CONSUMER PORTFOLIO SERVICES, INC. 10-Q

Item 1. Financial Statements CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) March 31, December 31, 2024 2023 ASSETS Cash and cash equivalents $ 13,249 $ 6,174 Restricted cash and equivalents 137,706 119,257 Finance receivables measured at fair value 2,791,373 2,722,662 Finance receivables 18,781 27,553 Less: Allowance for finance credit losses ( 1,890 ) ( 2,869 ) Finance receivables, net 16,891 24,684 Furniture and equipment, net 1,268 1,372 Deferred tax assets, net 3,485 3,736 Other assets 42,554 25,861 Total Assets  $ 3,006,526 $ 2,903,746 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 79,122 $ 62,544 Warehouse lines of credit 249,522 234,025 Residual interest financing 98,968 49,875 Securitization trust debt 2,277,676 2,265,446 Subordinated renewable notes 22,140 17,188 Total Liabilities 2,727,428 2,629,078 COMMITMENTS AND CONTINGENCIES – – Shareholders' Equity Preferred stock, $ 1 par value; authorized 4,998,130 shares; none issued – – Series A preferred stock, $ 1 par value; authorized 5,000,000 shares; none issued – – Series B preferred stock, $ 1 par value; authorized 1,870 shares; none issued – – Common stock, no par value; authorized 75,000,000 shares; 21,147,743 and 21,174,856 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively 28,518 28,678 Retained earnings 252,447 247,857 Accumulated other comprehensive loss ( 1,867 ) ( 1,867 ) Total stockholders' equity 279,098 274,668 Total liabilities and stockholders' equity $ 3,006,526 $ 2,903,746 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 3 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended March 31, 2024 2023 Revenues: Interest income $ 84,288 $ 80,062 Mark to finance receivables measured at fair value 5,000 – Other income 2,456 3,038 Total revenues 91,744 83,100 Expenses: Employee costs 24,416 22,033 General and administrative 13,753 11,396 Interest 41,968 32,759 Provision for credit losses ( 1,635 ) ( 9,000 ) Sales 4,870 5,724 Occupancy 1,600 1,526 Depreciation and amortization 215 231 Total operating expenses 85,187 64,669 Income before income tax expense 6,557 18,431 Income tax expense 1,967 4,608 Net income $ 4,590 $ 13,823 Earnings per share: Basic $ 0.22 $ 0.68 Diluted 0.19 0.54 Number of shares used in computing earnings per share: Basic 21,143 20,418 Diluted 24,602 25,392 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 4 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Three Months Ended March 31, 2024 2023 Net income $ 4,590 $ 13,823 Other comprehensive income/(loss); change in funded status of pension plan – – Comprehensive income $ 4,590 $ 13,823 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 5 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, 2024 2023 Cash flows from operating activities: Net income $ 4,590 $ 13,823 Adjustments to reconcile net income to net cash provided by operating activities: Net interest income accretion on fair value receivables 54,247 47,472 Depreciation and amortization 215 231 Amortization of deferred financing costs ( 672 ) 2,403 Mark to finance receivables measured at fair value ( 5,000 ) – Provision for credit losses ( 1,635 ) ( 9,000 ) Stock-based compensation expense 832 912 Changes in assets and liabilities: Deferred tax assets, net 251 385 Other assets ( 16,702 ) 4,511 Accounts payable and accrued expenses 16,579 4,404 Net cash provided by operating activities 52,705 65,141 Cash flows from investing activities: Payments received on finance receivables held for investment 9,428 24,746 Purchases of finance receivables measured at fair value ( 328,893 ) ( 352,598 ) Payments received on finance receivables at fair value 210,935 206,626 Change in repossessions held in inventory 9 101 Purchase of furniture and equipment ( 111 ) ( 34 ) Net cash used in investing activities ( 108,632 ) ( 121,159 ) Cash flows from financing activities: Proceeds from issuance of securitization trust debt 280,924 324,768 Proceeds from issuance of subordinated renewable notes 5,489 – Payments on subordinated renewable notes ( 537 ) ( 1,820 ) Net proceeds from (repayments of) warehouse lines of credit 17,176 ( 7 ) Net Proceeds from (repayment of) residual interest financing debt 50,000 – Repayment of securitization trust debt ( 268,710 ) ( 258,224 ) Payment of financing costs ( 1,899 ) ( 2,072 ) Purchase of common stock ( 1,697 ) ( 7,293 ) Exercise of options and warrants 705 6,960 Net cash provided by financing activities 81,451 62,312 Increase in cash and cash equivalents 25,524 6,294 Cash and restricted cash at beginning of period 125,431 162,789 Cash and restricted cash at end of period $ 150,955 $ 169,083 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 42,145 $ 29,658 Income taxes $ 29 $ 25 Non-cash financing activities: Right-of-use asset, net $ ( 23,267 ) $ ( 3,013 ) Lease liability $ 23,782 $ 3,313 Deferred office rent $ ( 515 ) $ ( 300 ) See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 6 CONSUMER PORTFOLIO SERVICES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Three