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 ~~September~~June 30, ~~2022~~2023

☐

~~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: 1-11416

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 NASDAQStock 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 ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer”, “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated Filer ☐~~	~~Accelerated Filer~~ ☐
~~Non-accelerated Filer~~ ☒	~~Smaller reporting company~~ ☒
~~Emerging Growth Company~~ ☐

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 ~~November 7, 2022~~August 3, 2023 the registrant had ~~20,438,986~~21,164,580 common shares outstanding.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended ~~September~~June 30, ~~2022~~2023

		Page

PART I.I – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022	3
	Unaudited Condensed Consolidated Statements of Operations for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	6
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2427
Item 4.	Controls and Procedures	4244


PART ~~II.~~II – OTHER INFORMATION

Item 1.	Legal Proceedings	4345
Item 1A.	Risk Factors	4345
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4447
Item 6.	Exhibits	4547
	Signatures	4648

PART I.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)

June 30, December 31,
2023 2022
ASSETS
Cash and cash equivalents $ 7,081 $ 13,490
Restricted cash and equivalents 148,063 149,299
Finance receivables measured at fair value 2,618,420 2,476,617

Finance receivables 52,080 92,304
Less: Allowance for finance credit losses (5,721 ) (21,753 )
Finance receivables, net 46,359 70,551

Furniture and equipment, net 1,284 1,660
Deferred tax assets, net 7,367 10,177
Other assets 25,304 30,974
Total Assets $ 2,853,878 $ 2,752,768

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 57,384 $ 55,421
Warehouse lines of credit 245,272 285,328
Residual interest financing 49,749 49,623
Securitization trust debt 2,225,072 2,108,744
Subordinated renewable notes 21,204 25,263
Total liabilities 2,598,681 2,524,379
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; 21,151,966 and 20,131,323 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively 27,937 28,906
Retained earnings 230,291 202,514
Accumulated other comprehensive loss (3,031 ) (3,031 )
Total stockholders’ equity 255,197 228,389

Total liability and stockholder’ equity $ 2,853,878 $ 2,752,768

September 30, December 31,
2022 2021
ASSETS
Cash and cash equivalents $ 12,944 $ 29,928
Restricted cash and equivalents 159,762 146,620
Finance receivables measured at fair value 2,343,253 1,749,098

Finance receivables 117,686 232,390
Less: Allowance for finance credit losses (27,996 ) (56,206 )
Finance receivables, net 89,690 176,184

Furniture and equipment, net 1,700 1,129
Deferred tax assets, net 14,570 19,575
Accrued interest receivable 776 2,269
Other assets 27,829 34,775
Total Assets $ 2,650,524 $ 2,159,578

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 55,982 $ 43,648
Warehouse lines of credit 242,449 105,610
Residual interest financing 49,560 53,682
Securitization trust debt 2,057,100 1,759,972
Subordinated renewable notes 27,249 26,459
Total liabilities 2,432,340 1,989,371
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; 20,607,286 and 21,143,764 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively 31,427 55,298
Retained earnings 188,379 116,531
Accumulated other comprehensive loss (1,622 ) (1,622 )
Total stockholders’ equity 218,184 170,207

Total liability and stockholder’ equity $ 2,650,524 $ 2,159,578

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 Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Revenues:
Interest income $ 82,637 $ 75,670 $ 162,699 $ 145,730
Mark to finance receivables measured at fair value – 4,700 – 7,100
Other income 2,221 1,648 5,259 3,554
Total revenues 84,858 82,018 167,958 156,384

Expenses:
Employee costs 21,147 20,591 43,180 42,743
General and administrative 11,783 8,280 23,180 16,511
Interest 35,706 18,771 68,465 35,171
Provision for credit losses (9,700 ) (8,000 ) (18,700 ) (17,400 )
Sales 5,463 5,838 11,186 11,224
Occupancy 1,644 1,937 3,170 3,789
Depreciation and amortization 211 385 442 802
Total operating expenses 66,254 47,802 130,923 92,840
Income before income tax expense 18,604 34,216 37,035 63,544
Income tax expense 4,650 8,896 9,258 17,109
Net income $ 13,954 $ 25,320 $ 27,777 $ 46,435

Earnings per share:
Basic $ 0.67 $ 1.18 $ 1.35 $ 2.18
Diluted $ 0.55 $ 0.91 $ 1.09 $ 1.66

Number of shares used in computing earnings per share:
Basic 20,866 21,370 20,643 21,296
Diluted 25,373 27,687 25,384 27,943

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
Revenues:
Interest income $ 79,817 $ 67,018 $ 225,547 $ 198,551
Mark to finance receivables measured at fair value 8,183 – 15,283 (4,417 )
Other income 2,305 1,547 5,859 4,312
Total revenues 90,305 68,565 246,689 198,446

Expenses:
Employee costs 20,671 18,170 63,414 57,777
General and administrative 9,408 7,455 25,920 23,034
Interest 23,483 18,334 58,654 58,260
Provision for credit losses (6,000 ) (1,590 ) (23,400 ) (1,590 )
Sales 5,962 4,288 17,186 12,475
Occupancy 2,031 1,952 5,820 5,870
Depreciation and amortization 406 409 1,207 1,254
Total operating expenses 55,961 49,018 148,801 157,080
Income before income tax expense 34,344 19,547 97,888 41,366
Income tax expense 8,931 5,864 26,040 12,807
Net income $ 25,413 $ 13,683 $ 71,848 $ 28,559

Earnings per share:
Basic $ 1.22 $ 0.59 $ 3.39 $ 1.25
Diluted 0.95 0.52 2.61 1.12

Number of shares used in computing earnings per share:
Basic 20,911 23,011 21,166 22,866
Diluted 26,654 26,218 27,512 25,439
4
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022

Net income $ 13,954 $ 25,320 $ 27,777 $ 46,435

Other comprehensive income/(loss); change in funded status of pension plan – – – –
Comprehensive income $ 13,954 $ 25,320 $ 27,777 $ 46,435
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

45

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE INCOME~~
~~(In thousands)~~

Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021

Net income $ 25,413 $ 13,683 $ 71,848 $ 28,559

Other comprehensive income/(loss); change in funded status of pension plan – – – –
Comprehensive income $ 25,413 $ 13,683 $ 71,848 $ 28,559
~~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)

Six Months Ended
June 30,
2023 2022
Cash flows from operating activities:
Net income $ 27,777 $ 46,435
Adjustments to reconcile net income to net cash provided by operating activities:
Net interest income accretion on fair value receivables 94,305 60,766
Depreciation and amortization 442 802
Amortization of deferred financing costs 4,800 3,628
Mark to finance receivables measured at fair value – (7,100 )
Provision for credit losses (18,700 ) (17,400 )
Stock-based compensation expense 1,817 1,518
Changes in assets and liabilities:
Deferred tax assets, net 2,810 2,052
Other assets 5,447 10,202
Accounts payable and accrued expenses 1,963 18,767
Net cash provided by operating activities 120,661 119,670

Cash flows from investing activities:
Payments received on finance receivables held for investment 42,892 80,246
Purchases of finance receivables measured at fair value (658,048 ) (904,475 )
Payments received on finance receivables at fair value 421,940 425,774
Change in repossessions held in inventory 223 1,087
Purchase of furniture and equipment (66 ) (1,028 )
Net cash used in investing activities (193,059 ) (398,396 )

Cash flows from financing activities:
Proceeds from issuance of securitization trust debt 657,653 712,400
Proceeds from issuance of subordinated renewable notes – 2,682
Payments on subordinated renewable notes (4,059 ) (1,933 )
Net proceeds from (repayments of) warehouse lines of credit (41,031 ) 124,606
Net Proceeds from (repayment of) residual interest financing debt – (4,311 )
Repayment of securitization trust debt (540,958 ) (536,824 )
Payment of financing costs (4,066 ) (6,204 )
Purchase of common stock (18,464 ) (34,285 )
Exercise of options and warrants 15,678 14,416
Net cash provided by financing activities 64,753 270,547
Increase in cash and cash equivalents (7,645 ) (8,179 )
Cash and restricted cash at beginning of period 162,789 176,548
Cash and restricted cash at end of period $ 155,144 $ 168,369

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 62,612 $ 30,809
Income taxes $ 4,639 $ 4,796

