As filed with the Securities and Exchange Commission on October 18, 2001

Registration No. 333-     

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

LONG BEACH HOLDINGS CORP.
(Exact name of Registrant as specified in its charter)

One Mack Centre Drive
Paramus, New Jersey 07652
(201) 262-5222
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Stephen W. Prough
Chairman, President and Chief Executive Officer
Long Beach Holdings Corp.
One Mack Centre Drive
Paramus, New Jersey 07652
(201) 262-5222
(Name, address, including zip code, and telephone number,
including area code, of agent for services)

Copies to:

   Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

   If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / /

   If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

   If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

   If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /

   If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / /

CALCULATION OF REGISTRATION FEE

(1)

Includes shares of common stock issuable upon exercise of the underwriters' over-allotment option.

(2)

Estimated solely for purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

   The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to such Section 8(a), may determine.

Prospectus

Subject to Completion, dated October 18, 2001

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

Common Stock
     Shares

    This is an initial public offering of common stock of Long Beach Holdings Corp. We are offering for sale an aggregate of       shares of our common stock. We are a newly organized holding company formed to acquire and own all of the outstanding stock of Long Beach Acceptance Corp., an independent automobile finance company that underwrites, purchases, securitizes and services automobile loans.

    We anticipate the initial public offering price of our common stock will be between $      and $      per share. The market price of the shares after the offering may be higher or lower than the initial offering price.

    We expect to list our common stock on The Nasdaq National Market under the symbol "LBHC."

    Investing in our common stock involves risks. See "Risk Factors" beginning on page 7 of this prospectus to read about the risks you should consider before buying shares of our common stock.

    We have granted an over-allotment option to the underwriters. Under this option, the underwriters may elect to purchase a maximum of            additional shares of our common stock from us within 30 days following the date of this prospectus to cover over-allotments.

    Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

FRIEDMAN BILLINGS RAMSEY

The date of this prospectus is            , 2001.

Inside Front Cover

Map of United States

Location of Regional Offices will be indicated by circles.

Location of sales representatives will be indicated by stars.

States in which we purchase loans will be shaded.

TABLE OF CONTENTS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    We make many statements in this prospectus under the captions "Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and elsewhere that are forward-looking and are not based on historical facts. These statements relate to our future plans, objectives, expectations and intentions. We have attempted to identify forward-looking statements by terminology including "anticipates," "believes," "can," "continue," "could," "estimates," "expects," "intends," "may," "plans," "potential," "predicts," "should" or "will" or the negative of these terms or other comparable terminology. Certain statements regarding the following are particularly forward-looking in nature: (1) our business strategy; and (2) our projected capital expenditures. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under "Risk Factors," that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Some of the important factors that could cause our actual results, performance or financial position to differ materially from expectations are: (1) our level of charge-offs, as an increase in the level of charge-offs will decrease our earnings; (2) our ability to purchase automobile loans in a sufficient amount to reach our needs, as a decrease in the amount we purchase will reduce our earnings; (3) a decrease in the difference between the average interest rate we receive on the loans we purchase and the rate of interest we must pay to fund those loans, as a decrease will reduce our earnings; (4) the continued availability of sources of funding for our operations, as a reduction in the availability of funding will reduce our ability to purchase automobile loans; (5) our level of operating costs, as an increase in those costs will reduce our net earnings; (6) the effect on us of new laws, regulations and court decisions; (7) a change in general economic conditions; and (8) the other risk factors referenced in this prospectus including, without limitation, under the "Risk Factors,"

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"Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections.

    Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are not under any duty to update any of the forward-looking statements after the date of this prospectus to conform these statements to actual results, unless required by law. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus may not occur. We qualify any and all of our forward-looking statements entirely by these cautionary factors.

    Information regarding market and industry statistics contained in the "Prospectus Summary" and "Business" sections is included based on information available to us that we believe is accurate. It is generally based on industry publications and other sources that were not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources and cannot assure you of the accuracy of the data we have included.

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NOTE REGARDING OUR CORPORATE STRUCTURE

    Long Beach Holdings Corp. (which we sometimes separately refer to as LBHC) was recently organized in order to acquire all of the issued and outstanding capital stock of, and to act as a holding company for, Long Beach Acceptance Corp. (which we sometimes separately refer to as LBAC). Concurrently with and contingent upon the completion of this offering, LBHC will purchase all of the shares of LBAC from its parent, Ameriquest Mortgage Company (which we sometimes refer to as Ameriquest). In this prospectus, references to "we," "our," "ours" and "us" mean LBHC and LBAC as a combined entity, unless otherwise indicated.

PROSPECTUS SUMMARY

    This summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all the information that you should consider before investing in our common stock. You should read the following summary together with the more detailed information regarding our company and our common stock being sold in this offering and our consolidated financial statements and related notes appearing elsewhere in this prospectus before making an investment decision. You should also consider the information discussed in "Risk Factors."

Our Company

Overview

    We are an independent automobile finance company engaged in underwriting, purchasing, securitizing and servicing automobile retail installment sales contracts (which we refer to as automobile loans) originated by franchised and independent automobile dealers in connection with the sale of used and, to a lesser extent, new automobiles (including vans, light trucks and SUVs). Our customers generally are consumers who are unable to obtain financing from traditional sources. Our strategy is to enhance our profitability by focusing on customers who are charged higher rates of interest than prime borrowers, while managing our risk through careful underwriting, risk-based pricing and intensive collection management. We classify our customers into three categories, "near-prime," "non-prime" and "sub-prime," based upon our analysis of the anticipated cumulative loss rates of their automobile loans. Accordingly, we customize the terms of our automobile loans, including interest rates charged, down payment amounts required and other loan terms, depending upon our assessment of the customer.

History

    LBAC was organized and began operations in 1995. From its inception until December 1997, LBAC focused upon a lower credit quality of customer than we focus on today. By early 1997, we had expanded rapidly to seven regional offices in Northern and Southern California, Illinois, Massachusetts, New Jersey, Texas and Virginia and had significantly increased the number of our employees. By December 1997, we found that we had incurred significant losses as a result of poor underwriting, poor collections efforts, emphasis on high-risk customers and a high concentration of non-franchised dealerships from whom we purchased automobile loans. Beginning in December 1997, our new senior operations management team, which we had begun assembling during the third quarter of 1997, implemented a major operational restructuring.

    We adopted a more disciplined, efficient and centralized underwriting and collection process, consolidated our offices from seven to two, reduced staff by more than 50%, significantly reduced general and administrative expenses, replaced substantially all and improved the quality of our underwriting and collection management personnel and shifted our marketing focus to franchised dealer relationships. As a result of these efforts, we have experienced a substantial improvement in our automobile loan performance and profitability. The percentage of dealers with which we do business that are franchised dealers increased from 67% as of December 31, 1997 to 94% as of September 30, 2001. Our 30+ day gross delinquency rate on our managed portfolio decreased from 10.4% as of December 31, 1997 to 3.3% as of September 30, 2001. In addition, our annualized charge-off rate for

our managed portfolio decreased from 9.9% for the year ended December 31, 1997 to 3.9% for the nine months ended September 30, 2001.

    During our restructuring period, we controlled our growth while we implemented our new operations strategy. After we completed our restructuring in 1999, our total managed portfolio increased from $420.4 million as of December 31, 1999 to $518.2 million as of December 31, 2000. As of September 30, 2001, our total managed portfolio had increased to $591.7 million. For the nine months ended September 30, 2001, the profile of our automobile loans purchased was as follows:

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approximately 16% related to the purchase of new automobiles and approximately 84% related to the purchase of used automobiles;

•

the average age of used financed vehicles was approximately 2.4 years at the time of purchase;

•

the average initial principal balance was approximately $16,000;

•

the weighted average annual percentage rate was 17.3%; and

•

the weighted average loan maturity was approximately 63 months.

