CONSUMER PORTFOLIO SERVICES, INC. 10-K

Item 9A. Controls and Procedures Disclosure Controls and Procedures . Under the supervision and with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the " Exchange Act " ) as of December 31, 2024 (the " Evaluation Date " ). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by us in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission; and (ii) to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management, including the Company’s Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. The certifications of our Chief Executive Officer and Chief Financial Officer required under Section 302 of the Sarbanes-Oxley Act have been filed as Exhibits 31.1 and 31.2 to this report. Internal Control. Management’s Report on Internal Control over Financial Reporting is included in this Annual Report, immediately below. During the fiscal quarter ended December 31, 2024, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management’s Report on Internal Control over Financial Reporting . We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance to our management and Board of Directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can only provide reasonable assurance with respect to financial statement preparation and presentation. Management, with the participation of the Chief Executive and Chief Financial Officers, assessed the effectiveness of our internal control over financial reporting as of December 31, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control — Integrated Framework. Based on this assessment, management, with the participation of the Chief Executive and Chief Financial Officers, believes that, as of December 31, 2024, our internal control over financial reporting is effective based on those criteria. Our internal control over financial reporting as of December 31, 2024, has been audited by Crowe LLP, an independent registered public accounting firm, as stated in their report which is included herein. 50 Item 9B. Other Information During the quarter ended December 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K. Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not Applicable. 51 PART III Item 10. Directors, Executive Officers and Corporate Governance. Directors The names of the Company’s directors, their principal occupations, and certain other information regarding them are set forth below. Charles E. Bradley, Jr ., 65, has been the Company’s Chief Executive Officer since January 1992, a director since the Company’s formation in March 1991, and was elected Chairman of the Board in July 2001. Prior to that he was President of the Company from March 1991 to December 2022. From April 1989 to November 1990, he served as Chief Operating Officer of Barnard and Company, a private investment firm. From September 1987 to March 1989, Mr. Bradley was an associate of The Harding Group, a private investment banking firm. Having been with the Company since its inception, Mr. Bradley brings comprehensive knowledge of the Company’s business, structure, history and culture to the Board and the Chairman position. Stephen H. Deckoff , 59, has been a director of the Company since August 2022. Mr. Deckoff has been the Managing Principal of Black Diamond, Capital Management, L.L.C., (“Black Diamond”), a privately held alternative asset management firm, since its founding in 1995. In that capacity, he is responsible for all portfolio management and business operations. Prior to 1995, Mr. Deckoff was a Senior Vice President of Kidder, Peabody & Co. Inc. (“Kidder”) and head of its Structured Finance Group. Prior to joining Kidder, Mr. Deckoff was a Managing Director in the Structured Finance Group at Bear Stearns & Co., Inc. (“Bear Stearns”). Before joining Bear Stearns, Mr. Deckoff worked in the Structured Finance Department of Chemical Securities, Inc. and the Fixed Income Research Department at Drexel Burnham Lambert. In June 2023, Mr. Deckoff joined the Board of KVH Industries, Inc., a publicly traded company providing connectivity solutions to primarily maritime customers globally. Mr. Deckoff brings to the Board his extensive financial experience and expertise. Louis M. Grasso , 78, has been a director of the Company since October 2019. Mr. Grasso was the founder and majority owner of PFC Corporation (“PFC”) until his retirement in November 2011, upon sale of PFC’s portfolio of assets to Capstone Realty Advisors. Over a period of 35 years, PFC Corporation originated over $1.8 billion of mortgage loans, and issued $1.8 billion of mortgage-backed securities. He brings to the Board knowledge and experience bearing in particular on the Company’s strategies for meeting its capital requirements, and broad organizational and management skills. William W. Grounds , 69, has been a director of the Company since December 2021. From 2008 to 2021, he was the President and COO of Infinity World Development Corp., which is a subsidiary of a sovereign wealth fund in the United Arab Emirates. The principal business of Infinity World Development Corp. was a $5 billion investment in the CityCenter mixed use integrated resort property located in Las Vegas, Nevada. Mr. Grounds served on the board of MGM Resorts International, a hospitality and entertainment company, from 2013 to 2021 and of Remark Holdings Inc., a technology company, from 2013 to 2019. Mr. Grounds joined the Board of PointsBet Holdings Limited, an Australian sports wagering operator and iGaming provider, in December 2022. In June 2023, Mr. Grounds was appointed to the Board of the GCGRA, the national gaming regulator of the UAE. During his career he has held senior executive positions in major real estate private equity investment, development and construction entities. Mr. Grounds brings to the Board experience as a director of publicly-traded companies, and skills in investment and general management. Brian J. Rayhill , 62, has been a director of the Company since August 2006. Mr. Rayhill has been a practicing attorney in New York State since 1988 and the managing attorney of the Law Office of Brian Rayhill since 2017. As an experienced advocate, counselor and litigator, Mr. Rayhill brings legal knowledge and perspective to the Company’s Board. William B. Roberts , 87, has been a director of the Company since its formation in March 1991. From 1981 until his retirement at the end of 2020, he was the President of Monmouth Capital Corp., an investment firm that specializes in management buyouts. Having spent decades in the business of finance, Mr. Roberts brings to the Company’s Board his perspective and judgment regarding means of financing its business. 52 James E. Walker III , 62, has been a director of the Company since August 2022. Mr. Walker is President and Senior Managing Director of Black Diamond Capital Management, where he oversees general management, drives strategic growth, and identifies new investment opportunities. A co-founder of Black Diamond in 1996, Mr. Walker rejoined the firm as President in September 2023, bringing extensive leadership and investment experience. Prior to his return to Black Diamond, Mr. Walker served as Managing Partner of Vinson Ventures, LLC, a boutique investment firm. From 2008 until 2017, Mr. Walker was a Managing Partner at Fir Tree Partners, where he co-founded the firm’s distressed real estate funds and chaired the Risk Committee. Following his tenure at Fir Tree, he was a Strategic Partner at Jadian Capital, an alternative investment firm from 2017 to 2021. Throughout his career, Mr. Walker has held numerous board positions. Since November 2017, he has been a board member of Starwood Real Estate Trust, a private real estate investment firm. In June 2023, he joined the board of Emeco, an Australian mining equipment rental company. He previously served on the Board of Clarus Corporation, a global company catering to outdoor and consumer enthusiast markets. Mr. Walker began his career in investment banking at Kidder Peabody and Bear Stearns. Mr. Walker brings to the Board his extensive investment management experience. Gregory S. Washer , 63, has been a director of the Company since June 2007. He was the President and owner of Clean Fun Promotional Marketing (“Clean Fun”), a promotional marketing company, from its founding in 1986 through its sale in September 2014. He continued to act as a consultant to Clean Fun through August 2017, and is now retired. Mr. Washer contributes to the Board significant organizational and operational management skills, combined with a wealth of experience in promotion and marketing of services. Daniel S. Wood , 66, has been a director of the Company since July 2001. Mr. Wood was President of Carclo Technical Plastics (“Carclo”), a manufacturer of custom injection moldings, from September 2000 until his retirement in April 2007. Previously, from 1988 to September 2000, he was the Chief Operating Officer and co-owner of Carrera Corporation, the predecessor to the business of Carclo. As President of Carclo, Mr. Wood was responsible for the overall operation of that company and for the quality and integrity of its financial statements. He brings to the Board the knowledge and perspective useful in evaluating the Company’s financial statements, and broad organizational and management skills. Executive Officers The information regarding the Company’s executive officers set forth in Part I of this report under the caption “Information about Our Executive Officers” is incorporated herein by reference. Code of Ethics The Company has adopted a Code of Ethics for Senior Financial Officers, which applies to the Company’s chief executive officer, chief financial officer, controller and others. A copy of the Code of Ethics may be obtained at no charge by written request to the Corporate Secretary at the Company’s principal executive offices. Audit and Other Committees The Board of Directors (the “Board”) has established an Audit Committee, a Compensation Committee, and a Nominating Committee. Each of these three committees operates under a written charter, adopted by the Board of Directors. The charters are available on the Company’s website, https://ir.consumerportfolio.com/corporate-governance. The Board of Directors has concluded that each member of these three committees (and every director other than Mr. Bradley, the Company’s chief executive officer), is independent in accordance with the director independence standards prescribed by Nasdaq, and has determined that none of them have a material relationship with the Company that would impair their independence from management or otherwise compromise the ability to act as an independent director. 53 The members of the Audit Committee are Mr. Rayhill (chairman), Mr. Grasso, Mr. Washer, and Mr. Wood. The Board has determined that each Audit Committee member is independent as defined under Nasdaq Listing Rules and Rule 10A-3(b)(1) of the Exchange Act. The Audit Committee is empowered by the Board of Directors to review the financial books and records of the Company in consultation with the Company’s accounting and auditing staff and its independent auditors and to review with the accounting staff and independent auditors any questions that may arise with respect to accounting and auditing policy and procedure. The Board of Directors has further determined that Mr. Wood has the qualifications and experience necessary to serve as an "audit committee financial expert" as such term is defined in Item 407 of Regulation S-K promulgated by the SEC. Mr. Wood, as president of Carclo, was responsible for the preparation and evaluation of the audited financial statements of that company. Insider Trading Policy The Company has adopted an insider trading policy that governs the purchase, sale, and/or other transactions of our securities by our directors, officers and employees that we believe is reasonably designed to promote compliance with insider trading laws, rules and regulations, and the applicable exchange listing standards. A copy of our insider trading policy is filed as Exhibit 19 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024. In addition, with regard to the Company’s trading in its own securities, it is the Company’s policy to comply with the federal securities laws and the applicable exchange listing standards. Item 11. Executive Compensation. Compensation Committee Interlocks and Insider Participation The members of the Compensation Committee are Mr. Wood (chairman), Mr. Grounds, and Mr. Roberts. Compensation Committee Report The Compensation Committee has reviewed and discussed with the Company’s management the Compensation Discussion and Analysis contained in this report. Based on such review and discussions and relying thereon, the Compensation Committee has recommended to the Company’s Board of Directors that the Compensation Discussion and Analysis set forth below be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. THE COMPENSATION COMMITTEE Daniel S. Wood (chairman) William W. Grounds William B. Roberts Compensation Discussion and Analysis 2024 Say-on-Pay Advisory Vote Outcome The Compensation Committee annually considers the results of the most recent advisory vote by shareholders to approve executive officer compensation. In the 2024 advisory vote, a majority of the voted shares (92%) approved of the compensation of our named executive officers. The Compensation Committee interprets that vote as a reason to retain the existing design, purposes and structure of our executive compensation programs. The Compensation Committee will continue to consider the results from future shareholder advisory votes regarding executive officer compensation in its future administration of executive compensation. 54 Compensation Objectives The Company’s objectives with respect to compensation are several. The significant objectives are to cause compensation (i) to be sufficient in total amount to provide reasonable assurance of retaining key executives, (ii) to include a significant contingent component, so as to provide strong incentives to meet designated Company objectives, and (iii) to include a significant component tied to the price of the common stock, so as to align management’s incentives with shareholder interests. The Compensation Committee ("Committee") of the Company’s Board of Directors is charged with administering the Company’s compensation plans to meet those objectives. To the extent that elements of compensation would not advance such objectives, or would do so less effectively than would other elements, the Committee seeks to avoid paying compensation in those forms. Role of the Compensation Committee and the Chief Executive Officer Our Board has authorized the Compensation Committee, which is composed solely of independent directors, to make all decisions regarding executive compensation, including administration of our compensation plans. In that regard, the Compensation Committee: · Reviews and discusses with management the factors underlying our compensation policies and decisions, including overall compensation objectives; · Reviews and approves all Company goals and objectives (both financial and non-financial) relevant to the compensation of the Chief Executive Officer; · Evaluates, together with the other independent directors, the performance of the Chief Executive Officer in light of these goals and objectives and that individual’s overall effectiveness; · Fixes and approves each element of the compensation of the Chief Executive Officer; · Reviews the performance evaluations of all other members of executive management (the Chief Executive Officer prepares and presents to the Compensation Committee the performance evaluations of the other executive officers); · Reviews and approves each element of compensation, as well as the terms and conditions of employment, of those other executive officers; · Grants awards under our equity compensation plans and oversees the administration of those plans; and · Reviews the costs and structure of our key employee benefit and fringe-benefit plans and programs. The Compensation Committee is authorized to form subcommittee(s) and to retain experts and consultants to assist in the discharge of its responsibilities. To date it has not done so. The Chief Executive Officer, who attends meetings of the Compensation Committee by invitation of the Committee’s chairman, assists the Committee in determining the compensation of our other executive officers by, among other things: · Proposing annual merit increases to the base salaries of the other executive officers; · Establishing annual individual performance objectives for the other executive officers and evaluating their performance against such objectives (the Committee reviews these performance evaluations); and · Making recommendations, from time to time, for special stock option and restricted stock grants ( e.g ., for motivational or retention purposes) to other executive officers. The other executive officers do not have a role in determining their own compensation, other than to discuss their annual individual performance objectives and results achieved with the chief executive officer. Our Overall Approach The Committee has put into place a compensation system consisting of three key components: base salary, an annual cash bonus pursuant to an incentive plan, and long-term equity incentives in the form of stock options. 