CONSUMER PORTFOLIO SERVICES, INC. 10-Q

CONSUMER PORTFOLIO SERVICES, INC. 10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to_____ Commission file number: 001-11416 CONSUMER PORTFOLIO SERVICES, INC. (Exact name of registrant as specified in its charter) California 33-0459135 (State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.) 3800 Howard Hughes Parkway , Suite 1400 , Las Vegas , Nevada 89169 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including Area Code: ( 949 ) 753-6800 Former name, former address and former fiscal year, if changed since last report: N/A Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Trading Symbol Name of Each Exchange on Which Registered Common Stock, no par value CPSS The NASDAQ Stock Market LLC (Global Market) Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated Filer ☐ Accelerated Filer ☒ Non-accelerated Filer ☐ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 1, 2025 the registrant had 21,559,795 common shares outstanding. CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q For the Quarterly Period Ended March 31, 2025 Page PART I. FINANCIAL INFORMATION Item 1. Financial Statements 3 Unaudited Condensed Consolidated Balance Sheets as of March 31, 2025, and December 31, 2024 3 Unaudited Condensed Consolidated Statements of Operations for the three-month periods ended March 31, 2025, and 2024 4 Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month periods ended March 31, 2025, and 2024 5 Unaudited Condensed Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2025, and 2024 6 Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month periods ended March 31, 2025, and 2024 7 Notes to Unaudited Condensed Consolidated Financial Statements 8 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 27 Item 4. Controls and Procedures 40 PART II. OTHER INFORMATION Item 1. Legal Proceedings 41 Item 1A. Risk Factors 41 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42 Item 5. Other Information 42 Item 6. Exhibits 42 Signatures 43 2 PART I — FINANCIAL INFORMATION Item 1. Financial Statements CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) March 31, December 31, 2025 2024 ASSETS Cash and cash equivalents $ 29,841 $ 11,713 Restricted cash and equivalents 153,637 125,684 Finance receivables measured at fair value 3,449,106 3,313,767 Finance receivables 3,109 5,420 Less: Allowance for finance credit losses ( 249 ) ( 433 ) Finance receivables, net 2,860 4,987 Furniture and equipment, net 1,165 943 Deferred tax assets, net 826 1,010 Other assets 36,171 35,764 Total assets $ 3,673,606 $ 3,493,868 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Accounts payable and accrued expenses $ 75,289 $ 70,151 Warehouse lines of credit 365,683 410,898 Residual interest financing 163,391 99,176 Securitization trust debt 2,743,269 2,594,384 Subordinated renewable notes 27,547 26,489 Total liabilities 3,375,179 3,201,098 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; 21,503,198 and 21,432,698 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively 26,683 25,720 Retained earnings 271,754 267,060 Accumulated other comprehensive loss ( 10 ) ( 10 ) Total shareholders' equity 298,427 292,770 Total liabilities and shareholders' equity $ 3,673,606 $ 3,493,868 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 3 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended March 31, 2025 2024 Revenues: Interest income $ 101,933 $ 84,288 Mark to finance receivables measured at fair value 3,500 5,000 Other income 1,441 2,456 Total revenues 106,874 91,744 Expenses: Employee costs 25,033 24,416 General and administrative 13,542 13,753 Interest 54,918 41,968 Provision for credit losses ( 979 ) ( 1,635 ) Sales 5,911 4,870 Occupancy 1,398 1,600 Depreciation and amortization 249 215 Total expenses 100,072 85,187 Income before income tax expense 6,802 6,557 Income tax expense 2,108 1,967 Net income $ 4,694 $ 4,590 Earnings per share: Basic $ 0.22 $ 0.22 Diluted $ 0.19 $ 0.19 Number of shares used in computing earnings per share: Basic 21,444 21,143 Diluted 24,325 24,602 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 4 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Three Months Ended March 31, 2025 2024 Net income $ 4,694 $ 4,590 Other comprehensive income/(loss); change in funded status of pension plan – – Comprehensive income $ 4,694 $ 4,590 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 5 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, 2025 2024 Cash flows from operating activities: Net income $ 4,694 $ 4,590 Adjustments to reconcile net income to net cash provided by operating activities: Net interest income accretion on fair value receivables 64,907 54,247 Depreciation and amortization 249 215 Amortization of deferred financing costs 2,865 ( 672 ) Mark to finance receivables measured at fair value ( 3,500 ) ( 5,000 ) Provision for credit losses ( 979 ) ( 1,635 ) Stock-based compensation expense 717 832 Changes in assets and liabilities: Deferred tax assets, net 184 251 Other assets ( 407 ) ( 16,702 ) Accounts payable and accrued expenses 5,138 16,579 Net cash provided by operating activities 73,868 52,705 Cash flows from investing activities: Payments received on finance receivables held for investment 3,106 9,428 Purchases of finance receivables measured at fair value ( 449,602 ) ( 328,893 ) Payments received on finance receivables at fair value 252,856 210,935 Change in repossessions held in inventory – 9 Purchase of furniture and equipment ( 471 ) ( 111 ) Net cash used in investing activities ( 194,111 ) ( 108,632 ) Cash flows from financing activities: Proceeds from issuance of securitization trust debt 442,420 280,924 Proceeds from issuance of subordinated renewable notes 1,603 5,489 Payments on subordinated renewable notes ( 545 ) ( 537 ) Net proceeds from (repayments of) warehouse lines of credit ( 45,811 ) 17,176 Net Proceeds from (repayment of) residual interest financing debt 65,000 50,000 Repayment of securitization trust debt ( 292,997 ) ( 268,710 ) Payment of financing costs ( 3,592 ) ( 1,899 ) Purchase of common stock – ( 1,697 ) Exercise of options and warrants 246 705 Net cash provided by financing activities 166,324 81,451 Increase in cash and cash equivalents 46,081 25,524 Cash and restricted cash at beginning of period 137,397 125,431 Cash and restricted cash at end of period $ 183,478 $ 150,955 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 51,507 $ 42,145 Income taxes $ ( 75 ) $ 29 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 6 CONSUMER PORTFOLIO SERVICES, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (In thousands) Three Months Ended March 31, 2025 2024 Common Stock (Shares Outstanding) Balance, beginning of period 21,433 21,175 Common stock issued upon exercise of options and warrants 70 180 Repurchase of common stock – ( 207 ) Balance, end of period 21,503 21,148 Common Stock Balance, beginning of period $ 25,720 $ 28,678 Common stock issued upon exercise of options and warrants 246 705 Repurchase of common stock – ( 1,697 ) Stock-based compensation 717 832 Balance, end of period $ 26,683 $ 28,518 Retained Earnings Balance, beginning of period $ 267,060 $ 247,857 Net income 4,694 4,590 Balance, end of period $ 271,754 $ 252,447 Accumulated Other Comprehensive Loss Balance, beginning of period $ ( 10 ) $ ( 1,867 ) Pension benefit obligation – – Balance, end of period $ ( 10 ) $ ( 1,867 ) Balance, beginning of period 292,770 – Pension benefit obligation – – Total Shareholders' Equity $ 298,427 $ 279,098 See accompanying Notes to Unaudited Condensed Consolidated Financial Statements. 7 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (1) Summary of Significant Accounting Policies Description of Business We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts." Basis of Presentation Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the three-month period ended March 31, 2025, are not necessarily indicative of the operating results to be expected for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods. Finance Receivables Measured at Fair Value Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter, we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value of the receivables. 8 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required. Anticipated credit losses are included in our estimation of cash to be received with respect to receivables. In accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred. Other Income The following table presents the primary components of Other Income for the three-month periods ending March 31, 2025, and 2024: Schedule of other income Three Months Ended March 31, 2025 2024 (In thousands) Origination and servicing fees from third party receivables $ 1,431 $ 2,144 Sales tax refunds – 289 Other 10 23 Other income for the period $ 1,441 $ 2,456 Leases The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. 9 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the supplemental balance sheet information related to leases: Schedule of supplemental balance sheet information related to leases March 31, December 31, 2025 2024 (In thousands) Operating Leases Operating lease right-of-use assets $ 51,093 $ 51,093 Less: Accumulated amortization right-of-use assets ( 32,850 ) ( 31,644 ) Operating lease right-of-use assets, net $ 18,243 $ 19,449 Operating lease liabilities $ ( 20,250 ) $ ( 21,471 ) Finance Leases $ Property and equipment, at cost $ 4,039 $ 3,794 Less: Accumulated depreciation ( 3,538 ) ( 3,488 ) Property and equipment, net $ 501 $ 306 $ Finance lease liabilities $ ( 514 ) $ ( 315 ) $ 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 liabilities (In thousands) Operating Finance Lease Lease Year Ending December 31, 2025 (excluding the three months ended March 31, 2025) $ 3,907 $ 161 2026 5,084 207 2027 5,242 149 2028 5,408 30 2029 3,761 10 Thereafter 985 – Total undiscounted lease payments 24,387 557 Less amounts representing interest ( 4,137 ) ( 43 ) Lease Liability $ 20,250 $ 514 10 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations: Schedule of lease cost Three Months Ended March 31, 2025 2024 (In thousands) Operating lease cost $ 1,311 $ 1,374 Finance lease cost 55 14 Total lease cost $ 1,366 $ 1,388 The following table presents the supplemental cash flow information related to leases: Schedule of supplemental cash flow information related to leases Three Months Ended March 31, 2025 2024 Cash paid for amounts included in the measurement of lease liabilities: (In thousands) Operating cash flows from operating leases $ 1,311 $ 1,374 Operating cash flows from finance leases 47 13 Financing cash flows from finance leases 8 1 Stock-based Compensation We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”. For the three months ended March 31, 2025, and 2024, we recorded stock-based compensation costs in the amount of $ 717,000 and $ 832,000 , respectively. As of March 31, 2025, unrecognized stock-based compensation costs to be recognized over future periods equaled $ 2.3 million. This amount will be recognized as expense over a weighted-average period of 0.8 years. 11 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following represents stock option activity for the three months ended March 31, 2025: Schedule of stock option activity Weighted Number of Weighted Average Shares Average Remaining (in thousands) Exercise Price Contractual Term Options outstanding at the beginning of period 6,097 $ 5.39 N/A Granted – – N/A Exercised ( 70 ) 3.49 N/A Forfeited – – N/A Options outstanding at the end of period 6,027 $ 5.41 2.46 years Options exercisable at the end of period 5,204 $ 4.94 2.24 years The following table presents the price distribution of stock options outstanding and exercisable for the years ended March 31, 2025 and December 31, 2024: Schedule of price distribution of stock options outstanding and exercisable Number of shares as of Number of shares as of March 31, 2025 December 31, 2024 Outstanding Exercisable Outstanding Exercisable Range of exercise prices: (In thousands) (In thousands) $2.00 - $2.99 1,197 1,197 1,197 1,197 $3.00 - $3.99 1,955 1,955 2,026 2,026 $4.00 - $4.99 1,262 972 1,262 972 $10.00 - $10.99 1,613 1,080 1,612 892 Total shares 6,027 5,204 6,097 5,087 At March 31, 2025, the aggregate intrinsic value of options outstanding and exercisable was $ 22.2 million and $ 21.1 million, respectively. There were 70,000 options exercised for the three months ended March 31, 2025, compared to 180,000 for the comparable period in 2024. The total intrinsic value of options exercised was $ 390,000 and $ 716,000 for the three-month periods ended March 31, 2025, and 2024. There were 2,984,000 shares available for future stock option grants under existing plans as of March 31, 2025. 12 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Purchases of Company Stock The table below describes the purchase of our common stock for the three months ended March 31, 2025, and 2024: Schedule of purchase of our common stock Three Months Ended March 31, 2025 March 31, 2024 Shares Avg. Price Shares Avg. Price Open market purchases – $ – 101,355 $ 8.51 Shares redeemed upon net exercise of stock options – – 105,758 7.89 Total stock purchases – $ – 207,113 $ 8.19 Reclassifications Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity. Financial Covenants Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of March 31, 2025, we were in compliance with all such covenants. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. Provision for Contingent Liabilities We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined. Recent Accounting Pronouncements In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740),” which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements. 13 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (2) Finance Receivables Our portfolio of finance receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on a portfolio basis according to delinquency status. Our 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. We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended within limits specified in the servicing agreements. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable. Automobile contracts less than 31 days delinquent are not reported as delinquent. In certain circumstances we will grant obligors one-month payment extensions. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In certain limited cases, a two-month extension may be granted. There are no other concessions, such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments. The following table summarizes the delinquency status of finance receivables as of March 31, 2025, and December 31, 2024: Schedule of delinquency status of finance receivables March 31, December 31, 2025 2024 Delinquency Status (In thousands) Current $ 1,735 $ 2,994 31-60 days 645 1,184 61-90 days 554 971 91 + days 175 271 $ 3,109 $ 5,420 Finance receivables totaling $ 175,000 and $ 271,000 at March 31, 2025, and December 31, 2024, 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. 14 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS We measure the weighted average monthly incremental change in cumulative net losses for the vintage pools in the relevant historical period. For the pools in the relevant historical period, we consider each pool’s performance from its inception through the end of the current period. We then apply the results of the historical analysis to less seasoned vintage pools beginning with each vintage pool’s most recent actual cumulative net loss experience and extrapolating from that point based on the historical data. We believe the pattern and magnitude of losses on older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key credit characteristics of individual contracts such as obligor credit history, job stability, residence stability and ability to pay, there is relatively little variation from the average for the portfolio. Similarly, for key structural characteristics such as loan-to-value, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. Consequently, we do not believe there are significant differences in risk characteristics between various segments of our portfolio. Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment. In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. Throughout our history we have observed how events such as extreme weather, political unrest, and other qualitative factors have influenced the performance of our portfolio. Consequently, we have considered how such qualitative factors may affect future credit losses and have incorporated our judgement of the effect of those factors into our estimates. The following table presents the amortized cost basis of our finance receivables by annual vintage as of March 31, 2025, and December 31, 2024: Schedule of finance receivables by annual vintage March 31, December 31, 2025 2024 (In thousands) Annual Vintage Pool 2015 and prior 158 294 2016 739 1,336 2017 2,212 3,790 $ 3,109 $ 5,420 The following table presents a summary of the activity for the allowance for finance credit losses for the three-month periods ended March 31, 2025, and 2024: Schedule of allowance for finance credit losses Three Months Ended March 31, 2025 2024 (In thousands) Balance at beginning of period $ 433 $ 2,869 Provision for credit losses on finance receivables ( 979 ) ( 1,635 ) Charge-offs ( 329 ) ( 1,001 ) Recoveries 1,124 1,657 Balance at end of period $ 249 $ 1,890 15 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month periods ended March 31, 2025, and 2024: Schedule of gross charge-off Three Months Ended March 31, 2025 2024 (In thousands) Annual Vintage Pool 2014 and prior $ 135 $ 70 2015 27 115 2016 105 377 2017 62 481 Applied against repos in inventory (net) – ( 42 ) $ 329 $ 1,001 (3) Securitization Trust Debt We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table: Schedule of securitization trust debt Weighted Average Final Receivables Outstanding Outstanding Contractual Debt Scheduled Pledged at Principal at Principal at Interest Rate at Payment March 31, Initial March 31, December 31, March 31, Series Date (1) 2025 (2) Principal 2025 2024 2025 (Dollars in thousands) CPS 2020-C November 2027 22,486 252,200 17,548 22,453 4.95 % CPS 2021-A March 2028 26,575 230,545 19,067 22,396 2.50 % CPS 2021-B June 2028 34,772 240,000 27,234 31,903 3.41 % CPS 2021-C September 2028 54,285 291,000 42,922 49,739 2.55 % CPS 2021-D December 2028 75,514 349,202 62,973 72,090 3.39 % CPS 2022-A April 2029 85,515 316,800 66,736 77,872 3.61 % CPS 2022-B October 2029 136,495 395,600 115,569 132,002 5.83 % CPS 2022-C April 2030 163,166 391,600 122,681 141,176 6.76 % CPS 2022-D June 2030 141,231 307,018 121,637 135,857 9.08 % CPS 2023-A August 2030 170,620 324,768 128,500 146,020 6.97 % CPS 2023-B November 2030 185,817 332,885 152,296 172,154 7.10 % CPS 2023-C February 2031 180,556 291,732 156,898 175,219 6.98 % CPS 2023-D May 2031 194,089 286,149 171,113 191,621 7.71 % CPS 2024-A August 2031 207,289 280,924 185,746 206,348 6.26 % CPS 2024-B November 2031 259,400 319,871 239,755 262,768 6.42 % CPS 2024-C March 2032 376,172 436,310 348,842 379,254 6.24 % CPS 2024-D June 2032 388,933 416,816 359,232 390,983 5.20 % CPS 2025-A August 2032 443,564 442,420 420,527 – 5.37 % – $ 3,146,479 $ 5,905,840 $ 2,759,276 $ 2,609,855 _________________ (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 $ 810.2 million in 2025, $ 810.4 million in 2026, $ 548.7 million in 2027, $ 329.7 million in 2028, $ 171.8 million in 2029, $ 70.7 million in 2030, and $ 1.7 million in 2031. (2) Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet. 16 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Debt issuance costs of $ 16 .0 million and $ 15.5 million as of March 31, 2025, and December 31, 2024, 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 sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets. 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 March 31, 2025. 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 March 31, 2025, restricted cash under the various agreements totaled approximately $ 153.6 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. 17 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (4) Debt The terms and amounts of our other debt outstanding at March 31, 2025, and December 31, 2024, are summarized below: Schedule of debt outstanding Amount Outstanding at March 31, December 31, 2025 2024 (In thousands) Description Interest Rate Subordinate Lender Interest Rate Maturity Warehouse lines of credit 3.00% over CP yield rate (Minimum 3.75%) 7.38% and 7.52% at March 31, 2025 and December 31 2024, respectively 6.40% over SOFR yield rate (Minimum 7.15%) 10.95% and 11.09% at March 31, 2025 and December 31, 2024, respectively July 2026 $ 280,400 $ 269,602 Warehouse lines of credit 4.50% over a commercial paper rate (Minimum 7.50%) 8.82% and 8.90% at March 31 2025, and December 31 2024, respectively March 2026 88,988 145,597 Residual interest financing 7.86 % June 2026 50,000 50,000 Residual interest financing 11.50 % March 2029 50,000 50,000 Residual interest financing 11.00 % June 2032 65,000 – Subordinated renewable notes Weighted average rate of 9.18 % and 9.24 % at March 31, 2025 and December 31, 2024, respectively Weighted average maturity of April 2027 and December 2026 at March 31, 2025 and December 31, 2024, respectively 27,547 26,489 $ 561,935 $ 541,688 18 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On March 20, 2025, we completed a $ 65 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $ 65 .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 October 2023 through September 2024. The sold notes (“2025-1 Notes”), issued by CPS Auto Securitization Trust 2025-1, consist of a single class with a coupon of 11.00%. At March 31, 2025, there was $ 65 .0 million outstanding under this facility. On December 19, 2024, we increased the capacity of our revolving credit agreement with Citibank, N.A., to $ 335 million. This follows the November 2024 closing of a revolving credit agreement with Oaktree Capital Management, which is subordinate to our credit agreement with Citibank, N.A. The facility provides effective advances up to 10.00% of eligible finance receivables, effectively increasing the advance rate up to 95% across the facility for eligible receivables. The revolving credit agreement with Citibank, N.A. was last renewed in July 2024, extending the maturity date to July 2026 followed by an amortization period through July 2027 for any receivables pledged at the end of the revolving period. There was $ 280.4 million outstanding under this facility at March 31, 2025. On March 29, 2024, we renewed our two-year $ 200 million revolving credit agreement with Ares Agent Services, L.P. The revolving period for this facility was extended to March 2026 followed by an amortization period through March 2028 for any receivables pledged at the end of the revolving period. There was $ 89 .0 million outstanding under this facility at March 31, 2025. On March 22, 2024, we completed a $ 50 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $ 50 .0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023. The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. At March 31, 2025, there was $ 50 .0 million outstanding under this facility. 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 March 31, 2025, there was $ 50 .0 million outstanding under this facility Unamortized debt issuance costs of $ 1.6 million and $ 824,000 as of March 31, 2025, and December 31, 2024, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $ 3.7 million and $ 4.3 million as of March 31, 2025, and December 31, 2024, respectively, have been excluded from the Warehouse lines of credit amounts in the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets. 19 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (5) Interest Income and Interest Expense The following table presents the components of interest income: Schedule of interest income Three Months Ended March 31, 2025 2024 (In thousands) Interest on finance receivables $ 1,171 $ 2,337 Interest on finance receivables at fair value 99,567 80,505 Other interest income 1,195 1,446 Interest income $ 101,933 $ 84,288 The following table presents the components of interest expense: Schedule of interest expense Three Months Ended March 31, 2025 2024 (In thousands) Securitization trust debt $ 45,044 $ 35,932 Warehouse lines of credit 6,513 4,321 Residual interest financing 2,715 1,209 Subordinated renewable notes 646 506 Interest expense $ 54,918 $ 41,968 (6) Earnings Per Share Earnings per share for the three-month periods ended March 31, 2025, and 2024 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month periods ended March 31, 2025, and 2024: Schedule of earnings per share Three Months Ended March 31, 2025 2024 (In thousands) Weighted average number of common shares outstanding during the period used to compute basic earnings per share 21,444 21,143 Incremental common shares attributable to exercise of outstanding options and warrants 2,881 3,459 Weighted average number of common shares used to compute diluted earnings per share 24,325 24,602 If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three months ended March 31, 2025, would have included an additional 1.4 million shares attributable to the exercise of outstanding options and warrants. For the three months ended March 31, 2024, 1.7 million shares, would be included in the diluted earnings per share calculation. 20 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (7) Income Taxes We file numerous consolidated and separate income tax returns with the United States and with many states. With few exceptions, we are no longer subject to U.S. federal, state, or local examinations by tax authorities for years before 2015. As of March 31, 2025, and December 31, 2024, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months. The Company and its subsidiaries file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $ 826,000 as of March 31, 2025, is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $ 826,000 consists of approximately $ 338,000 of net U.S. federal deferred tax assets and $ 488,000 of net state deferred tax assets. Income tax expense was $ 2.1 million for the three months ended March 31, 2025, representing effective income tax rates of 31 %, compared to income tax expense of $ 2 .0 million for the three months ended March 31, 2024, and representing effective income tax rates of 30 % respectively. (8) Legal Proceedings Consumer Litigation. We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate. For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case. Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019, alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. The complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. In April 2024, a motion for certification of a class was filed. 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 we filed a cross appeal of the denial of the motion to compel arbitration on October 31, 2024. 21 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS In General. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of March 31, 2025, 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 March 31, 2025, does not exceed $ 3.2 million. Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period. (9) Fair Value Measurements ASC 820, “Fair Value Measurements” clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy. ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement. Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter. Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process. Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement. For the quarter ended March 31, 2025, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value and did not record a mark down to that portfolio. 22 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The table below presents a reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs: Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis Three Months Ended March 31, 2025 2024 (In thousands) Balance at beginning of period $ 3,313,767 $ 2,722,662 Finance receivables at fair value acquired during period 449,602 328,893 Payments received on finance receivables at fair value ( 252,856 ) ( 210,935 ) Net interest income accretion on fair value receivables ( 64,907 ) ( 54,247 ) Mark to fair value 3,500 5,000 Balance at end of period $ 3,449,106 $ 2,791,373 The table below compares the fair values of these finance receivables to their contractual balances for the periods shown: Schedule of finance receivables to their contractual balances March 31, 2025 December 31, 2024 Contractual Fair Contractual Fair Balance Value Balance Value (In thousands) Finance receivables measured at fair value $ 3,611,445 $ 3,449,106 $ 3,485,540 $ 3,313,767 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 March 31, December 31, March 31, December 31, 2025 2024 Unobservable 2025 2024 (In thousands) Assets: Finance receivables measured at fair value $ 3,449,106 $ 3,313,767 Discount rate 11.37% 11.37% Cumulative net losses 15.73% 15.47% 23 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes the delinquency status of these finance receivables measured at fair value as of March 31, 2025 and December 31, 2024: Schedule of delinquency status of finance receivables measured at fair value March 31, December 31, 2025 2024 (In thousands) Delinquency Status Current $ 3,166,583 $ 2,969,864 31 - 60 days 194,950 241,883 61 - 90 days 95,158 113,662 91 + days 60,862 64,810 Repo 93,892 95,321 $ 3,611,445 $ 3,485,540 There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended March 31, 2025, and 2024. The estimated fair values of financial assets and liabilities at March 31, 2025, and December 31, 2024, were as follows: Schedule of fair values of financial assets and liabilities As of March 31, 2025 Financial Instrument (In thousands) Carrying Fair Value Measurements Using: Value Level 1 Level 2 Level 3 Total Assets: Cash and cash equivalents $ 29,841 $ 29,841 $ – $ – $ 29,841 Restricted cash and equivalents 153,637 153,637 – – 153,637 Finance receivables, net 2,860 – – 2,473 2,473 Accrued interest receivable 37 – – 37 37 Liabilities: Warehouse lines of credit $ 365,683 $ – $ – $ 365,683 $ 365,683 Residual interest financing 163,391 163,391 163,391 Accrued interest payable 11,209 – – 11,209 11,209 Securitization trust debt 2,743,269 – – 2,733,488 2,733,488 Subordinated renewable notes 27,547 – – 27,547 27,547 24 CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 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 10) Business Segment Information The company has 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. Within the Company’s one reportable segment, it provides indirect vehicle financing to motor vehicle dealer’s less credit- worthy borrowers. The Company’s revenue primarily consists of interest income and is derived from the interest recorded on contracts the Company has purchased, The revenue generated from any individual borrower is deemed to be immaterial. (11) Subsequent Events On May 12, 2025, we executed our second securitization of 2025. In the transaction, qualified institutional buyers purchased $419.95 million of asset-backed notes secured by $439.29 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2025-B, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer. The weighted average yield on the notes is approximately 5.96%. 25 Cautionary Note Regarding Forward-Looking Statements Discussions of certain matters contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. You can generally identify forward-looking statements as statements containing the words “will,” “would,” “believe,” “may,” “could,” “expect,” “anticipate,” “intend,” “estimate,” “judgment,” “assume,” “plans,” “goals, “strategy,” “future,” “likely,” “should” or other similar expressions. Examples of forward-looking statements include, among others, statements we make regarding: · charge-offs and recovery rates; · the willingness or ability of obligors to pay pursuant to contractual terms; · our ability to enforce rights under contracts; · our ability to and rates at which we plan to acquire automobile contracts; · the anticipated levels of recoveries upon sale of repossessed vehicles; · revenues or expenses; · provisions for credit losses; · expected industry and general economic trends; · accrued losses for legal contingencies; · anticipated deferred tax assets; · estimates of taxable income; · our ability to service and repay our debt; · the structuring of securitization transactions as secured financings and the effects of such structures on financial items and future profitability; or · the effect of the change in structure on our profitability and the duration of the period in which our profitability would be affected by the change in securitization structure. Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. Some of the factors that might cause such a difference include, but are not limited to, the following: · unexpected exogenous events, such as a widespread public health emergency; · mandates imposed in reaction to such events, such as prohibitions of otherwise permissible activity; · changes in general economic conditions; · changes in performance of our automobile contracts; · increases in interest rates; · our ability to generate sufficient operating and financing cash flows; · competition; · the level of losses incurred on contracts in our managed portfolio; · adverse decisions by courts or regulators; · regulatory changes with respect to consumer finance; · changes in the market for used vehicles; · levels of cash releases from existing pools of contracts; · the terms on which we are able to finance contract purchases; · the willingness or ability of dealers to assign contracts to us on acceptable terms; · the terms on which we are able to complete term securitizations once contracts are acquired; · any breach in the security of our systems; and · such other factors as discussed through the “Risk Factors” section of this report. Forward-looking statements are neither historical facts nor guarantees of performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other uncertain conditions. Because forward-looking statements relate to the future, they involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond our ability to control or predict, including those described herein, and in any documents incorporated by reference in this report. Therefore, you should not rely on any of these forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. We undertake no obligation to publicly update any forward-looking information. You are advised to consult any additional disclosure we make in our periodic reports filed with the SEC. 26 Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are a specialty finance company. Our business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers and, to a lesser extent, by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through our automobile contract purchases, we provide indirect financing to the customers of dealers who have limited credit histories or past credit problems, who we refer to as sub-prime customers. We serve as an alternative source of financing for dealers, facilitating sales to customers who otherwise might not be able to obtain financing from traditional sources, such as commercial banks, credit unions and the captive finance companies affiliated with major automobile manufacturers. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) originated vehicle purchase money loans by lending directly to consumers, (ii) acquired installment purchase contracts in four merger and acquisition transactions, and (iii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders. In this report, we refer to all of such contracts and loans as "automobile contracts." We were incorporated and began our operations in March 1991. From inception through March 31, 2025, we have originated a total of approximately $23.5 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below: Contract Purchases and Outstanding Managed Portfolio $ in thousands Period Contracts Purchased in Period Managed Portfolio at Period End 2019 1,002,782 2,416,042 2020 742,584 2,174,972 2021 1,146,321 2,249,069 2022 1,854,385 3,001,308 2023 1,357,752 3,194,623 2024 1,681,941 3,665,725 Three months ended March 31, 2025 451,218 3,774,629 In May 2021 we began purchasing some contracts for immediate sale to a third-party to whom we refer applications that don’t meet our lending criteria. We service all such contracts on behalf of the third-party. We earn fees for originating the receivable and also servicing fees on active accounts in the third-party portfolio. For the three months ended March 31, 2025, we originated $4.3 million under this third-party program. As of March 31, 2025, our managed portfolio includes $160.1 million of such third-party receivables. Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California. Credit and underwriting functions are performed primarily in that California branch with certain of these functions also performed in our Florida, Nevada, and Virginia branches. We service our automobile contracts from our California, Nevada, Virginia, Florida and Illinois branches. The programs we offer to dealers and consumers are intended to serve a wide range of sub-prime customers, primarily through franchised new car dealers. We originate automobile contracts with the intention of financing them on a long-term basis through securitizations. Securitizations are transactions in which we sell a specified pool of contracts to a special purpose subsidiary of ours, which in turn issues asset-backed securities to fund the purchase of the pool of contracts from us. 27 Securitization and Warehouse Credit Facilities Throughout the period for which information is presented in this report, we have purchased automobile contracts with the intention of financing them on a long-term basis through securitizations, and on an interim basis through warehouse credit facilities. All such financings have involved identification of specific automobile contracts, sale of those automobile contracts (and associated rights) to one of our special-purpose subsidiaries, and issuance of asset-backed securities to be purchased by institutional investors. Depending on the structure, these transactions may be accounted for under generally accepted accounting principles as sales of the automobile contracts or as secured financings. All of our active securitizations are structured as secured financings. When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet. We then periodically (i) recognize interest and fee income on the contracts, and (ii) recognize interest expense on the securities issued in the transaction. For automobile contracts acquired after 2017 we take account of estimated credit losses in our computation of a level yield used to determine recognition of interest on the contracts. For contracts acquired before 2018, we adopted CECL on January 1, 2020, and we may, as circumstances warrant, record or reverse expense provisions for credit losses. Since 1994 we have conducted 104 term securitizations of automobile contracts that we originated. As of March 31, 2025, 18 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year. Our recent history of term securitizations is summarized in the table below: Recent Asset-Backed Term Securitizations $ in thousands Period Number of Term Securitizations Receivables Pledged in Term Securitizations 2019 4 1,014,124 2020 3 741,867 2021 4 1,145,002 2022 4 1,537,383 2023 4 1,352,114 2024 4 1,533,854 Three months ended March 31, 2025 4 462,541 Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. We currently have short-term funding capacity of $535 million over two credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027. In addition, a subordinated lender was added to the credit facility in November 2024, effectively increasing our advance rate to a maximum of 95% for eligible receivables across the facility. The capacity was then increased from $200 million at the most recent renewal date to $335 million in December 2024. In November 2015, we entered into another $100 million facility. 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 to March 2028. 28 In a securitization and in our warehouse credit facilities, we are required to make certain representations and warranties, which are generally similar to the representations and warranties made by dealers in connection with our purchase of the automobile contracts. If we breach any of our representations or warranties, we may be required to repurchase the automobile contract at a price equal to the principal balance plus accrued and unpaid interest. We may then be entitled under the terms of our dealer agreement to require the selling dealer to repurchase the contract at a price equal to our purchase price, less any principal payments made by the customer. Subject to any recourse against dealers, we will bear the risk of loss on repossession and resale of vehicles under automobile contracts that we repurchase. In a securitization, the related special purpose subsidiary may be unable to release excess cash to us if the credit performance of the securitized automobile contracts falls short of pre-determined standards. Such releases represent a material portion of the cash that we use to fund our operations. An unexpected deterioration in the performance of securitized automobile contracts could therefore have a material adverse effect on both our liquidity and results of operations. In addition, from time to time, we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored. On March 20, 2025, we completed a $65 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $65.0 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 October 2023 through September 2024. The sold notes (“2025-1 Notes”), issued by CPS Auto Securitization Trust 2025-1, consist of a single class with a coupon of 11.00%. Receivables we originate and service for third-parties are not pledged to our warehouse facilities or included in our securitizations. Financial Covenants Certain of our securitization transactions and our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of March 31, 2025, we were in compliance with all such covenants. Results of Operations Comparison of Operating Results for the three months ended March 31, 2025, with the three months ended March 31, 2024 Revenues . During the three months ended March 31, 2025, our revenues were $106.9 million, an increase of $15.2 million, or 16.6%, from the prior year revenue of $91.7 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended March 31, 2025, include a $3.5 million mark up to the recorded value of the finance receivables measured 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. In the current period, 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 $3.5 million. There was a $5.0 million mark up to the fair value portfolio in the prior year period. 29 Interest income for the three months ended March 31, 2025, increased $17.6 million, or 20.9%, to $101.9 million from $84.3 million in the prior year. The primary reason for the increase in interest income is the 19.3% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio increased from 11.3% in the prior year period to 11.4% in the current year period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the three months ended March 31, 2025 and 2024: Three Months Ended March 31, 2025 2024 (Dollars in thousands) Average Interest Average Interest Balance Interest Yield Balance Interest Yield Interest Earning Assets Loan Portfolio $ 3,572,642 $ 101,933 11.40% $ 2,993,816 $ 84,288 11.30% Other income was $1.4 million for the three months ended March 31, 2025, compared to $2.5 million for the comparable period in 2024. This 41.3% decrease was primarily driven by the decrease in origination and servicing fees we earned from third party receivables. These fees were $1.4 million for the quarter ended March 31, 2025, compared to $2.1 million in the prior year period. Expenses . Our operating expenses consist largely of interest expense, employee costs, sales and general and administrative expenses. Interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts. Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received, processed and serviced. Factors that affect profit margins and net income include changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates and changes in the unemployment level. Employee costs include base salaries, commissions and bonuses paid to employees, and certain expenses related to the accounting treatment of outstanding stock options and are one of our most significant operating expenses. These costs (other than those relating to stock options) generally fluctuate with the level of applications and automobile contracts purchased and serviced. Other operating expenses consist largely of facilities expenses, telephone and other communication services, credit services, computer services, sales and advertising expenses, and depreciation and amortization. Total operating expenses were $100.1 million for the three months ended March 31, 2025, compared to $85.2 million for the prior period, an increase of $14.9 million, or 17.5%. The increase is primarily due to increases in interest expense and to a lesser extent, increases to sales costs. 30 Employee costs were $25.0 million during the three months ended March 31, 2025, compared to $24.4 million for the same quarter in the prior year, an increase of $617,000, or 2.5%. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended, March 31, 2025, and 2024: Three Months Ended March 31, 2025 2024 (Dollars in millions) Contracts purchased (dollars) $ 451.2 $ 346.3 Contracts purchased (units) 20,707 16,414 Managed portfolio outstanding (dollars) $ 3,614.6 $ 3,021.2 Managed portfolio outstanding (units) 207,123 181,650 Number of Originations staff 200 191 Number of Sales staff 120 101 Number of Servicing staff 559 427 Number of other staff 64 183 Total number of employees 943 902 General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses was $13.5 million, a decrease of $211,000 from $13.8 million in the prior year period. Interest expense for the three months ended March 31, 2025, was $54.9 million and represented 54.9% of total operating expenses, compared to $42.0 million in the previous year, when it was 49.3% of total operating expenses. The $12.9 million increase in interest expense compared to the same three month period in the prior year was largely due to the volume, and to a lesser extent, due to the rate. Interest on securitization trust debt increased by $9.1 million for the three months ended March 31, 2025, compared to the prior period. The average balance of securitization trust debt increased to $2,861.9 million for the three months ended March 31, 2025, compared to $2,388.1 million for the three months ended March 31, 2024. The annualized average rate on our securitization trust debt was 6.3% for the three months ended March 31, 2025, compared to 6.0% in the prior year period. For each quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below: Blended Cost of Funds on Recent Asset-Backed Term Securitizations Period Blended Cost of Funds January 2022 2.54% April 2022 4.83% July 2022 6.02% October 2022 8.48% January 2023 6.48% April 2023 7.17% July 2023 7.13% October 2023 7.89% January 2024 6.51% April 2024 6.69% June 2024 6.56% September 2024 5.52% January 2025 5.88% 31 Interest expense on warehouse credit line debt increased by $2.2 million to $6.5 million for the three months ended March 31, 2025, compared to $4.3 million in the prior year period. The increase was primarily due to the higher utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $275.8 million during the three months ended March 31, 2025, compared to $164.9 million for the same period in 2024. The annualized average rate on our credit line debt was 9.4% for the three months ended March 31, 2025, compared to 10.5% in the prior year period. Interest expense on subordinated renewable notes was $646,000 for the three months ended March 31, 2025. The average balance of the outstanding subordinated debt was $26.9 million for the three months ended March 31, 2025, compared to $20.8 million for the prior year period. The average yield of subordinated notes decreased to 9.6% compared to 9.7% in the prior period. In June 2021, March 2024, and again on March 20, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, and $65 million, respectively. Interest expense for these residual interest financings was $2.7 million for the three months ended March 31, 2025, compared to $1.2 for the same period in 2024. The following table presents the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended March 31, 2025, and 2024: Three Months Ended March 31, 2025 2024 (Dollars in thousands) Annualized Annualized Average Average Average Average Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Interest Earning Assets Loan Portfolio $ 3,572,642 $ 101,933 11.4% $ 2,993,816 $ 84,288 11.3% Interest Bearing Liabilities Warehouse lines of credit $ 275,816 $ 6,513 9.4% $ 164,883 4,321 10.5% Residual interest financing 108,667 2,715 10.0% 67,033 1,209 7.2% Securitization trust debt 2,861,870 45,044 6.3% 2,388,146 35,932 6.0% Subordinated renewable notes 26,945 646 9.6% 20,842 506 9.7% $ 3,273,298 $ 54,918 6.7% $ 2,640,904 $ 41,968 6.4% Net interest income/spread $ 47,015 $ 42,320 Net interest yield (2) 4.7% 4.9% Ratio of average interest earning assets to average interest bearing liabilities 109% 113% (1) Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances. (2) Annualized net interest income divided by average interest earning assets. 32 Three Months Ended March 31, 2025 Compared to March 31, 2024 Total Change Due Change Due Change to Volume to Rate (In thousands) Interest Earning Assets Loan Portfolio $ 17,645 $ 16,752 $ 893 Interest Bearing Liabilities Warehouse lines of credit 2,192 2,950 (758 ) Residual interest financing 1,506 745 761 Securitization trust debt 9,112 6,966 2,146 Subordinated renewable notes 140 147 (7 ) 12,950 10,808 2,142 Net interest income/spread $ 4,695 $ 5,944 $ (1,249 ) Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of March 31, 2025. The allowance applies only to our finance receivables originated through December 2017, which we refer to as our legacy portfolio. Finance receivables that we have originated since January 2018 are accounted for at fair value. Under the fair value method of accounting, we recognize interest income net of expected credit losses. Thus, no provision for credit loss expense is recorded for finance receivables measured at fair value. For the three months ended March 31, 2025, we recorded a reduction to provision for credit losses on finance receivables in the amount of $979,000. The reserve decrease was primarily due to better than expected recovery rates and a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. This compares to $1.6 million in reductions to provision for credit losses for the three months ended March 31, 2024. Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases. Sales expense increased to $5.9 million during the three months ended March 31, 2025, from $4.9 million for the same quarter in 2024. We purchased $451.2 million of new contracts during the three months ended March 31, 2025, compared to $346.3 million in the prior year period. Occupancy expenses was $1.4 million for the three months ending March 31, 2025, which is down from the $1.6 million in the first quarter of 2024. Depreciation and amortization expenses increased to $249,000 compared to $215,000 in the previous year. For the three months ended March 31, 2025, we recorded income tax expense of $2.1 million, representing a 31% effective tax rate. In the prior period, our income tax expense was $2.0 million, representing a 30% effective tax rate. Credit Experience Our financial results are dependent on the performance of the automobile contracts in which we retain an ownership interest. Broad economic factors such as recession and significant changes in unemployment levels influence the credit performance of our portfolio, as does the weighted average age of the receivables at any given time. The tables below document the delinquency, repossession and net credit loss experience of all such automobile contracts that we originated or own an interest in as of the respective dates shown. 33 Delinquency, Repossession and Extension Experience (1) Total Managed Portfolio (Excludes Third Party Portfolio) March 31, 2025 March 31, 2024 December 31, 2024 Number of Number of Number of Contracts Amount Contracts Amount Contracts Amount (Dollars in thousands) Delinquency Experience Gross servicing portfolio (1) 207,123 $ 3,614,555 181,650 $ 3,021,185 201,441 $ 3,490,960 Period of delinquency (2) 31-60 days 11,800 $ 195,595 10,992 $ 172,425 14,643 $ 243,068 61-90 days 6,020 95,712 5,443 85,338 7,244 114,633 91+ days 4,161 61,037 2,792 43,816 4,477 65,081 Total delinquencies (2) 21,981 352,344 19,227 301,579 26,364 422,782 Amount in repossession (3) 6,214 93,997 5,020 72,861 6,227 95,620 Total delinquencies and amount in repossession (2) 28,195 $ 446,341 24,247 $ 374,440 32,591 $ 518,402 Delinquencies as a percentage of gross servicing portfolio 10.61% 9.75% 10.58% 9.98% 13.09% 12.11% Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 13.61% 12.35% 13.35% 12.39% 16.18% 14.85% Extension Experience Contracts with one extension, accruing 34,239 $ 616,697 33,481 $ 593,699 33,623 $ 601,049 Contracts with two or more extensions, accruing 47,578 716,420 43,748 601,574 47,227 701,158 81,817 1,333,117 77,229 1,195,273 80,850 1,302,207 Contracts with one extension, non-accrual (4) 3,203 48,729 2,628 42,315 3,483 53,018 Contracts with two or more extensions, non-accrual (4) 4,122 61,109 2,022 28,015 4,052 60,660 7,325 109,838 4,650 70,330 7,535 113,678 Total contracts with extensions 89,142 $ 1,442,955 81,879 $ 1,265,603 88,385 $ 1,415,885 ____________________________________ (1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract. The information in the table represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold in securitization transactions that we continue to service. The table does not include certain contracts we have serviced for third parties on which we earn servicing fees only and have no credit risk. (2) 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. Automobile contracts less than 31 days delinquent are not included. The delinquency aging categories shown in the tables reflect the effect of extensions. (3) Amount in repossession represents financed vehicles that have been repossessed but not yet liquidated. (4) Amount in repossession and accounts past due more than 90 days are on non-accrual. 34 Finance Receivables Portfolio March 31, March 31, December 31, 2025 2024 2024 (Dollars in thousands) Average servicing portfolio outstanding $ 3,572,642 $ 2,993,816 $ 3,209,988 Annualized net charge-offs as a percentage of average servicing portfolio (2) 7.5% 7.8% 7.6% _________________________ (1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract. (2) Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying interim consolidated financial statements. March 31, 2025, and March 31, 2024, percentages represent three months ended March 31, 2025, and March 31, 2024,, annualized. December 31, 2024, represents 12 months ended December 31, 2024. Extensions In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to more than eight over the life of the contract. 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 some 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. The basic question in deciding to grant an extension is whether or not we will (a) be delaying the inevitable repossession and liquidation or (b) risk losing the vehicle as a result of not being able to locate the obligor and vehicle. In both of those situations, the loss would likely be higher than if the vehicle had been repossessed without the extension. The benefits of granting an extension include minimizing current losses and delinquencies, minimizing lifetime losses, getting the obligor’s account current (or close to it) and building goodwill so that the obligor might prioritize us over other creditors on future payments. Our servicing staff are trained to identify when a past due obligor is facing a temporary problem that may be resolved with an extension. In some cases, the extension will be granted in conjunction with our receiving all or a portion of a past due payment from the obligor, thereby indicating an additional monetary and psychological commitment to the contract on the obligor’s part. The credit assessment for granting an extension is initially made by our collector, who bases the recommendation on the collector’s discussions with the obligor. In such assessments the collector will consider, among other things, the following factors: (1) the reason the obligor has fallen behind in payment; (2) whether or not the reason for the delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making regular monthly payments again after the extension; (3) the obligor's past payment history, including past extensions if applicable; (4) the obligor’s willingness to communicate and cooperate on resolving the delinquency; and (5) a numeric score from our internal risk assessment system that indicating the likelihood that the extension will prove beneficial. If the collector believes the obligor is a good candidate for an extension, an approval is obtained from a supervisor, who will review the same factors stated above prior to offering the extension to the obligor. After receiving an extension, an account remains subject to our normal policies and procedures for interest accrual, reporting delinquency and recognizing charge-offs. 35 We believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables. The table below summarizes the status, as of March 31, 2025, for accounts that received extensions from 2011 through 2024: Period of Extension # Extensions Granted Active or Paid Off at March 31, 2025 % Active or Paid Off at March 31, 2025 Charged Off > 6 Months After Extension % Charged Off > 6 Months After Extension Charged Off <= 6 Months After Extension % Charged Off <= 6 Months After Extension Avg Months to Charge Off Post Extension 2011 18,786 10,962 58.4% 6,883 36.6% 941 5.0% 19 2012 18,783 11,315 60.2% 6,667 35.5% 801 4.3% 18 2013 23,398 11,130 47.6% 11,282 48.2% 986 4.2% 23 2014 25,773 10,418 40.4% 14,486 56.2% 869 3.4% 25 2015 53,319 21,934 41.1% 30,056 56.4% 1,329 2.5% 26 2016 80,897 34,963 43.2% 42,980 53.1% 2,954 3.7% 26 2017 133,847 54,877 41.0% 68,256 51.0% 10,714 8.0% 23 2018 121,531 56,141 46.2% 53,509 44.0% 11,881 9.8% 20 2019 71,548 41,364 57.8% 22,772 31.8% 7,412 10.4% 19 2020 83,170 55,266 66.4% 23,869 28.7% 4,035 4.9% 22 2021 47,010 32,903 70.0% 12,871 27.4% 1,236 2.6% 20 2022 56,142 38,265 68.2% 15,923 28.4% 1,954 3.5% 16 2023 83,113 61,814 74.4% 18,040 21.7% 3,259 3.9% 12 2024 90,484 84,017 92.9% 4,273 4.7% 2,194 2.4% 6 ______________________ Note: Table excludes extensions on portfolios serviced for third parties We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in 2019, 57.8% were either paid in full or active and performing as of March 31, 2025. Each of these successful accounts represent continued payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial loss and no interest revenue after the extension. 36 For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 2018 that subsequently charged off, such charge offs occurred, on average, 20 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest. Additional information about our extensions is provided in the tables below: Three Months Ended March 31, Three Months Ended March 31, Year Ended December 31, 2025 2024 2024 Average number of extensions granted per month 7,390 6,760 7,540 Average number of outstanding accounts 205,203 180,332 189,460 Average monthly extensions as % of average outstandings 3.6% 3.7% 4.0% ____________________ Note: Table excludes portfolios originated and owned by third parties March 31, 2025 March 31, 2024 December 31, 2024 Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount (Dollars in thousands) Contracts with one extension 37,442 $ 665,427 36,109 $ 636,014 37,106 $ 654,067 Contracts with two extensions 22,345 377,895 20,228 345,488 22,452 382,301 Contracts with three extensions 13,685 221,613 10,758 153,331 13,300 214,194 Contracts with four extensions 7,785 108,780 6,648 69,027 7,462 99,071 Contracts with five extensions 4,586 46,605 5,017 40,981 4,645 43,264 Contracts with six extensions 3,299 22,635 3,119 20,762 3,420 22,988 89,142 $ 1,442,955 81,879 $ 1,265,603 88,385 $ 1,415,885 Managed portfolio (excluding originated and owned by 3rd parties) 207,123 $ 3,614,555 181,650 $ 3,021,185 201,441 $ 3,490,960 ___________________ Note: Table excludes portfolios originated and owned by third parties Since 2019, we have been able to reduce extensions by working with our servicing staff to be more selective in granting extensions including, where appropriate, to exhaust all possibilities of payment by the customer before granting an extension. However, as delinquency rates have risen, so has the average number of extensions granted. 37 Non-Accrual Receivables It is not uncommon for our obligors to fall behind in their payments. However, with the diligent efforts of our Servicing staff and systems for managing our collection efforts, we regularly work with our customers to resolve delinquencies. Our staff are trained to employ a counseling approach to assist our customers with their cash flow management skills and help them to prioritize their payment obligations in order to avoid losing their vehicle to repossession. Through our experience, we have learned that once a customer becomes greater than 90 days past due, it is not likely that the delinquency will be resolved and will ultimately result in a charge-off. As a result, we do not recognize any interest income for contracts that are greater than 90 days past due. If a contract exceeds the 90 days past due threshold at the end of one period, and then makes the necessary payments such that it becomes less than or equal to 90 days delinquent at the end of a subsequent period, it would be restored to full accrual status for our financial reporting purposes. At the time a contract is restored to full accrual in this manner, there can be no assurance that full repayment of interest and principal will ultimately be made. However, we monitor each obligor’s payment performance and are aware of the severity of his delinquency at any time. The fact that the delinquency has been reduced below the 90-day threshold is a positive indicator. Should the contract again exceed the 90-day delinquency level at the end of any reporting period, it would again be reflected as a non-accrual account. Our policy for placing a contract on non-accrual status is independent of our policy to grant an extension. In practice, it would be an uncommon circumstance where an extension was granted and the account remained in a non-accrual status, since the goal of the extension is to bring the contract current (or nearly current). Liquidity and Capital Resources Our business requires substantial cash to support our purchases of automobile contracts and other operating activities. Our primary sources of cash have been cash flows from the proceeds from term securitization transactions and other sales of automobile contracts, amounts borrowed under various revolving credit facilities (also sometimes known as warehouse credit facilities), customer payments of principal and interest on finance receivables, fees for origination of automobile contracts, and releases of cash from securitization transactions and their related spread accounts. Our primary uses of cash have been the purchases of automobile contracts, repayment of amounts borrowed under lines of credit, securitization transactions and otherwise, operating expenses such as employee, interest, occupancy expenses and other general and administrative expenses, the establishment of spread accounts and initial overcollateralization, if any, the increase of credit enhancement to required levels in securitization transactions, and income taxes. There can be no assurance that internally generated cash will be sufficient to meet our cash demands. The sufficiency of internally generated cash will depend on the performance of securitized pools (which determines the level of releases from those pools and their related spread accounts), the rate of expansion or contraction in our managed portfolio, and the terms upon which we are able to acquire and borrow against automobile contracts. Net cash provided by operating activities for the three-month period ended March 31, 2025, was $73.9 million, an increase of $24.2 million, compared to net cash provided by operating activities for the three-month period ended March 31, 2024, of $52.7 million. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and marks to finance receivables measured at fair value. Net cash used in investing activities was $194.1 million for the three months ended March 31, 2025, compared to $108.6 million in the prior year period. Net cash used in investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were $449.6 million and $328.9 million during the first three months of 2025 and 2024, respectively. 38 Net cash provided by financing activities for the three months ended March 31, 2025, was $166.3 million compared to $81.5 million in the prior year period. Cash provided by financing activities is primarily related to the issuance of securitization trust debt, reduced by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt. In the first three months of 2025, we issued $442.4 million in new securitization trust debt compared to $280.9 million for the same period in 2024. We repaid $293.0 million in securitization trust debt in the three months ended March 31, 2025, compared to repayments of securitization trust debt of $268.7 million in the prior year period. In the three months ended March 31, 2025, we had net repayments on warehouse lines of credit of $45.8 million, compared to net advances from warehouse lines of credit of $17.2 million in the prior year’s period. We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years. We have been dependent on warehouse credit facilities to purchase automobile contracts and our securitization transactions for long term financing of our contracts. In addition, we have accessed other sources, such as residual financings and subordinated debt in order to finance our continuing operations. The acquisition of automobile contracts for subsequent financing in securitization transactions, and the need to fund spread accounts and initial overcollateralization, if any, and increase credit enhancement levels when those transactions take place, results in a continuing need for capital. The amount of capital required is most heavily dependent on the rate of our automobile contract purchases, the required level of initial credit enhancement in securitizations, and the extent to which the previously established trusts and their related spread accounts either release cash to us or capture cash from collections on securitized automobile contracts. Of those, the factor most subject to our control is the rate at which we purchase automobile contracts. We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital. As of March 31, 2025, we had unrestricted cash of $29.8 million and $153.6 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of March 31, 2025, we had approximately $23.5 million of such eligible collateral. Our plans to manage our liquidity include maintaining our rate of automobile contract purchases at a level that matches our available capital, and, as appropriate, minimizing our operating costs. During the three-month period ended March 31, 2025, we completed one securitization aggregating $442.4 million of notes sold. Our liquidity will also be affected by releases of cash from the trusts established with our securitizations. While the specific terms and mechanics of each spread account vary among transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below certain predetermined levels. In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may require increased credit enhancement to be accumulated for the particular pool. There can be no assurance that collections from the related trusts will continue to generate sufficient cash. Our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of March 31, 2025, we were in compliance with all such financial covenants. We have and will continue to have a substantial amount of indebtedness. At March 31, 2025, we had approximately $3,300.0 million of debt outstanding. Such debt consisted primarily of $2,743.3 million of securitization trust debt and $365.7 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $148.9 million while our warehouse lines of credit debt has decreased by $45.2 million since December 31, 2024 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had $27.5 million and $26.5 million in subordinated renewable notes outstanding at March 31, 2025, and December 31, 2024, respectively. In June 2021, March 2024, and again on March 20, 2025, we completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, and $65 million, respectively. As of March 31, 2025, all $165.0 million of the residual interest debt remains outstanding. 39 Although we believe we are able to service and repay our debt, there is no assurance that we will be able to do so. If our plans for future operations do not generate sufficient cash flows and earnings, our ability to make required payments on our debt would be impaired. If we fail to pay our indebtedness when due, it could have a material adverse effect on us and may require us to issue additional debt or equity securities. Item 4. Controls and Procedures We maintain a system of internal controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. As of the end of the period covered by this report, we evaluated the effectiveness of the design and operation of such disclosure controls and procedures. Based upon that evaluation, the principal executive officer (Charles E. Bradley, Jr.) and the principal financial officer (Denesh Bharwani) concluded that the disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, material information relating to us that is required to be included in our reports filed under the Securities Exchange Act of 1934. There has been no change in our internal controls over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 40 PART II — OTHER INFORMATION Item 1. Legal Proceedings The information provided under the caption “Legal Proceedings,” Note 8 to the Unaudited Condensed Consolidated Financial Statements, included in Part I of this report, is incorporated herein by reference. Item 1A. Risk Factors We remind the reader that risk factors are set forth in Item 1A of our report on Form 10-K, filed with the U.S. Securities and Exchange Commission on March 12, 2025. Where we are aware of material changes to such risk factors as previously disclosed, we set forth below an updated discussion of such risks. The reader should note that the other risks identified in our report on Form 10-K remain applicable. We have substantial indebtedness. We have and will continue to have a substantial amount of indebtedness. At March 31, 2025, we had approximately $3,300.0 million of debt outstanding. Such debt consisted primarily of $2,743.3 million of securitization trust debt and $365.7 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $148.9 million while our warehouse lines of credit debt has decreased by $45.2 million since December 31, 2024 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had $27.5 million and $26.5 million in subordinated renewable notes outstanding at March 31, 2025, and December 31, 2024, respectively. In June 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. In March 2024, we completed another residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. On March 20, 2025, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $65.0 million. As of March 31, 2025, all $165.0 million of the residual interest debt remains outstanding. Our substantial indebtedness could adversely affect our financial condition by, among other things: · increasing our vulnerability to general adverse economic and industry conditions; · requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing amounts available for working capital, capital expenditures and other general corporate purposes; · limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; · placing us at a competitive disadvantage compared to our competitors that have less debt; and · limiting our ability to borrow additional funds. Although we believe we are able to service and repay such debt, there is no assurance that we will be able to do so. If we do not generate sufficient operating profits, our ability to make required payments on our debt would be impaired. Failure to pay our indebtedness when due could have a material adverse effect. 41 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended March 31, 2025, we did not repurchase any shares from existing shareholders. Item 5. Other Information During the quarter ended March 31, 2025, 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 6. Exhibits The Exhibits listed below are filed with this report. 4.14 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. 31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of the registrant . 31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of the registrant . 32 Section 1350 Certifications .* 101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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 Definition Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (formatted in inline XBRL, and included in exhibit 101). * These Certifications shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. These Certifications shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registration statement specifically states that such Certifications are incorporated therein. 42 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CONSUMER PORTFOLIO SERVICES, INC. (Registrant) Date: May 12, 2025 By: /s/ CHARLES E. BRADLEY, JR. Charles E. Bradley, Jr. Chief Executive Officer (Principal Executive Officer) Date: May 12, 2025 By: /s/ DENESH BHARWANI Denesh Bharwani Executive Vice President and Chief Financial Officer (Principal Financial Officer) 43