Size and Scope of Market

    We believe that the automobile finance industry is the second largest consumer finance industry in the United States. CNW Marketing/Research reports that, during 2000, approximately $700 billion of automobile loans were originated, of which approximately $225 billion were originated to customers with credit below prime levels. Our near-prime, non-prime and sub-prime customers are all below prime levels. CNW Marketing/Research also reports that the major captive automobile finance companies (including such companies as General Motors Acceptance Corporation, Ford Motor Credit Corporation and Chrysler Credit Corporation) hold an approximate 36.5% share of the new automobile finance market. The remainder of the new automobile finance market, as well as the used automobile finance market, is highly fragmented and competition is intense. Other participants include the captive automobile finance companies of other manufacturers, banks, credit unions, independent automobile finance companies and other financial institutions. Accordingly, we believe that these market characteristics provide us with significant opportunities for growth.

Our Strengths

    We believe that the following strengths provide us with a competitive advantage:

    Experienced People.  We believe that we have highly experienced, dedicated people working at all levels within our organization. Our nine senior management members have an average of 23 years of experience in the financial services industry. Forty-two of our top 45 management personnel have been with us for at least two years. Our average employee turnover has dropped from 32% in 1999 to 14% in 2001. We strive to be an industry leader in recruiting, developing and supporting our employees. We believe that our incentive-based compensation system, specifically tailored to the functions of our employees, provides us with a competitive advantage.

    Disciplined Underwriting.  We believe that we have a superior underwriting process that enables us to make consistent and accurate risk assessments and to differentiate automobile loan terms in accordance with each applicant's characteristics. Our underwriting process has four elements, incorporating consistently applied objective and subjective criteria. First, we employ our proprietary credit scoring system, which we developed through extensive statistical analysis of our historical portfolio databases. Our credit scoring system ranks credit risk in terms of expected default rates. Second, we obtain a credit bureau score, which is a risk ranking provided by Fair, Issacs, and Co. to the three main credit-reporting agencies and is an industry standard for measuring consumer creditworthiness. Third, we assign each application a quality factor grade, which is an objective grade generated by factoring in the credit bureau score, our proprietary credit score and the customer's debt-to-income ratio. Finally, the qualitative judgment of experienced personnel with credit authority is

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the most significant factor in the final credit decision. On average, our senior credit management team has 15 years of experience. Our final credit decision determines whether to underwrite an automobile loan, the internal credit class into which the loan will be placed and the pricing structure and terms accorded to the automobile loan.

    Intensive Collection Management.  We initiate and maintain an intensive collection process. We begin the collection process when a loan is three days past due and emphasize frequent, close contact with the customer. Our senior collections management team has an average of 18 years of experience in collections. We prioritize delinquent automobile loans based upon a risk-based analysis and focus our collection efforts accordingly.

    Enabling Technology.  We believe that careful examination of data is a critical factor in successful underwriting and collections. We have made important up-front investments in technology in order to minimize costly errors in the underwriting and collections processes. Most automobile loan applications are submitted by dealers via facsimile. Our computer imaging technology enables us to make faster and more accurate credit decisions on these applications. Our imaging technology also enables us to create a computer file for each automobile loan which is updated and transferred from our credit officers to our risk management and servicing personnel. In addition, we believe that our proprietary scoring system gives us a technological advantage in managing our risk.

Strategy and Future Growth

    Our strategy is to increase the number of automobile loans we underwrite, purchase, securitize and service while maintaining our disciplined underwriting and collection standards. Key elements to our strategy include:

•

Increased penetration in existing markets. We plan to increase our penetration of markets we currently serve by attracting new account managers, increasing the number of automobile loans generated per automobile dealer by continuing to improve our existing dealer relationships and developing new relationships with additional dealers that meet our selective criteria.

•

Continued growth in newly entered markets. In 2001, we began purchasing loans from dealers in Georgia, Maine, Oregon, South Carolina and Washington. During the past six months, we have hired nine account managers to develop new dealer relationships in these markets.

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Expanding into selected new markets. In 2002, we expect to enter into additional markets, including certain midwestern states. In connection with our expansion into the Midwest, we plan to open a regional originations office in Denver, Colorado in the first quarter of 2002. The senior management team for this new office is already in place. Plans are underway to begin hiring account managers who meet our selective requirements to serve these markets.

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Increased efficiencies. We plan to seek out improved securitization structures and warehouse financing facilities to lower our cost of funds and increase our general operations efficiencies.

•

Investment in technology. We intend to invest further in technology to enable us to reduce our operating expenses relative to the size of our managed portfolio and to improve our service to dealers. Development of new systems and automation of our operational processes will enhance our ability to service dealers and facilitate quicker credit decisions and faster loan funding. In addition, we intend to continue to improve our automobile loan servicing tools in order to more efficiently allocate collection resources to those accounts requiring the most attention. We also are in the implementation stage of our Internet strategy. We already have in place a strategic alliance with a major automotive dealer group to provide expanded service in receiving and underwriting automobile loan applications over the Internet. We intend to expand the use of Internet technologies to other members of our dealer network.

Our Headquarters

    Our principal executive offices are located at One Mack Centre Drive, Paramus, New Jersey 07652, and our telephone number is (201) 262-5222.

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THE OFFERING

(1)

Before exercise of the underwriters' option to purchase up to an additional         shares of common stock to cover over-allotments, if any. If the underwriters exercise their option to purchase all of the additional         shares of common stock to cover over-allotments, then the total number of shares of common stock offered would be         , and the number of shares of common stock outstanding after the offering would be         . Upon the closing of this offering and in connection with the acquisition of LBAC, the shares of our common stock held by our existing sole stockholder will be redeemed and canceled.

    For a more detailed description of our capitalization, please see the "Capitalization" section of this prospectus.

    Unless otherwise indicated, information in this prospectus assumes the following:

–

our acquisition of LBAC has occurred;



–

the underwriters have not exercised their over-allotment option; and



–

our directors, officers and employees holding options to purchase shares of our common stock have not exercised those options.

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SUMMARY CONSOLIDATED FINANCIAL DATA

    The following table summarizes our consolidated financial data. You should read these summary financial data in conjunction with our consolidated financial statements and related notes beginning on page F-1 and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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(1)

Includes principal balance outstanding of automobile loans held for sale and securitized.

(2)

Net delinquency excludes loans secured by repossessed vehicles; gross delinquency includes loans secured by repossessed vehicles.

(3)

Data for the nine-month periods ended September 30, 2000 and 2001 have been annualized.

(4)

Charge-off rate equals gross charge-offs less cash recoveries divided by the average monthly managed portfolio outstanding for the period.

(5)

As adjusted to give effect to the sale of the shares in this offering, the application of the proceeds as described in "Use of Proceeds" and the redemption and cancellation of the shares of common stock held by the existing sole stockholder of LBHC.

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RISK FACTORS

    An investment in our common stock involves a high degree of risk. You should consider carefully the risks described below and the other information in this prospectus before deciding to purchase shares of our common stock. Any of these risks could materially and adversely affect our business, financial condition, results of operations and future business prospects. In that case, the trading price of our common stock could decline, and you could lose all or part of your investment. Additional risks and uncertainties that we do not currently know about or that we currently deem immaterial may also impair our business, financial condition, results of operations and future growth prospects. See "Special Note Regarding Forward-Looking Statements."

Risks related to our business.

The nature of our business requires that we rely heavily on access to significant amounts of cash.