55 The table below provides comparative information regarding the components of our year 2024 executive compensation program. We are applying the same elements in our executive compensation program for the year 2025. Element Form Objectives and Basis Base Salary Cash · Attract and retain high quality personnel · Targeted to be superior to compensation offered by our competitors Annual Incentive Bonus Cash · Achieve objectives set annually · Annual bonus amount is set and computed as a percentage of base salary · Actual payout determined by Company and individual performance · Target total cash (base salary + target bonus) designed to be superior to compensation offered by our competitors Long-Term Incentive Stock options · Align interests of executives with those of shareholders; Compensation · Target long-term incentive award size designed to retain executives through long-term vesting and the potential for wealth accumulation, contingent on benefit to the shareholders The Committee has from time to time considered providing additional elements of executive compensation. It has considered elements such as restricted stock awards, restricted stock units, compensation contingent on a change in control, defined benefit pension plans, deferred cash compensation, and supplemental retirement plans (supplemental in the sense that they exceed the limits for tax advantaged treatment). To date, the Committee has elected not to pay compensation in such forms, having determined that the Company’s objectives are better met by one or more of the elements of compensation that it does pay. Regarding restricted stock and restricted stock units, the Committee has noted that any form of equity equivalent to or closely tied to common stock does serve to meet the objective of aligning officers’ personal interest with that of the shareholders generally. The Committee believes, however, that the objective is better met by grants of stock options than by grants of share equivalents, because recipients of the grants will face the same degree of variance in results at a lesser cost to the Company, when option grants are compared to grants of restricted stock units. Further, unlike restricted stock, option grants will not provide a reward to the holder absent an improvement over time in the Company’s stock price. The Committee has elected not to provide material perquisites as compensation, having determined that cash is a better medium of exchange. Regarding compensation that would be payable contingent on a change in control of the Company, the Committee believes that there are certain legitimate objectives to be met by such contingent compensation. As of the date of this report, however, no such contingent compensation plans are in place. Regarding defined benefit pension plans, deferred cash compensation and supplemental retirement plans, the Committee believes that the Company’s retention objective is better met by straight cash payments, whether in the form of base salary or in the form of bonus compensation. In particular with respect to plans for deferred compensation, the Committee believes those make sense for the Company and for the recipient only on the basis of assumptions regarding future tax rates payable by each. Having no assurance that such assumptions would be correct, the Committee has chosen not to put into place any special deferred compensation programs for the company’s executive officers. Those officers do participate in a Company-sponsored tax-deferred savings plan, commonly known as a 401(k) plan, on the same terms available to Company employees generally. The Committee may in the future revisit its conclusions as to any of the components discussed above, or may consider other forms of compensation. The Base Salary Element With respect to the retention objective, the Committee considers an executive’s base salary to be the most critical component. Acting primarily on the basis of recommendations of the Chief Executive Officer, the Committee adjusts other officers’ base salaries annually, with the adjustment generally consisting of a 2% to 10% increase from the prior year’s rate. Where exceptional circumstances apply, such as recruitment of a new executive officer, a promotion to executive officer status or a special need to retain an individual officer, the chief executive officer may recommend, and the Committee may approve, a larger increase. 56 The Company’s general approach in setting the annual compensation of its named executive officers is to set those officers’ base compensation by reference to their base rates for the preceding year. During the year ended December 2024, the Company’s chief executive officer, Charles E. Bradley, Jr., received $995,000 in base salary. In setting that rate in 2024, the Committee considered the base salary rate that the Company had paid in the prior year ($995,000), the desirability of providing an annual increase, the desirability of ensuring retention of the services of the Company’s incumbent chief executive officer, the Company’s financial performance, and the levels of chief executive officer compensation prevailing among other financial services companies. The Committee considered whether to adjust officers’ base compensation for 2024, and determined to increase the base rate for the President and Chief Financial Officer by 4%. The Annual Incentive Bonus (Executive Management Bonus Plan) Element To encourage executive officers and key management personnel to exercise their best efforts and management skills toward causing the Company to meet its overall objective, and toward achieving designated specific individual objectives, the Company has implemented an Executive Management Bonus Plan, with annual payouts. Under the Company’s bonus plan as applied to the year ended December 2024, the Company’s president is eligible to receive a cash bonus of up to 170% of his base salary and the executive vice presidents are eligible to receive a cash bonus of up to 140% of their base salaries. The chief executive officer is eligible to receive a cash bonus of up to 600% of his base salary. The Committee is expected to evaluate each named executive officer’s performance and determine the amount of the Executive Management Bonus Plan award earned by the end of June 2025. The Long-Term Incentive Compensation Element The Committee may also award incentive and non-qualified stock options under the Company’s stock option plans. Such awards are designed to assist in the retention of key executives and management personnel and to create an incentive to create shareholder value over a sustained period of time. The Company believes that stock options are a valuable tool in compensating and retaining employees. Because the exercise price of all options granted is equal to or above the fair market value of the Company’s common stock on the date of grant, the option holders may realize value only if the stock price appreciates from the price on the date the options were granted. This design is intended to focus executives on the enhancement of shareholder value over the long term. During the year ended December 31, 2024, the Committee did not grant stock options to the Company’s executive officers. Other Elements The Company also maintains certain broad-based employee benefit plans, such as medical and dental insurance, and a qualified defined contribution retirement savings plan (401(k) plan), in which executive officers are permitted to participate. Such officers participate on the same terms as non-executive personnel who meet applicable eligibility criteria, and are subject to any legal limitations on the amounts that may be contributed or the benefits that may be payable under the plans. The Company does not maintain any form of defined benefit pension or retirement plan in which executive officers may participate, nor does it maintain any form of supplemental retirement savings or supplemental deferred compensation plan. Exercise of Discretion In exercising its discretion as to the level of executive compensation and its components, the Committee considers a number of factors. Members of the Committee conduct informal surveys of compensation paid to comparable executives within and without the consumer finance industry. The Committee finds these data useful primarily in evaluating the overall level of compensation paid or to be paid to the Company’s executive officers. Financial factors considered include earnings, revenue, originations, and budget attainment. Operational factors considered include individual and group management goals; indicators of the performance and credit quality of the Company’s servicing portfolio, including levels of delinquencies and charge-offs; and indicators of successful management of personnel, including employee stability. All of such factors are assessed with reference to the judgment of the Committee as to the degree of difficulty of achieving desired outcomes. With respect to payment of annual bonuses and grants of stock options, the Committee also takes note of factors relating to the degree of the Company’s success over the most recent year. 57 Specific Objectives and Evaluation In 2024, the Committee designated specific objectives with respect to the chief executive officer to be accomplished within the year 2024, and fixed weights to be associated with each such objective. The chief executive officer proposed to the Committee specific annual objectives with respect to each other executive officer of the Company, which the Committee approved. The Committee anticipates determining the amount of the Executive Management Bonus Plan award earned by each named executive officer by the end of June 2025. Grants of Options The Committee did not award stock options to the Company’s officers in 2024. The Committee does not have a policy or practice on when to grant option awards. The Committee does not have a policy or practice of taking into account material nonpublic information when determining the timing and terms of option awards, however if a public announcement of material information is anticipated, the grant date of such options may be deferred at the discretion of the Committee, until after the release of such information. The Company does not time the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation. Stock Ownership, Hedging and Pledging Our Board of Directors and Compensation Committee have considered whether to establish a minimum stock ownership goal for members of our senior management. We have elected not to do so, considering that such a policy would either be strict and mandatory, in which case it would undermine the compensatory objectives of our equity compensation plans, or would be merely hortatory, in which case it could be expected to have little effect. We’ve also noted that the multiyear vesting terms of the equity incentives granted under our plans have the effect of aligning our executives’ individual personal financial incentives with the future price performance of the Company’s stock. As part of our comprehensive compliance policy, we remind all Company executive officers of the mandatory legal prohibition on selling short company shares and the implications of the SEC’s short-swing profit rule. We also prohibit Company executive officers from entering into transactions that would have the effect of causing those individuals to benefit from a decline in the price of the Company stock, such as the purchase of “put” options. We prohibit such “hedging” transactions but we do not find it appropriate to prohibit our executive officers from pledging their shares of Company stock as security for a loan. We believe that the beneficial incentives of owning Company stock remain substantially the same with or without such a pledge. Summary of Compensation The following table summarizes all compensation earned during the three fiscal years ended December 31, 2024 by the Company’s chief executive officer, its chief financial officer, and the other three most highly compensated individuals (such five individuals, the “named executive officers”) who were serving in such position or as executive officers at any time in 2024. It lists their names, their principal positions in which they served in those years, and each component of compensation paid with respect to those years. 58 Summary Compensation Table Name and Principal Position (1) Year Salary Non-Equity Incentive Plan Compensation (2) Option Awards (3) All Other Compen- sation (4) Total Charles E. Bradley, Jr. 2024 $ 995,000 $ – $ – $ 40,611 $ 1,035,611 Chief Executive Officer 2023 995,000 3,005,000 – 342 4,000,342 2022 995,000 3,980,000 5,885,850 351 10,861,201 Michael T. Lavin 2024 470,000 – – 47,158 517,158 President 2023 452,000 582,063 – 342 1,034,405 & Chief Operating Officer 2022 411,000 575,000 448,200 351 1,434,551 Danny Bharwani 2024 386,000 – – 44,871 430,871 Executive Vice President 2023 371,000 385,655 – 342 756,997 & Chief Financial Officer 2022 331,000 324,000 298,800 351 954,151 Teri L. Robinson 2024 386,000 – – 2,342 388,342 Executive Vice President 2023 386,000 413,406 – 342 799,748 - Sales & Originations 2022 368,000 401,000 298,800 351 1,068,151 Christopher Terry 2024 374,000 – – 9,534 383,534 Executive Vice President - Risk, Systems & IT (1) Mr. Terry qualified as a named executive officer pursuant to Item 402 of Regulation S-K beginning for the year 2024. (2) The amount of the Non-Equity Incentive Plan Compensation award for 2024 is expected to be determined by the end of June 2025. Such amount, when finally determined, will be disclosed in a filing under Item 5.02(f) of Form 8-K. (3) Represents the dollar value accrued for financial accounting purposes in connection with the grant of such options, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 and SFAS 123R. Value was estimated using a Black-Scholes model for 2022. For the options granted on January 24, 2022, (comprising 750,000 options granted to Mr. Bradley), the weighted average fair value per option was $5.8558, based on assumptions of 4.11 years expected life, expected volatility of 75.26%, and a risk-free rate of 1.43%. For the options granted on June 24, 2022, (comprising all of the other options granted to named executive officers in 2022), the weighted average fair value per option was $4.98, based on assumptions of 4.11 years expected life, expected volatility of 75.15%, and a risk-free rate of 3.13%. (4) For 2024, includes premiums paid by the Company for group life insurance and employer matching contributions under the Company’s defined contribution plan. Additionally, the amounts include a (i) cash-out of accrued vacation time of $38,269, $26,423 and $22,269 to Messrs. Bradley, Lavin, and Bharwani and (ii) a car allowance of $16,077 and $20,260 for Messrs. Lavin and Bharwani and (iii) gym membership fees of $2,316 for Mr. Lavin. 59 Grants of Plan-Based Awards in Last Fiscal Year In the year ended December 31, 2024, we did not grant any options, stock awards, or stock appreciation rights to any of our named executive officers. Our named executive officers are eligible for awards under our Executive Management Bonus Plan, which are expected to be determined by the end of June 2025. The table below provides information regarding the awards for which the named executive officers are eligible for the year 2024. Grants of Plan-Based Awards Estimated future payouts under non-equity incentive plan awards Name Threshold Target Maximum Mr. Bradley $ – $ 5,970,000 $ 5,970,000 Mr. Lavin – 799,000 799,000 Mr. Bharwani – 540,400 540,400 Ms. Robinson – 540,400 540,400 Mr. Terry – 523,600 523,600 The “target” and “maximum” figures appearing in the table above represent the maximum cash payout under the individual executives’ Executive Management Bonus Plan awards as of the date the incentive was fixed. The chief executive officer, Mr. Bradley, is eligible to receive a cash bonus of up to 600% of his base salary. The Company’s president, Mr. Lavin, is eligible to receive a cash bonus of up to 170% of his base salary. The other named executive officers, as executive vice presidents, are eligible to receive a cash bonus of up to 140% of their base salaries. The actual payout to each individual named in the table above has not been determined as of the date of this report. Outstanding Equity Awards at Fiscal Year-end The following table sets forth as of December 31, 2024 the number of unexercised options held by each of the named executive officers, the number of shares subject to then exercisable and unexercisable options held by such persons and the exercise price and expiration date of each such option. Each option referred to in the table was granted at an option price per share no less than the fair market value per share on the date of grant. None of such individuals holds a stock award; accordingly, only information concerning option awards is presented. 60 Name Number of securities underlying unexercised options (exercisable) Number of securities underlying unexercised options (unexercisable) Option exercise price Option expiration date Charles E. Bradley, Jr. 300,000 – $ 3.48 5/9/2025 300,000 – $ 3.53 8/8/2026 240,000 – $ 2.47 6/1/2027 225,000 75,000 (1) $ 4.95 8/3/2028 375,000 375,000 (2) $ 10.32 1/24/2029 150,000 150,000 (3) $ 10.25 6/24/2029 Michael T. Lavin 90,000 – $ 3.48 5/9/2025 90,000 – $ 3.53 8/8/2026 150,000 – $ 2.47 6/1/2027 67,500 22,500 (1) $ 4.95 8/3/2028 45,000 45,000 (3) $ 10.25 6/24/2029 Danny Bharwani 60,000 – $ 3.48 5/9/2025 60,000 – $ 3.53 8/8/2026 60,000 – $ 2.47 6/1/2027 45,000 15,000 (1) $ 4.95 8/3/2028 30,000 30,000 (3) $ 10.25 6/24/2029 Teri L. Robinson 60,000 – $ 3.48 5/9/2025 60,000 – $ 3.53 8/8/2026 80,000 – $ 2.47 6/1/2027 45,000 15,000 (1) $ 4.95 8/3/2028 30,000 30,000 (3) $ 10.25 6/24/2029 Christopher Terry 60,000 – $ 3.48 5/9/2025 60,000 – $ 3.53 8/8/2026 60,000 – $ 2.47 6/1/2027 45,000 15,000 (1) $ 4.95 8/3/2028 30,000 30,000 (3) $ 10.25 6/24/2029 (1) Becomes exercisable on August 3, 2025. (2) Becomes exercisable as to increments of one-half of the unexercisable portion on January 24, 2025 and 2026. (3) Becomes exercisable as to increments of one-half of the unexercisable portion on June 24, 2025 and 2026. 61 Option Exercises in Last Fiscal Year All of the five named executive officers exercised stock options during 2024. The table below shows the realized value and the number of options exercised for those individuals. None of our officers hold stock awards; accordingly, no stock awards vested during 2024. Option Exercises and Stock Vested Value realized on exercise (1) Number of shares acquired on exercise Mr. Bradley $ 1,275,000 300,000 Mr. Lavin 382,500 90,000 Mr. Bharwani 255,000 60,000 Ms. Robinson 255,000 60,000 Mr. Terry 233,400 60,000 (1) The value realized is the difference between the fair market value of the Company’s common stock on the date of exercise (the closing price reported by Nasdaq) and the exercise price of the option. Executive Management Bonus Plan (Non-equity Incentive Plan) The salary and cash bonus of the named executive officers are determined by the Compensation Committee. The compensation appearing in the Summary Compensation Table above under the caption "Non-Equity Incentive Plan Compensation" is paid pursuant to an Executive Management Bonus Plan (the “EMB Plan”). The EMB Plan is administered by the Compensation Committee. Among other things, the Compensation Committee selects participants in the EMB Plan from among the Company’s executive officers and determines the performance goals, target amounts and other terms and conditions of awards under the EMB Plan. With respect to officers other than the chief executive officer, determinations of base salary and of criteria relating to the EMB Plan are based in part on evaluations of such officers prepared by the Chief Executive Officer, which are furnished to and discussed with the Compensation Committee. Pension Plans The Company’s officers do not participate in any pension or retirement plan, other than a tax-qualified defined contribution plan (commonly known as a 401(k) plan). Potential Payments Upon Termination or Change of Control This section provides information regarding payments and benefits to the named executive officers that would be triggered by termination of the officer’s employment (including resignation, or voluntary termination; severance, or involuntary termination; and retirement) or a change of control of the Company. Each of the named executive officers is an at-will employee and, as such, does not have an employment contract. In addition, if the officer’s employment terminates for any reason other than a change of control of the Company, any unvested stock options are terminated, and vested options become subject to accelerated expiration: ordinarily three months following separation from service, or twelve months in the case of disability, retirement or death. Accordingly, there are no payments or benefits that are triggered by any termination event (including resignation and severance) other than in connection with a change of control of the Company. 62 Benefits Triggered by Change of Control or Termination after Change of Control Our stock option plans provide that each employee of ours who holds outstanding unexpired options under our stock option may have the right to exercise such options following a change of control of the Company, without regard to the date such option would first be exercisable. Each of the named executive officers holds such options. The “acceleration” of options is mandatory following certain changes of control, and subject to the discretion of the Compensation Committee following certain others. Acceleration is mandatory in the event of (i) the sale, or other disposition of substantially all of the Company’s assets, or (ii) a merger or similar transaction in which shareholders of the Company hold less than 50% of the shares of the surviving entity; provided, however, that acceleration following a merger or similar transaction is mandatory only if the holder suffers a Qualifying Termination (defined below) within one year following the transaction, or if the surviving entity does not provide the holder with an equivalent award. Acceleration is also mandatory if a holder suffers a Qualifying Termination within one year following (iii) a change within a three-year period in the membership of a majority of the Board of Directors (excluding changes recommended by the board), or (iv) a person’s acquisition of outstanding voting securities of the Company, other than directly from the Company and without approval of the board, resulting in that person’s having beneficial ownership of greater than 25% of the Company. Under our stock option plans, the Compensation Committee may exercise its discretion to provide for acceleration under other circumstances than those described above with respect to any particular stock option or class of stock options. The committee would expect to exercise its discretion with the intention of preserving the value of the stock option award. To date, such discretion has not been exercised. A “Qualifying Termination” is a termination of the holder’s employment by the Company other than for cause, disability or death, or by the holder for “good reason” (principally relating to a material diminution in the holder’s authority, compensation or responsibilities, or a relocation of greater than 50 miles). The preceding description applies to options held by officers and employees. Options issued to non-employee directors accelerate without the exercise of discretion upon any of the four categories of change of control described above. As of December 31, 2024, each of the named executive officers would realize a benefit if unvested stock options were to become immediately exercisable upon a change in control, based on the value of the shares underlying such options at the closing market price on December 31, 2024, which was $10.86 per share. The respective amounts of such possible benefit are set forth in the following table: Potential Value Upon Acceleration Mr. Bradley $ 737,250 Mr. Lavin 160,425 Mr. Bharwani 106,950 Ms. Robinson 106,950 Mr. Terry 106,950 Management Structure The Board is responsible for overseeing the management of the Company. Its oversight is aimed at seeing to it that the Company’s business is managed to meet our goals, and that the interests of the shareholders are served. Charles E. Bradley, Jr. currently serves as both the Chairman of the Board and our Chief Executive Officer, and is the only member of our Board who is not independent of the Company. The Nominating Committee has determined that the remaining directors and director nominees are “independent” under applicable independence standards of the Nasdaq Stock Market. Our Board has chosen not to designate any individual formally as the lead independent director. Each director retains his full oversight responsibility. 63 Our Board structure supports the independence of our non-management directors. Our Audit Committee, Compensation Committee and Nominating Committee are each composed solely of independent directors. Our bylaws provide that any two directors have the authority to call meetings of the Board of Directors, as do specified officers, including the president and the secretary. To enhance the possible use of that authority by independent directors, the corporate secretary is under standing instructions to call a meeting at the instance of any one director. The board believes that combining the Chairman and Chief Executive Officer positions is currently the most effective leadership structure given Mr. Bradley’s in-depth knowledge of our business and industry and his demonstrated ability to formulate and implement strategic initiatives. Mr. Bradley is continuously involved in developing and implementing our strategies, working closely with the company’s other senior executives to seek continued disciplined growth and excellence in operations. His close involvement in management places Mr. Bradley in the best position to decide which business issues require consideration by the independent directors of the board. In addition, having a combined Chairman and Chief Executive Officer enables us to speak with a unified voice to shareholders, customers and others concerned with our company. The Board believes that combining the Chief Executive and Chairman roles, as part of a governance structure that includes oversight of management responsibilities by independent directors, provides the preferred system for meeting the requirement that the Company be managed in the best interest of our shareholders. Risk Oversight The board’s overall responsibility for directing the management of the Company includes risk oversight. The risk oversight function is performed at the board level, and by the Audit and Compensation Committees. The Board of Directors as a whole in its regular meetings discusses and considers the risk inherent in the existing business of the Company and in proposed initiatives. Because the Company’s business consists of extending consumer credit to individuals believed to be of higher risk than others (sub-prime credit), the assessment of the risk assumed in such extensions of credit is a primary consideration on the part of the board. Risk oversight is also a key function of the Audit Committee and Compensation Committee. The principal risk management function performed by the Audit Committee is the ongoing assessment of the credit estimates and allowances periodically recorded in the Company’s books. The Audit Committee reviews that assessment regularly. Other risk assessments performed by the Audit Committee include assessments of contingent liabilities, and of other reserves and allowances. The principal risk management functions performed by the Compensation Committee are its setting and evaluation of objectives for the chief executive officer, in connection with its administration of the Executive Management Bonus Plan. The Compensation Committee recognizes that the Company’s business of extending subprime credit inherently includes a conflict between growing the business and managing the risk of credit losses: one means to increase the Company’s business is to offer credit on terms that are priced too low for the risk assumed. The Compensation Committee manages that risk by insisting that objectives to grow the business are qualified by a mandate that credit quality be maintained at appropriate levels. To some extent, such risk management is shared with the Audit Committee, which performs the primary oversight of whether credit risk assumed is reflected with adequate allowances in the Company’s financial statements. 64 Chief Executive Officer Pay Ratio The Dodd-Frank Reform and Consumer Protection Act includes a mandate that public companies disclose the ratio of the compensation of their chief executive officer to their median employee (“CEO Pay Ratio”). The CEO Pay Ratio for 2024 is not calculable at this time because Mr. Bradley’s 2024 Non-Equity Incentive Plan Compensation award has not yet been determined. The 2024 Non-Equity Incentive Plan Compensation award is expected to be determined by the end of June 2025. Such amount, when finally determined, and the CEO Pay Ratio for 2024, will be disclosed in a filing under Item 5.02(f) of Form 8-K. Director Compensation Throughout 2024, we paid our non-employee directors a retainer of $6,000 per month, with an additional fee of $700 per month for service on a board committee ($1,200 for a committee chairman). Non-employee directors also received per diem fees of $1,000 for attendance in person at meetings of the Board of Directors, or $500 for attendance by telephone. No per diem fees are paid for attendance at committee meetings. The following table summarizes compensation received by our directors for the year 2024: Name of Director Fees Earned or Paid in Cash (1) Total Charles E. Bradley, Jr. (2) $ – $ – Stephen H. Deckoff 74,000 74,000 Louis M. Grasso 84,400 84,400 William W. Grounds 91,300 91,300 Brian J. Rayhill 106,700 106,700 William B. Roberts 81,900 81,900 James E. Walker III 74,500 74,500 Gregory S. Washer 98,800 98,800 Daniel S. Wood 107,200 107,200 (1) This column reports cash compensation earned in 2024 for Board and committee service. (2) Mr. Bradley’s compensation as chief executive officer of the Company is described elsewhere in this report. He received no additional compensation for service on the Company’s Board of Directors. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The table below sets forth the number and percentage of shares of our common stock (our only class of voting securities) owned beneficially as of March 10, 2025 (the latest practicable date) by (i) each person known to us to own beneficially more than 5% of the outstanding common stock, (ii) each director and each named executive officer, and (iii) all of our directors and executive officers, as a group. Except as otherwise indicated, and subject to applicable community property and similar laws, each of the persons named has sole voting and investment power with respect to the shares shown as beneficially owned by such persons. Percent of class is calculated by reference to 21,443,198 shares outstanding on March 10, 2025. Except as otherwise noted, each person named in the table has a mailing address at 3800 Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169. 