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Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 288 added, 222 removed, 619 unchanged (45% of the section changed)

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(In thousands, except share and per share

Cash and cash equivalents

23 unchanged sentences

authorized 75,000,000 shares;

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

21,151,966 and 20,131,323 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Retained earnings

10 unchanged sentences

Three Months Ended

Six Months Ended

Interest income

18 unchanged sentences

Three Months Ended

Six Months Ended

Other comprehensive income/(loss);

8 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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Cash paid during the period for:

See accompanying Notes to Unaudited Condensed

Consolidated Financial Statements.

See accompanying Notes to Unaudited Condensed Consolidated

Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC.

3 unchanged sentences

Three Months Ended

Six Months Ended

Common Stock (Shares Outstanding)

18 unchanged sentences

Total Shareholders' Equity

See accompanying Notes to Unaudited Condensed

Consolidated Financial Statements.

See accompanying Notes

to Unaudited Condensed Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

20 unchanged sentences

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

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.

Certain information and footnote disclosures normally

included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America

have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements.

Results for the six-month period ended June 30, 2023 are not necessarily indicative

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

Certain information and footnote disclosures

normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of

America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements.

These Unaudited Condensed Consolidated

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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

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.

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

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

4 unchanged sentences

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 STATEMENTS

We re-evaluate the fair value of such receivables

5 unchanged sentences

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

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, 2023 and 2022:

The following table presents

the primary components of Other Income for the three-month and six-month periods ending June 30, 2023 and 2022:

Schedule of other income

Three Months Ended

Six Months Ended

(In thousands)

Origination and servicing fees from third party receivables

13 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following table presents

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Finance lease

of lease liabilities were as follows:

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

1 unchanged sentence

Lease Liability

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following table presents

2 unchanged sentences

Three Months Ended

Six Months Ended

(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

cash flow information related to leases:

The following table presents

the supplemental cash flow information related to leases:

Supplemental cash flow information related to leases

Three Months Ended

Six Months Ended

(In thousands)

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

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Compensation”.

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 three months ended March 31, 2023:

For the three and six months ended June 30, 2023,

we recorded stock-based compensation costs in the amount of $ 905,000 and $ 1.8 million, respectively.

These stock-based compensation costs

were $ 728,000 and $ 1.5 million for the three and six months ended June 30, 2022.

As of June 30, 2023, unrecognized stock-based compensation

costs to be recognized over future periods equaled $ 7.6 million.

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

of 2.0 years.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following represents stock

option activity for the six months ended June 30, 2023:

Schedule of option activity

5 unchanged sentences

Options exercisable at the end of period

The following table presents the price distribution

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

The following table presents

the price distribution of stock options outstanding and exercisable for the years ended June 30, 2023 and December 31, 2022:

Schedule of stock options outstanding and exercisable

1 unchanged sentence

Number of shares as of

March 31, 2023

June 30, 2023

December 31, 2022

Range of exercise prices:

(In thousands)

Range of exercise prices:

$2.00 - $2.99

5 unchanged sentences

$10.00 - $10.99

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

At March 31, 2023 the aggregate intrinsic value

At June 30, 2023 the aggregate intrinsic value

of options outstanding and exercisable was $ 55.1 million and $ 41.8 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.

There were 2.8 million options exercised for

the six months ended June 30, 2023 compared to 2.9 million 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.

was $ 13.3 million and $ 12.2 million for the six-month periods ended June 30, 2023 and 2022.

There were 2,661,000 shares available for

future stock option grants under existing plans as of June 30, 2023.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Purchases of Company Stock

The table below describes the purchase of our

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

The table below describes

the purchase of our common stock for the six months ended June 30, 2023 and 2022:

Schedule of purchases of company stock

Three Months Ended

March 31, 2023

March 31, 2022

Six Months Ended

June 30, 2023

June 30, 2022

Open market purchases

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

As of March 31, 2023, we were in compliance with all such covenants.

As of June 30, 2023, we were in compliance with all such covenants.

In addition, certain of our debt agreements other than our

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AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Our portfolio of finance receivables

consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on

a portfolio basis according to delinquency status.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(2) Finance Receivables

Our portfolio of finance

receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment

on a portfolio basis according to delinquency status.

Our contract purchase guidelines are designed to produce a homogenous portfolio.

key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from the

average for the portfolio.

For key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from

the average for the portfolio.

We report delinquency on a contractual basis.