    We require access to significant sources and amounts of cash to fund our operations and to purchase and securitize automobile loans. As a result of our need to fund the purchase of automobile loans prior to securitization and the significant initial capital contributions that we are required to make in connection with our securitizations, our cash requirements exceed and are expected to continue to exceed the cash generated from our operations. Our primary operating cash requirements include the funding of (1) the purchase of automobile loans prior to securitization, (2) the making of initial cash deposits to reserve accounts that we are required to maintain under our securitization agreements, (3) fees and expenses incurred in connection with the warehousing and securitization of automobile loans and (4) on-going administrative and other operating expenses. We expect to obtain these funds in three ways: (a) warehouse financing facilities, pursuant to which automobile loan purchases are funded on a temporary basis pending their securitization; (b) securitizations of automobile loans, which enable us to pay down our warehouse facility borrowings, thereby making additional borrowings available to be used for purchases of additional automobile loans; and (c) general working capital obtained from our business operations or through the issuance of debt or equity. Failure to procure funding from all or any one of these sources could have a material adverse effect on our business. Our ability to borrow or to sell equity further depends on general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

    If we were unable to continue to effect securitizations, establish alternative long-term financing arrangements and obtain sufficient financing under warehouse facilities on acceptable terms, or our capital requirements were to exceed anticipated levels, then, in order to meet our need for significant amounts of cash, we would be required to obtain additional debt financing, which could impair our ability to pay dividends, or additional equity financing, which would dilute the interests of stockholders. Although we have no specific plans for additional equity financings other than this offering of common stock, in order to meet our need for significant amounts of cash, we may at some point require additional equity financing. We cannot estimate the amount and timing of additional equity financing requirements, because those requirements are tied to, among other things, the number of automobile loans we may purchase in the future, which cannot be predicted definitively. If we were unable to raise additional capital when needed, our results of operations and financial condition would be adversely affected. See "Use of Proceeds" and "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

We rely on warehouse facilities to provide the liquidity necessary to operate our business, and the loss or substantial impairment of our access to such warehouse facilities would have a material adverse effect on our business.

    Our primary sources of financing for the purchase of automobile loans are our (1) $175 million warehouse revolving line of credit with Greenwich Capital Financial Products, Inc. ("Greenwich") and

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(2) $30 million warehouse revolving line of credit with Bank One, N.A. ("Bank One"), which expire in February 2002 and August 2002, respectively. As of the date of this prospectus we have not extended the term of the warehouse facility with Greenwich, but we do expect to do so. There can be no assurance that either of our warehouse facilities will be extended beyond their current expiration dates, or that substitute facilities will be available on terms acceptable to us. Our ability to continue to borrow under our warehouse facilities depends upon our compliance with their terms, including the maintenance by us of certain minimum capital levels. Our ability to obtain a successor facility or similar financing will depend on, among other things, the willingness of financial organizations to participate in funding automobile loans and our financial condition and results of operations. To the extent that we were unable to maintain our current warehouse facilities or were unable to arrange new warehouse facilities at rates and upon terms acceptable to us, we would have to curtail our automobile loan purchasing activities, which would have a material adverse effect on our operations and cash position, and also would adversely affect our growth. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources."

A substantial portion of our revenue and income is derived from the sale of automobile loans to trusts and subsequent securitization of these loans, and a delay in our ability, or our inability, to access the securitization markets would affect us adversely.

    We rely heavily on a strategy of periodically selling automobile loans to certain special-purpose finance trusts, which in turn issue asset-backed securities to investors. Proceeds from securitizations are typically used to repay borrowings under our warehouse facilities, thereby making such facilities available to be used to purchase additional automobile loans.

    Our ability to access the asset-backed securities market is affected by a number of factors, some of which are beyond our control and any of which could cause substantial delays in effecting, or an inability to complete, securitizations including conditions in the securities markets in general, conditions in the asset-backed securities market and investor demand for automobile loans. Further, there can be no assurance that we will recognize gains on future sales of automobile loans to the trusts consistent with our gains on previous sales.

    In addition, gains on sales generated by our securitizations currently represent the single largest component of our revenues. We try to effect securitizations of our automobile loans at least twice per year. Accordingly, adverse changes in our asset-backed securities program or in the asset-backed securities market for automobile loans generally could have a material adverse effect on our ability to purchase and securitize automobile loans on a timely basis and upon terms reasonably favorable to us. Any delay in the securitization of automobile loans beyond a quarter-end would eliminate our gain on sales of loans in that quarter and adversely affect our reported earnings for that quarter. In addition, unanticipated delays in completing securitizations could increase our exposure to interest rate fluctuations by lengthening the period during which our variable-rate borrowings under our warehouse facilities are outstanding. If we were unable to securitize our automobile loans and did not have sufficient credit available, either under warehouse facilities or from other sources, we would have to sell portions of our portfolio directly to whole loan buyers or curtail our automobile loan purchasing activities. There is no assurance that we could sell our automobile loans to whole loan buyers. Any of these adverse changes or delays would have a material adverse effect on our financial position, liquidity and results of operations.

If we are unable to obtain financial guarantee insurance policies for our securitizations, we would likely lose our securitization credit enhancement, which could have a material adverse effect on our financial position, liquidity and results of operations.

    To date, we have utilized credit enhancement for all of our securitizations in the form of financial guaranty insurance policies issued by Financial Security Assurance Inc. ("FSA") in order to achieve

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AAA/Aaa ratings from Standard & Poor's Corp. and Moody's Investors Service. These ratings reduce the costs of securitizations relative to alternative forms of financing available to us. FSA is not required to insure our securitizations and there can be no assurance that it will continue to do so or that our future securitizations will be similarly rated. On certain securitizations, we have utilized reinsurance and other credit enhancement alternatives to reduce the initial cash deposits we are required to make. A downgrading of FSA's credit rating, FSA's withdrawal of credit enhancement or the lack of availability of reinsurance or other alternative credit enhancements for our securitization program could result in higher interest costs for our future securitizations and larger initial cash deposit requirements. These events could have a material adverse effect on our financial position, liquidity and results of operations.

We currently have, and after the offering will continue to have, a significant amount of indebtedness.

    Our average indebtedness was $104.1 million for the nine months ended September 30, 2001. Our substantial indebtedness could have important consequences to the holders of our common stock, including:

•

we may be more vulnerable to adverse general economic and industry conditions;



•

we may find it more difficult to fund future working capital, capital expenditures, general corporate purposes or other purposes;



•

we would have to dedicate a substantial portion of our cash resources to the payments on our indebtedness, thereby reducing the funds available for operations and future business opportunities; and



•

in the event of bankruptcy or liquidation, holders of our indebtedness would be repaid before any assets may be distributed to holders of our common stock.

Our warehouse facilities and securitization agreements contain extensive restrictions and covenants and require us to comply with certain financial ratios and asset quality maintenance requirements.

    Our warehouse facilities and our securitization agreements contain covenants, financial ratio requirements and financial tests that restrict our ability to, among other things:

•

initiate a change in or replace our president, chief executive officer or chief financial officer without prior approval by the lender of the replacement candidate;



•

sell or transfer assets;



•

incur additional debt;



•

repay other debt;



•

pay dividends;



•

make certain investments or acquisitions;



•

repurchase or redeem capital stock;



•

engage in mergers or consolidations; and



•

engage in certain transactions with subsidiaries and affiliates.

    Each facility and securitization contains some of the foregoing restrictions. These restrictions may interfere with our ability to obtain financing or to engage in other necessary or desirable business activities. Failure to meet any of these covenants, financial ratios or financial tests could result in an event of default under these agreements. If an event of default occurs under these agreements, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interests against collateral pledged under these agreements and restrict our

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ability to obtain additional borrowings under these agreements. Our ability to meet these financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will meet these financial ratios and tests.

    If our debt payments were accelerated, our assets might not be sufficient to fully repay our debt. Further, our default under one agreement may automatically cause us to default under numerous other agreements. These lenders may also require us to use all of our available cash to repay our debt, may foreclose upon their collateral or may prevent us from making payments to other creditors on certain portions of our outstanding debt. We may not be able to obtain a waiver of these provisions or refinance our debt, if needed. If we were deemed to be in default under our debt agreements, our business, results of operations and financial condition would suffer.