65 Name and Address of Beneficial Owner Amount and Nature of Beneficial Ownership (1) Percent of Class Charles E. Bradley, Jr. 5,697,181 24.5% Stephen H. Deckoff 5,127,165 (2) 23.9% Louis M. Grasso 100,300 * William W. Grounds 34,600 * Brian J. Rayhill 368,236 1.7% William B. Roberts 760,078 3.5% James E. Walker III 0 * Gregory S. Washer 521,803 2.4% Daniel S. Wood 351,910 1.6% Danny Bharwani 608,384 2.8% Michael T. Lavin 847,834 3.9% Teri L. Robinson 731,302 3.4% Christopher Terry 458,985 2.1% All directors and executive officers combined (21 persons) 17,081,795 (3) 65.6% Black Diamond Capital Management, L.L.C. 2187 Atlantic Street, 9 th Floor, Stamford, CT 06902 5,127,165 (2) 23.9% Dimensional Fund Advisors LP, Building One, 6300 Bee Cave Road, Austin, Texas, 78746 1,623,488 (4) 7.6% *Less than 1% (1) Includes certain shares that may be acquired within 60 days after March 10, 2025 from the Company upon exercise of options, as follows: Mr. Bradley, 1,777,500 shares; Mr. Grasso, 90,000 shares; Mr. Grounds, 30,000 shares; Mr. Rayhill, 165,000 shares; Mr. Roberts, 60,000 shares; Mr. Washer, 150,000 shares; Mr. Wood, 165,000 shares; Mr. Bharwani, 255,000 shares; Mr. Lavin, 442,500 shares; Ms. Robinson, 275,000 shares; and Mr. Terry, 255,000 shares. Of Mr. Bradley’s shares, 1,685,878 are pledged to secure loan(s) to him. The calculation of beneficial ownership also includes, in the case of the executive officers, an approximate number of shares each executive officer could be deemed to hold through contributions made to the Company’s Employee 401(k) Plan (the "401(k) Plan"). The 401(k) Plan provides an option for all participating employees to purchase stock in the Company indirectly by buying units in a mutual fund. Each "unit" in the mutual fund represents an interest in Company stock, cash and cash equivalents. (2) These shares are held directly by certain Black Diamond investment vehicles ("Black Diamond vehicles"). Black Diamond Capital Management, L.L.C. ("Black Diamond") exercises investment discretion on behalf of investment advisory affiliates that serve as investment advisers to the Black Diamond vehicles. Mr. Deckoff is the Managing Principal of Black Diamond. Mr. Deckoff disclaims beneficial ownership over the shares, except to the extent of his pecuniary interest therein. (3) Includes a total of 4,587,440 shares that are not outstanding as of the date of this report, but which may be acquired within 60 days after March 10, 2025 upon exercise of options, and includes an estimate of 401(k) Plan shares. 1,751 shares are pledged as security by an executive officer. (4) Based on a report on Schedule 13G/A filed by the named person on February 9, 2024. 66 Equity Compensation Plan Information The table below presents inform a tion regarding securities authorized for issuance under equity compensation plans, including the CPS 2006 Long-Term Equity Incentive Plan, as of December 31, 2024. Plan Category Outstanding Options Weighted average exercise price of Outstanding Options Number of securities remaining available for future issuance under equity compensation plans Plans approved by shareholders 6,097,440 $ 5.39 2,983,830 Plans not approved by shareholders None N/A N/A Total 6,097,440 $ 5.39 2,983,830 Item 13. Certain Relationships and Related Transactions, and Director Independence Subordinated Notes. The Company has offered and sold its subordinated notes in a continuous public offering. Executive officer Teri L. Robinson has purchased such notes directly from the Company in the offering, in each case on the same terms then offered to the public generally. The largest aggregate amount of principal outstanding on Ms. Robinson’s notes in 2024 was $459,351. The amount of principal outstanding on Ms. Robinson’s notes as of March 10, 2025 was $212,801. In 2024, the Company paid $496,663 of principal on Ms. Robinson’s notes, which includes principal paid more than once due to the renewal of matured notes during the year. In 2024, the Company paid $23,125 of interest at rates fixed at the time of purchase of each note. The interest rate on Ms. Robinson’s notes ranges from 4.9% to 8.9%. Executive officer Steve Schween purchased such subordinated notes from the Company before he became an executive officer. The largest aggregate amount of principal outstanding on Mr. Schween’s note in 2024 was $665,460. The amount of principal outstanding as of March 10, 2025 was $665,460. In 2024, the Company paid $148,013 in interest at a rate fixed at the time of purchase of the note. The interest rate on the note is 12.25%. Employment . Ms. Noel Jackson, the Company’s Vice President of Servicing, is the sister of Mr. Bradley, the Company’s chief executive officer and chairman of the board. For fiscal year 2024, Ms. Jackson received annual compensation of a base salary of $181,000 and is also eligible for an award under the Executive Management Bonus Plan described above. Ms. Jackson’s employment with the Company was authorized by the Board of Directors and her base salary and Executive Management Bonus Plan award is reviewed and approved by the Compensation Committee on an annual basis. Other Transactions .. On June 14, 2024, and as part of the Company’s stock repurchase program, the Company purchased directly from the Company’s chief executive officer, Charles E. Bradley, Jr., 50,000 shares of CPS common stock at the previous day’s market closing price of $8.98. The dollar amount involved in the transaction and Mr. Bradley’s interest in the transaction was $449,000. On September 10, 2024, the Company purchased an additional 70,000 shares of CPS common stock at the market closing price of $9.85 per share from Mr. Bradley, and Mr. Bradley’s interest in the transaction was $689,500. 67 Policy on Related Party Transactions and Director Independence. It is the Company’s policy that transactions with related parties having a control or fiduciary relationship with the Company who personally benefit from such transactions may take place only if approved by the Audit Committee or by the members of the Company’s Board of Directors who are disinterested with respect to the transaction, and independent in accordance with the standards for director independence prescribed by Nasdaq. Such policy is maintained in writing in the charter of the Audit Committee. The Audit Committee has given general approval to executive officer purchases of subordinated notes that are on terms and rates then available to the public, including the purchases by Ms. Robinson. The transactions with Mr. Schween were not subject to approval because they were entered into before Mr. Schween was an executive officer. The repurchases by the Company from Mr. Bradley were made pursuant to the Company’s stock repurchase program but were not preapproved. The Audit Committee subsequently ratified the Company’s transactions with Mr. Bradley. The nine directors of the Company are Charles E. Bradley, Jr., Stephen H. Deckoff, Louis M. Grasso, William W. Grounds, Brian J. Rayhill, William B. Roberts, James E. Walker III, Gregory S. Washer, and Daniel S. Wood, of whom Messrs. Rayhill, Grasso, Washer, and Wood compose the Audit Committee. The Board of Directors has concluded that other than Mr. Bradley (who is the Company’s chief executive officer), each of the other eight directors is independent in accordance with the director independence standards prescribed by Nasdaq, and has determined that none of them has a material relationship with the Company that would impair his independence from management or otherwise compromise his ability to act as an independent director. Item 14. Principal Accounting Fees and Services Fees Paid to Auditors The following table sets forth the fees accrued or paid to the Company’s independent registered public accounting firms for the years ended December 31, 2024 and 2023. Crowe LLP has served as the Company’s independent registered public accounting firm since February 2009, and has reported on the Company’s financial statements for the years ended December 31, 2008 through 2024. Audit and Non-Audit Fees 2023 2024 Audit Fees (1) $ 960,000 $ 1,000,000 Audit-Related Fees (2) 240,850 169,300 Tax Fees (3) 296,000 304,000 All Other Fees – – TOTAL $ 1,496,850 $ 1,473,300 (1) Audit fees relate to professional services rendered in connection with the audit of the Company’s annual financial statements and internal control over financial reporting, quarterly review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings. (2) Audit-related fees comprise fees for professional services that are reasonably related to the performance of the audit or review of the Company’s financial statements. (3) The 2023 and 2024 tax fees represent services rendered in connection with preparation of state and federal tax returns for the Company and its subsidiaries. 68 Audit Committee Supervision of Principal Accountant The Audit Committee acts pursuant to a written charter adopted by the Board of Directors. Pursuant to the charter, the Audit Committee pre-approves the audit and permitted non-audit fees to be paid to the independent auditor, and authorizes on behalf of the Company the payment of such fees, or refuses such authorization. The Audit Committee is also empowered to delegate such authority to one or more of its members. The Audit Committee has delegated to its chairman the authority to approve performance of services on an interim basis. In the fiscal years ended December 31, 2024 and December 31, 2023, all services for which audit fees or audit related fees were paid were preapproved by the Audit Committee as a whole, or pursuant to such delegated authority. In the course of its meetings, the Audit Committee has considered whether the provision of the non-audit fees outlined above is compatible with maintaining the independence of the audit firm, and has concluded that such independence is not and was not impaired. 69 PART IV Item 15. Exhibits, Financial Statement Schedules The financial statements listed below under the caption " Index to Financial Statements " are filed as a part of this report. No financial statement schedules are filed as the required information is inapplicable or the information is presented in the Consolidated Financial Statements or the related notes. Separate financial statements of the Company have been omitted as the Company is primarily an operating company and its subsidiaries are wholly owned and do not have minority equity interests held by any person other than the Company in amounts that together exceed 5% of the total consolidated assets as shown by the most recent year-end Consolidated Balance Sheet. The exhibits listed below are filed as part of this report, whether filed herewith or incorporated by reference to an exhibit filed with the report identified in the parentheses following the description of such exhibit. Unless otherwise indicated, each such identified report was filed by or with respect to the registrant. Exhibit Number Description (“**” indicates compensatory plan or agreement.) 3.1 Restated Articles of Incorporation (Exhibit 3.1 to Form 10-K filed March 31, 2009) 3.1.1 Certificate of Designation re Series B Preferred (Exhibit 3.1.1 to Form 8-K filed by the registrant on December 30, 2010) 3.2 Amended and Restated Bylaws (Exhibit 3.2 to Form 8-K filed December 3, 2021) 4. Instruments defining the rights of holders of long-term debt of certain consolidated subsidiaries of the registrant are omitted pursuant to the exclusion set forth in subdivisions (b)(iv)(iii)(A) and (b)(v) of Item 601 of Regulation S-K (17 CFR 229.601). The registrant agrees to provide copies of such instruments to the United States Securities and Exchange Commission upon request. 4.1 Form of Indenture re Renewable Unsecured Subordinated Notes (“RUS Notes”). (Exhibit 4.1 to Form S-1, no. 333-168976) 4.2 Form of RUS Notes (Exhibit 4.2 to Form S-1, no. 333-168976) 4.3 Supplement No. 1 dated December 7, 2010 to Indenture re RUS Notes (Exhibit 4.3 to Form S-1, no. 333-168976) 4.4 Supplement No. 2 dated January 22, 2014 to Indenture re RUS Notes (Exhibit 4.4 to Form S-1, no. 333-190766) 4.5 Supplement No. 3 dated June 14, 2023 to Indenture re RUS Notes (Exhibit 4.5 to Form S-3, no. 333-272653) 10.2 1997 Long-Term Incentive Stock Plan (“1997 Plan”) (Exhibit 10.20 to Form S-2, no. 333-121913) ** 10.2.1 Form of Option Agreement under 1997 Plan (Exhibit 10.2.1 to Form 10-K filed March 13, 2006) ** 10.14 2006 Long-Term Equity Incentive Plan as amended May 18, 2015 (Incorporated by reference to pages A-1 through A-10 of the definitive proxy statement filed by the registrant on April 27, 2015)** 10.14.1 Form of Option Agreement under the 2006 Long-Term Equity Incentive Plan (Exhibit 10.14.1 to registrant’s Form 10-K filed March 9, 2007)** 10.14.2 Form of Option Agreement under the 2006 Long-Term Equity Incentive Plan (Exhibit 99.(D)(2) to registrant’s Schedule TO filed November 12, 2009)** 10.14.3 Form of Option Agreement under the 2006 Long-Term Equity Incentive Plan (Exhibit 99.(D)(3) to registrant’s Schedule TO filed November 12, 2009)** 14 Registrant’s Code of Ethics for Senior Financial Officers (Exhibit 14 to Form 10-K filed March 13, 2006) 19 Insider Trading Policy (filed herewith) 21 List of subsidiaries of the registrant (filed herewith) 23.1 Consent of Crowe LLP (filed herewith) 31.1 Rule 13a-14(a) certification by Chief Executive Officer (filed herewith) 31.2 Rule 13a-14(a) certification by Chief Financial Officer (filed herewith) 32 Section 1350 certification (filed herewith) 97 Policy Relating to Recovery of Erroneously Awarded Compensation (Exhibit 97 to Form 10-K filed March 15, 2024) 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Item 16. Form 10-K Summary None. 70 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CONSUMER PORTFOLIO SERVICES, INC. (registrant) March 12, 2025 By: /s/ CHARLES E. BRADLEY, JR. Charles E. Bradley, Jr., Director and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 12, 2025 /s/ CHARLES E. BRADLEY, JR. Charles E. Bradley, Jr., Director and Chief Executive Officer (Principal Executive Officer) March 12, 2025 /s/ STEPHEN H. DECKOFF Stephen H. Deckoff, Director March 12, 2025 /s/ LOUIS M. GRASSO Lou Grasso, Director March 12, 2025 /s/ WILLIAM W. GROUNDS William W. Grounds, Director March 12, 2025 /s/ BRIAN J. RAYHILL Brian J. Rayhill, Director March 12, 2025 /s/ WILLIAM B. ROBERTS William B. Roberts, Director March 12, 2025 /s/ JAMES E. WALKER James E. Walker, Director March 12, 2025 /s/ GREGORY S. WASHER Gregory S. Washer, Director March 12, 2025 /s/ DANIEL S. WOOD Daniel S. Wood, Director March 12, 2025 /s/ DENESH BHARWANI Denesh Bharwani, Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 71 INDEX TO FINANCIAL STATEMENTS Page Reference Report of Crowe LLP, Independent Registered Public Accounting Firm (PCAOB ID: 173 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-4 Consolidated Statements of Income for the years ended December 31, 2024, 2023 and 2022 F-5 Consolidated Statements of Comprehensive Income for the years ended December 31, 2024, 2023 and 2022 F-6 Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024, 2023 and 2022 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023 and 2022 F-8 Notes to Consolidated Financial Statements F-9 F- 1 Crowe LLP Independent Member Crowe Global REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and the Board of Directors of Consumer Portfolio Services, Inc. and Subsidiaries Las Vegas, Nevada Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Consumer Portfolio Services, Inc. and Subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, shareholders’ equity, and cash flows for each of the years in the three- year period ended December 31, 2024, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO. Basis for Opinions The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting. Our responsibility is to express an opinion on the Company’s financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. F- 2 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Accounting for Loans at Fair Value As described in Notes 1 and 12 to the consolidated financial statements, the Company carries all finance receivables acquired after 2017 at fair value on a recurring basis. The Company had $3.3 billion in finance receivables that are carried at fair value, all of which are classified as level 3 fair values as they contain one or more inputs which are unobservable and significant to the fair value measurement. With assistance from an outside valuation expert, the Company used a level 3 fair value methodology for the fair value of finance receivables. The significant assumptions used by the Company to calculate the fair value of these financial receivables include the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivables. These significant assumptions were based on the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. We identified the valuation of finance receivables carried at fair value as a critical audit matter as this estimate requires subjective auditor judgment. Our principal considerations in making this determination are (i) there was significant judgment and estimation by the Company in determining the assumptions to estimate fair value, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures related to the fair value of these finance receivables, and (ii) the audit effort involved professionals with specialized skill and knowledge to assist in evaluating the audit evidence obtained from these procedures. Testing the design and operating effectiveness of controls over the application of the assumptions used to support the estimate of loans at fair value included addressing: · The completeness and accuracy of data · Third-party model review · Review of management’s judgments and significant assumptions over inputs Substantively testing management's process, including evaluating management’s judgments and assumptions, for developing the estimate of loans at fair value included: · Using an auditor employed valuation specialist to assist in testing the Company’s estimate of fair value of the finance receivables. Testing included evaluation of certain management significant assumptions and, evaluating the appropriateness of the methodology including a recalculation of the model. · Testing the completeness and accuracy of the underlying data used in the fair value of finance receivables estimate. Crowe LLP We have served as the Company’s auditor since 2008. Dallas, Texas March 12, 2025 F- 3 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) December 31, December 31, 2024 2023 ASSETS Cash and cash equivalents $ 11,713 $ 6,174 Restricted cash and equivalents 125,684 119,257 Finance receivables measured at fair value 3,313,767 2,722,662 Finance receivables 5,420 27,553 Less: Allowance for finance credit losses ( 433 ) ( 2,869 ) Finance receivables, net 4,987 24,684 Furniture and equipment, net 943 1,372 Deferred tax assets, net 1,010 3,736 Other assets 35,764 25,861 Total assets $ 3,493,868 $ 2,903,746 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities Accounts payable and accrued expenses $ 70,151 $ 62,544 Warehouse lines of credit 410,898 234,025 Residual interest financing 99,176 49,875 Securitization trust debt 2,594,384 2,265,446 Subordinated renewable notes 26,489 17,188 Total liabilities 3,201,098 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; 21,432,698 and 21,174,856 shares issued and outstanding at December 31, 2024 and December 31, 2023, respectively 25,720 28,678 Retained earnings 267,060 247,857 Accumulated other comprehensive loss ( 10 ) ( 1,867 ) Total shareholders’ equity 292,770 274,668 Total liabilities and shareholders’ equity $ 3,493,868 $ 2,903,746 See accompanying Notes to Consolidated Financial Statements. F- 4 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Year Ended December 31, 2024 2023 2022 Revenues: Interest income $ 363,962 $ 329,219 $ 305,237 Mark to finance receivables measured at fair value 21,000 12,000 15,283 Other income 8,544 10,795 9,189 Total revenues 393,506 352,014 329,709 Expenses: Employee costs 96,192 88,148 84,282 General and administrative 54,710 50,001 37,618 Interest 191,257 146,631 87,524 Provision for credit losses ( 5,307 ) ( 22,300 ) ( 28,100 ) Sales 22,752 21,216 23,039 Occupancy 5,609 6,374 7,535 Depreciation and amortization 862 847 1,618 Total operating expenses 366,075 290,917 213,516 Income before income tax expense (benefit) 27,431 61,097 116,193 Income tax expense (benefit) 8,228 15,754 30,210 Net income $ 19,203 $ 45,343 $ 85,983 Earnings per share: Basic $ 0.90 $ 2.17 $ 4.10 Diluted 0.79 1.80 3.23 Number of shares used in computing earnings per share: Basic 21,292 20,896 20,958 Diluted 24,325 25,218 26,589 See accompanying Notes to Consolidated Financial Statements. F- 5 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2024 2023 2022 Net income $ 19,203 $ 45,343 $ 85,983 Other comprehensive income (loss); change in funded status of pension plan, net of $ 681 , $ 422 and $ 513 in tax for 2024, 2023 and 2022, respectively 1,857 1,164 ( 1,409 ) Comprehensive income $ 21,060 $ 46,507 $ 84,574 See accompanying Notes to Consolidated Financial Statements. F- 6 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Accumulated Other Common Stock Retained Comprehensive Shares Amount Earnings Loss Total Balance at January 1, 2022 21,144 $ 55,298 $ 116,531 $ ( 1,622 ) $ 170,207 Common stock issued upon exercise of options and warrants 3,127 15,277 – – 15,277 Repurchase of common stock ( 4,140 ) ( 46,096 ) – – ( 46,096 ) Other comprehensive income (loss) – – – ( 1,409 ) ( 1,409 ) Stock-based compensation – 4,427 – – 4,427 Net income – – 85,983 – 85,983 Balance at December 31, 2022 20,131 $ 28,906 $ 202,514 $ ( 3,031 ) $ 228,389 Common stock issued upon exercise of options and warrants 3,020 16,581 – – 16,581 Repurchase of common stock ( 1,976 ) ( 20,273 ) – – ( 20,273 ) Other comprehensive income (loss) – – – 1,164 1,164 Stock-based compensation – 3,464 – – 3,464 Net income – – 45,343 – 45,343 Balance at December 31, 2023 21,175 $ 28,678 $ 247,857 $ ( 1,867 ) $ 274,668 Common stock issued upon exercise of options and warrants 1,728 6,913 – – 6,913 Repurchase of common stock ( 1,470 ) ( 12,828 ) – – ( 12,828 ) Other comprehensive income (loss) – – – 1,857 1,857 Stock-based compensation – 2,957 – – 2,957 Net income – – 19,203 – 19,203 Balance at December 31, 2024 21,433 $ 25,720 $ 267,060 $ ( 10 ) $ 292,770 See accompanying Notes to Consolidated Financial Statements. F- 7 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2024 2023 2022 Cash flows from operating activities: Net income $ 19,203 $ 45,343 $ 85,983 Adjustments to reconcile net income to net cash provided by operating activities: Net interest income accretion on fair value receivables 224,304 193,541 135,147 Depreciation and amortization 862 847 1,618 Amortization of deferred financing costs 10,574 9,690 8,207 Mark to fair value of finance receivables measured at fair value ( 21,000 ) ( 12,000 ) ( 15,283 ) Provision for credit losses ( 5,307 ) ( 22,300 ) ( 28,100 ) Stock-based compensation expense 2,957 3,464 4,427 Changes in assets and liabilities: Other assets ( 10,028 ) 4,667 4,171 Deferred tax assets, net 2,726 6,441 9,398 Accounts payable and accrued expenses 9,464 8,287 10,364 Net cash provided by operating activities 233,755 237,980 215,932 Cash flows from investing activities: Payments received on finance receivables held for investment 25,004 68,167 133,733 Purchases of finance receivables measured at fair value ( 1,653,037 ) ( 1,251,020 ) ( 1,673,166 ) Payments on receivables portfolio at fair value 858,628 823,434 825,783 Change in repossessions held in inventory 125 446 1,899 Purchase of furniture and equipment ( 433 ) ( 559 ) ( 2,149 ) Net cash (used in) investing activities ( 769,713 ) ( 359,532 ) ( 713,900 ) Cash flows from financing activities: Proceeds from issuance of securitization trust debt 1,453,921 1,235,534 1,411,018 Proceeds from issuance of subordinated renewable notes 11,037 – 4,004 Payments on subordinated renewable notes ( 1,736 ) ( 8,075 ) ( 5,200 ) Net advances (repayments) of warehouse lines of credit 180,574 ( 53,253 ) 181,868 Net advances (repayments) of residual interest financing debt 50,000 – ( 4,311 ) Repayment of securitization trust debt ( 1,124,088 ) ( 1,078,432 ) ( 1,060,052 ) Payment of financing costs ( 15,869 ) ( 7,888 ) ( 12,299 ) Purchase of common stock ( 12,828 ) ( 20,273 ) ( 46,096 ) Exercise of options and warrants 6,913 16,581 15,277 Net cash provided by financing activities 547,924 84,194 484,209 Increase (decrease) in cash and cash equivalents 11,966 ( 37,358 ) ( 13,759 ) Cash and cash equivalents at beginning of year 125,431 162,789 176,548 Cash and cash equivalents at end of year $ 137,397 $ 125,431 $ 162,789 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 177,949 $ 135,203 $ 76,696 Income taxes 11,799 3,552 16,182 See accompanying Notes to Consolidated Financial Statements. F- 8 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Description of Business Consumer Portfolio Services, Inc. (“CPS”) was incorporated in California on March 8, 1991. CPS and its subsidiaries (collectively, the “Company”) specialize in purchasing and servicing retail automobile installment sale contracts ("Contracts") originated by licensed motor vehicle dealers (“Dealers”) located throughout the United States. Customers located in Texas, Ohio, California, Illinois, Florida, and Georgia represented 7.8 %, 7.3 %, 6.0 %, 5.7 %, 5.4 %, and 4.5 %. respectively, of contracts purchased during 2024 compared with 7.1 %, 6.2 %, 6.0 %, 6.9 %, 5.4 %, and 4.0 % respectively in 2023. No other state had a concentration in excess of 4.5% in 2024. We specialize in contracts with vehicle purchasers who generally would not be expected to qualify for traditional financing provided by commercial banks or automobile manufacturers’ captive finance companies. We are subject to various regulations and laws as they relate to the extension of credit in consumer credit transactions. Failure to comply with such laws and regulations could have a material adverse effect on the Company. Principles of Consolidation The Consolidated Financial Statements include the accounts of Consumer Portfolio Services, Inc. and its wholly-owned subsidiaries, certain of which are special purpose subsidiaries (“SPS”), formed to accommodate the structures under which we purchase and securitize our contracts. The Consolidated Financial Statements also include the accounts of CPS Leasing, Inc., an 80% owned subsidiary. All significant intercompany balances and transactions have been eliminated in consolidation. Cash and Cash Equivalents For purposes of the statements of cash flows, we consider all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. Cash equivalents consist of cash on hand and due from banks and money market accounts. Substantially all of our cash is deposited at three financial institutions. We maintain cash due from banks in excess of the banks’ insured deposit limits. We do not believe we are exposed to any significant credit risk on these deposits. As part of certain financial covenants related to debt facilities, we are required to maintain a minimum unrestricted cash balance. As of December 31, 2024, our unrestricted cash balance was $ 11.7 million, which exceeded the minimum amounts required by our financial covenants. Finance Receivables Finance receivables, which we have the intent and ability to hold for the foreseeable future or until maturity or payoff, are presented at cost. All finance receivable contracts are held for investment. Interest income is accrued on the unpaid principal balance. Origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the interest method without anticipating prepayments. Generally, payments received on finance receivables are restricted to certain securitized pools, and the related contracts cannot be resold. Finance receivables are charged off pursuant to the controlling documents of certain securitized pools, generally as described below under Charge Off Policy. Management may authorize an extension of payment terms if collection appears likely during the next calendar month. F- 9 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our portfolio of finance receivables consists of small-balance homogeneous contracts that are collectively evaluated for impairment on a portfolio basis. 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. 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. 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. For the twelve-month period ended December 31, 2024 include a $ 21 .0 million positive mark to the carrying value of the portion of the receivables portfolio accounted for at fair value. The Company recorded a $ 12 .0 positive mark to for the twelve-month period ended December 31, 2023. 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. Allowance for Finance Credit Losses In order to estimate an appropriate allowance for losses likely incurred on finance receivables, we use a loss allowance methodology commonly referred to as “ static pooling,” which stratifies the finance receivable portfolio into separately identified pools based on their period of origination, then uses historical performance of seasoned pools to estimate future losses on current pools. Historical loss experience is adjusted as necessary for current economic conditions. We consider our portfolio of finance receivables to be relatively homogenous and consequently we analyze credit performance primarily in the aggregate rather than stratification by any particular credit quality indicator. Using analytical and formula driven techniques, we estimate an allowance for finance credit losses, which we believe is adequate for current expected credit losses that can be reasonably estimated in our portfolio of finance receivable contracts. Net losses incurred on finance receivables are charged to the allowance. We evaluate the adequacy of the allowance by examining current delinquencies, the characteristics of the portfolio, the value of the underlying collateral and historical loss trends. As conditions change, our level of provisioning and/or allowance may change. F- 10 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Charge Off Policy Delinquent contracts for which the related financed vehicle has been repossessed are generally charged off at the earliest of (1) the month in which the proceeds from the sale of the financed vehicle are received, (2) the month in which 90 days have passed from the date of repossession or (3) the month in which the Contract becomes seven scheduled payments past due (see Repossessed and Other Assets below). The amount charged off is the remaining principal balance of the Contract, after the application of the net proceeds from the liquidation of the financed vehicle. With respect to delinquent contracts for which the related financed vehicle has not been repossessed, the remaining principal balance is generally charged off no later than the end of the month that the Contract becomes five scheduled payments past due. Contract Acquisition Fees and Origination Costs Upon purchase of a Contract from a Dealer, we generally either charge or advance the Dealer an acquisition fee. Dealer acquisition fees and deferred origination costs are applied to the recorded value of finance receivables and are accreted into earnings as an adjustment to the yield over the estimated life of the Contract using the interest method. However, for receivables measured at fair value, 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. Repossessed and Other Assets If a Contract obligor fails to make or keep promises for payments, or if the obligor is uncooperative or attempts to evade contact or hide the vehicle, a supervisor will review the collection activity relating to the account to determine if repossession of the vehicle is warranted. Generally, such a decision is made between the 60th and 90th day past the obligor’s payment due date, but could occur sooner or later, depending on the specific circumstances. At the time the vehicle is repossessed we stop accruing interest on the Contract, and reclassify the remaining Contract balance to the line item "Other Assets" on our Consolidated Balance Sheet at its estimated fair value less costs to sell. Treatment of Securitizations Our term securitization structure has generally been as follows: We sell contracts we acquire to a wholly-owned SPS, which has been established for the limited purpose of buying and reselling our contracts. The SPS then transfers the same contracts to another entity, typically a statutory trust ( " Trust " ). The Trust issues interest-bearing asset-backed securities ( “ Notes”), in a principal amount equal to or less than the aggregate principal balance of the contracts. We typically sell these contracts to the Trust at face value and without recourse, except representations and warranties that we make to the Trust that are similar to those provided to us by the Dealer. One or more investors (the “Noteholders”) purchase the Notes issued by the Trust; the proceeds from the sale of the Notes are then used to purchase the contracts from us. We may retain or sell subordinated Notes issued by the Trust. In addition, we have provided "Credit Enhancement" for the benefit of the Noteholders in three forms: (1) an initial cash deposit to a bank account (a "Spread Account") held by the Trust, (2) overcollateralization of the Notes, where the principal balance of the Notes issued is less than the principal balance of the contracts, and (3) in the form of subordinated Notes. The agreements governing the securitization transactions (collectively referred to as the "Securitization Agreements") require that the initial level of Credit Enhancement be supplemented by a portion of collections from the contracts until the level of Credit Enhancement reaches specified levels, which are then maintained. The specified levels are generally computed as a percentage of the principal amount remaining unpaid under the related contracts. The specified levels at which the Credit Enhancement is to be maintained will vary depending on the performance of the portfolios of contracts held by the Trusts and on other conditions. Such levels have increased and decreased from time to time based on performance of the various portfolios, and have also varied from one Trust to another. F- 11 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Our warehouse securitization structures are similar to the above, except that (i) the SPS that purchases the contracts pledges the contracts to secure promissory notes or loans that it issues, and (ii) no increase in the required amount of Credit Enhancement is contemplated. Upon each sale of contracts in a securitization structured as a secured financing, we retain as assets on our Consolidated Balance Sheet the securitized contracts and record as indebtedness the Notes issued in the transaction. We have the power to direct the most significant activities of the SPS. In addition, we have the obligation to absorb losses and the rights to receive benefits from the SPS, both of which could be potentially significant to the SPS. These types of securitization structures are treated as secured financings, in which the receivables remain on our Consolidated Balance Sheet, and the debt issued by the SPS is shown as a securitization trust debt on our Consolidated Balance Sheet. We receive periodic base servicing fees for the servicing and collection of the contracts. In addition, we are entitled to the cash flows from the Trusts that represent collections on the contracts in excess of the amounts required to pay principal and interest on the Notes, the base servicing fees, and certain other fees (such as trustee and custodial fees). Required principal payments on the Notes are generally defined as the payments sufficient to keep the principal balance of the Notes equal to the aggregate principal balance of the related contracts (excluding those contracts that have been charged off), or a pre-determined percentage of such balance. Where that percentage is less than 100%, the related Securitization Agreements require accelerated payment of principal until the principal balance of the Notes is reduced to the specified percentage. Such accelerated principal payment is said to create " overcollateralization " of the Notes. If the amount of cash required for payment of fees, interest and principal on the senior Notes exceeds the amount collected during the collection period, the shortfall is generally withdrawn from the Spread Account, if any. If the cash collected during the period exceeds the amount necessary for the above allocations plus required principal payments on the subordinated Notes, if any, and there is no shortfall in the related Spread Account or other form of Credit Enhancement, the excess is released to us. If the total Credit Enhancement amount is not at the required level, then the excess cash collected is retained in the Trust until the specified level is achieved. Cash in the Spread Accounts is restricted from our use. Cash held in the various Spread Accounts is invested in high quality, liquid investment securities, as specified in the Securitization Agreements. In all of our term securitizations we have transferred the receivables (through a subsidiary) to the securitization Trust. We report the assets and liabilities of the securitization Trust on our Consolidated Balance Sheet. The Noteholders’ and the related securitization Trusts’ recourse against us for failure of the contract obligors to make payments on a timely basis is limited, in general, to our Finance Receivables, and Spread Accounts. Servicing We consider the contractual servicing fee received on our managed portfolio held by non-consolidated subsidiaries to be equal to adequate compensation. Additionally, we consider that these fees would fairly compensate a substitute servicer, should one be required. As a result, no servicing asset or liability has been recognized. Servicing fees received on the managed portfolio held by non-consolidated subsidiaries are reported as income when earned. Servicing fees received on the managed portfolio held by consolidated subsidiaries are included in interest income when earned. Servicing costs are charged to expense as incurred. Servicing fees receivable, which are included in Other Assets in the accompanying Consolidated Balance Sheets, represent fees earned but not yet remitted to us by the trustee. F- 12 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Furniture and Equipment Furniture and equipment are stated at cost net of accumulated depreciation. We calculate depreciation using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Assets held under capital leases and leasehold improvements are amortized over the lesser of the estimated useful lives of the assets or the related lease terms. Amortization expense on assets acquired under capital lease is included with depreciation expense on owned assets. Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of Long-lived assets and certain identifiable intangibles are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Other Income The following table presents the primary components of Other Income: Schedule of other income Year Ended December 31, 2024 2023 2022 (In thousands) Third-party portfolio $ 7,324 $ 9,350 $ 6,814 Direct mail revenues – – 774 Sales tax refunds 1,093 1,078 737 Other 127 367 864 Other income for the period $ 8,544 $ 10,795 $ 9,189 F- 13 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Earnings Per Share Earnings per share were calculated using the weighted average number of shares outstanding for the related period. The following table illustrates the computation of basic and diluted earnings per share: Schedule of computation of earnings per share Year Ended December 31, 2024 2023 2022 (In thousands, except per share data) Numerator: Numerator for basic and diluted earnings per share $ 19,203 $ 45,343 $ 85,983 Denominator: Denominator for basic earnings per share - weighted average number of common shares outstanding during the year 21,292 20,896 20,958 Incremental common shares attributable to exercise of outstanding options and warrants 3,033 4,322 3,218 Denominator for diluted earnings per share 24,325 25,218 26,589 Basic earnings per share $ 0.90 $ 2.17 $ 4.10 Diluted earnings per share $ 0.79 $ 1.80 $ 3.23 Incremental shares of 1.7 million, 1.7 million and 1.2 million related to stock options and warrants have been excluded from the diluted earnings per share calculation for the years ended December 31, 2024, 2023 and 2022, respectively, because the effect is anti-dilutive. Deferral and Amortization of Debt Issuance Costs Costs related to the issuance of debt are deferred and amortized using the interest method over the contractual or expected term of the related debt. Unamortized debt issuance costs are presented as a direct deduction to the carrying amount of the related debt on our Consolidated Balance Sheets. Income Taxes 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. We estimate a valuation allowance against that portion of the deferred tax asset whose utilization in future periods is not more than likely. F- 14 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Purchases of Company Stock We record purchases of our own common stock at cost and treat the shares as retired. Stock Option Plan The Company accounts for stock-based compensation in accordance with FASB ASC Topic 718, Compensation—Stock Compensation , that generally requires entities to recognize the cost of employee services received in exchange for awards of stock options, restricted stock or other equity instruments, based on the grant date fair value of those awards. Compensation cost is recognized for awards issued to employees based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options. This cost is recognized over the period which an employee is required to provide services in exchange for the award, generally the vesting period. 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. These are material estimates that could be susceptible to changes in the near term and, accordingly, actual results could differ from those estimates. Reclassification Certain amounts for the prior year have been reclassified to conform to the current year’s presentation with no effect on previously reported earnings or shareholders’ equity. 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 December 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. F- 15 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We have recorded a liability as of December 31, 2024, which represents our estimate of the immaterial aggregate probable incurred losses for legal contingencies. The amount of losses that may ultimately be incurred, over and above such losses as are probable, cannot be estimated with certainty. Accounting Pronouncements Recently Adopted In November of 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments in this ASU became effective for the Company beginning with this Annual Report on Form 10-K for the year ended December 31, 2024, and we have adopted using the retrospective transition method. The adoption did not have a material impact on the Company’s consolidated financial statements. See Note 13 for additional information on the adoption of ASU 2023-07. (2) Restricted Cash Restricted cash consists of cash and cash equivalent accounts relating to our outstanding securitization trusts and credit facilities. The amount of restricted cash on our Consolidated Balance Sheets was $ 125.7 million and $ 119.3 million as of December 31, 2024 and 2023, respectively. Our securitization transactions and one of our warehouse credit facilities require that we establish cash reserves, or spread accounts, as additional credit enhancement. These cash reserves, which are included in restricted cash, were $ 62.3 million and $ 59 .0 million as of December 31, 2024 and 2023, respectively. (3) 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. The following table presents the components of finance receivables, net of unearned interest: Schedule of finance receivables December 31, 2024 2023 Finance receivables (In thousands) Automobile finance receivables, net of unearned interest $ 5,420 $ 27,553 Unearned acquisition fees, discounts and deferred origination costs, net – – Finance receivables $ 5,420 $ 27,553 F- 16 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO 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 December 31, 2024 and 2023: Schedule of delinquency status of finance receivables December 31, 2024 2023 Delinquency Status (In thousands) Current $ 2,994 $ 17,771 31-60 days 1,184 5,626 61-90 days 971 3,087 91 + days 271 1,069 $ 5,420 $ 27,553 Finance receivables totaling $ 271,000 and $ 1.1 million at December 31, 2024 and 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. F- 17 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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 December 31, 2024 and 2023: Schedule of amortized cost basis of finance receivables December 31, 2024 2023 Annual Vintage Pool (In thousands) 2015 and prior $ 294 $ 2,158 2016 1,336 7,673 2017 3,790 17,722 $ 5,420 $ 27,553 For our receivables originated prior to January 2018, we maintain an allowance for credit losses on automobile contracts held on our balance sheet, which reflects our estimates of probable credit losses that can be reasonably estimated. The Company recorded a reduction to provision for credit losses on finance receivables in the amount of $ 5.3 million, $ 22.3 million, and $ 28.1 million for the years ended December 31, 2024, 2023, and 2022, respectively. The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from better than expected credit performance for these receivables. F- 18 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents a summary of the activity for the allowance for finance credit losses, for the years ended December 31, 2024, 2023 and 2022: Schedule of allowance for finance credit losses December 31, 2024 2023 2022 (In thousands) Balance at beginning of period $ 2,869 $ 21,753 $ 56,206 Provision for credit losses on finance receivables ( 5,307 ) ( 22,300 ) ( 28,100 ) Charge-offs ( 1,846 ) ( 8,064 ) ( 18,319 ) Recoveries 4,717 11,480 11,966 Balance at end of period $ 433 $ 2,869 $ 21,753 The following table presents the gross charge-offs by year of origination of our finance receivables for the year ended December 31, 2024, 2023, and 2022: Schedule of charge-offs for financed receivables December 31, 2024 2023 2022 Annual Vintage Pool (In thousands) 2014 and prior $ 353 $ 325 $ 963 2015 285 1,031 3,047 2016 703 3,266 6,586 2017 976 4,294 8,271 Applied against repos in inventory (net) ( 471 ) ( 852 ) ( 548 ) $ 1,846 $ 8,064 $ 18,319 (4) Furniture and Equipment The following table presents the components of furniture and equipment: Schedule of furniture and equipment December 31, 2024 2023 (In thousands) Furniture and fixtures $ 2,083 $ 1,936 Computer and telephone equipment 6,942 6,823 Leasehold improvements 1,638 1,570 10,663 10,329 Less: accumulated depreciation and amortization ( 9,720 ) ( 8,957 ) $ 943 $ 1,372 F- 19 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Depreciation expense totaled $ 862,000 , $ 847,000 , and $ 1,618,000 for the years ended December 31, 2024, 2023 and 2022, respectively. (5) Securitization Trust Debt We have completed numerous term securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our 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 December 31, Initial December 31, December 31, December 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 – 243,513 – 19,725 – CPS 2019-D December 2026 – 274,313 – 27,445 – CPS 2020-A March 2027 – 260,000 – 26,382 – CPS 2020-B June 2027 – 202,343 – 24,197 – CPS 2020-C November 2027 27,353 252,200 22,453 43,487 4.79 % CPS 2021-A March 2028 31,368 230,545 22,396 39,039 2.30 % CPS 2021-B June 2028 41,023 240,000 31,903 55,684 3.30 % CPS 2021-C September 2028 63,518 291,000 49,739 85,563 2.43 % CPS 2021-D December 2028 86,594 349,202 72,090 126,059 3.25 % CPS 2022-A April 2029 98,550 316,800 77,872 137,479 3.40 % CPS 2022-B October 2029 156,093 395,600 132,002 213,779 5.64 % CPS 2022-C April 2030 185,160 391,600 141,176 230,273 6.55 % CPS 2022-D June 2030 157,127 307,018 135,857 205,583 8.84 % CPS 2023-A August 2030 188,215 324,768 146,020 231,906 6.79 % CPS 2023-B November 2030 207,630 332,885 172,154 268,172 6.97 % CPS 2023-C February 2031 199,594 291,732 175,219 257,568 6.89 % CPS 2023-D May 2031 214,416 286,149 191,621 271,939 7.57 % CPS 2024-A August 2031 228,617 280,924 206,348 – 6.20 % CPS 2024-B November 2031 283,802 319,871 262,768 – 6.36 % CPS 2024-C March 2032 408,423 436,310 379,254 – 6.21 % CPS 2024-D June 2032 415,560 416,816 390,983 – 5.18 % – $ 2,993,044 $ 6,671,864 $ 2,609,855 $ 2,280,022 _________________________ (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 $ 987.8 million in 2025, $ 696.4 million in 2026, $ 470.5 million in 2027, $ 275.1 million in 2028, $ 126.6 million in 2029, and $ 38 .0 million in 2030. (2) Includes repossessed assets that are included in Other Assets on our Consolidated Balance Sheets. F- 20 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt issuance costs of $ 15.5 million and $ 14.6 million as of December 31, 2024 and December 31, 2023, respectively, 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 issued in private placement transactions to qualified institutional investors. The debt was issued by our wholly-owned, bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by any of our other assets. The terms of the various securitization agreements related to the issuance of the securitization trust debt require that certain delinquency and credit loss criteria be met with respect to the collateral pool, and require that we maintain minimum levels of liquidity and net worth and not exceed maximum leverage levels. We were in compliance with all such covenants as of December 31, 2024. We are responsible for the administration and collection of the contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional credit enhancement for the Notes or to be applied to make payments on the securitization trust debt. As of December 31, 2024, restricted cash under the various agreements totaled approximately $ 125.7 million. Interest expense on the securitization trust debt is composed of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, insurance premiums, amortization of deferred financing costs, and amortization of discounts required on the notes at the time of issuance. Deferred financing costs related to the securitization trust debt are amortized using the interest method. Accordingly, the effective cost of borrowing of the securitization trust debt is greater than the stated rate of interest. 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 warehouse line of credit. 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 any of our other creditors. F- 21 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (6) Debt The terms of our debt outstanding at December 31, 2024 and 2023 are summarized below: Schedule of debt outstanding Amount Outstanding at December 31, December 31, 2024 2023 Subordinate Lender (In thousands) Description Interest Rate Interest Rate Maturity Warehouse line of credit 2.85% over CP yield rate (Minimum 3.60%) 7.52% and 8.58% at December 31, 2024 and December 31 2023, respectively 6.40% over SOFR yield rate (Minimum 7.15%) 11.09% at December 31, 2024 July 2026 $ 269,602 $ 165,628 Warehouse line of credit 4.50% over a commercial paper rate (Minimum 7.50%) 8.90% and 9.63% at December 31 2024, and December 31 2023, respectively March 2026 145,597 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 9.24 % and 8.45 % at December 31, 2024 and December 31, 2023, respectively Weighted average maturity of December 2026 and February 2026 at December 31, 2024 and December 31, 2023, respectively 26,489 17,188 $ 541,688 $ 301,813 F- 22 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Debt issuance costs of $ 4.3 million and $ 599,000 as of December 31, 2024 and December 31, 2023, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the Warehouse lines of credit and residual interest financing on our Consolidated Balance Sheets. On May 11, 2012, we entered into a $ 100 million one-year warehouse credit line with Citibank, N.A. The facility is structured to allow us to fund a portion of the purchase price of automobile contracts by borrowing from a credit facility to our consolidated subsidiary Page Eight Funding, LLC. 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 facility is structured to allow us to fund a portion of the purchase price of automobile contracts by borrowing from a credit facility to our consolidated subsidiary Page Eight Funding, LLC. The facility provides for effective advances up to 95.00% of eligible finance receivables. The Class A loans under the facility generally accrue interest during the revolving period at a per annum rate equal to the CP Cost of Funds Rate plus 2.85% per annum, with a minimum rate of 3.60% per annum and during the amortization period at a per annum rate equal to the CP Cost of Funds Rate plus 3.85% per annum, with a minimum rate of 4.60% per annum. In July 2024, this facility was amended to extend the revolving period to July 2026 and to include an amortization period through July 2027 for any receivables pledged to the facility at the end of the revolving period. In November 2024, we closed a revolving credit agreement with Oaktree Capital Management, which was subordinate to our credit agreement with Citibank, N.A., and with a $25 million credit capacity. The facility provides effective advances up to 10.00% of eligible finance receivables. The Class B loans under the facility generally accrue interest during the revolving period at a per annum rate equal to the Adjusted Term SOFR plus 6.40% per annum, with a minimum rate of 7.15% per annum and during the amortization period at a per annum rate equal to the Adjusted Term SOFR plus 7.40% per annum, with a minimum rate of 8.15% per annum. In December 2024, we increased the capacity to $ 335 million. At December 31, 2024 there was $ 269.6 million outstanding under this facility. On February 2, 2022, we renewed our two-year revolving credit agreement with Ares Agent Services, L.P. The facility is structured to allow us to fund a portion of the purchase price of automobile contracts by borrowing from a credit facility to our consolidated subsidiary Page Nine Funding, LLC. The facility provides for effective advances up to 85.25% of eligible finance receivables. The loans under the facility accrue interest at a commercial paper rate plus 4.50% per annum, with a minimum rate of 7.50% per annum. In June 2022, we increased the capacity of our credit agreement with Ares Agent Services, L.P. from $100 million to $200 million. This facility was most recently renewed in March 2024, extending the revolving period to March 2026 followed by an amortization period through March 2028 for any receivables pledged to the facility at the end of the revolving period. At December 31, 2024 there was $ 145.6 million outstanding under this facility. The total outstanding debt on our two warehouse lines of credit was $ 415.2 million as of December 31, 2024, compared to $ 234.6 million outstanding as of December 31, 2023. On June 30, 2021, we completed a $ 50 million securitization of residual interests from previously issued securitizations. In this residual interest financing transaction, qualified institutional buyers purchased $ 50 .0 million of asset-backed notes secured by residual interests in eleven CPS securitizations consecutively issued from January 2018 and September 2020. The sold notes (“2021-1 Notes”), issued by CPS Auto Securitization Trust 2021-1, consist of a single class with a coupon of 7.86%. At December 31, 2024 there was $ 50 .0 million outstanding under this facility. 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 December 31, 2024 there was $ 50 .0 million outstanding under this facility. F- 23 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The agreed valuation of the collateral for the 2021-1 and 2024-1 Notes are the sum of the amounts on deposit in the underlying spread accounts for each related securitization and the over-collateralization of each related securitization, which is the difference between the outstanding principal balances of the related receivables less the principal balance of the outstanding notes issued in the related securitization. On each monthly payment date, the 2021-1 and 2024-1 Notes are entitled to interest at the coupon rate and, if necessary, a principal payment necessary to maintain a specified minimum collateral ratio. Unamortized debt issuance costs of $ 824,000 and $ 125,000 as of December 31, 2024 and December 31, 2023, respectively, have been excluded from the amount reported above for residual interest financing. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Consolidated Balance Sheets. We must comply with certain affirmative and negative covenants related to debt facilities, which require, among other things, that we maintain certain financial ratios related to liquidity, net worth and capitalization. Further covenants include matters relating to investments, acquisitions, restricted payments and certain dividend restrictions. See the discussion of financial covenants in Note 1. The following table summarizes the contractual and expected maturity amounts of our outstanding subordinated renewable notes as of December 31, 2024: Schedule of contractual and expected maturity amounts of our outstanding subordinated renewable Subordinated Contractual maturity renewable date notes (In thousands) 2025 $ 8,444 2026 5,284 2027 6,911 2028 4,648 2029 88 Thereafter 1,114 Total $ 26,489 (7) Shareholders’ Equity Common Stock Holders of common stock are entitled to such dividends as our board of directors, in its discretion, may declare out of funds available, subject to the terms of any outstanding shares of preferred stock and other restrictions. In the event of liquidation of the Company, holders of common stock are entitled to receive, pro rata , all of the assets of the Company available for distribution, after payment of any liquidation preference to the holders of outstanding shares of preferred stock. Holders of the shares of common stock have no conversion or preemptive or other subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. F- 24 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Stock Purchases For the year ending December 31, 2024, we purchased 1,469,658 shares of our common stock at an average price of $ 8.73 . In April 2024 our board of directors authorized the repurchase of an additional $ 10 million of our common stock. There is approximately $ 6.3 million of board authorization remaining under such plans, which have no expiration date. The table below describes the purchase of our common stock for the twelve-month period ended December 31, 2024 and 2023: Schedule of stock purchases Twelve Months Ended December 31, 2024 December 31, 2023 Shares Avg. Price Shares Avg. Price Open market purchases 473,202 $ 8.67 670,968 $ 10.20 Shares redeemed upon net exercise of stock options 876,456 8.66 1,305,388 10.29 Other 120,000 9.49 – – Total stock purchases 1,469,658 $ 8.73 1,976,356 $ 10.26 Options and Warrants In 2006, the Company adopted and its shareholders approved the CPS 2006 Long-Term Equity Incentive Plan (the “2006 Plan”) pursuant to which our Board of Directors, or a duly-authorized committee thereof, may grant stock options, restricted stock, restricted stock units and stock appreciation rights to our employees or employees of our subsidiaries, to directors of the Company, and to individuals acting as consultants to the Company or its subsidiaries. In June 2008, May 2012, April 2013, May 2015, July 2018 and again in November 2021, the shareholders of the Company approved an amendment to the 2006 Plan to increase the maximum number of shares that may be subject to awards under the 2006 Plan to 5,000,000, 7,200,000, 12,200,000, 17,200,000, 19,200,000 and 22,200,000 , respectively, in each case plus shares authorized under prior plans and not issued. Options that have been granted under the 2006 Plan and a previous plan approved in 1997 have been granted at an exercise price equal to (or greater than) the stock’s fair value at the date of the grant, with terms generally of 7-10 years and vesting generally over 4-5 years. There were no stock options granted during the years ended December 31, 2024 and 2023. The per share weighted-average fair value of stock options granted during the year ended December 31 2022 was $ 5.42 . That fair value was estimated using a binomial option pricing model using the weighted average assumptions noted in the following table. We use historical data to estimate the expected term of each option. The volatility estimate is based on the historical and implied volatility of our stock over the period that equals the expected life of the option. Volatility assumptions ranged from 75 % to 80 % for 2022. The risk-free interest rate is based on the yield on a U.S. Treasury bond with a maturity comparable to the expected life of the option. The dividend yield is estimated to be zero based on our intention not to issue dividends for the foreseeable future. Schedule of assumptions for stock options Year Ended December 31, 2022 Expected life (years) 4.00 Risk-free interest rate 2.38 % Volatility 76 % Expected dividend yield – F- 25 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2024, 2023 and 2022, we recorded stock-based compensation costs in the amount of $ 3 .0 million, $ 3.5 million and $ 4.4 million, respectively. As of December 31, 2024, the unrecognized stock-based compensation costs to be recognized over future periods was equal to $ 3 .0 million. This amount will be recognized as expense over a weighted-average period of 1.1 years. At December 31, 2024 and 2023, options outstanding had intrinsic values of $ 33.3 million and $ 36.1 million , respectively. At December 31, 2024 and 2023, options exercisable had intrinsic values of $ 31.2 million and $ 31.2 million , respectively. The total intrinsic value of options exercised was $ 8.2 million and $ 14.5 million for the years ended December 31, 2024 and 2023, respectively. New shares were issued for all options exercised during the year ended December 2024 for a total price of $ 6.9 million . At December 31, 2024, there were a total of 2,984,000 additional shares available for grant under the 2006 Plan. Stock option activity for the year ended December 31, 2024 for stock options under the 2006 and 1997 plans is as follows: Schedule of 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 3.14 years Granted – – N/A Exercised ( 1,728 ) 4.00 N/A Forfeited/Expired ( 300 ) 5.80 N/A Options outstanding at the end of period 6,097 $ 5.39 2.68 years Options exercisable at the end of period 5,087 $ 4.73 2.40 years The following table presents the price distribution of stock options outstanding and exercisable for the years ended December 31, 2024 and 2023: Schedule of options outstanding and exercisable Number of shares as of Number of shares as of December 31, 2024 December 31, 2023 Outstanding Exercisable Outstanding Exercisable Range of exercise prices: (In thousands) (In thousands) $2.00 - $2.99 1,197 1,197 1,410 1,082 $3.00 - $3.99 2,026 2,026 2,473 2,473 $4.00 - $4.99 1,262 972 2,539 1,929 $10.00 - $10.99 1,612 892 1,703 578 Total shares 6,097 5,087 8,125 6,062 We did not issue any stock options with an exercise price above or below the market price of the stock on the grant date for the years ended December 31, 2024, 2023 and 2022. F- 26 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8) Interest Income and Interest Expense The following table presents the components of interest income: Schedule of interest income Year Ended December 31, 2024 2023 2022 (In thousands) Interest on finance receivables $ 6,948 $ 15,567 $ 35,091 Interest on finance receivables at fair value 350,729 307,543 268,621 Other interest income 6,285 6,109 1,525 Interest income $ 363,962 $ 329,219 $ 305,237 The following table presents the components of interest expense: Schedule of interest expense Year Ended December 31, 2024 2023 2022 (In thousands) Securitization trust debt $ 161,014 $ 121,409 $ 70,627 Warehouse lines of credit 19,292 19,192 10,310 Residual interest financing 8,702 4,199 4,243 Subordinated renewable notes 2,249 1,831 2,344 Interest expense $ 191,257 $ 146,631 $ 87,524 (9) Income Taxes Income taxes consist of the following: Schedule of income taxes expenses Year Ended December 31, 2024 2023 2022 (In thousands) Current federal tax expense $ 4,376 $ 7,122 $ 16,946 Current state tax expense 1,807 2,613 3,352 Deferred federal tax expense 1,382 4,307 5,573 Deferred state tax expense 663 1,712 4,339 Income tax expense $ 8,228 $ 15,754 $ 30,210 F- 27 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income tax expense for the years ended December 31, 2024, 2023 and 2022 differs from the amount determined by applying the statutory federal rate to income before income taxes as follows: Schedule of reconciliation of income taxes Year Ended December 31, 2024 2023 2022 (In thousands) Expense at federal tax rate $ 5,760 $ 12,830 $ 24,401 State taxes, net of federal income tax effect 1,863 3,716 6,462 Stock-based compensation ( 958 ) ( 1,184 ) ( 2,611 ) Non-deductible expenses 1,612 1,629 1,056 Net operating loss carryback – – – Effect of change in tax rate – – – Accounting method change – – – Other ( 49 ) ( 1,237 ) 902 Income tax expense $ 8,228 $ 15,754 $ 30,210 The tax effected cumulative temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2024 and 2023 are as follows: Schedule of deferred tax assets and liabilities December 31, 2024 2023 (In thousands) Deferred Tax Assets: Finance receivables $ 77 $ 895 Accrued liabilities 703 1,423 NOL carryforwards 256 400 Built in losses 753 1,383 Stock compensation 755 1,131 Lease liability 5,846 883 Other 185 – Total deferred tax assets $ 8,575 $ 6,115 Deferred Tax Liabilities: Pension accrual $ ( 2,015 ) $ ( 1,217 ) Lease right-of-use assets ( 5,301 ) ( 803 ) Furniture and equipment and other ( 249 ) ( 359 ) Total deferred tax liabilities ( 7,565 ) ( 2,379 ) Net deferred tax asset $ 1,010 $ 3,736 F- 28 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS We acquired certain net operating losses and built-in loss assets as part of our acquisitions of MFN Financial Corp. (“MFN”) in 2002 and TFC Enterprises, Inc. (“TFC”) in 2003. Moreover, both MFN and TFC have undergone an ownership change for purposes of Internal Revenue Code (“IRC”) Section 382. In general, IRC Section 382 imposes an annual limitation on the ability of a loss corporation (that is, a corporation with a net operating loss (“NOL”) carryforward, credit carryforward, or certain built-in losses (“BILs”)) to utilize its pre-change NOL carryforwards or BILs to offset taxable income arising after an ownership change. In determining the possible future realization of deferred tax assets, we have considered future taxable income from the following sources: (a) reversal of taxable temporary differences; and (b) tax planning strategies that, if necessary, would be implemented to accelerate taxable income into years in which net operating losses might otherwise expire. 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 judgements, 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 $ 1 .0 million as of December 31, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $1.0 million consists of approximately $ 479,000 of net U.S. federal deferred tax assets and $ 530,000 of net state deferred tax assets. As of December 31, 2024, we had net operating loss carryforwards for state income tax purposes of $ 4.1 million . These state net operating losses begin to expire in 2025. We recognize a tax position as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. We recognize potential interest and penalties related to unrecognized tax benefits as income tax expense. At December 31, 2024, we had no unrecognized tax benefits for uncertain tax positions. We are subject to taxation in the US and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2020. (10) Commitments and Contingencies 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. We determine if a contract contains a lease at contract inception. Right-of-use assets and liabilities are recognized based on the present value of lease payments over the lease term. In determining the present value of lease payments, we use the Company’s incremental borrowing rate. Right-of-use assets are included in other assets and lease liabilities are included in accounts payable and accrued expenses in our Condensed Consolidated Balance Sheet. F- 29 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the supplemental balance sheet information related to leases: Schedule of balance sheet information related to leases December 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 ( 31,644 ) ( 26,651 ) Operating lease right-of-use assets, net $ 19,449 $ 2,924 Operating lease liabilities $ ( 21,471 ) $ ( 3,220 ) Finance Leases Property and equipment, at cost $ 3,794 $ 3,474 Less: Accumulated depreciation ( 3,488 ) ( 3,385 ) Property and equipment, net $ 306 $ 89 Finance lease liabilities $ ( 315 ) $ ( 93 ) Weighted Average Discount Rate Operating lease 5.0 % 5.0 % Finance lease 6.5 % 6.5 % Maturities of lease liabilities were as follows: Schedule of maturities of lease (In thousands) Operating Finance Year Ending December 31, Lease Lease 2025 $ 5,233 $ 128 2026 5,084 118 2027 5,242 61 2028 5,408 30 2029 3,761 10 Thereafter 985 – Total undiscounted lease payments 25,713 347 Less amounts representing interest ( 4,242 ) ( 32 ) Lease Liability $ 21,471 $ 315 F- 30 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the leases expense included in Occupancy, General and administrative on our Condensed Consolidated Statement of Operations: Schedule of lease cost Year Ended December 31, 2024 2023 2022 (In thousands) Operating lease cost $ 3,582 $ 5,547 $ 6,650 Finance lease cost 115 158 987 Total lease cost $ 3,697 $ 5,705 $ 7,637 The following table presents the supplemental cash flow information related to leases: Schedule of supplemental cash flow information related to leases Year Ended December 31, 2024 2023 2022 (In thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 5,308 $ 5,547 $ 7,056 Operating cash flows from finance leases 97 152 948 Financing cash flows from finance leases 18 6 40 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. Prior to the motion being ruled upon, summary judgment was granted in our favor, disposing of the claims against CPS. An appeal of the summary judgment ruling was filed on October 25, 2024 and a cross appeal of the denial of the motion to compel arbitration was filed on October 31, 2024. 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 December 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 range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of December 31, 2024 does not exceed $ 3.2 million. F- 31 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO 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. (11) Employee Benefits We sponsor a pretax savings and profit sharing plan (the “401(k) Plan”) qualified under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, eligible employees are able to contribute up to the maximum allowed under the law. We may, at our discretion, match 100% of employees’ contributions up to $ 2,000 per employee per calendar year. Our matching contributions to the 401(k) Plan were $ 1.5 million , $ 1.4 million , and $ 1.3 million respectively, for the years ended December 31, 2024, 2023 and 2022. We also sponsor a defined benefit plan, the MFN Financial Corporation Pension Plan (the “Plan”). The Plan benefits were frozen on June 30, 2001. The following tables represents a reconciliation of the change in the plan’s benefit obligations, fair value of plan assets, and funded status at December 31, 2024 and 2023: Schedule of reconciliation of the change in the plan’s benefit obligations December 31, 2024 2023 (In thousands) Change in Projected Benefit Obligation Projected benefit obligation, beginning of year $ 15,477 $ 15,952 Interest cost 695 753 Assumption changes ( 564 ) ( 3 ) Actuarial (gain) loss ( 223 ) ( 271 ) Settlements – – Benefits paid ( 1,113 ) ( 954 ) Projected benefit obligation, end of year $ 14,272 $ 15,477 Change in Plan Assets Fair value of plan assets, beginning of year $ 20,048 $ 18,768 Return on assets 2,967 2,347 Employer contribution – – Expenses ( 122 ) ( 113 ) Settlements – – Benefits paid ( 1,113 ) ( 954 ) Fair value of plan assets, end of year $ 21,780 $ 20,048 Funded Status at end of year $ 7,508 $ 4,571 F- 32 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Additional Information Weighted average assumptions used to determine benefit obligations and cost at December 31, 2024 and 2023 were as follows: Schedule of weighted average assumptions used to determine benefit obligations December, 31 2024 2023 Weighted average assumptions used to determine benefit obligations Discount rate 5.32 % 4.68 % Weighted average assumptions used to determine net periodic benefit cost Discount rate 4.68 % 4.87 % Expected return on plan assets 6.75 % 7.00 % Our overall expected long-term rate of return on assets is 6.75 % per annum as of December 31, 2024. The expected long-term rate of return is based on the weighted average of historical returns on individual asset categories, which are described in more detail below. Schedule of components of net periodic benefit cost December 31, 2024 2023 2022 (In thousands) Amounts recognized on Consolidated Balance Sheet Other assets $ 7,508 $ 4,571 $ 2,816 Other liabilities – – – Net amount recognized $ 7,508 $ 4,571 $ 2,816 Amounts recognized in accumulated other comprehensive loss consists of: Net loss $ 1,593 $ 4,130 $ 5,716 Unrecognized transition asset – – – Net amount recognized $ 1,593 $ 4,130 $ 5,716 Components of net periodic benefit cost Interest cost $ 695 $ 753 $ 579 Expected return on assets ( 1,311 ) ( 1,280 ) ( 1,860 ) Amortization of transition asset – – – Amortization of net loss 216 358 105 Net periodic benefit cost ( 400 ) ( 169 ) ( 1,176 ) Settlement (gain)/loss – – 256 Total $ ( 400 ) $ ( 169 ) $ ( 920 ) Benefit Obligation Recognized in Other Comprehensive Loss (Income) Net loss (gain) $ ( 2,937 ) $ ( 1,755 ) $ 1,003 Prior service cost (credit) – – – Amortization of prior service cost – – – Net amount recognized in other comprehensive loss (income) $ ( 2,937 ) $ ( 1,755 ) $ 1,003 F- 33 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The estimated net gain that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2025 is $ 703,000 . The weighted average asset allocation of our pension benefits at December 31, 2024 and 2023 were as follows: Schedule of weighted average asset allocation of our pension benefits December 31, 2024 2023 Weighted Average Asset Allocation at Year-End Asset Category Equity securities 87 % 87 % Debt securities 13 % 13 % Cash and cash equivalents 0 % 0 % Total 100 % 100 % Our investment policies and strategies for the pension benefits plan utilize a target allocation of 75% equity securities and 25% fixed income securities (excluding Company stock). Our investment goals are to maximize returns subject to specific risk management policies. We address risk management and diversification by the use of a professional investment advisor and several sub-advisors which invest in domestic and international equity securities and domestic fixed income securities. Each sub-advisor focuses its investments within a specific sector of the equity or fixed income market. For the sub-advisors focused on the equity markets, the sectors are differentiated by the market capitalization, the relative valuation and the location of the underlying issuer. For the sub-advisors focused on the fixed income markets, the sectors are differentiated by the credit quality and the maturity of the underlying fixed income investment. The investments made by the sub-advisors are readily marketable and can be sold to fund benefit payment obligations as they become payable. Schedule of estimated future benefit payments Cash Flows Estimated Future Benefit Payments (In thousands) 2025 $ 1,206 2026 1,324 2027 1,240 2028 1,129 2029 942 Years 2030 - 2034 5,954 Anticipated Contributions in 2025 $ – F- 34 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The fair value of plan assets at December 31, 2024 and 2023, by asset category, is as follows: Schedule of fair value of plan assets December 31, 2024 Level 1 (1) Level 2 (2) Level 3 (3) Total Investment Name: (in thousands) Company Common Stock $ 9,617 $ – $ – $ 9,617 Large Cap Value – 2,198 – 2,198 Mid Cap Index – 625 – 625 Small Cap Growth – 631 – 631 Small Cap Value – 599 – 599 Large Cap Blend – 722 – 722 Growth – 2,713 – 2,713 International Growth – 2,249 – 2,249 Core Bond – 1,656 – 1,656 High Yield – 348 – 348 Inflation Protected Bond – 407 – 407 Money Market – 15 – 15 Total $ 9,617 $ 12,163 $ – $ 21,780 December 31, 2023 Level 1 (1) Level 2 (2) Level 3 (3) Total Investment Name: (in thousands) Company Common Stock $ 8,308 $ $ – $ 8,308 Large Cap Value – 2,121 – 2,121 Mid Cap Index – 606 – 606 Small Cap Growth – 604 – 604 Small Cap Value – 596 – 596 Large Cap Blend – 638 – 638 Growth – 2,278 – 2,278 International Growth – 2,330 – 2,330 Core Bond – 1,763 – 1,763 High Yield – 351 – 351 Inflation Protected Bond – 437 – 437 Money Market – 16 – 16 Total $ 8,308 $ 11,740 $ – $ 20,048 ________________________ (1) Company common stock is classified as level 1 and valued using quoted prices in active markets for identical assets. (2) All other plan assets in stock, bond and money market funds are classified as level 2 and valued using significant observable inputs. (3) There are no plan assets classified as level 3 in the fair value hierarchy as a result of having significant unobservable inputs. F- 35 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (12) 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 are 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 impact on our fair value measurement. 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 Twelve Months Ended December 31, 2024 2023 (In thousands) Balance at beginning of period $ 2,722,662 $ 2,476,617 Finance receivables at fair value acquired during period 1,653,037 1,251,020 Payments received on finance receivables at fair value ( 858,628 ) ( 823,434 ) Net interest income accretion on fair value receivables ( 224,304 ) ( 193,541 ) Mark to fair value 21,000 12,000 Balance at end of period $ 3,313,767 $ 2,722,662 F- 36 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO 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 December 31, 2024 December 31, 2023 Contractual Fair Contractual Fair Balance Value Balance Value (In thousands) Finance receivables measured at fair value. $ 3,485,540 $ 3,313,767 $ 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 Weight Avg. Inputs as of December 31, December 31, 2024 2023 Unobservable Inputs 2024 2023 (In thousands) Assets: Discount rate 11.37% 11.35% Finance receivables measured at fair value $ 3,313,767 $ 2,722,662 Cumulative net losses 15.47% 15.25% Results for the years ended December 31, 2024 and 2023 include marks of $ 21 .0 and $ 12 .0 million, respectively, to the carrying value of the finance receivables accounted for at fair value. The marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. Our re-evaluation of the fair values of these receivables resulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value mark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $ 21 .0 million and $ 12 .0 million for the years ended December 31, 2024 and 2023, respectively. The following table summarizes the delinquency status using the contractual balance of these finance receivables measured at fair value as of December 31, 2024 and December 31, 2023: Schedule of delinquency status of finance receivables measured at fair value December 31, December 31, 2024 2023 (In thousands) Delinquency Status Current $ 2,969,864 $ 2,520,158 31 - 60 days 241,883 204,574 61 - 90 days 113,662 101,057 91 + days 64,810 49,541 Repo 95,321 66,585 $ 3,485,540 $ 2,941,915 F- 37 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS There were no transfers in or out of level 1 or level 2 assets and liabilities for 2024 and 2023. We have no level 3 assets or liabilities that are measured at fair value on a non-recurring basis. The estimated fair values of financial assets and liabilities at December 31, 2024 and 2023, were as follows: Schedule of fair values of financial assets and liabilities As of December 31, 2024 Financial Instrument (In thousands) Carrying Fair Value Measurements Using: Value Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 11,713 $ 11,713 $ – $ – $ 11,713 Restricted cash and equivalents 125,684 125,684 – – 125,684 Finance receivables, net 4,987 – – 3,996 3,996 Accrued interest receivable 65 – – 65 65 Liabilities: Warehouse lines of credit $ 410,898 $ – $ – $ 410,898 $ 410,898 Accrued interest payable 10,663 – – 10,663 10,663 Securitization trust debt 2,594,384 – – 2,614,352 2,614,352 Subordinated renewable notes 26,489 – – 26,489 26,489 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 F- 38 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13) Business Segment Information The company has identified one reportable segment. This determination is made by our Chief Executive Officer, who acts as the chief operating decision-maker (“CODM”), in assessing performance and making decisions regarding resource allocation. The CODM assesses performance by reviewing the consolidated financial statements, which reflect the financial results of our one reportable operating segment. Although the Company operates as one reportable segment, it serves a diverse network of 8,600 dealerships across 47 states, in which we provide financing to the dealer’s less credit- worthy borrowers. During the year ended December 31, 2024, no dealer accounted for as much as 2 % of the total number of automobile contracts we purchased, and revenue generated from any individual borrower is deemed to be immaterial. 14) Subsequent Events On January 22, 2025 we executed our first securitization of 2025. In the transaction, qualified institutional buyers purchased $442.4 million of asset-backed notes secured by $462.5 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2025-A, 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 coupon on the notes is approximately 5.88%. The 2025-A transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 4.35%. The transaction agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of 8.50% of the original receivable pool balance, or 23.00% 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. F- 39