Once a contract becomes greater than 90 days delinquent, we do

not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days delinquent.

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

Once a contract becomes greater than 90 days delinquent,

we do not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days

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

to principal reduction.

In January 2018 the Company

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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.

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

past due, as extended where applicable.

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 past due, as extended where applicable.

Automobile contracts less than 31 days delinquent are not included.

In certain circumstances

we will grant obligors one-month payment extensions to assist them with temporary cash flow problems.

The only modification of terms

is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month.

limited cases, a two-month extension may be granted.

circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems.

The only modification

of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month.

certain limited cases, a two-month extension may be granted.

There are no other concessions such as a reduction in interest rate, forgiveness

of principal or of accrued interest.

Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled

debt restructurings.

Automobile finance receivables, net of unearned interest was $ 52.1

million and $ 92.3 million as of March

million and $ 92.3 million as of June

30, 2023 and December 31, 2022, 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, 2023 and December 31, 2022:

3 unchanged sentences

Finance receivables totaling

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

$ 1.1 million and $ 2.0 million at June 30, 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

Allowance for Credit Losses

– Finance Receivables

The allowance for credit losses

1 unchanged sentence

Charge offs are deducted from the allowance when management believes that collectability is unlikely.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Management estimates the allowance

13 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

16 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 March 31, 2023 and December 31, 2022.

The following table presents

the amortized cost basis of our finance receivables by annual vintage as of June 30, 2023 and December 31, 2022.

Schedule of amortized cost basis of finance receivables

2 unchanged sentences

2014 and prior

The following table presents a summary of the

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following table presents

a summary of the activity for the allowance for finance credit losses for the three-month periods ended June 30, 2023 and 2022:

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

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:

The following table presents

the gross charge-offs by year of origination of our finance receivables for the three-month and six-month ended June 30, 2023 and 2022:

Schedule of charge-offs for financed receivables

Three Months Ended

Six 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:

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

3 unchanged sentences

Net repossessed inventory included in other assets

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(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

Final Scheduled Payment Date (1)

Receivables Pledged at

June 30, 2023

Initial Principal

Outstanding Principal at

Weighted Average Contractual Debt

Interest Rate at

June 30, 2023

(Dollars in thousands)

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AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Debt issuance costs of $ 14.5

million and $ 14.2 million as of March 31, 2023 and December 31, 2022, respectively, have been excluded from the table above.

million and $ 14.2 million as of June 30, 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

7 unchanged sentences

of liquidity and not exceed maximum leverage levels.

As of March 31, 2023, we were in compliance with all such covenants.

We are responsible for the administration

and collection of the automobile contracts.

The securitization agreements also require certain funds be held in restricted cash accounts

to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding

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

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.

As of June 30, 2023, we were in compliance with all such covenants.

We are responsible for the

administration and collection of the automobile contracts.

The securitization agreements also require certain funds be held in restricted

cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or

as pre-funding proceeds from a term securitization prior to the purchase of additional collateral.

As of June 30, 2023, restricted cash

under the various agreements totaled approximately $ 148.1 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 March 31, 2023 and December 31, 2022 are summarized below:

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The terms and amounts of our

other debt outstanding at June 30, 2023 and December 31, 2022 are summarized below:

Schedule of debt outstanding

3 unchanged sentences

Warehouse lines of credit

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

3.00% over one month Libor (Minimum 3.75%) 8.38% and 7.48% at June 30, 2023 and December 31, 2022, respectively

4.15% over a commercial paper rate (Minimum 5.15%) 9.41% and 8.60% at June 30, 2023, and December 31, 2022, respectively

Residual interest financing

Subordinated renewable notes

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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

On February 2, 2022, we renewed our two-year revolving

credit agreement with Ares Agent Services, L.P.

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.

Weighted average rate of 7.98% and 7.82% at June 30, 2023 and December 31, 2022, respectively

Weighted average maturity of April 2025 and October 2024 at June 30, 2023 and December 31,

2022, respectively

On February 2, 2022, we renewed our two-year

revolving credit agreement with Ares Agent Services, L.P.

There was $ 144.9 million outstanding under this facility at June 30, 2023.

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.

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.

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

1 unchanged sentence

There was $ 101.9 million outstanding

under this facility at March 31, 2023.

under this facility at June 30, 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.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Unamortized debt issuance costs of $ 251,000 and

$ 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,

$ 377,000 as of June 30, 2023 and December 31, 2022, respectively, have been excluded from the amount reported above for residual interest

Similarly, unamortized debt issuance costs of $ 1.6 million and $ 2.6 million as of June 30, 2023 and December 31, 2022, respectively,

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

2 unchanged sentences

(5) Interest Income and Interest Expense

The following table presents the components of interest

The following table presents

the components of interest income:

Schedule of interest income

Three Months Ended

Six Months Ended

(In thousands)

Interest on finance receivables

2 unchanged sentences

Interest income

The following table presents the components of

interest expense:

The following table presents

the components of interest expense:

Schedule of interest expense

Three Months Ended

Six Months Ended

(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.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(6) Earnings Per Share

Earnings per share for the

three-month and six-month periods ended June 30, 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 and six-month periods ended June 30, 2023 and 2022:

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

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-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.

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 six-month periods ended June 30, 2023 would have included an additional 1.5 million and 1.5 million shares, respectively, attributable

to the exercise of outstanding options and warrants.

For the three-month and six-month periods ended June 30, 2022, 824,000 and 692,000

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 31,2023, 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.

As of June 30, 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.

Deferred tax assets are recognized

subject to management’s judgment that realization is more likely than not.

A valuation allowance is recognized for a deferred tax

asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

Deferred tax assets are

recognized subject to management’s judgment that realization is more likely than not.

A valuation allowance is recognized for a

deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax

asset will not be realized.

In making such judgments, significant weight is given to evidence that can be objectively verified.

Although realization

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

realization is not assured, we believe that the realization of the recognized net deferred tax asset of $ 7.4 million as of June 30, 2023

is more likely than not based on forecasted future net earnings.

Our net deferred tax asset of $7.4 million consists of approximately

$ 4.8 million of net U.S.

federal deferred tax assets and $ 2.6 million of net state deferred tax assets.

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 %.

Income tax expense was $ 4.7

million and $ 9.3 million for the three months and six months ended June 30, 2023, representing effective income tax rates of 25 %, compared

to income tax expense of $ 8.9 million and $ 17.1 million for the three months and six months ended June 30, 2022, and represents an effective

income tax rates of 26 % and 27 % respectively.

(8) Legal Proceedings

Consumer Litigation.

5 unchanged sentences

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

8 unchanged sentences

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.

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.

Wage and Hour

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.

We believe that our compensation practices with respect to our sales representatives

are compliant with applicable law.

In August 2023, the parties settled by agreement the claims of the plaintiff and a California

settlement class and the settlement remains subject to final court approval.

Massachusetts Civil Investigative

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We record at each measurement date, most recently as

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 .

of June 30, 2023, our best estimate of probable incurred losses for legal contingencies, including the matters identified above.

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 June 30, 2023 is $ 3.8 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

June 30, 2023 does not exceed $ 7.3 million.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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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a significant effect on our fair value measurement.

For the quarter ended March

For the quarter ended June

30, 2023, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired

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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:

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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

Six Months Ended

(In thousands)

Balance at beginning of period

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Balance at end of period

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

March 31, 2023

June 30, 2023

December 31, 2022

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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

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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:

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

The following table summarizes

the delinquency status of these finance receivables measured at fair value as of June 30, 2023 and December 31, 2022:

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 March 31, 2023 the finance receivables related to the repossessed

At June 30, 2023 the finance receivables related to the repossessed

vehicles in inventory totaled $1.0 million.

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amount of the repossessed inventory at December 31, 2022 was $1.9 million after applying a valuation adjustment of $1.3 million.

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, 2023 and 2022.

There were no transfers

in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended June 30, 2023 and 2022.

The estimated fair values

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

of financial assets and liabilities at June 30, 2023 and December 31, 2022, were as follows:

Schedule of estimated fair values of financial assets and liabilities

As of March 31, 2023

As of June 30, 2023

Financial Instrument

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Subordinated renewable notes

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

As of December 31, 2022

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Subordinated renewable notes

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(10) Subsequent Events

On April 27, 2023 we executed our second securitization

On July 25, 2023 we executed our third securitization

In the transaction, qualified institutional buyers purchased $291.7 million of asset-backed notes secured by $312.7 million in

automobile receivables originated by CPS.

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 sold notes, issued by CPS Auto Receivables Trust 2023-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 2023-B transaction has initial credit enhancement

The 2023-C transaction has initial credit enhancement

consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 6.70%.

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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