Our future cash flows may be impaired if certain conditions of our securitization agreements are not met.

    Under the terms of our securitization agreements, certain excess cash flows generated by securitized automobile loans are retained in a cash reserve or "spread" account to provide liquidity and credit enhancement. Although the specific terms and mechanics of the cash reserve accounts vary under each securitization agreement, they generally provide that we are not entitled to receive certain excess cash flows unless certain reserve account balances have been attained and the delinquency, defaults or losses related to the automobile loans securitized in the transaction are below certain predetermined levels. In the event delinquencies, defaults or losses on those automobile loans exceed such levels, the terms of the securitizations may require increased cash reserve account balances to be accumulated for the automobile loans included in such transaction, which would result in decreased cash flows, or, in certain circumstances, may require us to transfer our collection function to another servicer. In addition, certain of our securitization trusts are cross-collateralized so that excess cash flows from a securitization trust may be used to support a non-performing trust, which would further restrict excess cash flows available to us. The occurrence of any of the above-referenced conditions could have a material adverse effect on our liquidity and financial condition.

There is a high degree of risk associated with our borrowers.

    We are an independent automobile finance company engaged in underwriting, purchasing, securitizing and servicing automobile loans. We provide financing to consumers who generally have limited access to traditional sources of credit. These customers include those with numerous negative credit characteristics. Automobile loans held by such customers entail a higher risk of delinquency and may entail higher losses than automobile loans held by customers with better credit records. In addition, our customers could be more adversely impacted during economic slowdowns or recessions.

    We can give you no assurance that the criteria and methods we employ to manage these risks, such as our proprietary credit scoring model, risk-based automobile loan pricing and other underwriting policies and collection methods, will be effective to manage our risk of loan default. In the event that we were to underestimate the default risk or under-price automobile loans that we purchase, our financial position, liquidity and results of operations would be adversely affected, possibly to a material degree.

We bear the risk of losses resulting from payment defaults prior to securitization.

    In the event of a payment default on an automobile loan prior to securitization, the collateral value of the financed vehicle usually does not cover the outstanding automobile loan balance and costs of recovery. We bear the risk of such a default. We maintain an allowance for losses on automobile loans held by us, which reflects management's estimates of probable losses for these automobile loans.

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If the allowance were inadequate, then we would recognize as an expense the losses in excess of that allowance and our results of operations could be adversely affected.

We rely on insurance to limit potential losses on our automobile loans.

    In order to limit potential losses on automobile loans, we have purchased vendor's single interest ("VSI") insurance policies for our automobile loans. VSI policies generally include physical damage coverage with respect to the financed vehicles, subject to certain conditions and limitations. We do not obtain insurance coverage for loss deficiencies. The protections afforded by the VSI policies are not complete and depend on our compliance with the terms and conditions of the policy. There can be no assurance that such insurance will be available in the future at reasonable rates. The unavailability of such insurance could adversely affect our ability to profitably purchase and securitize automobile loans.

We retain a substantial portion of the default and prepayment risk associated with the automobile loans that we securitize.

    We finance our automobile loans under one of our warehouse facilities and subsequently securitize the loans. The gain on sale accounting for such securitizations creates an asset called residual interests in securitizations, the carrying value of which is based on the present value of future excess cash flows resulting from the difference between the finance charge income received from the obligors on the automobile loans and the interest paid to the investors in the asset-backed securities, net of credit losses, servicing fees and other expenses. The carrying value of these residual interests in securitizations is calculated on the basis of management's assumptions concerning, among other things, defaults and prepayments. Actual defaults and prepayments may vary from management's assumptions, possibly to a material degree.

    We regularly measure our default, prepayment and other assumptions against the actual performance of securitized automobile loans. If we were to determine, as a result of that regular review or otherwise, that we underestimated defaults or prepayments, or that any other assumptions were materially inaccurate, we would be required to adjust the carrying value of our residual interests in securitizations by making a charge to income and writing down the carrying value of the residual interests in securitizations on our balance sheet. Such a charge and write-down could have a material adverse effect on our results of operations and financial condition.

A loss of our automobile loan servicing could have a material adverse effect on our business.

    As servicer of all of our securitized automobile loans, we are entitled to receive contractual servicing fees. FSA, as insurer, can terminate our right to act as servicer upon 90 days' notice or upon the occurrence of events defined in the securitization documents, such as our bankruptcy or material breach of warranties or covenants. Any loss of such servicing could have a material adverse effect on our financial position, liquidity and results of operations.

Our financial results may fluctuate as a result of the timing of automobile loan securitizations, the demand for automobile loan financing and other factors which make it difficult to predict our future performance.

    Our results of operations have fluctuated in the past and are expected to fluctuate in the future principally as a result of the timing, size, pricing and structure of our securitizations. Other significant factors that could affect our quarterly earnings include:

•

variations in the volume of automobile loans purchased, which historically tend to be lower in the first and fourth quarters of the year;

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•

interest rate spreads;



•

credit losses, which historically tend to be higher in the first and fourth quarters of the year;



•

operating costs; and



•

whether a securitization is treated as a sale or a financing for accounting purposes.

    In addition, the following factors influence our revenues and net earnings:

•

the level and volatility of interest rates; and



•

the demand for automobile loans.

    These and other factors make it very difficult to predict our results of operations. If our results of operations do not meet the expectations of our stockholders and securities analysts, then the price of our common stock may be materially adversely affected.

We are subject to certain representations, warranties and covenants under our agreements with the trusts, which could require us to repurchase automobile loans upon certain events.

    We make certain representations, warranties and covenants when we sell automobile loans to a trust, including that, within 150 days of the sale of automobile loans to the trust, we will deliver to the custodian of the trust evidence of perfected title to the vehicle collateralizing each automobile loan sold to that trust. If we discover that we have not perfected title, or are unable to perfect title, to a vehicle collateralizing an automobile loan sold to the trust within that time, or otherwise breach a representation, warranty or covenant with respect to an automobile loan, we must repurchase the related automobile loan. Repurchases of automobile loans from a trust will affect the asset pool of the securitization, will cause our returns to deviate from our projections and could have a negative impact on our cash position, which could have a material adverse effect on our financial position, liquidity, results of operations and financial condition.

We have no recent history of independent operations.

    LBAC was formed in April of 1995 and, since its inception, has been a subsidiary of Ameriquest. Accordingly, we have never operated as an independent entity, and are in the process of developing the systems and administrative capabilities necessary to function as an independent entity. We cannot assure you that we will be able to function effectively as an independent entity.

We currently depend on Ameriquest for financial and administrative support, and will continue to do so in some respects after this offering.

    Ameriquest guarantees certain important obligations of ours, including our warehouse facilities, which are essential to our business. These guarantees are expected to be terminated prior to the effective date of this offering. We also sublease one of our locations from Ameriquest. Furthermore, we expect to enter into agreements with Ameriquest pursuant to which certain administrative functions, such as payroll and benefits plan administration, will be provided by Ameriquest for an interim period (which we currently anticipate will be approximately one year) after this offering. These agreements have been developed in the context of a parent/subsidiary relationship and therefore are not the result of arm's-length negotiations between independent parties. There can be no assurances that we will be able to function effectively without Ameriquest's support. See "Related Party Transactions."

Dependence on dealer relationships.