Months Ended March 31, 2024 2023 Common Stock (Shares Outstanding) Balance, beginning of period 21,175 20,131 Common stock issued upon exercise of options and warrants 180 1,086 Repurchase of common stock ( 207 ) ( 721 ) Balance, end of period 21,148 20,496 Common Stock Balance, beginning of period $ 28,678 $ 28,906 Common stock issued upon exercise of options and warrants 705 6,960 Repurchase of common stock ( 1,697 ) ( 7,293 ) Stock-based compensation 832 912 Balance, end of period $ 28,518 $ 29,485 Retained Earnings Balance, beginning of period $ 247,857 $ 202,514 Net income 4,590 13,823 Balance, end of period $ 252,447 $ 216,337 Accumulated Other Comprehensive Loss Balance, beginning of period $ ( 1,867 ) $ ( 3,031 ) Pension benefit obligation – – Balance, end of period $ ( 1,867 ) $ ( 3,031 ) Balance, beginning of period 274,668 228,389 Pension benefit obligation – – Total Shareholders' Equity $ 279,098 $ 242,791 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 7 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Description of Business We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts." Basis of Presentation Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the nine-month period ended March 31, 2024 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 Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Finance Receivables Measured 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. 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. 8 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required. Anticipated credit losses are included in our estimation of cash to be received with respect to receivables. In accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred. Other Income The following table presents the primary components of Other Income for the three-month periods ending March 31, 2024 and 2023: Schedule of other income Three Months Ended March 31, 2024 2023 (In thousands) Origination and servicing fees from third party receivables $ 2,144 $ 2,738 Sales tax refunds 289 260 Other 23 40 Other income for the period $ 2,456 $ 3,038 Leases The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. 9 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the supplemental balance sheet information related to leases: Schedule of supplemental balance sheet information related to leases March 31, December 31, 2024 2023 (In thousands) Operating Leases Operating lease right-of-use assets $ 51,093 $ 29,575 Less: Accumulated amortization right-of-use assets ( 27,902 ) ( 26,651 ) Operating lease right-of-use assets, net $ 23,191 $ 2,924 Operating lease liabilities $ ( 23,702 ) $ ( 3,220 ) Finance Leases Property and equipment, at cost 3,474 3,474 Less: Accumulated depreciation ( 3,398 ) ( 3,385 ) Property and equipment, net $ 76 $ 89 Finance lease liabilities $ ( 80 ) $ ( 93 ) Weighted Average Discount Rate Operating lease 5.0 % 5.0 % Finance lease 6.5 % 6.5 % Schedule of maturities of lease liabilities Maturities of lease liabilities were as follows: $ (In thousands) Operating Finance Year Ending December 31, Lease Lease 2024 (excluding the three months ended March 31, 2024) $ 2,422 $ 27 2025 5,233 45 2026 5,084 15 2027 5,242 15 2028 5,408 4 Thereafter 4,747 – Total undiscounted lease payments 28,136 106 Less amounts representing interest ( 4,434 ) ( 26 ) Lease Liability $ 23,702 $ 80 10 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations: Schedule of lease expense Three Months Ended March 31, 2024 2023 (In thousands) Operating lease cost $ 1,374 $ 1,360 Finance lease cost 14 101 Total lease cost $ 1,388 $ 1,461 The following table presents the supplemental cash flow information related to leases: Schedule of supplemental cash flow information related to leases Three Months Ended March 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: (In thousands) Operating cash flows from operating leases $ 1,374 $ 1,360 Operating cash flows from finance leases $ 13 $ 99 Financing cash flows from finance leases $ 1 $ 2 Stock-based Compensation We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”. For the three months ended March 31, 2024 and 2023, we recorded stock-based compensation costs in the amount of $ 832,000 and $ 912,000 , respectively. As of March 31, 2024, unrecognized stock-based compensation costs to be recognized over future periods equaled $ 5.1 million. This amount will be recognized as expense over a weighted-average period of 1.5 years. The following represents stock option activity for the three months ended March 31, 2024: Schedule of stock option activity Weighted Number of Weighted Average Shares Average Remaining (in thousands) Exercise Price Contractual Term Options outstanding at the beginning of period 8,125 $ 5.11 N/A Granted – – N/A Exercised ( 180 ) 3.92 N/A Forfeited – – N/A Options outstanding at the end of period 7,945 $ 5.14 2.95 years Options exercisable at the end of period 6,070 $ 4.51 2.47 years 11 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the