What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-08 · 273 added, 258 removed, 649 unchanged (45% of the section changed)

3 unchanged sentences

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share

(In thousands, except share and per share data)

September 30,

Cash and cash equivalents

23 unchanged sentences

authorized 75,000,000 shares;

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

21,113,152 and 20,131,323 shares issued and

outstanding at September 30, 2023 and December 31, 2022, respectively

Retained earnings

10 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Interest income

18 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Other comprehensive income/(loss);

change in funded status of pension plan

change in funded status of pension

Comprehensive income

6 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

13 unchanged sentences

Purchases of finance receivables measured at fair value

( 1,311,735 )

Payments received on finance receivables at fair value

18 unchanged sentences

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

Nine Months Ended

September 30,

Common Stock (Shares Outstanding)

22 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(1) Summary of Significant Accounting Policies

20 unchanged sentences

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

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.

Results for the nine-month period ended September 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

12 unchanged sentences

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

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.

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.

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

2 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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 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.

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 six-month periods ending June 30, 2023 and 2022:

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

Schedule of other income

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

15 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents

the supplemental balance sheet information related to leases:

Supplemental balance sheet information related to leases

Schedule of supplemental balance sheet information related to

September 30,

(In thousands)

12 unchanged sentences

Finance lease

of lease liabilities were as follows:

Maturities of lease liabilities were as

Schedule of maturities of lease liabilities

(In thousands)

Year Ending June 30,

Year Ending September 30,

Total undiscounted lease payments

3 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

The following table presents

the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:

Lease information

Schedule of lease information

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

5 unchanged sentences

the supplemental cash flow information related to leases:

Supplemental cash flow information related to leases

Schedule of supplemental cash flow information related to leases

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

8 unchanged sentences

Compensation”.

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:

For the three and nine months

ended September 30, 2023, we recorded stock-based compensation costs in the amount of $ 816,000

and $ 2.6 million, respectively.

These stock-based compensation costs were $ 1.4

million and $ 3 .0 million for

the three and nine months ended September 30, 2022.

As of September 30, 2023, unrecognized stock-based compensation costs to be recognized

over future periods equaled $ 6.8

This amount will be recognized as expense over a weighted-average period of 2.0

The following represents

stock option activity for the nine months ended September 30, 2023:

Schedule of option activity

5 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 June 30, 2023 and December 31, 2022:

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

Schedule of stock options outstanding and exercisable

1 unchanged sentence

Number of shares as of

June 30, 2023

September 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

At June 30, 2023 the aggregate intrinsic value

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

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 $ 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

At September 30, 2023 the aggregate intrinsic

value of options outstanding and exercisable was $ 35.3 million and $ 30.5 million, respectively.

There were 2.8 million options exercised

for the nine months ended September 30, 2023 compared to 3 .0 million for the comparable period in 2022.

The total intrinsic value of options

exercised was $ 13.5 million and $ 23.1 million for the nine-month periods ended September 30, 2023 and 2022.

There were 2,661,000 shares

available for future stock option grants under existing plans as of September 30, 2023.

Purchases of Company Stock

The table below describes

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

the purchase of our common stock for the nine-month ended September 30, 2023 and 2022:

Schedule of purchases of company stock

Six Months Ended

June 30, 2023

June 30, 2022

Nine Months Ended

September 30, 2023

September 30, 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 June 30, 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.

As of September 30, 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.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Provision for Contingent

1 unchanged sentence

in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued.

counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it

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

counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that

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

Adoption of New Accounting Standards

9 unchanged sentences

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

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

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 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.

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.

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

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

to principal reduction.

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

In January 2018 the Company

15 unchanged sentences

Automobile finance receivables, net of unearned interest was $ 38.5

million and $ 92.3 million as of June

million and $ 92.3 million as of September

30, 2023 and December 31, 2022, respectively.

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

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

30, 2023 and December 31, 2022:

Schedule of delinquency status of finance receivables

September 30,

(In thousands)

Deliquency Status

Delinquency Status

Balance at end of period

Finance receivables totaling

$ 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.

$ 1.4 million

and $ 2.0 million

at September 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.

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Allowance for Credit Losses

3 unchanged sentences

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

32 unchanged sentences

The following table presents

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

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

Schedule of amortized cost basis of finance receivables

September 30,

(In thousands)

3 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

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 June 30, 2023 and 2022:

a summary of the activity for the allowance for finance credit losses for the three-month and nine-month periods ended September 30,

2023 and 2022:

Schedule of allowance for finance credit losses

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

Balance at end of period

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:

The following table presents the gross charge-offs

by year of origination of our finance receivables for the three-month and nine-month ended September 30, 2023 and 2022:

Schedule of charge-offs for financed receivables

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Annual Vintage Pool

9 unchanged sentences

Schedule of allowance for losses on repossessed inventory

September 30,

(In thousands)

4 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(3) Securitization Trust Debt

4 unchanged sentences

summarized in the following table:

Schedule of Long-term Debt Instruments

Final Scheduled Payment Date (1)

Receivables Pledged at

June 30, 2023

Initial Principal

Outstanding Principal at

Weighted Average Contractual Debt

Schedule of securitization trust debt

Contractual Debt

Interest Rate at

June 30, 2023

September 30,

(Dollars in thousands)

7 unchanged sentences

November 2030

February 2031

_________________

9 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Debt issuance costs of $ 14.5

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

million and $ 14.2 million as of September 30, 2023 and December 31, 2022, 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

All of the securitization trust

6 unchanged sentences

of liquidity and not exceed maximum leverage levels.