    We purchase automobile loans from dealerships with which we have non-exclusive relationships. These dealerships work with multiple financers for each prospective customer. Our competitors actively

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compete with us in our efforts to expand our dealership network. In addition, our ability to increase the volume of automobile loans we purchase depends on our ability to cultivate our existing dealer relationships and to establish relationships with other dealerships in the markets in which we currently operate and in the markets we plan to enter. The loss of any of our account managers or our inability to hire qualified account managers could materially and adversely affect our dealership relationships, resulting in a decrease in automobile loans available to us for purchase. See "—We may not be able to hire and retain a sufficient number of qualified employees on whom we depend to support our operations." Accordingly, we cannot assure you that we will be successful in maintaining our existing dealership relationships or expanding our dealership network.

We may be unable to compete in our industry successfully.

    Competition in the field of automobile loan financing is intense. The automobile finance market is highly fragmented and is served by a variety of financial entities, including:

•

the captive finance affiliates of major automobile manufacturers;



•

banks;



•

thrifts;



•

savings associations;



•

credit unions; and



•

independent finance companies.

    Many of these competitors have substantially greater financial and marketing resources and lower costs of funds than we have. Additionally, on occasion, the captive finance companies provide financing on terms significantly more favorable to automobile purchasers than we can offer. For example, the captive finance companies can offer special low interest financing programs as incentives to purchasers of selected models of automobiles manufactured by their respective parent manufacturers.

    Many of these competitors also have long standing relationships with automobile dealerships and may offer dealerships or their customers other forms of financing, including dealer floor plan financing and leasing, which we do not provide. As a provider of automobile financing, we have traditionally competed on the basis of interest rate charged, the quality of credit accepted, the flexibility of financing terms offered, dealer participation fees and the quality of service provided to dealers and customers. We cannot assure you that we will be able to compete successfully in the automobile finance market or against these competitors.

If we do not manage our growth effectively, our financial performance could be materially adversely affected.

    We have experienced rapid and substantial growth in our automobile loan purchases, securitizations and revenues since 1999. Our intended growth strategy for the foreseeable future is to increase our market share in our existing markets and expand our traditional business into new geographic areas. We cannot assure you that we will accurately anticipate and respond to the changing demands our expanding operations will face. We anticipate that future operations will place a significant strain on our management, information systems and other resources. We must attract and integrate new personnel and improve existing procedures and controls and implement new ones to support any future growth. Our inability to meet our future hiring needs and to adapt our procedures and controls accordingly could have a material adverse effect on our results of operations, financial condition and business prospects. We cannot assure you that we will achieve our growth expectations, and our inability to do so could materially adversely affect our results of operations, financial condition and business prospects.

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We conduct a majority of our business in California, New York and Arizona and may be adversely affected by a future decline in economic conditions in those states.

    In 2000, approximately 43.9%, 11.6% and 3.9% of the automobile loans we purchased (as measured by principal balances) were secured by automobiles located in California, New York and Arizona. For the first nine months of 2001, those percentages were approximately 40.7%, 7.0% and 10.7%. A decline in economic conditions in these states or the surrounding regions could materially adversely affect our business and results of operations.

The loss of our key management could result in a material adverse effect on our business.

    Our future success depends to a significant extent on the continued services of our senior management. The loss of the services of key employees could have a material adverse effect on our business and results of operations. We do not maintain "key person" life insurance for any of our personnel.

We may not be able to hire and retain a sufficient number of qualified employees on whom we depend to support our operations.

    Our industry is very labor intensive. We compete for qualified personnel with companies in our business and in the collection agency, teleservices and telemarketing industries. We depend on our account managers to generate customers by, among other things, creating, developing and maintaining relationships with the automobile dealerships in the geographic areas in which they live and work. We depend on our data entry personnel to enter the automobile loan information submitted by dealerships efficiently and accurately. We depend on our credit analysts to review automobile loan applications and make suitable bids for those automobile loans. We depend on our collections personnel to service and collect our receivables effectively. Accordingly, we must be able to attract, motivate and retain skilled employees. Competition for qualified personnel may lead to increased hiring and retention costs. We cannot guarantee that we will be able to attract or retain qualified personnel. If we cannot attract or retain a sufficient number of qualified employees, or even if we can retain them but at higher costs, we may not be able to continue our growth and to operate profitably, and our business and results of operations could be adversely affected.

    The market for qualified personnel is highly competitive and historically has experienced a high rate of turnover. A high turnover rate among our employees would increase our recruiting and training costs and may limit the number of experienced personnel available for us to employ. High turnover or an inability to attract and retain qualified replacement personnel could have an adverse effect on our portfolio delinquency, default and net loss rates and, ultimately, on our financial condition, results of operations and liquidity.

Our failure or inability to execute any element of our business strategy could materially adversely affect our financial position, liquidity and results of operations.

    Our financial position and results of operations depend on our ability to execute our business strategy. Our failure or inability to execute any element of our business strategy could materially adversely affect our financial position, liquidity and results of operations.

An economic slowdown or a recession could increase losses and reduce the demand for automobile financing; our profitability depends on the level of interest rates.

    Periods of economic slowdown or recession, whether general, regional or industry-related, may increase the default probability on automobile loans. This risk of default may increase for those of our customers who have numerous negative credit characteristics. These periods may also be accompanied by decreased consumer demand for automobiles that would result in reduced demand for automobile

14

loans and could reduce business for us. Decreased consumer demand for automobiles also contributes to a decline in the value of automobiles securing outstanding loans, which weakens collateral coverage and increases the possibility of losses in the event of a default. Significant increases in the inventory of used automobiles during periods of economic recession may also depress the prices at which repossessed automobiles may be sold or delay the timing of these sales. We cannot assure you that we could remain profitable under any such conditions or that such conditions will not result in such severe reductions in the cash flows available to us to permit us to remain current on our current financing.

    The level of interest rates also affects our business. Our profitability is largely determined by the difference between the effective rate of interest earned on automobile loans purchased by us and the interest paid on our warehouse facilities prior to securitization, as well as the interest rates paid for notes and certificates issued in securitization transactions. Several factors affect our ability to manage interest rate risk. Our automobile loans are purchased at fixed interest rates, while our warehouse facilities bear interest at variable rates that are subject to frequent adjustment to reflect prevailing market rates for short-term borrowings. In a rising interest rate environment we may not be able to increase rates charged to customers quickly enough to compensate for an increase in the interest rates we pay. In addition, if interest rates were to increase significantly, demand for our automobile loans may decline because our customers may not be able to afford the increased cost of purchasing an automobile caused by higher loan rates.

    Furthermore, our future gains recognized upon the securitization of automobile loans will also be affected by interest rates. We recognize a gain in connection with our securitizations based upon the estimated present value of projected future excess cash flows from the securitization trusts, which largely depends upon the gross interest rate spread. If the actual gross interest rate spread is smaller than we estimated, our actual cash flows received will be lower than the gain we initially recognized. Our investment in residual interests in securitizations is valued at fair market value in our financial statements. This asset is periodically marked to market, which includes management's estimates and market-based expectations of the performance of the underlying loans as well as current market expectations for interest rates and credit losses. We do not hedge these residuals related to these factors and their potential effects on the determination of the fair value of the residuals. Accordingly, our future operating performance may be materially impacted by changes in the fair value of the residuals.

We may experience a long-term negative impact from the September 11, 2001 terrorist attacks on the United States.

    On September 11, 2001, there were terrorist attacks on the United States. Although we do not yet know what effect these events or any similar or related events will have on the United States economy or our business, it is possible that they could have a direct or indirect negative impact on our financial position or results of operations in the future.

Our business would be adversely affected if we lost our licenses or if more stringent government regulations were enacted.

    Our business is subject to numerous federal and state consumer protection laws and regulations which, among other things:

•

require us to obtain and maintain licenses and qualifications;



•

limit the interest rates, fees and other charges we are allowed to charge;



•

limit or prescribe other terms of our automobile loans;



•

require specific disclosures; and



•

define our rights to repossess and sell collateral.

