What changed in this filing

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Item 1. Financial Statements

2022-08-08 compared with 2022-05-04 · 166 added, 143 removed, 703 unchanged (31% of the section changed)

30 unchanged sentences

authorized 75,000,000 shares;

21,292,393 and 21,143,764

shares issued and outstanding at March 31, 2022 and

December 31, 2021, respectively

21,206,839 and 21,143,764 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Retained earnings

10 unchanged sentences

Three Months Ended

Six Months Ended

Interest income

6 unchanged sentences

Total operating expenses

Income before income tax expense

Income tax expense

Income before income tax expense (benefit)

Income tax expense (benefit)

Earnings per share:

7 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Other comprehensive income/(loss);

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(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

4 unchanged sentences

Amortization of deferred financing costs

Mark to fair value of finance receivables measured at fair value

Mark to finance receivables measured at fair value

Provision for credit losses

16 unchanged sentences

Payments on subordinated renewable notes

Net advances (repayments) of warehouse lines of credit

Repayment of residual interest financing debt

Net proceeds from (repayments of) warehouse lines of credit

Net proceeds from (repayment of) residual interest financing debt

Repayment of securitization trust debt

3 unchanged sentences

Net cash provided by (used in) financing activities

Increase in cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and restricted cash at beginning of period

9 unchanged sentences

Three Months Ended

Six Months Ended

Common Stock (Shares Outstanding)

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Total Shareholders' Equity

See accompanying Notes to Unaudited Condensed Consolidated Financial

See accompanying Notes to Unaudited Condensed

Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC.

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

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.

Results for the six-month period ended June 30, 2022 are not necessarily indicative

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

Certain information and footnote disclosures normally

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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.

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

Results for the three-month and six-month periods ending June 30, 2022 include a $ 4.7 million and $ 7.1 million positive

mark to the carrying value of the portion of the receivables portfolio accounted for at fair value.

Mark downs of $ 4.4 million were included

in the results for the six months ending June 30, 2021, and the mark down is reflected as a reduction in revenue.

Anticipated credit losses are included in our

8 unchanged sentences

recognize the costs of acquisition as expenses in the period incurred.

The following table presents

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

The following

table presents the primary components of Other Income for the three-month and six-month periods ending June 30, 2022 and 2021:

Schedule of other income

Three Months Ended

Six Months Ended

(In thousands)

Origination and servicing fees from third party receivables

Direct mail revenues

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Finance lease

Maturities of leases

Schedule of maturities of lease liabilities

Maturities of lease liabilities were as follows:

(In thousands)

Year Ending March 31,

Year Ending June 30,

Total undiscounted lease payments

8 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Operating lease cost

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Three Months Ended

Six Months Ended

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 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.

For the three and six months ended June 30, 2022,

we recorded stock-based compensation costs in the amount of $ 1.5 million and $ 728,000 , respectively.

These stock-based compensation costs

were $ 327,000 and $ 735,000 for the three and six months ended June 30, 2021.

As of June 30, 2022, unrecognized stock-based compensation

costs to be recognized over future periods equaled $ 12.4 million.

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

of 2.7 years.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following represents stock option activity

for the three months ended March 31, 2022:

for the six months ended June 30, 2022:

Share-based payment arrangement option activity

4 unchanged sentences

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 March 31, 2022 and December 31, 2021:

of stock options outstanding and exercisable as of June 30, 2022 and December 31, 2021:

Schedule of stock options outstanding and exercisable

1 unchanged sentence

Number of shares as of

March 31, 2022

June 30, 2022

December 31, 2021

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$8.00 - $11.00

At March 31, 2022 the aggregate intrinsic value

At June 30, 2022 the aggregate intrinsic value

of options outstanding and exercisable was $ 57.8 million and $ 42.1 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.

There were 2.9 million options exercised for

the six months ended June 30, 2022 compared to 676,000 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.

was $ 12.2 million and $ 1.9 million for the six-month periods ended June 30, 2022 and 2021.

There were 2,661,000 shares available for future

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

stock option grants under existing plans as of June 30, 2022.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Purchases of Company Stock

The table below describes the purchase of our

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

common stock for the six months ended June 30, 2022 and 2021:

Schedule of purchases of company stock

Three Months Ended

March 31, 2022

March 31, 2021

Six Months Ended

June 30, 2022

June 30, 2021

Open market purchases

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Financial Covenants

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

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

As of June 30, 2022, we were in compliance with all such covenants.

In addition, certain of our debt agreements other than our

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is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

Coronavirus Pandemic

In December 2019, a new strain

of coronavirus (the “COVID-19 virus”) originated in Wuhan, China.

Since its discovery, the COVID-19 virus has spread throughout

the world, and the outbreak has been declared to be a pandemic by the World Health Organization.

We refer from time to time in this report

to the outbreak and spread of the COVID-19 virus as “the pandemic.”

We measure our portfolio of finance receivables

carried at fair value with consideration for unobservable inputs that reflect our own assumptions about the factors that market participants

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

(2) Finance Receivables

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

We consider an automobile contract delinquent

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Automobile finance receivables, net of unearned interest was $ 149.0

million and $ 232.4 million as of March

million and $ 232.4 million as of June

30, 2022 and December 31, 2021, respectively.

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

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

30, 2022 and December 31, 2021:

1 unchanged sentence

(In thousands)

Delinquency Status

Deliquency Status

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,

$ 2.2 million and $ 2.7 million at June 30, 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.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

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

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The following table presents the amortized cost

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

basis of our finance receivables by annual vintage as of June 30, 2022 and 2021.

Schedule of amortized cost basis of finance receivables

2 unchanged sentences

2012 and prior

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents a summary of the

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

activity for the allowance for finance credit losses for the three-month periods ended June 30, 2022 and 2021:

Schedule of allowance for finance credit losses

Three Months Ended

Six Months Ended

(In thousands)

Balance at beginning of period

1 unchanged sentence

Balance at end of period

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

18 unchanged sentences

Schedule of Long-term Debt Instruments

at December 31,

Average Contractual

Interest Rate

(Dollars in thousands)

December 2023

September 2024

December 2024

September 2025

September 2026

December 2026

November 2027

September 2028

December 2028

_________________

7 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 $ 13.4

million and $ 12.0 million as of June 30, 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

All of the securitization trust

6 unchanged sentences

of liquidity and not exceed maximum leverage levels.

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

As of June 30, 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 March 31, 2022, restricted cash under the various

As of June 30, 2022, restricted cash under the various

agreements totaled approximately $ 157.0 million.

19 unchanged sentences

The terms and amounts of our other debt outstanding

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

at June 30, 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

4.15% over a commercial paper rate (Minimum 5.15%)

2 unchanged sentences

Subordinated renewable notes

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,

Weighted average rate of 7.97% and 8.93% at June 30, 2022 and December 31, 2021, respectively

Weighted average maturity of June

2024 and January

2024 at June 30, 2022 and December 31, 2021, respectively

CONSUMER PORTFOLIO SERVICES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

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.

On February 2, 2022, we renewed our two-year revolving credit agreement with Ares Agent Services, L.P.

was $ 130.8 million outstanding under this facility at June 30, 2022.

On June 28, 2022, we increased the capacity of its credit agreement

with Ares Agent Services, L.P.

from $ 100 million to $ 200 million.

The revolving period for this facility was extended to January 2024

followed by an amortization period through January 2028 for any receivables pledged at the end of the revolving period.

Unamortized debt issuance costs of $ 503,000 and

$ 629,000 as of June 30, 2022 and December 31, 2021, respectively, have been excluded from the amount reported above for residual interest

Similarly, unamortized debt issuance costs of $ 1.7 million and $ 400,000 as of June 30, 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

Six Months Ended

(In thousands)

Interest on finance receivables

Interest on finance receivables at fair value

Mark to finance receivables measured at fair value

Other interest income

4 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Securitization trust debt

7 unchanged sentences

(6) Earnings Per Share

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:

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

periods ended June 30, 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

and six-month periods ended June 30, 2022 and 2021:

Computation of earnings per share

Three Months Ended

Six Months Ended

(In thousands)

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

2 unchanged sentences

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

equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and six-month periods

ended June 30, 2022 would have included an additional 824,000 and 692,000 shares, respectively, attributable to the exercise of outstanding

options and warrants.

For the three-month and six-month periods ended June 30, 2021, an additional 6 .0 million and 6.9 million shares,

respectively, would be included in the diluted earnings per share calculation.

(7) Income Taxes

3 unchanged sentences

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

As of March 31,2022, and December

As of June 30, 2022, and December

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

10 unchanged sentences

income in the period that includes the enactment date.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Deferred tax assets are recognized

4 unchanged sentences

Although realization

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

is not assured, we believe that the realization of the recognized net deferred tax asset of $ 17,523 17.5 million as of June 30, 2022 is more

likely than not based on forecasted future net earnings.

2 unchanged sentences

Income tax expense was $ 8.9

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

million and $ 17.1 million for the three months and six months ended June 30, 2022, representing effective income tax rates of 26 % and

27 %, respectively, compared to income tax expense of $ 4.2 million and $ 6.9 million for the three months and six months ended June 30,

2021, and represents an effective income tax rates of 30 % and 32 % respectively.

(8) Legal Proceedings

27 unchanged sentences

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

We believe that our compensation

practices with respect to our sales representatives are compliant with applicable law.

Accordingly, we have defended and intend to continue

to defend this lawsuit.

We believe that our compensation practices

with respect to our sales representatives are compliant with applicable law.

Accordingly, we have defended and intend to continue to defend

this lawsuit.

Massachusetts Civil Investigative Demand .

3 unchanged sentences

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

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

We record at each measurement date, most recently as

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

consumer claims.

of June 30, 2022, our best estimate of probable incurred losses for legal contingencies, including the matters identified above, and consumer

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 March 31, 2022 is $3.4 million,

However, based on such information as

is available to us, we believe that the total of probable incurred losses for legal contingencies as of June 30, 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 March 31, 2022 does not exceed $11.3 million.

above, as of June 30, 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

16 unchanged sentences

a significant effect on our fair value measurement.

For the quarter ended March

For the quarter ended June

30, 2022, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired

1 unchanged sentence

and did not record a mark down to that portfolio.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The table below presents a reconciliation of

2 unchanged sentences

Three Months Ended

Six Months Ended

(In thousands)

Balance at beginning of period

7 unchanged sentences

Finance receivables fair and contractual balances

March 31, 2022

June 30, 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

11 unchanged sentences

10.0% - 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 March 31, 2022 and December 31, 2021:

status of these finance receivables measured at fair value as of June 30, 2022 and December 31, 2021:

Schedule of delinquency status of finance receivables measured at fair value

4 unchanged sentences

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

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

At June 30, 2022 the finance receivables related to the repossessed

vehicles in inventory totaled $ 3.0 million.

4 unchanged sentences

There were no transfers in

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

or out of level 1, level 2 or level 3 assets and liabilities for the three months ended June 30, 2022 and 2021.

The estimated fair values of financial assets

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

and liabilities at June 30, 2022 and December 31, 2021, were as follows:

Schedule of estimated fair values of financial assets and liabilities

As of March 31, 2022

As of June 30, 2022

Financial Instrument

25 unchanged sentences

(10) Subsequent Events

On April 20, 2022 we executed our second securitization

On July 15, 2022, we renewed our two-year revolving

credit agreement with Citibank, N.A., and doubled the capacity from $100 million to $200 million.

There was $99.9 million outstanding

under this facility at June 30, 2022.

The revolving period for this facility was extended to July 2024 followed by an amortization period

through July 2025 for any receivables pledged at the end of the revolving period.

On August 3, 2022 we executed our third securitization

In the transaction, qualified institutional buyers purchased $391.6 million of asset-backed notes secured by $440.0 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 sold notes, issued by CPS Auto Receivables Trust 2022-C, consist of five classes.

of the notes were provided by Standard & Poor’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

The 2022-B transaction has initial credit enhancement

The 2022-C transaction has initial credit enhancement

consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 11.00%.

4 unchanged sentences

sold approximately $368.0 million of receivables at inception and plans to sell approximately $72.0 million of additional receivables

in August 2022.

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