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.

As of September 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 September 30, 2023, restricted cash under the

various agreements totaled approximately $ 142.1 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.

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:

The terms and amounts of

our other debt outstanding at September 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%) 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

3.00% over one month Libor (Minimum 3.75%) 8.59% and 7.48%

at September 30, 2023 and December 31, 2022, respectively

4.15% over a commercial paper rate (Minimum 5.15%) 9.60% and 8.60% at

September 30, 2023, and December 31, 2022, respectively

Residual interest financing

Subordinated renewable notes

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.

Weighted average rate of 8.16% and 7.82% at September

30, 2023 and December 31, 2022, respectively

average maturity of July 2025 and October 2024 at September 30, 2023 and December 31, 2022,

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 $ 163.5 million outstanding under this facility at September 30, 2023.

28, 2022, we increased the capacity of its credit agreement with Ares Agent Services, L.P.

from $ 100 million to $ 200 million.

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.

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.

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

1 unchanged sentence

There was $ 78.0 million outstanding

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

under this facility at September 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.

Unamortized debt issuance costs of $ 188,000 and

$ 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.

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 September 30, 2023 and December 31, 2022, respectively, have been excluded from the amount reported above for residual

interest financing.

Similarly, unamortized debt issuance costs of $ 1.1 million and $ 2.6 million as of September 30, 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

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

7 unchanged sentences

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(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

three-month and nine-month periods ended September 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

share for the three-month and nine-month periods ended September 30, 2023 and 2022:

Schedule of earnings per share

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In thousands)

3 unchanged sentences

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

If the anti-dilutive

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

and 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.

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, 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 nine-month periods ended September 30, 2022, 1.7 million and 1 .0

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 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.

As of September 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

9 unchanged sentences

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.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

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

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

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.

Although realization

is not assured, we believe that the realization of the recognized net deferred tax asset of $ 5.8 million as of September 30, 2023 is more

likely than not based on forecasted future net earnings.

Our net deferred tax asset of $5.8 million consists of approximately $ 3.5 million

federal deferred tax assets and $ 2.3 million of net state deferred tax assets.

Income tax expense was $ 3.8

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.

million and $ 13.1 million for the three months and nine months ended September 30, 2023, representing effective income tax rates of 27 %

and 26 % respectively, compared to income tax expense of $ 8.9 million and $ 26.0 million for the three months and nine months ended September

30, 2022, and represents an effective income tax rates of 26 % and 27 % respectively.

(8) Legal Proceedings

7 unchanged sentences

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

for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019 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 complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees

and interest.

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

5 unchanged sentences

will be on a class basis.

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.

Wage and Hour Claim.

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

3 unchanged sentences

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 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

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

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, 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 September 30, 2023 does not exceed $ 7.3 million.

Accordingly, we believe that

37 unchanged sentences

a significant effect on our fair value measurement.

For the quarter ended June

For the quarter ended September

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

3 unchanged sentences

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:

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

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

Nine Months Ended

September 30,

(In thousands)

6 unchanged sentences

Balance at end of period

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

June 30, 2023

The table below compares

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

Schedule of finance receivables fair and contractual balances

September 30, 2023

December 31, 2022

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Fair Values as of

September 30,

Unobservable Inputs

(In thousands)

6 unchanged sentences

13.4% - 19.4%

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

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:

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

Schedule of delinquency status of finance receivables measured at fair value

September 30,

(In thousands)

Delinquency Status

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

Repossessed vehicle inventory,

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

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

vehicles in inventory totaled $1.0 million.

We have applied a valuation adjustment, or loss allowance, of $655,000, which is based on

a recovery rate of approximately 35%, resulting in an estimated fair value and carrying amount of $348,000.

The fair value and carrying

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 June 30, 2023 and 2022.

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

vehicles in inventory totaled $ 604,000 .

We have applied a valuation adjustment, or loss allowance, of $ 444,000 , which is based on a recovery

rate of approximately 26%, resulting in an estimated fair value and carrying amount of $ 160,000 .

The fair value and carrying 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 September 30, 2023 and 2022.

The estimated fair values

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

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

Schedule of estimated fair values of financial assets and liabilities

As of June 30, 2023

As of September 30, 2023

Financial Instrument

10 unchanged sentences

Subordinated renewable notes

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

As of December 31, 2022

10 unchanged sentences

Subordinated renewable notes

CONSUMER PORTFOLIO SERVICES, INC.

AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL

(10) Subsequent Events

On July 25, 2023 we executed our third securitization

On October 24, 2023 we executed our fourth securitization

In the transaction, qualified institutional buyers purchased $286.1 million of asset-backed notes secured by $306.7 million in

automobile receivables originated by CPS.

The sold notes, issued by CPS Auto Receivables Trust 2023-C, consist of five classes.

The sold notes, issued by CPS Auto Receivables Trust 2023-D, 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

1 unchanged sentence

The weighted average yield on the notes is approximately

The 2023-C transaction has initial credit enhancement

The 2023-D 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%.

5 unchanged sentences

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