price distribution of stock options outstanding and exercisable for the years ended March 31, 2024 and December 31, 2023: Schedule of price distribution of stock options Number of shares as of Number of shares as of March 31, 2024 December 31, 2023 Outstanding Exercisable Outstanding Exercisable Range of exercise prices: (In thousands) (In thousands) $2.00 - $2.99 1,410 1,083 1,410 1,082 $3.00 - $3.99 2,383 2,383 2,473 2,473 $4.00 - $4.99 2,450 1,839 2,539 1,929 $6.00 - $6.99 – – – – $7.00 - $7.99 – – – – $10.00 - $10.99 1,702 765 1,703 578 Total shares 7,945 6,070 8,125 6,062 At March 31, 2024 the aggregate intrinsic value of options outstanding and exercisable was $ 23.9 million and $ 20.6 million, respectively. There were 180,000 options exercised for the three months ended March 31, 2024 compared to 1,086,000 for the comparable period in 2023. The total intrinsic value of options exercised was $ 716,000 and $ 3.8 million for the three-month periods ended March 31, 2024 and 2023. There were 2,684,000 shares available for future stock option grants under existing plans as of March 31, 2024. Purchases of Company Stock The table below describes the purchase of our common stock for the three months ended March 31, 2024 and 2023: Schedule of purchase of our common stock Three Months Ended March 31, 2024 March 31, 2023 Shares Avg. Price Shares Avg. Price Open market purchases 101,355 $ 8.51 263,185 $ 10.42 Shares redeemed upon net exercise of stock options 105,758 7.89 458,392 9.93 Total stock purchases 207,113 $ 8.19 721,577 $ 10.11 Reclassifications Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity. 12 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Financial Covenants Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of March 31, 2024, 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 Liabilities We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal 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. Recent Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, "Segment Reporting (Topic 280)," which is intended to enhance the disclosures on reportable segments. This new standard will be effective for annual reporting periods beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-07; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements. In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)," which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its 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. 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 reduction. In January 2018 the Company adopted the fair value method of accounting for finance receivables acquired after 2017. Finance receivables measured at fair value are recorded separately on the Company’s Balance Sheet and are excluded from all tables in this footnote. 13 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 reported as delinquent. In certain circumstances we will grant obligors one-month payment extensions. 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. In 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. The following table summarizes the delinquency status of finance receivables as of March 31, 2024 and December 31, 2023: Schedule of delinquency status of finance receivables March 31, December 31, 2024 2023 Delinquency Status (In thousands) Current $ 12,629 $ 17,771 31-60 days 3,618 5,626 61-90 days 2,065 3,087 91 + days 469 1,069 $ 18,781 $ 27,553 Finance receivables totaling $ 469,000 and $ 1.1 million at March 31, 2024 and December 31, 2023, respectively, have been placed on non-accrual status as a result of their delinquency status. Allowance for Credit Losses – Finance Receivables The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of finance receivables to present the net amount expected to be collected. Charge offs are deducted from the allowance when management believes that collectability is unlikely. Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions and, reasonable and supportable forecasts. We believe our historical credit loss experience provides the best basis for the estimation of expected credit losses. Consequently, we use historical loss experience for older receivables, aggregated into vintage pools based on their calendar quarter of origination, to forecast expected losses for less seasoned quarterly vintage pools. We measure the weighted average monthly incremental change in cumulative net losses for the vintage pools in the relevant historical period. For the pools in the relevant historical period, we consider each pool’s performance from its inception through the end of the current period. We then apply the results of the historical analysis to less seasoned vintage pools beginning with each vintage pool’s most recent actual cumulative net loss experience and extrapolating from that point based on the historical data. We believe the pattern and magnitude of losses on older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key credit characteristics of individual contracts such as obligor credit history, job stability, residence stability and ability to pay, there is relatively little variation from the average for the portfolio. Similarly, for key structural characteristics such as loan-to-value, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. Consequently, we do not believe there are significant differences in risk characteristics between various segments of our portfolio. 14 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment. In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. Throughout our history we have observed how events such as extreme weather, political unrest, and other qualitative factors have influenced the performance of our portfolio. Consequently, we have considered how such qualitative factors may affect future credit losses and have incorporated our judgement of the effect of those factors into our estimates. The following table presents the amortized cost basis of our finance receivables by annual vintage as of March 31, 2024 and December 31, 2023: Schedule of annual vintage March 31, December 31, 2024 2023 (In thousands) Annual Vintage Pool 2014 and prior. $ 237 $ 370 2015 1,141 1,788 2016 4,991 7,673 2017 12,412 17,722 $ 18,781 $ 27,553 The following table presents a summary of the activity for the allowance for finance credit losses for the three-month periods ended March 31, 2024 and 2023: Schedule of allowance for finance credit losses Three Months Ended March 31, 2024 2023 (In thousands) Balance at beginning of period $ 2,869 $ 21,753 Provision for credit losses on finance receivables ( 1,635 ) ( 9,000 ) Charge-offs ( 1,001 ) ( 3,018 ) Recoveries 1,657 4,993 Balance at end of period $ 1,890 $ 14,728 15 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month periods ended March 31, 2024 and 2023: Schedule of gross charge-off Three Months Ended March 31, 2024 2023 Annual Vintage Pool (In thousands) 2014 and prior $ 70 $ 141 2015 115 444 2016 377 1,321 2017 481 1,502 Applied against repos in inventory (net) ( 42 ) ( 390 ) $ 1,001 $ 3,018 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 in repossessed inventory March 31, December 31, 2024 2023 (In thousands) Gross balance of repossessions in inventory $ 546 $ 597 Allowance for losses on repossessed inventory ( 429 ) ( 472 ) Net repossessed inventory included in other assets $ 117 $ 125 16 CONSUMER PORTFOLIO SERVICES, INC. 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: Schedule of securitization trust debt Weighted Average Final Receivables Outstanding Outstanding Contractual Debt Scheduled Pledged at Principal at Principal at Interest Rate at Payment March 31, Initial March 31, December 31, March 31, Series Date (1) 2024 (2) Principal 2024 2023 2024 (Dollars in thousands) CPS 2019-B June 2026 $ – $ 228,275 $ – $ 15,742 – CPS 2019-C September 2026 20,050 243,513 15,489 19,725 5.26 % CPS 2019-D December 2026 27,023 274,313 21,811 27,445 4.50 % CPS 2020-A March 2027 26,213 260,000 21,459 26,382 4.95 % CPS 2020-B June 2027 31,296 202,343 20,745 24,197 7.38 % CPS 2020-C November 2027 44,231 252,200 37,586 43,487 4.25 % CPS 2021-A March 2028 48,164 230,545 34,383 39,039 1.90 % CPS 2021-B June 2028 61,128 240,000 47,473 55,684 2.71 % CPS 2021-C September 2028 93,137 291,000 73,693 85,563 2.16 % CPS 2021-D December 2028 126,773 349,202 110,294 126,059 2.71 % CPS 2022-A April 2029 141,660 316,800 120,884 137,479 2.93 % CPS 2022-B October 2029 218,246 395,600 191,200 213,779 5.07 % CPS 2022-C April 2030 253,043 391,600 205,529 230,273 5.97 % CPS 2022-D June 2030 211,067 307,018 185,573 205,583 8.10 % CPS 2023-A August 2030 251,394 324,768 208,585 231,906 6.41 % CPS 2023-B November 2030 275,600 332,885 241,966 268,172 6.66 % CPS 2023-C February 2031 259,928 291,732 236,937 257,568 6.70 % CPS 2023-D May 2031 275,342 286,149 252,383 271,939 7.29 % CPS 2024-A August 2031 287,710 280,924 266,246 – 6.09 % – $ 2,652,004 $ 5,498,867 $ 2,292,235 $ 2,280,021 _________________ (1) The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $ 644.3 million in 2024, $ 691.9 million in 2025, $ 435.8 million in 2026, $ 284.8 million in 2027, $ 169.4 million in 2028, and $ 51.5 million in 2029. (2) Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet. Debt issuance costs of $ 14.6 million as of March 31, 2024 and December 31, 2023 have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the Securitization trust debt on our Consolidated Balance Sheets. All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets. 17 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of March 31, 2024, 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, 2024, restricted cash under the various agreements totaled approximately $ 137.7 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 were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors. (4) Debt The terms and amounts of our other debt outstanding at March 31, 2024 and December 31, 2023 are summarized below: Schedule of debt outstanding Amount Outstanding at March 31, December 31, 2024 2023 (In thousands) Description Interest Rate Maturity Warehouse lines of credit 3.00% over CP yield rate (Minimum 3.75%) 8.42% and 8.58% at March 31, 2024 and December 31 2023, respectively July 2024 $ 184,079 $ 165,628 4.50% over a commercial paper rate (Minimum 7.50%) 9.94% and 9.63% at March 31 2024, and December 31 2023, respectively March 2026 67,721 68,997 Residual interest financing 7.86 % June 2026 50,000 50,000 Residual interest financing 11.50 % March 2029 50,000 – Subordinated renewable notes Weighted average rate of 9.01 % and 8.45 % at March 31, 2024 and December 31, 2023, respectively Weighted average maturity of May 2026 and February 2026 at March 31, 2024 and December 31, 2023, respectively 22,140 17,188 $ 373,940 $ 301,813 18 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On March 29, 2024, we renewed our two-year $ 200 million revolving credit agreement with Ares Agent Services, L.P. The revolving period for this facility was extended to March 2026 followed by an amortization period through March 2028 for any receivables pledged at the end of the revolving period. There was $ 67.7 million outstanding under this facility at March 31, 2024. On March 22, 2024, we completed a $ 50 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $ 50 .0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023. The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. At March 31, 2024 there was $ 50 .0 million outstanding under this facility. On July 15, 2022, we renewed our two-year revolving credit agreement with Citibank, N.A., and doubled the capacity from $ 100 million to $ 200 million. 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. There was $ 184.1 million outstanding under this facility at March 31, 2024. Unamortized debt issuance costs of $ 1 .0 million and $ 125,000 as of March 31, 2024 and December 31, 2023, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $ 2.3 million and $ 599,000 as of March 31, 2024 and December 31, 2023, 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 The following table presents the components of interest income: Schedule of interest income Three Months Ended March 31, 2024 2023 (In thousands) Interest on finance receivables $ 2,337 $ 4,662 Interest on finance receivables at fair value 80,505 74,058 Other interest income 1,446 1,342 Interest income $ 84,288 $ 80,062 The following table presents the components of interest expense: Schedule of interest expense Three Months Ended March 31, 2024 2023 (In thousands) Securitization trust debt $ 35,932 $ 26,353 Warehouse lines of credit 4,321 4,848 Residual interest financing 1,209 1,050 Subordinated renewable notes 506 508 Interest expense $ 41,968 $ 32,759 19 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (6) Earnings Per Share Earnings per share for the three-month periods ended March 31, 2024 and 2023 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, 2024 and 2023: Schedule of earnings per share Three Months Ended March 31, 2024 2023 (In thousands) Weighted average number of common shares outstanding during the period used to compute basic earnings per share 21,143 20,418 Incremental common shares attributable to exercise of outstanding options and warrants 3,459 4,974 Weighted average number of common shares used to compute diluted earnings per share 24,602 25,392 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, 2024 and 2023 would have included an additional 1.7 million shares attributable to the exercise of outstanding options and warrants. (7) Income Taxes We file numerous consolidated and separate income tax returns with the United States and with many states. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015. As of March 31,2024 and December 31, 2023, 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 file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in 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 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 $ 3.5 million as of March 31, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $3.5 million consists of approximately $ 2.2 million of net U.S. federal deferred tax assets and $ 1.3 million of net state deferred tax assets. 20 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Income tax expense was $ 2 .0 million for the three months ended March 31, 2024, representing effective income tax rates of 30 %. For the prior year period, income tax expense was $ 4.6 million for the three months ended March 31, 2023 representing an effective tax rate of 25 %. (8) Legal Proceedings Consumer Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and 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. Following our filing of a complaint 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 basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. In April 2024, 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. 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 for $ 1.1 million. The settlement was preliminarily approved by the court on March 1, 2024 and remains subject to final court approval. 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. On December 28, 2023 and without admitting any wrongdoing, the Company entered into an assurance of discontinuance with the Office of the Attorney General of the Commonwealth of Massachusetts, reflecting the parties’ agreements to settle and fully resolve allegations of the Company’s noncompliance with Massachusetts law. Under the settlement the Company paid, after March 31, 2024, $ 1.24 million to an independent trust for the purposes of making payments to eligible consumers, paying costs of implementation, and paying the Attorney General’s costs of investigation. In addition, the Company agreed to pay $ 75,000 for the fees and costs of a trustee to oversee the trust. In General. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of March 31, 2024, 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 March 31, 2024 is $ 3.6 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, 2024 does not exceed $ 5.6 million. 21 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period. (9) Fair Value Measurements ASC 820, "Fair Value Measurements" clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter. Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process. Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio 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 March 31, 2024, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value 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: Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis Three Months Ended March 31, 2024 2023 (In thousands) Balance at beginning of period $ 2,722,662 $ 2,476,617 Finance receivables at fair value acquired during period 328,893 352,598 Payments received on finance receivables at fair value ( 210,935 ) ( 206,626 ) Net interest income accretion on fair value receivables ( 54,247 ) ( 47,472 ) Mark to fair value 5,000 – Balance at end of period $ 2,791,373 $ 2,575,117 22 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The table below compares the fair values of these finance receivables to their contractual balances for the periods shown: Schedule of finance receivables to their contractual balances March 31, 2024 December 31, 2023 Contractual Fair Contractual Fair Balance Value Balance Value (In thousands) Finance receivables measured at fair value $ 3,001,859 $ 2,791,373 $ 2,941,915 $ 2,722,662 The following table provides certain qualitative information about our level 3 fair value measurements: Schedule of level 3 fair value measurements Financial Instrument Fair Values as of Inputs as of March 31, December 31, March 31, December 31, 2024 2023 Unobservable Inputs 2024 2023 (In thousands) Assets: Finance receivables measured at fair value 2,791,373 2,722,662 Discount rate 11.0% - 11.9% 11.0% - 11.7% Cumulative net losses 10.0% - 22.4% 10.0% - 21.7% The following table summarizes the delinquency status of these finance receivables measured at fair value as of March 31, 2024 and December 31, 2023: Schedule of delinquency status of finance receivables measured at fair value March 31, December 31, 2024 2023 (In thousands) Delinquency Status Current $ 2,634,116 $ 2,520,158 31 - 60 days 168,807 204,574 61 - 90 days 83,273 101,057 91 + days 43,348 49,541 Repo 72,315 66,585 $ 3,001,859 $ 2,941,915 Repossessed vehicle inventory, which is included in Other assets on our consolidated balance sheet, is measured at fair value using level 2 assumptions based on our actual loss experience on sale of repossessed vehicles. At March 31, 2024, the finance receivables related to the repossessed vehicles in inventory totaled $ 546,000 . We have applied a valuation adjustment, or loss allowance, of $ 429,000 , which is based on a recovery rate of approximately 21 %, resulting in an estimated fair value and carrying amount of $ 117,000 . The fair value and carrying amount of the repossessed inventory at December 31, 2023 was $ 597,000 after applying a valuation adjustment of $ 472,000 . 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, 2024 and 2023. 23 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The estimated fair values of financial assets and liabilities at March 31, 2024 and December 31, 2023, were as follows: Schedule of fair values of financial assets and liabilities As of March 31, 2024 Financial Instrument (In thousands) Carrying Fair Value Measurements Using: Value Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 13,249 $ 13,249 $ – $ – $ 13,249 Restricted cash and equivalents 137,706 137,706 – – 137,706 Finance receivables, net 16,891 – – 15,034 15,034 Accrued interest receivable 191 – – 191 191 Liabilities: Warehouse lines of credit $ 249,522 $ – $ – $ 249,522 $ 249,522 Residual interest financing 98,968 98,968 98,968 Accrued interest payable 8,423 – – 8,423 8,423 Securitization trust debt 2,277,676 – – 2,252,211 2,252,211 Subordinated renewable notes 22,140 – – 22,140 22,140 As of December 31, 2023 Financial Instrument (In thousands) Carrying Fair Value Measurements Using: Value Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 6,174 $ 6,174 $ – $ – $ 6,174 Restricted cash and equivalents 119,257 119,257 – – 119,257 Finance receivables, net 24,684 – – 20,848 20,848 Accrued interest receivable 292 – – 292 292 Liabilities: Warehouse lines of credit $ 234,025 $ – $ – $ 234,025 $ 234,025 Accrued interest payable 7,928 – – 7,928 7,928 Securitization trust debt 2,265,446 – – 2,183,331 2,183,331 Subordinated renewable notes 17,188 – – 17,188 17,188 (10) Subsequent Events On April 23, 2024 we executed our second securitization of 2024. In the transaction, qualified institutional buyers purchased $319.9 million of asset-backed notes secured by $337.2 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2024-B, consist of five classes. Ratings 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 6.69%. 24 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The 2024-B transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 5.15%. The transaction agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of 8.40% of the original receivable pool balance, or 23.15% of the then outstanding pool balance. The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law. On April 10, 2024, our Compensation Committee evaluated and determined the non-equity incentive plan payment amounts earned under the Executive Management Bonus Plan for each of our executive officers for fiscal year ended December 2023. The Company thereafter paid those amounts in April 2024, including $3,005,000 for Charles E. Bradley, Jr., $582,063 for Michael T. Lavin, $385,655 for Danny Bharwani, $413,406 for Teri L. Robinson, and $367,472 for Laurie A. Straten. Cautionary Note Regarding Forward-Looking Statements Discussions of certain matters contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. You can generally identify forward-looking statements as statements containing the words “will,” “would,” “believe,” “may,” “could,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plans,” “goals, “strategy,” “future,” “likely,” “should” or other similar expressions. Examples of forward-looking statements include, among others, statements we make regarding: · charge-offs and recovery rates; · the willingness or ability of obligors to pay pursuant to contractual terms; · our ability to enforce rights under contracts; · our ability to and rates at which we plan to acquire automobile contracts; · the anticipated levels of recoveries upon sale of repossessed vehicles; · revenues or expenses; · provisions for credit losses; · expected industry and general economic trends; · accrued losses for legal contingencies; · anticipated deferred tax assets; · estimates of taxable income; · our ability to service and repay our debt; · the structuring of securitization transactions as secured financings and the effects of such structures on financial items and future profitability; or · the effect of the change in structure on our profitability and the duration of the period in which our profitability would be affected by the change in securitization structure. 25 CONSUMER PORTFOLIO SERVICES, INC. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. Some of the factors that might cause such a difference include, but are not limited to, the following: · unexpected exogenous events, such as a widespread public health emergency; · mandates imposed in reaction to such events, such as prohibitions of otherwise permissible activity; · changes in general economic conditions; · changes in performance of our automobile contracts · increases in interest rates; · our ability to generate sufficient operating and financing cash flows; · competition; · the level of losses incurred on contracts in our managed portfolio; · adverse decisions by courts or regulators; · regulatory changes with respect to consumer finance; · changes in the market for used vehicles; · levels of cash releases from existing pools of contracts; · the terms on which we are able to finance contract purchases; · the willingness or ability of dealers to assign contracts to us on acceptable terms; · the terms on which we are able to complete term securitizations once contracts are acquired; · any breach in the security of our systems; and · such other factors as discussed through the “Risk Factors” section of this report. Forward-looking statements are neither historical facts nor guarantees of performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other uncertain conditions. Because forward-looking statements relate to the future, they involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond our ability to control or predict, including those described herein, and in any documents incorporated by reference in this report. Therefore, you should not rely on any of these forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to publicly update any forward-looking information. You are advised to consult any additional disclosure we make in our periodic reports filed with the SEC. 26