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    Any failure to comply with, or adverse changes in, existing laws or regulations, or in their interpretation, any adverse judicial decisions or the promulgation of any additional laws or regulations, could have a material adverse effect on our business. These actions could limit the states in which we may operate, restrict our ability to realize the value of the collateral securing our automobile loans or create potential liability related to automobile loans purchased from dealers. Furthermore, we retain some of the regulatory risk on automobile loans sold in securitizations as a result of representations and warranties made by us in these transactions. In addition, governmental regulations which would deplete the supply of used vehicles, such as environmental protection regulations governing emissions or fuel consumption, could have a material adverse effect on us.

Due to the nature of our business, we are frequently involved in litigation, which could reduce our profitability or force us to change the way we do business.

    Due to the consumer-oriented nature of the industry in which we operate, industry participants frequently are named as defendants in litigation involving alleged violations of state, federal and foreign truth-in-lending, credit availability, credit reporting, consumer protection, warranty, debt collection, insurance and other consumer-oriented laws and regulations, if applicable. Many of these cases are filed as purported class actions and seek damages in large dollar amounts. We have been, and are currently, involved in litigation of this type. There can be no assurance that the frequency of litigation will not increase as our business activities continue to expand. If any such actions were decided in a manner adverse to us, our operations and financial condition could be adversely affected. Please see "Business-Legal Matters" for a more detailed description of material litigation in which we are involved.

Delaware law and our charter documents could prevent a change of control that might be beneficial to you.

    Delaware law and certain provisions of our certificate of incorporation and bylaws could discourage unsolicited proposals to acquire us, even if such proposals may be beneficial to our stockholders. These provisions include:

•

a board of directors classified into three classes of directors with the directors of each class having staggered, three-year terms;



•

our board's authority to issue shares of preferred stock without stockholder approval, which preferred stock could have voting, liquidation, dividend or other rights superior to those of the common stock; and



•

provisions of Delaware law that restrict many business combinations and provide that directors serving on staggered boards of directors, such as ours, may be removed only for cause.

    These provisions of our certificate of incorporation, bylaws and Delaware law could discourage tender offers or other transactions that might otherwise result in our stockholders receiving a premium over the market price of our common stock.

Risks related to technology.

Our operations could be adversely affected as a result of inadequate or costly technology or telecommunications.

    Our success depends in large part on sophisticated telecommunications and computer systems. We must record and process significant amounts of data quickly and accurately to conduct our business. The temporary or permanent loss of our computer and telecommunications equipment and software systems, as a result of casualty or operating malfunction, could disrupt operations and adversely affect our business and financial condition. Our business also depends in large part on the service provided by

16

various local and long distance telephone companies. A significant increase in telephone service costs or any significant interruption in telephone services could reduce our profitability or disrupt our operations.

Our systems may be vulnerable to security risks and we may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by any breaches.

    The need for secure transmission of confidential information has been a significant barrier to the growth of wireless data communications or transactions on the Internet or by other electronic means. Unauthorized access by hackers, computer viruses and other accidental or intentional actions could disrupt our systems. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by any such breaches. If a third party were able to misappropriate our proprietary information or disrupt our operations, we could be subject to claims, litigation or other potential liabilities that could materially adversely impact our business.

    We rely on encryption and authentication technology licensed from third parties to provide the security and authentication technology to effect secure transmission of confidential information. There can be no assurance that advances in computer capabilities, new discoveries in the field of cryptography, or other events or developments will not result in a compromise or breach of the technology used by us to protect customer transaction data. If any such compromise of our security were to occur, it could have a material adverse effect on our reputation and, therefore, on our business, results of operations and financial condition. Furthermore, a party who is able to circumvent our security measures could misappropriate proprietary information or cause interruptions in our operations. We may be required to expend significant capital and other resources to protect against such security breaches or to alleviate problems caused by such breaches. Concerns over the security of transactions conducted on the Internet and other online services and the privacy of users may also inhibit the growth of the Internet and other online services generally, particularly as a means of conducting commercial transactions. To the extent that our activities involve the storage and transmission of proprietary information, security breaches could damage our reputation and expose us to a risk of loss or litigation and possible liability. There can be no assurance that our security measures will prevent security breaches or that failure to prevent such security breaches will not have a material adverse effect on our business, results of operations and financial condition.

Expansion of our Internet capabilities will affect the success and growth of our business.

    As part of our growth strategy, we are in the process of providing expanded service in receiving and underwriting automobile loan applications over the Internet. If our prospective customers and the dealers with which we do business do not accept the Internet as a method for transacting business with us or if the necessary network infrastructure for growth in Internet usage is not adequately developed, our growth may be adversely affected. In addition, the adoption of new laws, or the application to the Internet of existing laws, may decrease the use of the Internet, increase our costs or otherwise adversely affect our business.

Risks related to this offering.

Our stock price may be volatile, which could result in substantial losses for our stockholders.

    Before this offering, there has been no public market for our common stock. We cannot assure you that an active public market for our common stock will develop or can be sustained after this offering. Even if an active trading market does develop, the market price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in response to factors such as:

•

general economic conditions;

17

•

actual or anticipated changes in our future financial performance;



•

changes in financial estimates by securities analysts;



•

competitive developments, including announcements by us or our competitors of new products or services or significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;



•

the operating and stock performance of our competitors;



•

changes in interest rates;



•

the market for similar securities;



•

additions or departures of key personnel; and



•

conditions and trends in the Internet and e-commerce business.

You will experience immediate and substantial dilution as a result of this offering.

    The initial offering price per share will exceed our net tangible book value per share. As a result, if you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution of approximately $  in the net tangible book value per share from the assumed $  price per share paid for the common stock in this offering (the midpoint of the range set forth on the cover page of this prospectus). For a more detailed discussion of dilution, please see the "Dilution" section of this prospectus.

Additional shares of our common stock may be issued if options are exercised, causing dilution to our stockholders.

    Upon the closing of this offering, we will have outstanding options to purchase approximately      shares of our common stock. The existence of these options may adversely affect us or our stockholders for many reasons, including:

•

the market price of our stock may be adversely affected by the existence of convertible securities;



•

if any of these options are exercised, the value of the stock held by our stockholders will be diluted if the value of such stock immediately prior to the exercise of such options exceeds the exercise price;



•

these options give the holders the opportunity, at nominal cost, to profit from a rise in the market price of our stock; and



•

the terms upon which we could issue additional common stock or obtain additional financing may be adversely affected.

    Option holders are also likely to exercise their options when, in all likelihood, we could obtain additional capital on terms more favorable than those provided by the options.

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USE OF PROCEEDS

    We expect to receive approximately $      million from the sale by us of            shares of our common stock at an assumed initial public offering price of $      per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We expect to receive approximately $      million, if the underwriters' over-allotment option is exercised in full.

    We intend to use $      of the net proceeds of this offering to acquire all of the issued and outstanding capital stock of LBAC and the remainder for general corporate purposes.

DIVIDEND POLICY

    We intend to retain all of our earnings in the foreseeable future to finance the expansion of our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, financial condition, the requirements of any financing agreements to which we may be a party and on other factors considered relevant by our board of directors.

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DILUTION

    LBHC was incorporated on October 10, 2001. The net tangible book value as of September 30, 2001 would have been $1,000, or $10.00 per share, based on the number of shares of common stock outstanding, assuming LBHC had been incorporated and capitalized on September 30, 2001. Net tangible book value per share represents the amount of our tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

    Our pro forma net tangible book value at September 30, 2001 would have been $         million, or $         per share after giving effect to:

•

the sale of         shares of common stock at an assumed initial public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus);



•

the purchase of LBAC from Ameriquest; and



•

the application of the remaining estimated net proceeds.

    This represents an immediate dilution of $         per share to new investors purchasing common stock in this offering. The following table illustrates this per share dilution.

    Upon the closing of this offering and in connection with the acquisition of LBAC, the shares of our common stock held by our existing sole stockholder will be redeemed and canceled. As a result, all of our outstanding common stock will be held by new investors.

    The above discussion and table assume no exercise of the underwriters' over-allotment option and no exercise of stock options granted or expected to be granted to certain of our employees and directors.

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CAPITALIZATION

    The following table sets forth (1) the debt and capitalization of LBHC as of September 30, 2001, assuming it had been incorporated and capitalized on September 30, 2001, (2) the debt and capitalization of LBAC as of September 30, 2001, (3) adjustments to give effect to the purchase by LBHC of LBAC from Ameriquest, (4) adjustments to give effect to the sale of    shares of LBHC common stock in this offering, and (5) our debt and capitalization as of September 30, 2001, as adjusted by (3) and (4). You should read the following table in conjunction with the section captioned "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the audited financial statements and related notes included elsewhere in this prospectus.

(1)

Preferred stock of LBHC.

(2)

Common stock of LBHC, which was incorporated on October 10, 2001. The number of shares issued and outstanding excludes shares reserved for future issuance pursuant to our stock plan (of which shares are reserved for issuance pursuant to the options to be granted after this offering). Upon the closing of this offering and in connection with the acquisition of LBAC, the shares of our common stock held by our existing sole stockholder will be redeemed and canceled.

(3)

Preferred stock of LBAC.

(4)

Common stock of LBAC.

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SELECTED CONSOLIDATED FINANCIAL DATA

    The following table sets forth our selected historical consolidated financial data for the periods ended and as of the dates indicated. The selected historical consolidated financial data as of December 31, 1999 and 2000 and for the years ended December 31, 1998 through 2000 were derived from LBAC's audited consolidated financial statements, which are included elsewhere in this prospectus. The selected historical consolidated financial data as of December 31, 1996, 1997 and 1998 and for the years ended December 31, 1996 and 1997 were derived from LBAC's audited consolidated financial statements, which are not included elsewhere in this prospectus. The selected historical consolidated financial data as of September 30, 2000 and 2001 and for the nine months ended September 30, 2000 and 2001 were derived from LBAC's unaudited consolidated financial statements that are included in this prospectus, and in the opinion of management, reflect and include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of such results. Operating results for the nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the entire year. You should read this information in conjunction with the consolidated financial statements and accompanying notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this prospectus. Historical results are not necessarily indicative of results that may be expected in the future.

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(1)

Includes principal balance outstanding of automobile loans held for sale and securitized.

(2)

Net delinquency excludes loans secured by repossessed vehicles; gross delinquency includes loans secured by repossessed vehicles.

(3)

Data for the nine-month periods ended September 30, 2000 and 2001 have been annualized.

(4)

Charge-off rate equals gross charge-offs less cash recoveries divided by the average monthly managed portfolio outstanding for the period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto and other information included in this prospectus.

General

    We are an independent automobile finance company engaged in underwriting, purchasing, securitizing and servicing automobile loans originated by franchised and independent automobile dealers in connection with the sale of used and, to a lesser extent, new automobiles (including vans, light trucks and SUVs). Our customers generally are consumers who are unable to obtain financing from traditional sources. To fund the purchase of automobile loans prior to securitization, we utilize borrowings under our warehouse credit facilities. In 2000, we purchased $302.7 million in automobile loans from dealers located in 18 states. For the nine months ended September 30, 2001, we purchased $251.8 million in automobile loans from dealers located in 23 states.

    From its inception until December 1997, LBAC focused upon a lower credit quality of customer than we focus on today. By early 1997, we had expanded rapidly to seven regional offices in Northern and Southern California, Illinois, Massachusetts, New Jersey, Texas and Virginia and had significantly increased the number of our employees. By December 1997, we found that we had incurred significant losses as a result of poor underwriting, poor collections efforts, emphasis on high-risk customers and a high concentration of non-franchised dealerships from whom we purchased automobile loans. Beginning in December 1997, our new senior operations management team, which we had begun assembling during the third quarter of 1997, implemented a major operational restructuring.

    We adopted a more disciplined, efficient and centralized underwriting and collection process, consolidated our offices from seven to two, reduced staff by more than 50%, significantly reduced general and administrative expenses, replaced substantially all and improved the quality of our underwriting and collection management personnel and shifted our marketing focus to franchised dealer relationships. As a result of these efforts, we have experienced a substantial improvement in our automobile loan performance and profitability. The percentage of dealers with which we do business that are franchised dealers increased from 67% as of December 31, 1997 to 94% as of September 30, 2001. Our 30+ day gross delinquency rate on our managed portfolio decreased from 10.4% as of December 31, 1997 to 3.3% as of September 30, 2001. In addition, our annualized charge-off rate for our managed portfolio decreased from 9.9% for the year ended December 31, 1997 to 3.9% for the nine months ended September 30, 2001.

    We generate revenues through the purchase, securitization and servicing of automobile loans. These revenues consist of interest on loans, loan servicing fees and gain on sales of loans. The components of interest on loans are finance charge income on automobile loans held for sale and accretion income related to the amortization of the present value discount on estimated cash flows from residual interests in securitizations. Loan servicing fees include contractually specified servicing fees for the servicing of automobile loans, late charges and other miscellaneous servicing fee income.

    We periodically sell automobile loans to certain special-purpose finance trusts, which in turn issue asset-backed securities to investors. We retain interests in the automobile loans sold in the form of residual interests in securitizations. The residual interests in securitizations represent the present value of future excess cash flows resulting from the difference between the finance charge income received from the obligors on the automobile loans and the interest paid to the investors in the asset-backed securities, net of credit losses, servicing fees and other expenses.

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    We recognize gain on sales of automobile loans as the difference between the sale proceeds, net of transaction costs, and the allocated basis of the assets transferred. The allocated basis of the interests retained is classified as residual interests in securitizations on our balance sheet.

    For securitizations executed prior to 2000, we classify residual interests as trading assets and recognize in the current period gains or losses in residual interests held for trading in our statements of operations, as a component of gain on sales of loans, attributable to the change in the fair value of the residual interests. Beginning in 2000, residual interests resulting from securitizations are classified as available-for-sale and measured at fair value. Unrealized holding gains or temporary holding losses are reported net of income tax effects as a separate component of stockholder's equity until realized. If we deem a decline in fair value to be other than temporary, we write down the relevant assets through a charge to earnings.

    We estimate the fair value of residual interests in securitizations monthly by calculating the present value of the future excess cash flows from the trusts using discount rates commensurate with the risks involved. Such calculations include estimates of credit losses and prepayment rates for the remaining term of the automobile loans transferred to the trusts since these factors impact the amount and timing of future excess cash flows.

    Prior to securitization, loans purchased are recorded on our balance sheet as loans held for sale. The carrying value of loans held for sale includes loan principal balances, capitalized direct origination costs, dealer participation payments, discount fees received, accrued interest income and provision for loan losses.

    Our expenses largely consist of interest on borrowings, provision for loan losses, and general and administrative expenses.

    Interest on borrowings includes the borrowing costs under our warehouse credit facilities and our residual financing facility. We have two warehouse credit facilities that we use to aggregate automobile loans prior to sale in securitization. These credit facilities bear interest at a rate based on a spread to LIBOR and are collateralized by loans held for sale. Our residual financing facility bears interest at a rate based on a spread to LIBOR and is collateralized by the residual interests that we retain in securitizations.

    We charge the provision for loan losses to maintain the allowance for credit losses at a level to cover probable losses that can be reasonably estimated for loans held on our balance sheet. The allowance for credit losses is increased by charging the provision for loan losses and decreased by actual losses on the loans we hold for sale or by reversing the allowance for credit losses through the provision for loan losses when the amount of loans held for sale on our balance sheet is reduced by securitization transactions treated as sales. The level of the allowance is based principally on the outstanding balance of loans held for sale on our balance sheet and delinquency trends. We believe that the allowance for credit losses is currently adequate to absorb probable losses in our loans held for sale portfolio that can be reasonably estimated.

    General and administrative expenses consist primarily of: salaries, commissions and benefits; data processing and communications, including charges for our collection and payment processing system, charges for outsourced data processing, Internet support fees and telephone charges; and occupancy and equipment.

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Results of Operations

Nine Months Ended September 30, 2001 compared to Nine Months Ended September 30, 2000

Total Revenues

    Our total revenues increased to $37.5 million for the nine months ended September 30, 2001 from $24.1 million for the same period in 2000, an increase of $13.4 million, or 55.6%, as a result of stronger loan production and the subsequent securitizations of loans with an increased net interest spread.

    Interest on Loans.  Interest on loans increased to $15.8 million for the nine months ended September 30, 2001 from $11.0 million for the same period in 2000, an increase of $4.8 million, or 43.6%.

    Interest income on loans held for sale increased to $8.6 million for the nine months ended September 30, 2001 from $4.0 million for the same period in 2000, an increase of $4.6 million, or 115.0%. This increase in income resulted from an increase in average loan held for sale balances, partially offset by a decrease in weighted average coupon on our automobile loans. The average balance of loans held for sale increased to $78.1 million for the nine months ended September 30, 2001 from $45.1 million for the same period in 2000, an increase of $33.0 million, or 73.2%. The weighted average coupon decreased to 17.3% for the nine months ended September 30, 2001 from 17.6% for the same period in 2000.

    An additional component of interest on loans is accretion income, which is attributed to the amortization of the present value discount on estimated cash flows from residual interests in securitizations. Accretion income increased to $7.1 million for the nine months ended September 30, 2001 from $7.0 million for the same period in 2000, an increase of $0.1 million, or 1.4%. This increase was attributable primarily to the outstanding balance of the securitized portfolio, which grew to $532.3 million at September 30, 2001 from $408.2 million at September 30, 2000, an increase of $124.1 million, or 30.4%.

    Loan Servicing Fees.  Loan servicing fees increased to $11.5 million for the nine months ended September 30, 2001 from $10.2 million for the same period in 2000, an increase of $1.3 million, or 12.7%. The increase was primarily attributable to the increase in the size of our securitized portfolio.

    Gain on Sales of Loans.  Gain on sales of loans increased to $10.2 million for the nine months ended September 30, 2001 from $2.9 million for the same period in 2000, an increase of $7.3 million, or 251.7%. Gains related to current-year securitizations were $11.2 million for the nine months ended September 30, 2001 and $3.3 million for the same period in 2000, which were partially offset by unrealized losses of $3.3 million for the nine months ended September 30, 2001 and $0.7 million of unrealized gains for the same period in 2000. The increase in gains related to current-year securitizations was primarily attributable to increased loan securitizations, which increased to $230.0 million from $140.0 million, and net interest spread, which increased to 11.6% from 9.9%, partially offset by an increase in cumulative credit loss assumptions to 8.0% from 7.0% due to a perceived weakening in economic conditions.

    Significant assumptions used in determining the gain on sales of loans were as follows:

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Total Expenses

    Interest on Borrowings.  Interest on borrowings increased to $6.1 million for the nine months ended September 30, 2001 from $5.3 million for the same period in 2000, an increase of $0.8 million, or 15.1%. This increase resulted from an increase in debt balances, partially offset by a decrease in interest rates paid. Average debt balances increased to $104.1 million for the nine months ended September 30, 2001 from $76.1 million for the same period in 2000, an increase of $28.0 million, or 36.8%. The rate paid on borrowings is based on a spread to 30-day LIBOR. That rate averaged 4.4% and 6.3% for the nine months ended September 30, 2001 and 2000, respectively.

    Provision for Loan Losses.  The provision for loan losses increased to $3.5 million for the nine months ended September 30, 2001 from $2.5 million for the same period in 2000, an increase of $1.0 million, or 40.0%. The increase was attributable primarily to an increase in automobile loans purchased.

    Salaries, Commissions and Benefits.  Salaries, commissions and benefits increased to $13.2 million for the nine months ended September 30, 2001 from $12.1 million for the same period in 2000, an increase of $1.1 million, or 9.1%. This increase was primarily attributable to a 6% increase in personnel and a 17% increase in automobile loans purchased, which resulted in an increase in commissions paid.

    Data Processing and Communications.  Data processing and communications expense increased to $2.9 million for the nine months ended September 30, 2001 from $2.5 million for the same period in 2000, an increase of $0.4 million, or 16.0%. This increase was primarily attributable to an increase in the managed automobile loan portfolio and in the number of automobile loans purchased.

    Occupancy and Equipment.  Occupancy and equipment expense decreased to $2.0 million for the nine months ended September 30, 2001 from $2.6 million for the same period in 2000, a decrease of $0.6 million, or 23.1%. The decrease was primarily attributable to the expiration of equipment lease agreements.

    Other General and Administrative Expense.  Other general and administrative expense increased to $2.3 million for the nine months ended September 30, 2001 from $1.5 million for the same period in 2000, an increase of $0.8 million, or 53.3%. The increase was primarily the result of additional legal and consulting fees related to the negotiation of warehouse facilities and the utilization of information technology consultants.

Net Income

    Net income increased to $4.5 million for the nine months ended September 30, 2001 from a net loss of $1.4 million for the same period in 2000.

Year Ended December 31, 2000 compared to Year Ended December 31, 1999

Total Revenues

    Our total revenues increased to $36.8 million in 2000 from $27.8 million in 1999, an increase of $9.0 million, or 32.4%, as a result of stronger automobile loan production and the subsequent securitization of automobile loans with improved asset quality and an increased net interest spread.

    Interest on Loans.  Interest on loans was $15.8 million for each of 2000 and 1999.

    Interest income on loans held for sale decreased to $6.5 million in 2000 from $7.7 million in 1999, a decrease of $1.2 million, or 15.6%. This decline in income resulted from a decrease in the weighted average coupon on our automobile loans, partially offset by an increase in average loan held for sale balances. The average balance of loans held for sale increased to $55.2 million in 2000 from

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$54.1 million in 1999, while the weighted average coupon decreased to 17.7% in 2000 from 17.9% in 1999.

    Accretion income increased to $9.2 million in 2000 from $8.1 million in 1999, an increase of $1.1 million, or 13.6%. This increase was primarily attributable to the outstanding balance of the securitized portfolio, which grew to $487.7 million at December 31, 2000 from $405.1 million at December 31, 1999, an increase of $82.6 million, or 20.4%.

    Loan Servicing Fees.  Loan servicing fees increased to $13.6 million in 2000 from $11.6 million in 1999, an increase of $2.0 million, or 17.2%. This increase was primarily attributable to the increase in the size of our securitized portfolio.

    Gain on Sales of Loans.  Gain on sales of automobile loans increased to $7.4 million in 2000 from $0.4 million in 1999, an increase of $7.0 million. Gains related to current-year securitizations were $8.5 million in 2000 and $3.8 million in 1999, which were partially offset by an unrealized gain on trading assets of $0.1 million in 2000 and an unrealized loss on trading assets of $3.4 million in 1999. The increase in gains related to current-year securitizations was primarily attributable to increased loan securitizations, which increased to $292.4 million from $183.9 million, and a decrease in cumulative credit loss assumptions to 6.5% at December 2000 from 8.0% at July 1999 due to an improvement in asset quality of the loans purchased, partially offset by a decrease in net interest spread to 9.7% from 10.1%.

    Significant assumptions used in determining the gain on sales of loans were as follows: