What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-04 compared with 2021-11-10 · 180 added, 300 removed, 666 unchanged (42% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

Cash and cash equivalents

25 unchanged sentences

21,292,393 and 21,143,764

shares issued and

outstanding at September 30, 2021 and

shares issued and outstanding at March 31, 2022 and

December 31, 2021, respectively

11 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Interest income

6 unchanged sentences

Total operating expenses

Income before income tax expense (benefit)

Income tax expense (benefit)

Income before income tax expense

Income tax expense

Earnings per share:

7 unchanged sentences

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income/(loss);

in funded status of pension plan

change in funded status of pension plan

Comprehensive income

6 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

4 unchanged sentences

Amortization of deferred financing costs

Mark to finance receivables measured at fair value

Mark to fair value of finance receivables measured at fair value

Provision for credit losses

Stock-based compensation expense

Purchases of finance receivables held-for-sale

Sale of finance receivables held-for-sale

Changes in assets and liabilities:

14 unchanged sentences

Payments on subordinated renewable notes

Repayments of warehouse lines of credit

Net Proceeds from (repayment of) residual interest financing debt

Net advances (repayments) of warehouse lines of credit

Repayment of residual interest financing debt

Repayment of securitization trust debt

2 unchanged sentences

Exercise of options and warrants

Net cash used in financing activities

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

10 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Common Stock (Shares Outstanding)

10 unchanged sentences

Balance, beginning of period

Cumulative change in accounting principle (Note 2)

Balance, beginning of period (as adjusted for change in accounting principle)

Balance, end of period

6 unchanged sentences

Total Shareholders' Equity

See accompanying Notes to Unaudited Condensed Consolidated Financial

CONSUMER PORTFOLIO SERVICES, INC.

23 unchanged sentences

in the opinion of management, of a normal recurring nature.

Results for the nine-month period ended September 30, 2021 are not necessarily

Results for the three-month period ended March 31, 2022 are not necessarily

indicative of the operating results to be expected for the full year.

23 unchanged sentences

of the receivables.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

We re-evaluate the fair value of such receivables

2 unchanged sentences

would be required.

There are no adjustments to the carrying value of the portion of the receivables portfolio accounted for at fair value

in the third quarter of 2021.

Results for the third quarter of 2020 include a $3.2 million mark down.

Mark downs of $4.4 million and $23.1

million were included in the results for the nine months ending September 30, 2021 and 2020, respectively.

The mark down is an estimate

based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables

and our assessment of potential additional future net losses.

Mark downs are reflected as a reduction in revenue.

Results for the first quarter include a $2.4 million mark down reversal to the carrying value of the portion of the

receivables portfolio accounted for at fair value.

Results for the first quarter of 2021 include a $4.4 million mark down, and the mark

down is reflected as a reduction in revenue.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Anticipated credit losses are included in our

9 unchanged sentences

The following table presents

the primary components of Other Income for the three-month and nine-month periods ending September 30, 2021 and 2020:

the primary components of Other Income for the three-month periods ending March 31, 2022 and 2021:

Schedule of other income

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Direct mail revenues

3 unchanged sentences

Other income for the period

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The Company has operating leases for corporate

7 unchanged sentences

sheet and the related lease expense is recognized on a straight-line basis over the lease term.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents

1 unchanged sentence

Supplemental balance sheet information related to leases

September 30,

(In thousands)

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(In thousands)

Year Ending December 31,

2021 (excluding the nine months ended September 30, 2021)

Year Ending March 31,

Total undiscounted lease payments

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Operating lease cost

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

(In thousands)

Operating cash flows from operating leases

5 unchanged sentences

Compensation”.

For the three and nine months ended September

30, 2021, we recorded stock-based compensation costs in the amount of $ 530,000 and $ 1.3 million, respectively.

These stock-based compensation

costs were $ 539,000 and $ 1.4 million for the three and nine months ended September 30, 2020.

As of September 30, 2021, unrecognized stock-based

compensation costs to be recognized over future periods equaled $ 5.6 million.

This amount will be recognized as expense over a weighted-average

period of 2.5 years.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

For the three months ended March 31, 2022 and

2021, we recorded stock-based compensation costs in the amount of $ 790,000 and $ 408,000 , respectively.

As of March 31, 2022, unrecognized

stock-based compensation costs to be recognized over future periods equaled $ 8.4 million.

This amount will be recognized as expense over

a weighted-average period of 2.4 years.

The following represents stock option activity

for the nine months ended September 30, 2021:

for the three months ended March 31, 2022:

Share-based Payment Arrangement, Option, Activity

1 unchanged sentence

Exercise Price

Contractual Term

Options outstanding at the beginning of period

1 unchanged sentence

Options exercisable at the end of period

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents the price distribution

of stock options outstanding and exercisable for the years ended September 30, 2021 and December 31, 2020:

of stock options outstanding and exercisable for the years ended March 31, 2022 and December 31, 2021:

Schedule of stock options outstanding and exercisable

1 unchanged sentence

Number of shares as of

September 30, 2021

March 31, 2022

December 31, 2021

9 unchanged sentences

$7.00 - $7.99

At September 30, 2021 the aggregate intrinsic

value of options outstanding and exercisable was $ 24.1 million and $ 17.4 million, respectively.

There were 1,054,541 options exercised

for the nine months ended September 30, 2021 compared to 269,100 for the comparable period in 2020.

The total intrinsic value of options

exercised was $ 1.1 million and $ 308,000 for the nine-month periods ended September 30, 2021 and 2020.

There were 881,000 shares available

for future stock option grants under existing plans as of September 30, 2021.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

$8.00 - $11.00

At March 31, 2022 the aggregate intrinsic value

of options outstanding and exercisable was $ 64.3 million and $ 43.7 million, respectively.

There were 1,366,000 options exercised for

the three months ended March 31, 2022 compared to 98,000 for the comparable period in 2021.

The total intrinsic value of options exercised

was $ 10.2 million and $ 122,000 for the three-month periods ended March 31, 2022 and 2021.

There were 3,561,000 shares available for future

stock option grants under existing plans as of March 31, 2022.

Purchases of Company Stock

The table below describes the purchase of our

common stock for the nine-month ended September 30, 2021 and 2020:

common stock for the three-month ended March 31, 2022 and 2021:

Schedule of purchases of company stock

Nine Months Ended

September 30, 2021

September 30, 2020

Three Months Ended

March 31, 2022

March 31, 2021

Open market purchases

Shares redeemed upon net exercise of stock options

Other purchases

Total stock purchases

3 unchanged sentences

Reclassifications had no effect on net income or shareholders’ equity.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Financial Covenants

3 unchanged sentences

Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage

As of September 30, 2021, we were in compliance with all such covenants.

In addition, certain of our debt agreements other than

our term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare

a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to

be accompanied by acceleration of such other indebtedness.

As of March 31, 2022, we were in compliance with all such covenants.

In addition, certain of our debt agreements other than our

term securitizations contain cross-default provisions.

Such cross-default provisions would allow the respective creditors to declare a

default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be

accompanied by acceleration of such other indebtedness.

Provision for Contingent

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use in pricing similar receivables and are based on the best information available in the circumstances.

They include such inputs as estimates

for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio.

The pandemic and the adverse effect it

may have on the U.S.

economy and our obligors may cause us to consider significant changes in any of those inputs, which in turn may have

a significant effect on our fair value measurement.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

They include such inputs as

estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio.

The pandemic and the adverse

effect it may have on the U.S.

economy and our obligors may cause us to consider significant changes in any of those inputs, which in

turn may have a significant effect on our fair value measurement.

(2) Finance Receivables

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recorded separately on the Company’s Balance Sheet and are excluded from all tables in this footnote.

The following table presents the components of

Finance Receivables, net of unearned interest:

Schedule of finance receivables

September 30,

Finance receivables

(In thousands)

Automobile finance receivables, net of unearned interest

Unearned acquisition fees and originations costs

Finance receivables

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

We consider an automobile contract delinquent

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debt restructurings.

The following table summarizes the delinquency status of finance receivables as of September 30, 2021 and December

Automobile finance receivables, net of unearned interest was $ 186.7

million and $ 232.4 million as of March

31, 2022 and December 31, 2021, respectively.

The following table summarizes the delinquency status of finance receivables as of March

31, 2022 and December 31, 2021:

Schedule of delinquency status of finance receivables

September 30,

(In thousands)

Delinquency Status

Finance receivables totaling $ 2.3 million and

$ 5.4 million at September 30, 2021 and December 31, 2020, respectively, including all receivables greater than 90 days delinquent, have

been placed on non-accrual status as a result of their delinquency status.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Finance receivables totaling

$ 2.1 million and $ 2.7 million at March 31, 2022 and December 31, 2021, respectively, including all receivables greater than 90 days delinquent,

have been placed on non-accrual status as a result of their delinquency status.

Allowance for Credit Losses

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the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

In consideration of the depth

4 unchanged sentences

factors may affect future credit losses and have incorporated our judgement of the effect of such factors into our estimates.

Effective January 1, 2020, the Company adopted

Accounting Standards Codification ("ASC") 326, which changes the criteria under which credit losses on financial instruments

(such as the Company’s finance receivables) are measured.

ASC 326 introduced a new credit reserving model known as the Current Expected

Credit Loss (“CECL”) model, which replaces the incurred loss impairment methodology previously used under U.S.

methodology that records currently the expected lifetime credit losses on financial instruments.

The adoption of CECL required that we

establish an allowance for the remaining expected lifetime credit losses on the portion of the Company’s receivable portfolio for

which the Company was not already using fair value accounting.

We refer to that portion, which is those receivables that were originated

prior to January 2018, as our “legacy portfolio”.

To comply with CECL, the Company recorded an addition to its allowance for

finance credit losses of $ 127.0 million.

The offset to the addition to the allowance for finance credit losses was a tax affected reduction

to retained earnings using the modified retrospective method.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents the amortized cost

basis of our finance receivables by annual vintage as of September 30, 2021 and December 31, 2020.

basis of our finance receivables by annual vintage as of March 31, 2022 and 2021.

Schedule of amortized cost basis of finance receivables

September 30,

(In thousands)

2 unchanged sentences

The following table presents a summary of the

activity for the allowance for finance credit losses for the three-month and nine-month periods ended September 30, 2021 and 2020:

activity for the allowance for finance credit losses for the three-month periods ended March 31, 2022 and 2021:

Schedule of allowance for finance credit losses

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Balance at beginning of period

Early adoption of CECL

Provision for credit losses on finance receivables

Balance at end of period

For the three and nine months

ended September 30, 2021, we recorded a reduction to provision for credit losses on finance receivables in the amount of $ 1.6 million.

The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from improved credit performance.

Company made additional provisions for credit losses of $ 7.4 million and $ 14.1 million for the three-month and nine-month periods ended

September 30, 2020, respectively.

Those reserve increases were made in consideration for the uncertainty associated with the pandemic.

For the three months ended March 31, 2022, we

recorded a reduction to provision for credit losses on finance receivables in the amount of $ 9.4 million.

The reserve decrease was primarily

due to a decrease in lifetime expected credit losses resulting from improved credit performance, an improved macroeconomic outlook and

higher used car prices.

The Company did not make additional provisions for credit losses for the three months ended March 31, 2021.

Excluded from finance receivables are contracts

4 unchanged sentences

Schedule of allowance for losses on repossessed inventory

September 30,

(In thousands)

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Schedule of Long-term Debt Instruments

Interest Rate at

September 30,

at December 31,

Interest Rate

(Dollars in thousands)

September 2024

December 2023

September 2025

December 2024

September 2026

December 2026

November 2027

9 unchanged sentences

Balance Sheet.

Debt issuance costs of $ 12.5

million and $ 12.0 million as of March 31, 2022 and December 31, 2021, respectively, have been excluded from the table above.

issuance costs are presented as a direct deduction to the carrying amount of the Securitization trust debt on our Consolidated Balance

CONSUMER PORTFOLIO SERVICES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Debt issuance costs of $ 11.4

million and $ 10.6 million as of September 30, 2021 and December 31, 2020, respectively, have been excluded from the table above.

debt issuance costs are presented as a direct deduction to the carrying amount of the securitization trust debt on our Unaudited Condensed

Consolidated Balance Sheets.

All of the securitization trust

6 unchanged sentences

of liquidity and not exceed maximum leverage levels.

As of September 30, 2021, we were in compliance with all such covenants.

As of March 31, 2022, we were in compliance with all such covenants.

We are responsible for the administration

3 unchanged sentences

proceeds from a term securitization prior to the purchase of additional collateral.

As of September 30, 2021, restricted cash under the

various agreements totaled approximately $ 145.0 million.

Interest expense on the securitization trust debt consists of the stated rate

of interest plus amortization of additional costs of borrowing.

Additional costs of borrowing include facility fees, amortization of deferred

financing costs and discounts on notes sold.

Deferred financing costs and discounts on notes sold related to the securitization trust

debt are amortized using a level yield method.

Accordingly, the effective cost of the securitization trust debt is greater than the contractual

rate of interest disclosed above.

As of March 31, 2022, restricted cash under the various

agreements totaled approximately $ 164.6 million.

Interest expense on the securitization trust debt consists of the stated rate of interest

plus amortization of additional costs of borrowing.

Additional costs of borrowing include facility fees, amortization of deferred financing

costs and discounts on notes sold.

Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized

using a level yield method.

Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest

disclosed above.

Our wholly-owned bankruptcy remote subsidiaries

6 unchanged sentences

for the related debt.

All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for

all other purposes, including legal and bankruptcy purposes.

All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all

other purposes, including legal and bankruptcy purposes.

None of the assets of these subsidiaries are available to pay other creditors.

The terms and amounts of our other debt outstanding

at September 30, 2021 and December 31, 2020 are summarized below:

at March 31, 2022 and December 31, 2021 are summarized below:

Schedule of debt outstanding

4 unchanged sentences

3.00% over one month Libor (Minimum 3.75%)

December 2022

3.50% over a commercial paper rate (Minimum 4.50%)

December 2021

Residual interest financing

Subordinated renewable notes

Weighted average rate of 9.35% and 10.09% at September 30, 2021 and December 31, 2020, respectively

Weighted average maturity of October 2023 and January 2023 at September 30, 2021 and December 31, 2020, respectively

Weighted average rate of 8.65% and 8.93% at March 31, 2022 and December 31, 2021, respectively

Weighted average maturity of March 2024 and January 2024 at March 31, 2022 and December 31, 2021,

CONSUMER PORTFOLIO SERVICES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

As of December 31, 2020, we

had short-term funding capacity of $ 300 million, comprising three credit facilities.

We repaid the outstanding balance for the facility

first established in April 2015 at its maturity date in February 2021 and elected not to renew it.

As of September 30, 2021, our short-term

funding capacity is $ 200 million, comprising two credit facilities.

Unamortized debt issuance costs of $ 692,000 and

$ 150,000 as of September 30, 2021 and December 31, 2020, respectively, have been excluded from the amount reported above for residual

interest financing.

Similarly, unamortized debt issuance costs of $ 655,000 and $ 1.5 million as of September 30, 2021 and December 31,

2020, respectively, have been excluded from the Warehouse lines of credit amounts in the table above.

These debt issuance costs are presented

as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets.

Unamortized debt issuance costs of $ 566,000 and $ 629,000 as of March 31, 2022 and December

31, 2021, respectively, have been excluded from the amount reported above for residual interest financing.

Similarly, unamortized debt

issuance costs of $ 1.2 million and $ 400,000 as of March 31, 2022 and December 31, 2021, respectively, have been excluded from the Warehouse

lines of credit amounts in the table above.

These debt issuance costs are presented as a direct deduction to the carrying amount of the

debt on our Unaudited Condensed Consolidated Balance Sheets.

(5) Interest Income and Interest Expense

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Interest on finance receivables

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Securitization trust debt

7 unchanged sentences

(6) Earnings Per Share

Earnings per share for the three-month and nine-month

periods ended September 30, 2021 and 2020 were calculated using the weighted average number of shares outstanding for the related period.

The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month

and nine-month periods ended September 30, 2021 and 2020:

Earnings per share for the three-month periods

ended March 31, 2022 and 2021 were calculated using the weighted average number of shares outstanding for the related period.

The following

table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month periods ended

March 31, 2022 and 2021:

Computation of earnings per share

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Weighted average number of common shares outstanding during the period used to compute basic earnings per share

1 unchanged sentence

Weighted average number of common shares used to compute diluted earnings per share

If the anti-dilutive effects

of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and nine-month

periods ended September 30, 2021 would have included an additional 5.6 million and 5.8 million shares, respectively, attributable to the

exercise of outstanding options and warrants.

For the three-month and nine-month periods ended September 30, 2020, an additional 14.2

million and 13.5 million shares, respectively, would be included in the diluted earnings per share calculation.

If the anti-dilutive effects of common stock

equivalents were considered, shares included in the diluted earnings per share calculation for the three-months ended March 31, 2022

and 2021 would have included an additional 558,000 and 7.5 million shares, respectively, attributable to the exercise of outstanding

options and warrants.

(7) Income Taxes

3 unchanged sentences

state, or local examinations by tax authorities for years before 2015.

On March 27, 2020, the Coronavirus

Aid, Relief and Economic Security (“CARES”) Act was adopted, providing wide ranging economic relief for individuals and businesses.

One component of the CARES Act provides the Company with an opportunity to carry back net operating losses (“NOLs”) arising

from 2018, 2019 and 2020 to the prior five tax years.

The Company has such NOLs reflected on its balance sheet as a portion of deferred

The Company has previously valued its NOLs at the federal corporate income tax rate of 21%.

However, the provisions of the

CARES Act provide for NOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect

for the carryback years.

Consequently, the Company has revalued the benefit from its NOLs to reflect a 35% tax rate.

The result of the

revaluation of NOLs and other tax adjustments is a net tax benefit of $ 8.8 million, which is reflected in income taxes for the nine-month

period ending September 30, 2020.

As of September 30, 2021, and

December 31, 2020, we had no unrecognized tax benefits for uncertain tax positions.

We do not anticipate that total unrecognized tax benefits

will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

As of March 31,2022, and December

31, 2021, we had no unrecognized tax benefits for uncertain tax positions.

We do not anticipate that total unrecognized tax benefits will

significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

The Company and its subsidiaries

13 unchanged sentences

Although realization

is not assured, we believe that the realization of the recognized net deferred tax asset of $ 25.4 million as of September 30, 2021 is

more likely than not based on forecasted future net earnings.

Our net deferred tax asset of $25.4 million consists of approximately $ 14.6

million of net U.S.

is not assured, we believe that the realization of the recognized net deferred tax asset of $ 18.9 million as of March 31, 2022 is more

likely than not based on forecasted future net earnings.

Our net deferred tax asset of $18.9 million consists of approximately $ 11.6 million

federal deferred tax assets and $ 7.3 million of net state deferred tax assets.

Income tax expense was $ 5.9 million

and $ 12.8 million for the

three months and nine months ended September 30, 2021, representing effective income tax rates of 30 %

respectively.

Income tax expense was $ 8.2

million for the three months ended September 30, 2020.

Income tax benefit was $ 3.9 million for the nine months ended September 30,

2020, which includes net tax benefits of $8.8 million.

Excluding the tax benefit, income tax expense would have been $8.7 million

for the nine months ended September 30, 2020, representing an effective income tax rate of 36%.

million for the three months ended March 31, 2022, representing effective income tax rates of 28 %.

For the prior year period, income tax

expense was $ 2.8 million for the three months ended March 31, 2021 representing an effective tax rate of 35 %.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(8) Legal Proceedings

13 unchanged sentences

we had repossessed.

The defendant’s contract provides for resolution of disputes exclusively by arbitration, and exclusively on

The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on

an individual basis, not a class basis.

In August 2021, the court denied our motion to compel arbitration, without opinion.

date of this report, no motion for certification of a class has been filed or granted.

Also in August 2021, an obligor in Florida

filed a complaint in the Circuit Court of Miami-Dade County, alleging that our assessment and computation of late fees was deceptive

and unfair, and also alleging that resolution on a class basis would be appropriate.

The plaintiff is bound by an agreement to

arbitrate all claims, and to resolve claims on an individual basis and not on a class basis.

The Company has removed the case to the

federal district court, and plans to file a motion to compel arbitration, on an individual basis in accordance with the terms of the

plaintiff’s agreement.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion.

In April 2022, a motion for certification of a class was filed but has not been ruled upon.

It is reasonable to expect that resolution

of these claims will be on a class basis.

Wage and Hour Claim.

10 unchanged sentences

to defend this lawsuit.

We have not recorded a liability with respect to this claim on the accompanying consolidated financial statements.

Massachusetts Civil Investigative Demand .

In September 2021, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts

relating to the Company’s communications with and repossession notices sent to Massachusetts customers.

We are cooperating with

At this time, it is not possible to determine any amount of loss that is probable and measurable.

be no assurance as to the outcomes of the matters described or referenced above.

We record at each measurement date, most recently as

of September 30, 2021, our best estimate of probable incurred losses for legal contingencies, including the matters identified above,

and consumer claims.

of March 31, 2022, our best estimate of probable incurred losses for legal contingencies, including the matters identified above, and

consumer claims.

The amount of losses that may ultimately be incurred cannot be estimated with certainty.

However, based on such information

as is available to us, we believe that the total of probable incurred losses for legal contingencies as of September 30, 2021 is immaterial,

as is available to us, we believe that the total of probable incurred losses for legal contingencies as of March 31, 2022 is $3.4 million,

and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified

above, as of September 30, 2021 does not exceed $5.8 million.

above, as of March 31, 2022 does not exceed $11.3 million.

Accordingly, we believe that

19 unchanged sentences

valuation methodology are unobservable and significant to the fair value measurement.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Effective January 2018 we

9 unchanged sentences

quotes or pricing services available to assist us in our valuation process.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Our level 3, unobservable

5 unchanged sentences

a significant effect on our fair value measurement.

For the quarter ended September

For the quarter ended March

31, 2022, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Balance at beginning of period

6 unchanged sentences

finance receivables to their contractual balances for the periods shown:

Schedule of finance receivables to their contractual balances

September 30, 2021

Finance receivables fair and contractual balances

March 31, 2022

December 31, 2021

1 unchanged sentence

Finance receivables measured at fair value

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table provides certain qualitative

3 unchanged sentences

Fair Values as of

September 30,

Unobservable Inputs

3 unchanged sentences

10.6% - 11.3%

10.4 % - 11.1 %

Cumulative net losse

Cumulative net losses

10.0% - 18.4%

10.00% - 18.4%

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table summarizes the delinquency

status of these finance receivables measured at fair value as of September 30, 2021 and December 31, 2020:

status of these finance receivables measured at fair value as of March 31, 2022 and December 31, 2021:

Schedule of delinquency status of finance receivables measured at fair value

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based on our actual loss experience on sale of repossessed vehicles.

At September 30, 2021 the finance receivables related to the repossessed

At March 31, 2022 the finance receivables related to the repossessed

vehicles in inventory totaled $ 3.6 million.

4 unchanged sentences

There were no transfers in

or out of level 1, level 2 or level 3 assets and liabilities for the nine months ended September 30, 2021 and 2020.

or out of level 1, level 2 or level 3 assets and liabilities for the three months ended March 31, 2022 and 2021.

The estimated fair values of financial assets

and liabilities at September 30, 2021 and December 31, 2020, were as follows:

and liabilities at March 31, 2022 and December 31, 2021, were as follows:

Schedule of estimated fair values of financial assets and liabilities

As of September 30, 2021

As of March 31, 2022

Financial Instrument

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(10) Subsequent Events

On October 20, 2021, the Company

purchased 1,999,995 shares of its stock for a purchase price of $12.5 million.

The shares were acquired by the seller in 2018 upon the

exercise of a warrant that the Company issued to its lender upon the 2008 amendment and partial repayment of outstanding debt under a

residual interest financing.

The shares purchased, which represent approximately 8.7% of the common shares outstanding prior to the transaction,

have been cancelled and retired.

On April 20, 2022 we executed our second securitization

In the transaction, qualified institutional buyers purchased $395.6 million of asset-backed notes secured by $430.0 million in

automobile receivables originated by CPS.

The sold notes, issued by CPS Auto Receivables Trust 2022-B, consist of five classes.

of the notes were provided by Moody’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance

of similar receivables and CPS’s experience as a servicer.

The weighted average yield on the notes is approximately 4.83%.

The 2022-B transaction has initial credit enhancement

consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 8.00%.

The transaction

agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of 9.00% of the original

receivable pool balance, or 25.80% of the then outstanding pool balance.

The transaction utilizes a pre-funding structure, in which CPS

sold approximately $285.8 million of receivables at inception and plans to sell approximately $144.2 million of additional receivables

The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements