interest rate swaps
    
    
    1,025
    
    
    
    3,574Premium amortization
    
    
    8,595
    
    
    
    14,555Customer fees
    
    
    4,550
    
    
    
    4,701Total managed net interest margin
    
    $
    118,876
    
    
    $
    132,723
 For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Net margin as reflected on the consolidated statements of income
    
    $
    209,130
    
    
    $
    160,465Other interest income
    
    
    (16,900
    )
    
    
    (18,440
    )Financing revenue on sold receivables
    
    
    28,188
    
    
    
    78,591Interest expense on sold receivables
    
    
    (4,912
    )
    
    
    (14,693
    )Gains on interest rate swaps
    
    
    218
    
    
    
    5,565Premium amortization
    
    
    17,620
    
    
    
    35,417Customer fees
    
    
    10,533
    
    
    
    9,771Total managed net interest margin
    
    $
    243,877
    
    
    $
    256,676
 30




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For the Three MonthsEndedJune 30,2007
    
    2006(Dollars inThousands)Annualized finance revenue, fee and other income
    
    
    16.8
    %
    
    
    17.5
    %Annualized interest expense
    
    
    (5.4
    )
    
    
    (4.9
    )Annualized net interest margin as a percentage of average total managed receivables
    
    
    11.4
    %
    
    
    12.6
    %
 For the Six MonthsEndedJune 30,2007
    
    2006(Dollars inThousands)Annualized finance revenue, fee and other income
    
    
    16.9
    %
    
    
    17.3
    %Annualized interest expense
    
    
    (5.4
    )
    
    
    (4.8
    )Annualized net interest margin as a percentage of average total managed receivables
    
    
    11.5
    %
    
    
    12.5
    %
  Total Managed Credit Quality
   At June 30, 2007Owned
    
    
    Sold
    
    
    Total Managed(Dollars in thousands)Owned finance receivables, unpaid principal balance
    
    $
    3,903,177
    
    
    $
    
    
    
    $
    3,903,177Sold finance receivables
    
    
    
    
    
    
    269,908
    
    
    
    269,908Total managed finance receivables
    
    $
    3,903,177
    
    
    $
    269,908
    
    
    $
    4,173,085Number of outstanding contracts
    
    
    268,559
    
    
    
    32,895
    
    
    
    301,454Average principal amount of outstanding contracts (in
dollars)
    
    $
    14,534
    
    
    $
    8,205
    
    
    $
    13,843
 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 June 30, 2007Owned
    
    
    Sold
    
    
    Total ManagedDelinquent contracts:
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(Dollars in thousands)31 to 60 days
    
    $
    293,538
    
    
    
    7.5
    %
    
    $
    28,678
    
    
    
    10.6
    %
    
    $
    322,216
    
    
    
    7.7
    %Greater than 60 days
    
    
    129,658
    
    
    
    3.3
    
    
    
    11,792
    
    
    
    4.4
    
    
    
    141,450
    
    
    
    3.4423,196
    
    
    
    10.8
    
    
    
    40,470
    
    
    
    15.0
    
    
    
    463,666
    
    
    
    11.1In repossession
    
    
    15,275
    
    
    
    0.4
    
    
    
    2,317
    
    
    
    0.9
    
    
    
    17,592
    
    
    
    0.4$
    438,471
    
    
    
    11.2
    %
    
    $
    42,787
    
    
    
    15.9
    %
    
    $
    481,258
    
    
    
    11.5
    %
 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 June 30, 2007Owned
    
    Sold
    
    Total ManagedNever extended
    
    
    78.6
    %
    
    
    50.3
    %
    
    
    76.8
    %Extended:1-2 times
    
    
    21.0
    %
    
    
    45.7
    %
    
    
    22.6
    %3-4 times
    
    
    0.4
    %
    
    
    4.0
    %
    
    
    0.6
    %Total extended
    
    
    21.4
    %
    
    
    49.7
    %
    
    
    23.2
    %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
    %
    For the Three Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Owned:Repossession charge-offs
    
    $
    90,790
    
    
    $
    49,753Less: Sales proceeds and recoveries
    
    
    (57,593
    )
    
    
    (31,147
    )Mandatory charge-offs(1)
    
    
    27,245
    
    
    
    11,816Net
charge-offs(2)
    
    $
    60,442
    
    
    $
    30,422Sold:Charge-offs
    
    $
    9,494
    
    
    $
    24,712Less: Sales proceeds and recoveries
    
    
    (5,394
    )
    
    
    (14,016
    )Mandatory charge-offs(1)
    
    
    
    
    
    
    Net charge-offs
    
    $
    4,100
    
    
    $
    10,696Total Managed:Repossession charge-offs
    
    $
    100,284
    
    
    $
    74,465Less: Sales proceeds and recoveries
    
    
    (62,987
    )
    
    
    (45,163
    )Mandatory charge-offs(1)
    
    
    27,245
    
    
    
    11,816Net charge-offs
    
    $
    64,542
    
    
    $
    41,118Annualized net charge-offs as a percentage of average total
managed receivables outstanding
    
    
    6.2
    %
    
    
    3.9
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    49.4
    %
    
    
    52.3
    %
 33




---



##### Table of Contents



For the Six Months EndedJune 30,2007
    
    
    2006(Dollars in thousands)Owned:Repossession charge-offs
    
    $
    181,810
    
    
    $
    100,421Less: Sales proceeds and recoveries
    
    
    (116,921
    )
    
    
    (65,910
    )Mandatory charge-offs(1)
    
    
    60,677
    
    
    
    27,400Net
charge-offs(2)
    
    $
    125,566
    
    
    $
    61,911Sold:Charge-offs
    
    $
    23,133
    
    
    $
    61,721Less: Sales proceeds and recoveries
    
    
    (12,533
    )
    
    
    (33,490
    )Mandatory charge-offs(1)
    
    
    
    
    
    
    Net charge-offs
    
    $
    10,600
    
    
    $
    28,231Total Managed:Repossession charge-offs
    
    $
    204,943
    
    
    $
    162,142Less: Sales proceeds and recoveries
    
    
    (129,454
    )
    
    
    (99,400
    )Mandatory charge-offs(1)
    
    
    60,677
    
    
    
    27,400Net charge-offs
    
    $
    136,166
    
    
    $
    90,142Annualized net charge-offs as a percentage of average total
managed receivables outstanding
    
    
    6.4
    %
    
    
    4.4
    %Sales proceeds and recoveries as a percentage of charge-offs
    
    
    48.7
    %
    
    
    52.4
    %
 
 (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.  Liquidity and Capital Resources
 General
    34




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##### Table of Contents



Contractual and Long-Term Debt Obligations
  Securitizations
    35




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
   
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Interest Rate Risk
 General
  Warehouse and Residual Facilities
  36




---



##### Table of Contents



Securitizations
    37




---



##### Table of Contents



Interest Rate Swap Agreements
  
 ITEM 4. CONTROLS AND PROCEDURES
    38




---



##### 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)).10.5
    
    
    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)).
 40




---



##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.6
    
    
    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)).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


41



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##### Table of Contents



SIGNATURES
  Date: August 14, 2007
    /s/ Daniel D. LeonardDaniel D. LeonardPresident & Chief Executive OfficerDate: August 14, 2007
    /s/ Mike L. WilhelmsMike L. WilhelmsSenior Vice President & Chief Financial Officer 42




---



##### 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)).10.5
    
    
    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)).




---



##### Table of Contents



EXHIBITNO.
    
    DESCRIPTION10.6
    
    
    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)).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