What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-10 compared with 2022-11-14 · 231 added, 295 removed, 610 unchanged (46% of the section changed)

4 unchanged sentences

(In thousands, except share and per share data)

September 30,

Cash and cash equivalents

6 unchanged sentences

Deferred tax assets, net

Accrued interest receivable

LIABILITIES AND SHAREHOLDERS' EQUITY

15 unchanged sentences

authorized 75,000,000 shares;

20,607,286 and 21,143,764 shares issued

and outstanding at September 30, 2022 and December 31, 2021, respectively

20,496,144 and 20,131,323 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Retained earnings

10 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Interest income

18 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Other comprehensive income/(loss);

8 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Accretion of deferred acquisition fees and origination costs

Net interest income accretion on fair value receivables

4 unchanged sentences

Stock-based compensation expense

Purchases of finance receivables held-for-sale

Sale of finance receivables held-for-sale

Changes in assets and liabilities:

Accrued interest receivable

Deferred tax assets, net

4 unchanged sentences

Purchases of finance receivables measured at fair value

( 1,311,735 )

Payments received on finance receivables at fair value

12 unchanged sentences

Exercise of options and warrants

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

Net cash provided by financing activities

Increase in cash and cash equivalents

Cash and restricted cash at beginning of period

9 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Common Stock (Shares Outstanding)

18 unchanged sentences

Total Shareholders' Equity

See accompanying Notes to Unaudited Condensed

Consolidated Financial Statements.

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, 2022 are not necessarily

Results for the three-month period ended March 31, 2023 are not necessarily

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

12 unchanged sentences

at Fair Value

Effective January 1, 2018, we adopted the fair

value method of accounting for finance receivables acquired on or after that date.

For each finance receivable acquired after 2017, we

consider the price paid on the purchase date as the fair value for such receivable.

We estimate the cash to be received in the future

with respect to such receivables, based on our experience with similar receivables acquired in the past.

We then compute the internal

rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value.

we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest

Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value

of the receivables.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Effective January 1, 2018, we adopted the

fair value method of accounting for finance receivables acquired on or after that date.

For each finance receivable acquired after

2017, we consider the price paid on the purchase date as the fair value for such receivable.

We estimate the cash to be

received in the future with respect to such receivables, based on our experience with similar receivables acquired in the

We then compute the internal rate of return that results in the present value of those estimated cash receipts being

equal to the purchase date fair value.

Thereafter, we recognize interest income on such receivables on a level yield basis using

that internal rate of return as the applicable interest rate.

Cash received with respect to such receivables is applied first

against such interest income, and then to reduce the recorded value of the receivables.

We re-evaluate the fair value of such receivables

2 unchanged sentences

would be required.

Results for the three-month and nine-month periods ending September 30, 2022 include a $ 8.2 million and $ 15.3 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 nine months ending September 30, 2021.

Results for the first quarter include no mark down reversal to the carrying value of the portion of the receivables

portfolio accounted for at fair value.

Mark downs are 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, 2022 and 2021:

of Other Income for the three-month periods ending March 31, 2023 and 2022:

Schedule of other income

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Origination and servicing fees from third party receivables

Direct mail revenues

Convenience fee revenue

Recoveries on previously charged-off contracts

Sales tax refunds

15 unchanged sentences

Supplemental balance sheet information related to leases

September 30,

(In thousands)

12 unchanged sentences

Finance lease

Maturities of lease liabilities were as follows:

Schedule of maturities of lease liabilities

Maturities of lease liabilities were as follows:

(In thousands)

Year Ending September 30,

Year Ending March 31,

Total undiscounted lease payments

1 unchanged sentence

Lease Liability

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Operating lease cost

1 unchanged sentence

Total lease cost

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents the supplemental

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

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

(In thousands)

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

Operating cash flows from operating leases

5 unchanged sentences

Compensation”.

For the three and nine months ended September

30, 2022, we recorded stock-based compensation costs in the amount of $ 1.4 million and $ 3.0 million , respectively.

These stock-based compensation

costs were $ 530,000 and $ 1.3 million for the three and nine months ended September 30, 2021.

As of September 30, 2022, unrecognized stock-based

compensation costs to be recognized over future periods equaled $ 10.9 million .

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

period of 2.6 years.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

For the three months ended March 31, 2023 and

2022, we recorded stock-based compensation costs in the amount of $ 912,000 and $ 790,000 , respectively.

As of March 31, 2023, unrecognized

stock-based compensation costs to be recognized over future periods equaled $ 8.6 million .

This amount will be recognized as expense over

a weighted-average period of 2.2 years.

The following represents stock option activity

for the nine months ended September 30, 2022:

Share-based payment arrangement option activity

for the three months ended March 31, 2023:

Schedule of option activity

(in thousands)

5 unchanged sentences

The following table presents the price distribution

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

of stock options outstanding and exercisable for the years ended March 31, 2023 and December 31, 2022:

Schedule of stock options outstanding and exercisable

1 unchanged sentence

Number of shares as of

September 30, 2022

March 31, 2023

December 31, 2022

Range of exercise prices:

(In thousands)

$0.95 - $1.99

Range of exercise prices:

$2.00 - $2.99

5 unchanged sentences

$10.00 - $10.99

At September 30, 2022 the aggregate intrinsic

value of options outstanding and exercisable was $ 29.2 million and $ 22.7 million , respectively.

There were 2,974,223 million options exercised for the nine months ended September 30, 2022 compared to 1,054,541 for the comparable period in 2021.

The total intrinsic value of options

exercised was $ 23.1 million and $ 3.0 million for the nine-month periods ended September 30, 2022 and 2021.

There were 2,691,000 shares

available for future stock option grants under existing plans as of September 30, 2022.

CONSUMER PORTFOLIO SERVICES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

At March 31, 2023 the aggregate intrinsic value

of options outstanding and exercisable was $ 56.5 million and $ 43.0 million , respectively.

There were 1,086,000 options exercised for the

three months ended March 31, 2023 compared to 1,366,000 for the comparable period in 2022.

The total intrinsic value of options exercised

was $ 3.8 million and $ 10.2 for the three-month periods ended March 31, 2023 and 2022.

There were 2,661,000 shares available for future

stock option grants under existing plans as of March 31, 2023.

Purchases of Company Stock

The table below describes the purchase of our

common stock for the nine-month ended September 30, 2022 and 2021:

common stock for the three months ended March 31, 2023 and 2022:

Schedule of purchases of company stock

Nine Months Ended

September 30, 2022

September 30, 2021

Three Months Ended

March 31, 2023

March 31, 2022

Open market purchases

10 unchanged sentences

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

As of September 30, 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.

As of March 31, 2023, 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

3 unchanged sentences

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

(2) Finance Receivables

Adoption of New Accounting Standards

In March 2022, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update ("ASU") 2022-02, known as the Financial Instruments – Credit

Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures.

ASU 2022-02 eliminates the accounting guidance for TDRs in ASC

310-40 on troubled debt restructurings for entities that have adopted the CECL model introduced by ASU 2016-13, Current Expected Credit

ASU 2022-02 also requires that public business entities disclose current-period gross charge offs by year of origination for financing

receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured

at Amortized Cost.

This guidance is effective for fiscal years beginning after December 15, 2022, and the adoption of this guidance did

not have a material impact on the condensed consolidated financial statements.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Our portfolio of finance receivables

8 unchanged sentences

Any payments received on a contract that is greater than 90 days delinquent are first applied to accrued interest and then to principal

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

In January 2018 the Company

2 unchanged sentences

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

We consider an automobile contract

delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been

extended within limits specified in the servicing agreements.

We consider an automobile contract delinquent

when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended

within limits specified in the servicing agreements.

The period of delinquency is based on the number of days payments are contractually

11 unchanged sentences

Automobile finance receivables, net of unearned interest was $ 69.5

million and $ 232.4 million as of September

million and $ 92.3 million as of March

31, 2023 and December 31, 2022, respectively.

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

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

31, 2023 and December 31, 2022:

Schedule of delinquency status of finance receivables

September 30,

(In thousands)

1 unchanged sentence

Finance receivables totaling

$ 2.5 million and $ 2.7 million at September 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.

Allowance for Credit Losses

– Finance Receivables

$ 1.2 million and $ 2.0 million at March 31, 2023 and December 31, 2022, respectively, including all receivables greater than 90 days delinquent,

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

for Credit Losses – Finance Receivables

The allowance for credit losses

16 unchanged sentences

older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Our contract purchase guidelines

6 unchanged sentences

between various segments of our portfolio.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Our methodology incorporates

8 unchanged sentences

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

The following table presents

the amortized cost basis of our finance receivables by annual vintage as of September 30, 2022 and December 31, 2021.

The following table presents the amortized cost

basis of our finance receivables by annual vintage as of March 31, 2023 and December 31, 2022.

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, 2022 and 2021:

activity for the allowance for finance credit losses for the three-month periods ended March 31, 2023 and 2022:

Schedule of allowance for finance credit losses

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Balance at beginning of period

1 unchanged sentence

Balance at end of period

Excluded from finance receivables are contracts that were previously

classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle securing the Contract.

The following table presents a summary of such repossessed inventory together with the allowance for losses in repossessed inventory

that is not included in the allowance for finance credit losses:

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents the gross charge-offs

by year of origination of our finance receivables for the three-month periods ended March 31, 2023 and 2022:

Schedule of charge-offs for financed receivables

Three Months Ended

Annual Vintage Pool

(In thousands)

2014 and prior

Applied against repos in inventory (net)

Excluded from finance receivables are contracts

that were previously classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle

securing the Contract.

The following table presents a summary of such repossessed inventory together with the allowance for losses in

repossessed inventory that is not included in the allowance for finance credit losses:

Schedule of allowance for losses on repossessed inventory

September 30,

(In thousands)

2 unchanged sentences

Net repossessed inventory included in other assets

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(3) Securitization Trust Debt

We have completed many securitization

transactions that are structured as secured borrowings for financial accounting purposes.

The debt issued in these transactions is shown

on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are

summarized in the following table:

We have completed many securitization transactions

that are structured as secured borrowings for financial accounting purposes.

The debt issued in these transactions is shown on our Unaudited

Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the

following table:

Schedule of Long-term Debt Instruments

Contractual Debt

Interest Rate at

September 30,

Contractual Debt Interest

(Dollars in thousands)

1 unchanged sentence

September 2025

December 2024

September 2026

December 2026

2 unchanged sentences

December 2028

November 2030

_________________

11 unchanged sentences

Debt issuance costs of $ 14.4

million and $ 12.0 million as of September 30, 2022 and December 31, 2021, 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 Consolidated Balance

million and $ 14.2 million as of March 31, 2023 and December 31, 2022, 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 September 30, 2022, we were in compliance with all such covenants.

As of March 31, 2023, 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, 2022, restricted cash under the

various agreements totaled approximately $ 159.8 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, 2023, restricted cash under the various

agreements totaled approximately $ 158.9 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

9 unchanged sentences

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, 2022 and December 31, 2021 are summarized below:

The terms and amounts of our other debt outstanding

at March 31, 2023 and December 31, 2022 are summarized below:

Schedule of debt outstanding

Amount Outstanding at

September 30,

(In thousands)

1 unchanged sentence

Warehouse lines of credit

3.00% over one month Libor (Minimum 3.75%)

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

Residual interest financing

3.00% over one month Libor (Minimum 3.75%) 7.99% and 7.48% at March 31, 2023 and December 31, 2022, respectively

4.15% over a commercial paper rate (Minimum 5.15%) 9.09% and 8.60% at March 31, 2023, and December 31, 2022, respectively

Residual interest financing

Subordinated renewable notes

Weighted average rate of 7.67 % and 8.93 % at September 30, 2022 and December 31, 2021, respectively

Weighted average maturity of July 2024 and January 2024 at September 30, 2022

and December 31, 2021, respectively

Weighted average rate of 7.95% and 7.82% at March 31, 2023 and December 31, 2022, respectively

Weighted average maturity of December 2024 and October 2024 at March 31, 2023 and December 31, 2022, respectively

CONSUMER PORTFOLIO SERVICES, INC.

3 unchanged sentences

credit agreement with Ares Agent Services, L.P.

There was $ 106.9 million outstanding under this facility at September 30, 2022.

There was $ 119.1 million outstanding under this facility at March 31, 2023.

2022, we increased the capacity of its credit agreement with Ares Agent Services, L.P.

6 unchanged sentences

There was $ 168.8 million outstanding

under this facility at September 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

under this facility at March 31, 2023.

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.

Unamortized debt issuance costs of $ 314,000 and

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

interest financing.

Similarly, unamortized debt issuance costs of $ 3.0 million and $ 400 ,000 as of September 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.

$ 377,000 as of March 31, 2023 and December 31, 2022, respectively, have been excluded from the amount reported above for residual interest

Similarly, unamortized debt issuance costs of $ 2.1 million and $ 2.6 million as of March 31, 2023 and December 31, 2022, 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

6 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Securitization trust debt

3 unchanged sentences

Interest expense

(6) Earnings Per Share

Earnings per share for the three-month periods

ended March 31, 2023 and 2022 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, 2023 and 2022:

CONSUMER PORTFOLIO SERVICES, INC.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(6) Earnings Per Share

Earnings per share for the

three-month and nine-month periods ended September 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 nine-month periods ended September 30, 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

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-month and nine-month

periods ended September 30, 2022 would have included an additional 1.7 million and 1.0 million shares, respectively, attributable to the

exercise of outstanding options and warrants.

For the three-month and nine-month periods ended September 30, 2021, an additional 5.6 million

and 5.8 million shares, respectively, would be included in the diluted earnings per share calculation.

of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-months ended

March 31, 2023 and 2022 would have included an additional 1.7 million and 558,000 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.

As of September 30, 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.

As of March 31,2023, and December

31, 2022, 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

7 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 $ 14.6 million as of September 30, 2022 is

more likely than not based on forecasted future net earnings.

Our net deferred tax asset of $14.6 million consists of approximately $ 8.3

million of net U.S.

is not assured, we believe that the realization of the recognized net deferred tax asset of $ 9.8 million as of March 31, 2023 is more

likely than not based on forecasted future net earnings.

Our net deferred tax asset of $9.8 million consists of approximately $ 6.7 million

federal deferred tax assets and $ 3.1 million of net state deferred tax assets.

Income tax expense was $ 8.9

million and $ 26.0 million for the three months and nine months ended September 30, 2022, representing effective income tax rates of 26 %

and 27 %, respectively, compared to income tax expense of $ 5.9 million and $ 12.8 million for the three months and nine months ended September

30, 2021, and represents an effective income tax rates of 30 % and 31 % respectively.

(8) Legal Proceedings

Income tax expense was $ 4.6 million for the three months ended March 31, 2023, representing effective income tax rates of 25 %.

For the prior year period, income tax

expense was $ 8.2 million for the three months ended March 31, 2022 representing an effective tax rate of 28 %.

Consumer Litigation.

3 unchanged sentences

such lawsuits sometimes allege that resolution as a class action is appropriate.

For the most part, we have

legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular

circumstances of each case.

There are as of the date of this report two civil actions that could possibly result in a material liability,

if resolved adversely and on a class basis, as the respective plaintiffs allege would be appropriate.

Following our filing of a

complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim alleging that our

deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles

we had repossessed.

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

an individual basis, not a class basis.

For the most part, we have legal and factual defenses

to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Following our filing of a complaint

for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim alleging that our deficiency

notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had

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

basis, not a class basis.

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.

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.

On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that

we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain

other employee protective provisions of California and federal law.

The complaint seeks injunctive relief, an award of unpaid wages, liquidated

damages, and attorney fees and interest.

On September 24,

2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified

our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective

provisions of California and federal law.

The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney

fees and interest.

The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees.

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.

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.

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.

Massachusetts Civil Investigative

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 the inquiry.

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, 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, 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, 2022 does not exceed $11.3 million.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

of March 31, 2023, our best estimate of probable incurred losses for legal contingencies, including the matters identified above.

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, 2023 is $ 4.9 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, 2023 does not exceed $ 11.2 million .

Accordingly, we believe that

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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

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and the rate of amortization of the portfolio of finance receivable.

Significant changes in any of those

inputs in isolation would have a significant effect on our fair value measurement.

For the quarter ended September

Significant changes in any of those inputs in isolation would have

a significant effect on our fair value measurement.

For the quarter ended March

31, 2023, 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.

The table below presents a

reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:

The table below presents a reconciliation of

the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:

Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Balance at beginning of period

4 unchanged sentences

Balance at end of period

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The table below compares the

fair values of these finance receivables to their contractual balances for the periods shown:

The table below compares the fair values of these

finance receivables to their contractual balances for the periods shown:

Finance receivables fair and contractual balances

September 30, 2022

March 31, 2023

December 31, 2022

1 unchanged sentence

Finance receivables measured at fair value

The following table provides

certain qualitative information about our level 3 fair value measurements:

The following table provides certain qualitative

information about our level 3 fair value measurements:

Schedule of level 3 fair value measurements

1 unchanged sentence

Fair Values as of

September 30,

Unobservable Inputs

(In thousands)

1 unchanged sentence

Discount rate

11.0% - 11.5%

11.0% - 11.3%

Cumulative net losses

1 unchanged sentence

13.4% - 19.4%

The following table summarizes

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

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, 2023 and December 31, 2022:

Schedule of delinquency status of finance receivables measured at fair value

September 30,

(In thousands)

3 unchanged sentences

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

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

At March 31, 2023 the finance receivables related to the repossessed

vehicles in inventory totaled $1.4 million.

We have applied a valuation adjustment, or loss allowance, of $1.5 million, which is based

on a recovery rate of approximately 34%, resulting in an estimated fair value and carrying amount of $776,000.

We have applied a valuation adjustment, or loss allowance, of $933,000, which is based on

a recovery rate of approximately 34%, resulting in an estimated fair value and carrying amount of $470,000.

The fair value and carrying

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There were no transfers in

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The estimated fair values of

financial assets and liabilities at September 30, 2022 and December 31, 2021, were as follows:

or out of level 1, level 2 or level 3 assets and liabilities for the three months ended March 31, 2023 and 2022.

The estimated fair values

of financial assets and liabilities at March 31, 2023 and December 31, 2022, were as follows:

Schedule of estimated fair values of financial assets and liabilities

As of September 30, 2022

As of March 31, 2023

Financial Instrument

19 unchanged sentences

Warehouse lines of credit

Residual interest financing

Accrued interest payable

1 unchanged sentence

Subordinated renewable notes

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(10) Subsequent Events

On August 3, 2022 we executed our third securitization

On April 27, 2023 we executed our second securitization

In the transaction, qualified institutional buyers purchased $332.9 million of asset-backed notes secured by $369.9 million in

automobile receivables originated by CPS.

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 sold notes, issued by CPS Auto Receivables Trust 2023-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 7.17%.

The 2022-C transaction has initial credit enhancement

The 2023-B transaction has initial credit enhancement

consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 10.00%.

2 unchanged sentences

receivable pool balance, or 25.00% of the then outstanding pool balance.

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

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

The transaction was a private offering of securities, not registered

under the Securities Act of 1933, or any state securities law.

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