Nine Months Ended
September 30,
2022 2021
Cash flows from operating activities:
Net income $ 71,848 $ 28,559
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of deferred acquisition fees and origination costs – 651
Net interest income accretion on fair value receivables 97,462 100,676
Depreciation and amortization 1,207 1,254
Amortization of deferred financing costs 5,860 5,360
Mark to finance receivables measured at fair value (15,283 ) 4,417
Provision for credit losses (23,400 ) (1,590 )
Stock-based compensation expense 2,966 1,265
Purchases of finance receivables held-for-sale – (23,700 )
Sale of finance receivables held-for-sale – 23,513
Changes in assets and liabilities:
Accrued interest receivable 1,493 2,087
Deferred tax assets, net 5,005 3,146
Other assets 5,252 8,629
Accounts payable and accrued expenses 12,334 8,809
Net cash provided by operating activities 164,744 163,076

Cash flows from investing activities:
Payments received on finance receivables held for investment 109,894 198,366
Purchases of finance receivables measured at fair value (1,311,735 ) (795,457 )
Payments received on finance receivables at fair value 635,401 546,897
Change in repossessions held in inventory 1,694 1,567
Purchase of furniture and equipment (1,778 ) (1,547 )
Net cash used in investing activities (566,524 ) (50,174 )

Cash flows from financing activities:
Proceeds from issuance of securitization trust debt 1,104,000 761,545
Proceeds from issuance of subordinated renewable notes 4,004 7,416
Payments on subordinated renewable notes (3,214 ) (1,277 )
Net proceeds from (repayments of) warehouse lines of credit 139,477 (22,089 )
Net Proceeds from (repayment of) residual interest financing debt (4,311 ) 39,705
Repayment of securitization trust debt (804,774 ) (861,045 )
Payment of financing costs (10,407 ) (5,752 )
Purchase of common stock (41,535 ) (3,959 )
Exercise of options and warrants 14,698 2,167
Net cash provided by (used in) financing activities 397,938 (83,289 )
Increase (decrease) in cash and cash equivalents (3,842 ) 29,613
Cash and restricted cash at beginning of period 176,548 144,152
Cash and restricted cash at end of period $ 172,706 $ 173,765

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 51,300 $ 53,931
Income taxes $ 13,977 $ 8,997
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 Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
Common Stock (Shares Outstanding)
Balance, beginning of period 21,207 23,055 21,144 22,737 20,496 21,292 20,131 21,144
Common stock issued upon exercise of options and warrants 79 379 2,974 1,055 1,718 1,529 2,805 2,895
Repurchase of common stock (679 ) (434 ) (3,511 ) (792 ) (1,062 ) (1,614 ) (1,784 ) (2,832 )
Balance, end of period 20,607 23,000 20,607 23,000 21,152 21,207 21,152 21,207

Common Stock
Balance, beginning of period $ 36,947 $ 73,204 $ 55,298 $ 72,926 $ 29,485 $ 47,844 $ 28,906 $ 55,298
Common stock issued upon exercise of options and warrants 282 1,042 14,698 2,167 8,718 8,556 15,678 14,416
Repurchase of common stock (7,250 ) (2,377 ) (41,535 ) (3,959 ) (11,171 ) (20,181 ) (18,464 ) (34,285 )
Stock-based compensation 1,448 530 2,966 1,265 905 728 1,817 1,518
Balance, end of period $ 31,427 $ 72,399 $ 31,427 $ 72,399 $ 27,937 $ 36,947 $ 27,937 $ 36,947

Retained Earnings
Balance, beginning of period $ 162,966 $ 83,884 $ 116,531 $ 69,007 $ 216,337 $ 137,646 $ 202,514 $ 116,531
Net income 25,413 13,683 71,848 28,559 13,954 25,320 27,777 46,435
Balance, end of period $ 188,379 $ 97,566 $ 188,379 $ 97,566 $ 230,291 $ 162,966 $ 230,291 $ 162,966

Accumulated Other Comprehensive Loss
Balance, beginning of period $ (1,622 ) $ (8,571 ) $ (1,622 ) $ (8,571 ) $ (3,031 ) $ (1,622 ) $ (3,031 ) $ (1,622 )
Pension benefit obligation – – – – – – – –
Balance, end of period $ (1,622 ) $ (8,571 ) $ (1,622 ) $ (8,571 ) $ (3,031 ) $ (1,622 ) $ (3,031 ) $ (1,622 )

Balance, beginning of period 170,207 – 170,207 – – – 228,389 –
Pension benefit obligation – – – – – – – –
Total Shareholders' Equity $ 218,184 $ 161,394 $ 218,184 $ 161,394 $ 255,197 $ 198,291 $ 255,197 $ 198,291

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~~“automobile contracts."”

Basis of Presentation

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the operating results to be expected for the full year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated 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, ~~2021.~~2022.

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. Results for the ~~three-month and nine-month periods ending September 30, 2022~~first quarter include ~~a $8.2 million~~ ~~and $15.3 million~~ ~~positive~~no mark down reversal to the carrying value of the portion of the receivables portfolio accounted for at fair value. ~~Mark downs of $4.4 million~~ ~~were included in the results for the nine months ending September 30, 2021.~~ Mark downs are reflected as a reduction in revenue.

Anticipated credit losses are included in our estimation of cash to be received with respect to receivables. Because such credit losses are included in our computation of the appropriate level yield, 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 and ~~nine-month~~six-month periods ending ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
Schedule of other income
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
(In thousands) (In thousands) (In thousands) (In thousands)
Origination and servicing fees from third party receivables $ 2,016 $ 495 $ 4,268 $ 611 $ 1,924 $ 1,408 $ 4,661 $ 2,252
Direct mail revenues – 779 774 2,648 – – – 774
Convenience fee revenue 50 120 170 540
Recoveries on previously charged-off contracts 10 18 54 78
Sales tax refunds 209 134 512 423 264 159 524 303
Other 20 1 81 12 33 81 74 225
Other income for the period $ 2,305 $ 1,547 $ 5,859 $ 4,312 $ 2,221 $ 1,648 $ 5,259 $ 3,554

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:
Supplemental balance sheet information related to leases
June 30, December 31,
September 30, December 31, 2023 2022
2022 2021 (In thousands)
(In thousands)
Operating Leases
Operating lease right-of-use assets $ 25,819 $ 25,819 $ 29,575 $ 28,397
Less: Accumulated amortization right-of-use assets (21,599 ) (17,624 ) (24,649 ) (22,613 )
Operating lease right-of-use assets, net $ 4,220 $ 8,195 $ 4,926 $ 5,784
$
Operating lease liabilities $ (4,749 ) $ (9,058 ) $ (5,271 ) $ (6,234 )
$
Finance Leases $
Property and equipment, at cost 3,407 3,407 $ 3,454 $ 3,407
Less: Accumulated depreciation (3,086 ) (2,348 ) (3,357 ) (3,301 )
Property and equipment, net $ 321 $ 1,059 $ 97 $ 106
$
Finance lease liabilities $ (348 ) $ (1,124 ) $ (102 ) $ (177 )
$
Weighted Average Discount Rate
Operating lease 5.0% 5.0%
Finance lease 6.5% 6.5%

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 Operating Finance
Year Ending September 30, Lease Lease
2022 $ 817 $ 238
Year Ending June 30, Lease Lease
2023 1,888 84 $ 2,775 $ 30
2024 921 26 1,787 37
2025 794 9 737 20
2026 501 – 455 11
2027 452 11
Thereafter 1,160 – 565 1
Total undiscounted lease payments 6,081 357 6,771 110
Less amounts representing interest (1,332 ) (9 ) (1,500 ) (8 )
Lease Liability $ 4,749 $ 348 $ 5,271 $ 102

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:
Lease information
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
(In thousands) (In thousands) (In thousands) (In thousands)
Operating lease cost $ 1,767 $ 1,768 $ 5,288 $ 5,398 $ 1,411 $ 1,760 $ 2,771 $ 3,630
Finance lease cost 257 308 813 924 24 257 125 555
Total lease cost $ 2,024 $ 2,076 $ 6,101 $ 6,322 $ 1,435 $ 2,017 $ 2,896 $ 4,185

The following table presents the supplemental cash flow information related to leases:
Supplemental cash flow information related to leases
Three Months Ended Six Months Ended
Three Months Ended Nine Months Ended June 30, June 30,
September 30, September 30, 2023 2022 2023 2022
2022 2021 2022 2021 (In thousands) (In thousands)
Cash paid for amounts included in the measurement of lease liabilities: (In thousands) (In thousands)
Operating cash flows from operating leases $ 1,921 $ 1,840 $ 5,616 $ 5,662 $ 1,441 $ 1,907 $ 2,771 $ 3,965
Operating cash flows from finance leases $ 249 $ 283 $ 776 $ 834 23 245 122 527
Financing cash flows from finance leases $ 8 $ 25 $ 36 $ 90 2 12 4 28

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 and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we recorded stock-based compensation costs in the amount of $~~1.4 million~~905,000 and $~~3.0~~1.8 million,, respectively. These stock-based compensation costs were $~~530,000~~728,000 and $~~1.3~~1.5 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. As of ~~September~~June 30, ~~2022,~~2023, unrecognized stock-based compensation costs to be recognized over future periods equaled $~~10.9 million~~7.6. million. This amount will be recognized as expense over a weighted-average period of ~~2.6~~2.0 years.

11

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following represents stock option activity for the ~~nine~~six months ended ~~September~~June 30, ~~2022:~~2023:
Share-based payment arrangement option activity
Weighted
Number of Weighted Average
Shares Average Remaining
(in thousands) Exercise Price Contractual Term
Options outstanding at the beginning of period 13,075 $ 4.54 N/A
Granted 1,710 10.28 N/A
Exercised (2,975 ) 4.94 N/A
Forfeited (520 ) 7.26 N/A
Options outstanding at the end of period 11,290 $ 5.18 3.29 years

Options exercisable at the end of period 7,708 $ 4.39 2.13 years
Schedule of option activity
Weighted
Number of Weighted Average
Shares Average Remaining
(in thousands) Exercise Price Contractual Term
Options outstanding at the beginning of period 11,167 $ 5.21 N/A
Granted – – N/A
Exercised (2,805 ) 5.59 N/A
Forfeited – – N/A
Options outstanding at the end of period 8,362 $ 5.09 3.61 years

Options exercisable at the end of period 5,675 $ 4.31 2.94 years

The following table presents the price distribution of stock options outstanding and exercisable ~~as of September~~for the years ended June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:
Schedule of stock options outstanding and exercisable
Number of shares as of Number of shares as of Number of shares as of Number of shares as of
September 30, 2022 December 31, 2021 June 30, 2023 December 31, 2022
Outstanding Exercisable Outstanding Exercisable Outstanding Exercisable Outstanding Exercisable
Range of exercise prices: (In thousands) (In thousands) (In thousands) (In thousands)
$0.95 - $1.99 – – 577 577
$2.00 - $2.99 1,445 775 1,517 489 1,440 1,105 1,445 775
$3.00 - $3.99 3,933 3,638 4,285 3,382 2,543 2,253 3,785 3,495
$4.00 - $4.99 2,738 1,801 2,870 1,410 2,669 1,732 2,739 1,802
$5.00 - $5.99 – – – – – – – –
$6.00 - $6.99 746 746 2,651 2,652 – – 740 740
$7.00 - $7.99 748 748 1,175 1,175 – – 748 748
$8.00 - $11.00 1,680 – – –

$10.00 - $10.99 1,710 585 1,710 210
Total shares 11,290 7,708 13,075 9,685 8,362 5,675 11,167 7,770

At ~~September~~June 30, ~~2022~~2023 the aggregate intrinsic value of options outstanding and exercisable was $~~29.2~~55.1 million and $~~22.7~~41.8 million,, respectively. There were ~~2,974,223~~2.8 million options exercised for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~1,054,541~~2.9 million for the comparable period in ~~2021.~~2022. The total intrinsic value of options exercised was $~~23.1~~13.3 million and $~~3.0~~12.2 million for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. There were ~~2,691,000~~2,661,000 shares available for future stock option grants under existing plans as of ~~September~~June 30, ~~2022.~~2023.

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 ~~nine-month~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
Schedule of purchases of company stock
Nine Months Ended
September 30, 2022 September 30, 2021
Shares Avg. Price Shares Avg. Price
Open market purchases 2,617,548 $ 11.20 734,700 $ 5.03
Shares redeemed upon net exercise of stock options 893,153 13.56 56,983 4.47
Total stock purchases 3,510,701 $ 11.80 791,683 $ 4.99
Schedule of purchases of company stock
Six Months Ended
June 30, 2023 June 30, 2022
Shares Avg. Price Shares Avg. Price
Open market purchases 564,202 $ 10.36 1,938,637 $ 11.42
Shares redeemed upon net exercise of stock options 1,220,044 10.34 893,153 13.56
Total stock purchases 1,784,246 $ 10.35 2,831,790 $ 12.09

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 ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such covenants. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness.

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.

Adoption of New Accounting Standards
In March 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2022-02, known as the Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for TDRs in ASC 310-40 on troubled debt restructurings for entities that have adopted the CECL model introduced by ASU 2016-13, Current Expected Credit Loss. ASU 2022-02 also requires that public business entities disclose current-period gross charge offs by year of origination for financing receivables and net investments in leases within the scope of Subtopic 326-20, Financial Instruments – Credit Losses – Measured at Amortized Cost. This guidance is effective for fiscal years beginning after December 15, 2022, and the adoption of this guidance did not have a material impact on the condensed 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.
13
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

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 included. In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. 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 rather than troubled debt restructurings.~~ Automobile finance receivables, net of unearned interest was $~~116.7~~ 52.1 million and $~~232.4~~92.3 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. The following table summarizes the delinquency status of finance receivables as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:
Schedule of delinquency status of finance receivables
September 30, December 31, June 30, December 31,
2022 2021 2023 2022
(In thousands) (In thousands)
Deliquency Status
Current $ 89,041 $ 186,625 $ 37,553 $ 65,764
31 - 60 days 18,090 30,980 9,100 16,796
61 - 90 days 8,047 12,070 4,339 7,756
91 + days 2,508 2,715 1,088 1,988
$ 117,686 $ 232,390 $ 52,080 $ 92,304

Finance receivables totaling $~~2.5~~1.1 million and $~~2.7~~2.0 million at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, including all receivables greater than 90 days delinquent, 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.

14
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions and, reasonable and supportable forecasts. We believe our historical credit loss experience provides the best basis for the estimation of expected credit losses. Consequently, we use historical loss experience for older receivables, aggregated into vintage pools based on their calendar quarter of origination, to forecast expected losses for less seasoned quarterly vintage pools.

We measure the weighted average monthly incremental change in cumulative net losses for the vintage pools in the relevant historical period. For the pools in the relevant historical period, we consider each pool’s performance from its inception through the end of the current period. We then apply the results of the historical analysis to less seasoned vintage pools beginning with each vintage pool’s most recent actual cumulative net loss experience and extrapolating from that point based on the historical data. We believe the pattern and magnitude of losses on older vintages allows us to establish a reasonable and supportable forecast of less seasoned vintages.

Our contract purchase guidelines are designed to produce a homogenous portfolio. For key credit characteristics of individual contracts such as obligor credit history, job stability, residence stability and ability to pay, there is relatively little variation from the average for the portfolio. Similarly, for key structural characteristics such as loan-to-value, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. Consequently, we do not believe there are significant differences in risk characteristics between various segments of our portfolio.

14
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment.

In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. However, we have considered how certain qualitative factors may affect future credit losses and have incorporated our judgement of the effect of such factors into our estimates.

The following table presents the amortized cost basis of our finance receivables by annual vintage as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021.~~2022.
Schedule of amortized cost basis of finance receivables
September 30, December 31, June 30, December 31,
2022 2021 2023 2022
(In thousands) (In thousands)
Annual Vintage Pool
2012 and prior $ 39 $ 131
2013 335 1,091
2014 2,349 6,881
2014 and prior $ 876 $ 1,865
2015 11,987 29,695 4,019 8,627
2016 37,268 76,728 15,609 28,632
2017 65,708 117,864 31,576 53,180
$ 117,686 $ 232,390 $ 52,080 $ 92,304

15
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents a summary of the activity for the allowance for finance credit losses for the three-month ~~and nine-month~~ periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
Schedule of allowance for finance credit losses
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
(In thousands) (In thousands) (In thousands) (In thousands)
Balance at beginning of period $ 35,672 $ 72,242 $ 56,206 $ 80,790 $ 14,728 $ 45,001 $ 21,753 $ 56,206
Provision for credit losses on finance receivables (6,000 ) (1,590 ) (23,400 ) (1,590 ) (9,700 ) (8,000 ) (18,700 ) (17,400 )
Charge-offs (4,375 ) (6,336 ) (14,181 ) (25,157 ) (1,897 ) (4,446 ) (4,914 ) (9,805 )
Recoveries 2,699 4,408 9,371 14,681 2,590 3,117 7,582 6,671
Balance at end of period $ 27,996 $ 68,724 $ 27,996 $ 68,724 $ 5,721 $ 35,672 $ 5,721 $ 35,672

The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month and six-month ended June 30, 2023 and 2022:
Schedule of charge-offs for financed receivables
Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022
Annual Vintage Pool (In thousands) (In thousands)
2014 and prior $ 67 $ 243 $ 208 $ 535
2015 297 653 741 1,742
2016 713 1,514 2,034 3,539
2017 1,230 2,131 2,732 4,303
Applied against repos in inventory (net) (410 ) (95 ) (801 ) (314 )
$ 1,897 $ 4,446 $ 4,914 $ 9,805
Excluded from finance receivables are contracts that were previously classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle securing the Contract. The following table presents a summary of such repossessed inventory together with the allowance for losses in repossessed inventory that is not included in the allowance for finance credit losses:
Schedule of allowance for losses on repossessed inventory
September 30, December 31, June 30, December 31,
2022 2021 2023 2022
(In thousands) (In thousands)
Gross balance of repossessions in inventory $ 2,250 $ 4,341 $ 1,003 $ 1,894
Allowance for losses on repossessed inventory (1,474 ) (1,871 ) (655 ) (1,323 )
Net repossessed inventory included in other assets $ 776 $ 2,470 $ 348 $ 571

1516

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(3) Securitization Trust Debt
We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:
Schedule of Long-term Debt Instruments
Weighted
Average
Final Receivables Outstanding Outstanding Contractual Debt
Scheduled Pledged at Principal at Principal at Interest Rate at
Payment September 30, Initial September 30, December 31, September 30,
Series Date (1) 2022 (2) Principal 2022 2021 2022 Final Scheduled Payment Date (1) Receivables Pledged at
June 30, 2023 (2) Initial Principal Outstanding Principal at
June 30, 2023 Outstanding Principal at
December 31, 2022 Weighted Average Contractual Debt Interest Rate at
June 30, 2023
(Dollars in thousands) (Dollars in thousands)
CPS 2017-A April 2024 – 206,320 – 17,644 –
CPS 2017-B December  2023 – 225,170 – 12,491 –
CPS 2017-C September 2024 – 224,825 – 25,846 –
CPS 2017-D June 2024 17,526 196,300 13,892 26,744 5.30%
CPS 2018-A March 2025 20,221 190,000 16,770 29,518 5.17% March 2025 $ – $ 190,000 $ – $ 12,939 –
CPS 2018-B December  2024 24,742 201,823 21,179 36,092 5.61% December 2024 – 201,823 – 17,077 –
CPS 2018-C September 2025 29,131 230,275 24,879 42,765 5.90% September 2025 – 230,275 – 20,222 6.07%
CPS 2018-D June 2025 35,386 233,730 30,545 49,634 5.61% June 2025 20,498 233,730 16,011 25,563 5.82%
CPS 2019-A March 2026 44,846 254,400 38,693 62,667 5.32% March 2026 26,513 254,400 21,680 32,898 5.73%
CPS 2019-B June 2026 46,255 228,275 39,622 61,730 5.15% June 2026 28,679 228,275 24,730 33,897 5.56%
CPS 2019-C September 2026 54,352 243,513 48,110 75,065 4.19% September 2026 34,151 243,513 30,129 41,515 4.55%
CPS 2019-D December  2026 69,792 274,313 61,562 98,625 3.58% December 2026 45,068 274,313 39,936 53,625 3.86%
CPS 2020-A March 2027 64,894 260,000 60,828 99,485 3.83% March 2027 42,267 260,000 38,057 52,705 4.18%
CPS 2020-B June 2027 72,574 202,343 47,591 87,048 5.87% June 2027 48,747 202,343 31,860 41,736 6.36%
CPS 2020-C November 2027 97,439 252,200 84,204 138,899 3.03% November 2027 66,427 252,200 56,227 72,894 3.45%
CPS 2021-A March 2028 103,253 230,545 86,058 147,516 1.29% March 2028 70,683 230,545 51,064 72,076 1.49%
CPS 2021-B June 2028 127,433 240,000 116,429 179,856 1.71% June 2028 89,355 240,000 76,336 101,206 2.01%
CPS 2021-C September 2028 183,844 291,000 168,163 250,003 1.50% September 2028 131,240 291,000 113,606 147,593 1.70%
CPS 2021-D December  2028 249,729 349,202 236,820 330,325 1.70% December 2028 178,689 349,202 162,778 209,277 2.00%
CPS 2022-A April 2029 266,687 316,800 247,530 – 2.04% April 2029 196,998 316,800 176,857 222,613 2.29%
CPS 2022-B October 2029 384,556 395,600 356,044 – 4.05% October 2029 295,399 395,600 266,669 325,907 4.28%
CPS 2022-C April 2030 420,885 391,600 372,262 – 5.17% April 2030 332,262 391,600 285,595 346,714 5.34%
CPS 2022-D June 2030 278,221 307,018 250,805 292,461 7.45%
CPS 2023-A August 2030 196,998 324,768 281,081 – 6.13%

CPS 2023-B November 2030 295,399 332,885 316,192 – 6.46%
$ 2,313,545 $ 5,638,234 $ 2,071,179 $ 1,771,953 $ 2,377,595 $ 5,750,290 $ 2,239,614 $ 2,122,919
_________________
(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 $~~213.6~~409.3 million ~~in 2022, $967.3 million~~ in 2023, $~~302.1~~747.0 million in 2024, $~~283.2~~463.2 million in 2025, $~~165.3~~288.1 million in 2026, $~~101.6~~193.9 million in 2027, $102.9 million in 2028, and $~~23.9~~20.7 million in ~~2028.~~2029.
(2) Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

1617

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Debt issuance costs of $~~14.1~~14.5 million and $~~12.0~~14.2 million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, 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 securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such covenants.

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of ~~September~~June 30, ~~2022,~~2023, restricted cash under the various agreements totaled approximately $~~159.8 million~~148.1. million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

Our wholly-owned bankruptcy remote subsidiaries were formed to facilitate the above asset-backed financing transactions. Similar bankruptcy remote subsidiaries issue the debt outstanding under our credit facilities. Bankruptcy remote refers to a legal structure in which it is expected that the applicable entity would not be included in any bankruptcy filing by its parent or affiliates. All of the assets of these subsidiaries have been pledged as collateral for the related debt. All such transactions, treated as secured financings for accounting and tax purposes, are treated as sales for all other purposes, including legal and bankruptcy purposes. None of the assets of these subsidiaries are available to pay other creditors.

~~(4)~~ ~~Debt~~

~~The terms and amounts of our other debt outstanding at September 30, 2022 and December 31, 2021 are summarized below:~~
Schedule of debt outstanding
Amount Outstanding at
September 30, December 31,
2022 2021
(In thousands)
Description Interest Rate Maturity

Warehouse lines of credit 3.00% over one month Libor (Minimum 3.75%) July 2024 $ 138,596 $ 70,590

4.15% over a commercial paper rate (Minimum 5.15%) January 2024 106,891 35,420

Residual interest financing 8.60% January 2026 – 4,311

Residual interest financing 7.86% June 2026 50,000 50,000

Subordinated renewable notes Weighted average rate of 7.67% and 8.93% at September 30, 2022 and December 31, 2021, respectively Weighted average maturity of July 2024 and January 2024 at September 30, 2022 and December 31, 2021, respectively 27,249 26,459

$ 322,736 $ 186,780
1718

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 June 30, 2023 and December 31, 2022 are summarized below:
Schedule of debt outstanding
Amount Outstanding at
June 30, December 31,
2023 2022
(In thousands)
Description Interest Rate Maturity

Warehouse lines of credit 3.00% over one month Libor (Minimum 3.75%) 8.38% and 7.48% at June 30, 2023 and December 31, 2022, respectively July 2024 $ 144,949 $ 150,293

4.15% over a commercial paper rate (Minimum 5.15%) 9.41% and 8.60% at June 30, 2023, and December 31, 2022, respectively January 2024 101,898 137,585

Residual interest financing 7.86% June 2026 50,000 50,000

Subordinated renewable notes Weighted average rate of 7.98% and 7.82% at June 30, 2023 and December 31, 2022, respectively Weighted average maturity of April 2025 and October 2024 at June 30, 2023 and December 31, 2022, respectively 21,204 25,263

$ 318,051 $ 363,141
On February 2, 2022, we renewed our two-year revolving credit agreement with Ares Agent Services, L.P. There was $~~106.9~~144.9 million outstanding under this facility at ~~September~~June 30, ~~2022.~~2023. On June 28, 2022, we increased the capacity of its credit agreement with Ares Agent Services, L.P. from $100 million to $200 ~~million~~. million. The revolving period for this facility was extended to January 2024 followed by an amortization period through January 2028 for any receivables pledged at the end of the revolving period.

On July 15, 2022, we renewed our two-year revolving credit agreement with Citibank, N.A., and doubled the capacity from $100 million to $200 ~~million~~. million. There was $~~138.6~~101.9 million outstanding under this facility at ~~September~~June 30, ~~2022.~~2023. The revolving period for this facility was extended to July 2024 followed by an amortization period through July 2025 for any receivables pledged at the end of the revolving ~~period~~period.
19
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unamortized debt issuance costs of $~~440~~251,000~~,000~~ and $~~629~~377,000~~,000~~ as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $~~3.0~~1.6 million and $~~400~~2.6~~,000~~ million as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively, have been excluded from the Warehouse lines of credit amounts in the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets.

(5) Interest Income and Interest Expense
~~The following table presents the components of interest income:~~
Schedule of interest income
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(In thousands) (In thousands)
Interest on finance receivables $ 7,620 $ 16,062 $ 28,766 $ 56,652
Interest on finance receivables at fair value 71,734 50,951 196,204 141,882
Other interest income 463 5 577 17
$
Interest income $ 79,817 $ 67,018 $ 225,547 $ 198,551

The following table presents the components of interest income:
Schedule of interest income
Three Months Ended Six Months Ended
June 30, June 30,
2023 2022 2023 2022
(In thousands) (In thousands)
Interest on finance receivables $ 4,378 $ 9,832 $ 9,040 $ 21,146
Interest on finance receivables at fair value 76,735 65,730 150,793 124,470
Other interest income 1,524 108 2,866 114
Interest income $ 82,637 $ 75,670 $ 162,699 $ 145,730
The following table presents the components of interest expense:
Schedule of interest expense
Three Months Ended Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
(In thousands) (In thousands) (In thousands) (In thousands)
Securitization trust debt $ 18,519 $ 15,292 $ 47,792 $ 50,568 $ 29,171 $ 15,745 $ 55,524 $ 29,273
Warehouse lines of credit 3,342 929 5,887 3,264 5,008 1,386 9,856 2,544
Residual interest financing 1,050 1,413 3,193 2,446 1,050 1,050 2,100 2,144
Subordinated renewable notes 572 700 1,782 1,982 477 590 985 1,210
$
Interest expense $ 23,483 $ 18,334 $ 58,654 $ 58,260 $ 35,706 $ 18,771 $ 68,465 $ 35,171

1820

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(6) Earnings Per Share
Earnings per share for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:
Computation of earnings per share
Three Months Ended Nine Months Ended
September 30, September 30,
2022 2021 2022 2021
(In thousands) (In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share 20,911 23,011 21,166 22,866

Incremental common shares attributable to exercise of outstanding options and warrants 5,743 3,207 6,346 2,573

Weighted average number of common shares used to compute diluted earnings per share 26,654 26,218 27,512 25,439
Computation of earnings per share
Three Months Ended
June 30, Six Months Ended
June 30,
2023 2022 2023 2022
(In thousands) (In thousands)

Weighted average number of common shares outstanding during the period used to compute basic earnings per share 20,866 21,370 20,643 21,296

Incremental common shares attributable to exercise of outstanding options and warrants 4,507 6,317 4,741 6,647

Weighted average number of common shares used to compute diluted earnings per share 25,373 27,687 25,384 27,943

If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 would have included an additional ~~1.7~~1.5 million and ~~1.0~~1.5 million shares, respectively, attributable to the exercise of outstanding options and warrants. For the three-month and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021, an additional~~2022, ~~5.6 million~~824,000 and ~~5.8 million~~692,000 shares, respectively, would be included in the diluted earnings per share calculation.

(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 ~~September~~June 30, ~~2022,~~2023, and December 31, ~~2021,~~2022, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

The Company and its subsidiaries 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.

1921

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of $~~14.6~~7.4 million as of ~~September~~June 30, ~~2022~~2023 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of ~~$14.6~~$7.4 million consists of approximately $~~8.3~~4.8 million of net U.S. federal deferred tax assets and $~~6.3~~2.6 million of net state deferred tax assets.

Income tax expense was $~~8.9~~4.7 million and $~~26.0~~9.3 million for the three months and ~~nine~~six months ended ~~September~~June 30, 2023, representing effective income tax rates of 25%, compared to income tax expense of $8.9 million and $17.1 million for the three months and six months ended June 30, 2022, ~~representing~~and represents an effective income tax rates of 26% and 27%~~, respectively, compared to income tax expense of $5.9 million~~ ~~and $12.8 million~~ ~~for the three months and nine months ended September 30, 2021, and represents an effective income tax rates of~~ 30~~% and~~ 31% 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. There are as of the date of this report two civil actions that could possibly result in a material liability, if resolved adversely and on a class basis, as the respective plaintiffs allege would be appropriate.

Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. 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 2022, a motion for certification of a class was filed but has not been ruled upon. It is reasonable to expect that resolution of these claims will be on a class basis.
Wage and Hour Claim. On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. ~~As of the date of this report, no motion for class certification has been filed or granted.~~ We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. ~~Accordingly, we have defended~~In August 2023, the parties settled by agreement the claims of the plaintiff and ~~intend~~a California settlement class and the settlement remains subject to ~~continue to defend this lawsuit.~~final court approval.

Massachusetts Civil Investigative Demand. In September 2021, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts relating to the Company’s communications with and repossession notices sent to Massachusetts customers. We are cooperating with the inquiry. ~~At this time, it is not possible to determine any amount of loss that is probable and measurable.~~

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 ~~September~~June 30, ~~2022,~~2023, our best estimate of probable incurred losses for legal contingencies, including the matters identified ~~above, and consumer claims.~~above. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of ~~September~~June 30, ~~2022~~2023 is ~~$3.4~~$3.8 million, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of ~~September~~June 30, ~~2022~~2023 does not exceed ~~$11.3~~$7.3 million.

2022

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings there can be no assurance that the ultimate resolution of these matters will not be material to our operating results for a particular period, depending on, among other factors, the size of the loss or liability imposed and the level of our income for that period.

(9) Fair Value Measurements

ASC 820, "Fair Value Measurements" clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.

ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a three-level valuation hierarchy for disclosure of fair value measurement and enhances disclosure requirements for fair value measurements. The three levels are defined as follows: level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets; level 2 – inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument; and level 3 – inputs to the valuation methodology are unobservable and significant to the fair value measurement.

Effective January 2018 we have elected to use the fair value method to value our portfolio of finance receivables acquired in January 2018 and thereafter.

Our valuation policies and procedures have been developed by our Accounting department in conjunction with our Risk department and with consultation with outside valuation experts. Our policies and procedures have been approved by our Chief Executive and our Board of Directors and include methodologies for valuation, internal reporting, calibration and back testing. Our periodic review of valuations includes an analysis of changes in fair value measurements and documentation of the reasons for such changes. There is little available third-party information such as broker quotes or pricing services available to assist us in our valuation process.

Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.
For the quarter ended ~~September~~June 30, ~~2022,~~2023, 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.

23
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 Nine Months Ended Three Months Ended Six Months Ended
September 30, September 30, June 30, June 30,
2022 2021 2022 2021 2023 2022 2023 2022
(In thousands) (In thousands) (In thousands) (In thousands)
Balance at beginning of period $ 2,174,133 $ 1,582,175 $ 1,749,098 $ 1,523,726 $ 2,575,117 $ 1,903,857 $ 2,476,617 $ 1,749,098
Finance receivables at fair value acquired during period 407,260 310,340 1,311,735 795,457 305,450 511,068 658,048 904,475
Payments received on finance receivables at fair value (209,627 ) (191,458 ) (635,401 ) (546,897 ) (215,314 ) (215,930 ) (421,940 ) (425,774 )
Net interest income accretion on fair value receivables (36,696 ) (33,864 ) (97,462 ) (100,676 ) (46,833 ) (29,562 ) (94,305 ) (60,766 )
Mark to fair value 8,183 – 15,283 (4,417 ) – 4,700 – 7,100
Balance at end of period $ 2,343,253 $ 1,667,193 $ 2,343,253 $ 1,667,193 $ 2,618,420 $ 2,174,133 $ 2,618,420 $ 2,174,133

21
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:
Finance receivables fair and contractual balances
September 30, 2022 December 31, 2021
Contractual Fair Contractual Fair
Balance Value Balance Value
(In thousands)

Finance receivables measured at fair value $ 2,567,372 $ 2,343,253 $ 1,972,699 $ 1,749,098
Finance receivables fair and contractual balances
June 30, 2023 December 31, 2022
Contractual Fair Contractual Fair
Balance Value Balance Value
(In thousands)

Finance receivables measured at fair value $ 2,857,205 $ 2,618,420 $ 2,701,184 $ 2,476,617

The following table provides certain qualitative information about our level 3 fair value measurements:
Schedule of level 3 fair value measurements
Financial Instrument Fair Values as of Inputs as of Fair Values as of Inputs as of
September 30, December 31, September 30, December 31, June 30, December 31, June 30, December 31,
2022 2021 Unobservable Inputs 2022 2021 2023 2022 Unobservable 2023 2022
(In thousands) (In thousands)
Assets:
Finance receivables measured at fair value $ 2,343,253 $ 1,749,098 Discount rate 8.9% - 11.3% 8.9% - 11.3% $ 2,618,420 $ 2,476,617 Discount rate 11.0% - 11.5% 11.0% - 11.3%
Cumulative net losses 10.0% - 18.4% 10.0% - 18.4% Cumulative net losses 10.0% - 21.5% 13.4% - 19.4%
24
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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021:~~2022:
Schedule of delinquency status of finance receivables measured at fair value
September 30, December 31, June 30, December 31,
2022 2021 2023 2022
(In thousands) (In thousands)
Delinquency Status
Current $ 2,306,615 $ 1,787,641 $ 2,531,445 $ 2,375,271
31 - 60 days 152,622 115,924 180,284 184,968
61 - 90 day 57,888 38,999
61 - 90 days 74,963 72,390
91 + days 22,018 11,564 28,619 29,048
Repo 28,229 18,571 41,894 39,507
$ 2,567,372 $ 1,972,699 $ 2,857,205 $ 2,701,184

Repossessed vehicle inventory, which is included in Other ~~assets~~Assets on our unaudited condensed consolidated balance sheet, is measured at fair value using level 2 assumptions based on our actual loss experience on sale of repossessed vehicles. At ~~September~~June 30, ~~2022~~2023 the finance receivables related to the repossessed vehicles in inventory totaled ~~$2.3~~$1.0 million. We have applied a valuation adjustment, or loss allowance, of ~~$1.5 million,~~$655,000, which is based on a recovery rate of approximately ~~34%~~35%, resulting in an estimated fair value and carrying amount of ~~$776,000.~~$348,000. The fair value and carrying amount of the repossessed inventory at December 31, ~~2021~~2022 was ~~$2.4~~$1.9 million after applying a valuation adjustment of ~~$1.9~~$1.3 million.

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended ~~September~~June 30, 2023 and 2022.
The estimated fair values of financial assets and liabilities at June 30, 2023 and December 31, 2022, ~~and 2021.~~were as follows:
Schedule of estimated fair values of financial assets and liabilities
As of June 30, 2023
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 7,081 $ 7,081 $ – $ – $ 7,081
Restricted cash and equivalents 148,063 148,063 – – 148,063
Finance receivables, net 46,359 – – 42,495 42,495
Accrued interest receivable 93 – – 93 93
Liabilities:
Warehouse lines of credit $ 245,272 $ – $ – $ 245,272 $ 245,272
Residual interest financing 49,749 49,749 49,749
Accrued interest payable 7,243 – – 7,243 7,243
Securitization trust debt 2,225,072 – – 2,137,162 2,137,162
Subordinated renewable notes 21,204 – – 21,204 21,204

2225

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~The estimated fair values of financial assets and liabilities at September 30, 2022 and December 31, 2021, were as follows:~~
Schedule of estimated fair values of financial assets and liabilities
As of September 30, 2022
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 12,944 $ 12,944 $ – $ – $ 12,944
Restricted cash and equivalents 159,762 159,762 – – 159,762
Finance receivables, net 89,690 – – 79,700 79,700
Accrued interest receivable 776 – – 776 776
Liabilities:
Warehouse lines of credit $ 242,449 $ – $ – $ 242,449 $ 242,449
Residual interest financing 49,560 49,560 49,560
Accrued interest payable 5,063 – – 5,063 5,063
Securitization trust debt 2,057,100 – – 1,969,599 1,969,599
Subordinated renewable notes 27,249 – – 27,249 27,249

As of December 31, 2021 As of December 31, 2022
Financial Instrument (In thousands) (In thousands)
Carrying Fair Value Measurements Using: Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 29,928 $ 29,928 $ – $ – $ 29,928 $ 13,490 $ 13,490 $ – $ – $ 13,490
Restricted cash and equivalents 146,620 146,620 – – 146,620 149,299 149,299 – – 149,299
Finance receivables, net 176,184 – – 178,795 178,795 70,551 – – 60,063 60,063
Accrued interest receivable 2,269 – – 2,269 2,269 649 – – 649 649
Liabilities:
Warehouse lines of credit $ 105,610 $ – $ – $ 105,610 $ 105,610 $ 285,328 $ – $ – $ 285,328 $ 285,328
Residual interest financing 53,682 53,682 53,682
Accrued interest payable 3,568 – – 3,568 3,568 6,190 – – 6,190 6,190
Securitization trust debt 1,759,972 – – 1,740,901 1,740,901 2,108,744 – – 1,957,995 1,957,995
Subordinated renewable notes 26,459 – – 26,459 26,459 25,263 – – 25,263 25,263

(10) Subsequent Events

On ~~August 3, 2022~~July 25, 2023 we executed our third securitization of ~~2022.~~2023. In the transaction, qualified institutional buyers purchased ~~$391.6~~$291.7 million of asset-backed notes secured by ~~$440.0~~$312.7 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust ~~2022-C,~~2023-C, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer. The weighted average yield on the notes is approximately ~~6.02%~~7.13%.

The ~~2022-C~~2023-C transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of ~~11.00%~~6.70%. The transaction agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of ~~13.00%~~9.70% of the original receivable pool balance, or ~~31.50%~~21.50% of the then outstanding pool balance. The transaction utilizes a pre-funding structure, in which CPS sold approximately $368.0 million of receivables at inception and plans to sell approximately $72.0 million of additional receivables in August 2022. The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law.

2326

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 also originate vehicle purchase money loans by lending directly to consumers and have (i) acquired installment purchase contracts in four merger and acquisition transactions, and (ii) 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 ~~September~~June 30, ~~2022,~~2023, we have originated a total of approximately ~~$19.6~~$20.7 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
2016 1,088,785 2,308,070
2017 859,069 2,333,530
2018 902,416 2,380,847
2019 1,002,782 2,416,042
2020 742,584 2,174,972
2021 1,146,321 2,249,069
Nine months ended September 30, 2022 1,426,302 2,838,858
Contract Purchases and Outstanding Managed Portfolio

$ in thousands
Period Contracts Purchased in Period Managed Portfolio at Period End
2017 859,069 2,333,530
2018 902,416 2,380,847
2019 1,002,782 2,416,042
2020 742,584 2,174,972
2021 1,146,321 2,249,069
2022 1,845,385 3,001,308
Six months ended June 30, 2023 733,537 3,150,108
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 ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we originated ~~$126.8~~$70.8 million under this third-party program. As of ~~September~~June 30, ~~2022,~~2023, our managed portfolio includes ~~$151.5~~$239.8 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 and Nevada 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.

��
2427

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 asor reverse expense provisions for credit losses.

Since 1994 we have conducted 9497 term securitizations of automobile contracts that we originated. As of ~~September~~June 30, ~~2022, 19~~2023, 18 of those securitizations are active and all are structured as secured financings. ~~Since September 2010 we have utilized senior subordinated structures without any financial guarantees.~~ We have generally conducted our securitizations on a quarterly basis, near the end of each calendar quarter, resulting in four securitizations per calendar year. However, in 2020, we closed only three term securitization transactions in that calendar year rather than four.
Our recent history of term securitizations is summarized in the table below:

Recent Asset-Backed Term Securitizations
$ in thousands
$ in thousands
Period Number of Term Securitizations Receivables Pledged in Term Securitizations Number of Term Securitizations Receivables Pledged in Term Securitizations
2016 4 1,214,997
2017 4 870,000 4 $ 870,000
2018 4 883,452 4 883,452
2019 4 1,014,124 4 1,014,124
2020 3 741,867 3 741,867
2021 4 1,145,002 4 1,145,002
Nine months ended September 30, 2022 3 1,200,000
2022 4 1,537,383
Six months ended June 30, 2023 2 732,733

Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. We ~~previously had~~currently have short-term funding capacity of ~~$200~~$400 million ~~comprising three~~over two credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2022, extending the revolving period to July 2024, with an optional amortization period through July 2025. In addition, the capacity was doubled from $100 million to $200 million at the July 2022 renewal.

In November 2015, we entered into another $100 million facility. This facility was most recently renewed in January 2022, extending the revolving period to January 2024, followed by an amortization period to January 2026. In June 2022, we doubled the capacity for this facility from $100 million to $200 million.
In April 2015, we entered into a $100 million facility that was renewed in April 2017 and again in February 2019. We repaid the outstanding balance for this facility at its maturity date in February 2021 and elected not to renew it. We currently have short-term funding capacity of $400 million over two credit facilities.

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 will be obligated 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.

2528

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.

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 ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such covenants.
Results of Operations

Comparison of Operating Results for the three months ended ~~September~~June 30, ~~2022~~2023 with the three months ended ~~September~~June 30, ~~2021~~2022

Revenues.  During the three months ended ~~September~~June 30, ~~2022,~~2023, our revenues were ~~$90.3~~$84.9 million, an increase of ~~$21.7~~$2.9 million, or ~~31.7%~~3.5%, from the prior year revenue of ~~$68.6~~$82.0 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. ~~In addition, mark ups to the finance receivables measured at fair value also contributed to the increase in revenues during the quarter.~~ Revenues for the ~~three months ended September 30, 2022~~prior year period include ~~an $8.2~~a $4.7 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. ~~During~~Our evaluation of the ~~three months ended September 30, 2022, we reduced our estimate for expected future losses in~~ finance receivables measured at fair value ~~as we have observed that our previous estimates for increased losses due to the pandemic had not materialized. The change in estimated losses~~ resulted in ~~the $8.2 million mark up for the three months ended September 30, 2022. There was~~ no mark up or mark down to the fair value portfolio in the ~~prior~~current year period.

Interest income for the three months ended ~~September~~June 30, ~~2022~~2023 increased ~~$12.8~~$7.0 million, or ~~19.1%~~9.2%, to ~~$79.8~~$82.6 million from ~~$67.0~~$75.7 million in the prior year. The primary reason for the increase in interest income is the ~~37.0%~~17.6% increase in the average balance of ~~finance receivables measured at fair value~~our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreased from 12.3% in the prior year period to 11.4% in the current year period. The receivables measured at fair value make up a larger portion of our total loan portfolio in the current year period and this is the primary reason for the decrease in total interest yield. 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 ~~balances~~balance and interest ~~yields of the two components~~yield of our loan portfolio for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended September 30,
2022 2021
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Finance receivables $ 130,546 $ 8,083 24.8% $ 305,820 $ 16,067 21.0%
Finance receivables measured at fair value 2,517,663 71,734 11.4% 1,837,138 50,951 11.1%
Total $ 2,648,209 $ 79,817 12.1% $ 2,142,958 $ 67,018 12.5%
Three Months Ended June 30,
2023 2022
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Loan Portfolio $ 2,903,988 $ 82,637 11.4% $ 2,469,955 $ 75,670 12.3%

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Other income was ~~$2.3~~$2.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1.5~~$1.6 million for the comparable period in ~~2021.~~2022. This ~~49.0%~~34.8% increase was primarily driven by the increase in origination and servicing fees we earned from third party ~~receivables that began in May 2021.~~receivables. These fees were ~~$2.0~~$1.9 million for the quarter ended ~~September~~June 30, ~~2022.~~2023 compared to $1.2 million in the prior year period.
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Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). 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 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 ~~$56.0~~$66.3 million for the three months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$49.0~~$47.8 million for the prior period, an increase of ~~$7.0~~$18.5 million, or ~~14.2%~~38.6%. The increase is primarily due to increases in interest expense ~~employee costs~~ and general and administrative expenses.

Employee costs were ~~$20.7~~$21.1 million during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$18.2~~$20.6 million for the same quarter in the prior year. 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, ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended September 30,
2022 2021 Three Months Ended June 30,
2023 2022
(Dollars in millions) (Dollars in millions)
Contracts purchased (dollars) $ 468.2 $ 326.8 $ 318.4 $ 548.1
Contracts purchased (units) 20,888 14,741 15,296 23,261
Managed portfolio outstanding (dollars) $ 2,838.9 $ 2,184.1 $ 2,910.3 $ 2,650.9
Managed portfolio outstanding (units) 173,774 156,456 176,458 167,146

Number of Originations staff 187 170 165 194
Number of Sales staff 134 110 102 132
Number of Servicing staff 404 397 448 405
Number of other staff 67 74 88 68
Total number of employees 792 751 803 799

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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 ~~$9.4~~$11.8 million, an increase of $3.5 million from ~~$7.5~~$8.3 million in the ~~previous~~prior year ~~and represented 16.8% of total operating expenses.~~period.

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Interest expense for the three months ended ~~September~~June 30, ~~2022 were $23.5~~2023 was $35.7 million and represented ~~42.0%~~53.9% of total operating expenses, compared to ~~$18.3~~$18.8 million in the previous year, when it was ~~37.4%~~39.3% of total operating expenses.

Interest on securitization trust debt increased by ~~$3.2~~$13.4 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the prior period. The average balance of securitization trust debt increased to ~~$2,032.5~~$2,333.0 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1,819.8~~$2,037.3 million for the three months ended ~~September~~June 30, ~~2021.~~2022. The annualized average rate on our securitization trust debt was ~~3.6%~~5.0% for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~3.4%~~3.1% in the prior year period. The blended interest rates on new term securitizations have been increasing insince 2022. 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 2018~~ ~~3.46%~~
~~April 2018~~ ~~3.98%~~
~~July 2018~~ ~~4.18%~~
~~October 2018~~ ~~4.25%~~
~~January 2019~~ ~~4.22%~~
~~April 2019~~ ~~3.95%~~
~~July 2019~~ ~~3.36%~~
~~October 2019~~ ~~2.95%~~
January 2020 3.08%
June 2020 4.09%
September 2020 2.39%
January 2021 1.11%
April 2021 1.65%
July 2021 1.55%
October 2021 2.09%
January 2022 2.54%
April 2022 4.83%
July 2022 6.02%
October 2022 8.48%
January 2023 6.48%
April 2023 7.17%

Interest expense on warehouse credit line debt increased by ~~$2.4~~$3.6 million to ~~$3.3~~$5.0 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$929,000~~$1.4 million in the prior year period. The increase was due to the higher utilization of our credit lines and higher rates on credit line debt during the quarter compared to last year. The average balance of our warehouse debt was ~~$172.9~~$193.4 million during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$39.4~~$85.6 million for the same period in ~~2021.~~2022. The annualized average rate on our credit line debt was 10.4% for the three months ended June 30, 2023 compared to 6.5% in the prior year period.
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Interest expense on subordinated renewable notes was ~~$572,000~~$477,000 for the three months ended ~~September~~June 30, ~~2022.~~2023. The average balance of the outstanding subordinated debt ~~increased 2.4%~~decreased by $4.5 million to ~~$27.5~~$22.2 million for the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$26.9~~$26.7 million for the prior year. The average yield of subordinated notes decreased to ~~8.3%~~8.6% compared to ~~10.4%~~8.8% in the prior period.

In ~~May 2018 and~~ June 2021, we completed ~~two~~a residual interest ~~financings~~financing of our residual interests from previously issued securitizations in the ~~amounts~~amount of ~~$40.0 million and~~ $50.0 ~~million, respectively.~~million. Interest expense on ~~these~~this residual interest ~~financings~~financing was $1.1 million for the three months ended ~~September~~June 30, ~~2022 compared to $1.4 million in the prior year period.~~2023 and 2022.
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The following table presents the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Three Months Ended September 30, Three Months Ended June 30,
2022 2021 2023 2022
(Dollars in thousands) (Dollars in thousands)
Annualized Annualized Annualized Annualized
Average Average Average Average Average Average Average Average
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
Interest Earning Assets
Finance receivables gross (2) $ 130,546 $ 8,083 24.8% $ 305,820 $ 16,067 21.0%
Finance receivables at fair value 2,517,663 71,734 11.4% 1,837,138 50,951 11.1%
2,648,209 79,817 12.1% 2,142,958 67,018 12.5%
Loan Portfolio $ 2,903,988 $ 82,637 11.4% $ 2,469,955 $ 75,670 12.3%
$
Interest Bearing Liabilities $
Warehouse lines of credit $ 172,895 3,342 7.7% $ 39,447 929 9.4% $ 193,408 $ 5,008 10.4% $ 85,598 $ 1,387 6.5%
Residual interest financing 50,000 1,050 8.4% 66,824 1,413 8.5% 50,000 1,050 8.4% 50,000 1,050 8.4%
Securitization trust debt 2,032,527 18,519 3.6% 1,819,789 15,292 3.4% 2,332,997 29,171 5.0% 2,037,327 15,745 3.1%
Subordinated renewable notes 27,506 572 8.3% 26,868 700 10.4% 22,208 477 8.6% 26,688 590 8.8%
$ 2,282,928 23,483 4.1% $ 1,952,928 18,334 3.8% $ 2,598,613 35,706 5.5% $ 2,199,613 18,772 3.4%
$
Net interest income/spread $ $ 56,334 $ 48,684 $ 46,931 $ 56,898
Net interest yield (3) $ 8.0% 8.7%
Net interest yield (2) 5.9% 8.9%
��
Ratio of average interest earning assets to average interest bearing liabilities $ 116% 110% 112% 112%

     (1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
     (2)  ~~Net of deferred fees and direct costs.~~
     ~~(3)~~  Annualized net interest income divided by average interest earning assets.

Three Months Ended June 30, 2023
Compared to June 30, 2022
Total Change Due Change Due
Change to Volume to Rate
(In thousands)
Interest Earning Assets
Loan Portfolio $ 6,967 $ 8,894 $ (1,927 )

Interest Bearing Liabilities
Warehouse lines of credit 3,621 1,735 1,886
Residual interest financing – – –
Securitization trust debt 13,426 2,344 11,082
Subordinated renewable notes (113 ) (102 ) (11 )
16,934 3,977 12,957

Net interest income/spread $ (9,967 ) $ 4,917 $ (14,884 )

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Three Months Ended September 30, 2022
Compared to September 30, 2021
Total Change Due Change Due
Change to Volume to Rate
(In thousands)
Interest Earning Assets $
Finance receivables gross $ (7,984 ) $ (9,224 ) $ 1,240
Finance receivables at fair value 20,783 18,895 1,888
12,799 9,671 3,128
Interest Bearing Liabilities $
Warehouse lines of credit 2,413 3,148 (735 )
Residual interest financing (363 ) (350 ) (13 )
Securitization trust debt 3,227 2,211 1,016
Subordinated renewable notes (128 ) 16 (144 )
5,149 5,025 124

Net interest income/spread $ 7,650 $ 4,646 $ 3,004
The annualized yield on our finance receivables was 12.1% for the three months ended September 30, 2022 and 12.5% for the same period in 2021. 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 average balance of these fair value receivables was $2,517.7 million for the three months ended September 30, 2022 compared to $1,837.1 million in the prior year period.
For the three months ended ~~September~~June 30, ~~2022,~~2023, we recorded a reduction to provision for credit losses on finance receivables in the amount of ~~$6.0~~$9.7 million. The reserve decrease was primarily due to 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~~$8.0 million in reductions to provision for credit losses for the three months ended ~~September~~June 30, ~~2021.~~2022.

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of ~~September~~June 30, 2022. Although we have not yet seen a meaningful deterioration in the credit performance for these receivables, worsening economic conditions, inflation and a reversion to the mean for used car pricing could negatively affect credit performance in the future.2023.

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.

Sales expense consists 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 and sales of ancillary products and services that we offer our ~~dealers, such as training programs, internet lead sales, and direct mail products.~~dealers. Sales expense ~~increased by $1.7 million~~decreased to ~~$6.0~~$5.5 million during the three months ended ~~September~~June 30, ~~2022 and represented 10.7% of total operating expenses.~~2023 from $5.8 million in the same quarter in 2022. We purchased ~~$468.2~~$318.4 million of new contracts during the three months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$326.8~~$548.1 million in the prior year period.

Occupancy expenses was ~~$2.0~~$1.6 million for the three months ending ~~September~~June 30, ~~2022 and 2021.~~2023, which is down from the $1.9 million in the first quarter of 2022.
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Depreciation and amortization expenses decreased to ~~$406,000~~$211,000 compared to ~~$409,000~~$385,000 in the previous ~~year and represented 0.8% of total operating expenses.~~year.

For the three months ended ~~September~~June 30, ~~2022,~~2023, we recorded income tax expense of ~~$8.9~~$4.6 million, representing a ~~26%~~25% effective tax rate. In the prior period, our income tax expense was ~~$5.9~~$8.9 million, representing a ~~30%~~26% effective tax rate.

Comparison of Operating Results for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 with the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022

Revenues.  During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, our revenues were ~~$246.7~~$168.0 million, an increase of ~~$48.2~~$11.6 million, or ~~24.3%~~7.4%, from the prior year revenue of ~~$198.4~~$156.4 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. ~~In addition, mark ups to the finance receivables measured at fair value also contributed to the increase in revenues during the period.~~ Revenues for the ~~nine months ended September 30, 2022~~prior year period include a ~~$15.3~~$7.1 million mark up to the recorded value of the finance receivables measured at fair value. ~~This compares to a $4.4 million mark down in the prior year period.~~ 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. ~~During~~Our evaluation of the ~~nine months ended September 30, 2022, we reduced our estimate for expected future losses in~~ finance receivables measured at fair value ~~as we have observed that our previous estimates for increased losses due~~resulted in no mark up or mark down to the ~~pandemic had not materialized. These changes resulted~~fair value portfolio in the ~~$15.3 million mark up for the nine months ended September 30, 2022.~~current year period.

Interest income for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 increased ~~$27.0~~$17.0 million, or ~~13.6%~~11.6%, to ~~$225.5~~$162.7 million from ~~$198.6~~$145.7 million in the prior year. The primary reason for the increase in interest income is the ~~30.7%~~21.4% increase in the average balance of ~~finance receivables measured at fair value~~our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreased from 12.3% in the prior year period to 11.3% in the current year period. The receivables measured at fair value make up a larger portion of our total loan portfolio in the current year period and this is the primary reason for the decrease in total interest yield. 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 ~~balances~~balance and interest ~~yields of the two components~~yield of our loan portfolio for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Nine Months Ended September 30,
2022 2021
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Finance receivables $ 167,041 $ 29,343 23.4% $ 375,642 $ 56,669 20.1%
Finance receivables measured at fair value 2,296,841 196,204 11.4% 1,757,787 141,882 10.8%
Total $ 2,463,882 $ 225,547 12.2% $ 2,133,429 $ 198,551 12.4%
Six Months Ended June 30,
2023 2022
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Loan Portfolio $ 2,880,293 $ 162,699 11.3% $ 2,371,719 $ 145,730 12.3%
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Other income was ~~$5.9~~$5.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022. This marks a decrease of $1.5 million from other income of $4.3~~2023 compared to $3.6 million for the ~~nine~~comparable period in 2022. This 48.0% increase was primarily driven by the increase in origination and servicing fees we earned from third party receivables. These fees were $4.6 million for the six months ended ~~September~~June 30, ~~2021.~~2023 compared to $2.3 million in the prior year period.
Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). 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 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.

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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 ~~$148.8~~$130.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to ~~$157.1~~$92.8 million for the prior period, ~~a decrease~~an increase of ~~$8.3~~$38.1 million, or ~~5.3%~~41.0%. The ~~decrease~~increase is primarily due to ~~larger provision for credit loss reversals~~increases in ~~2022.~~interest expense and general and administrative expenses.

Employee costs were ~~$63.4~~$43.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$57.8~~$42.7 million for the same period in the prior year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the ~~nine-month~~six-month periods ended, ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Nine Months Ended September 30,
2022 2021 Six Months Ended June 30,
2023 2022
(Dollars in millions) (Dollars in millions)
Contracts purchased (dollars) $ 1,426.3 $ 818.3 $ 733.5 $ 958.1
Contracts purchased (units) 61,947 39,929 36,184 41,059
Managed portfolio outstanding (dollars) $ 2,838.9 $ 2,184.1 $ 2,910.3 $ 2,650.9
Managed portfolio outstanding (units) 173,774 156,456 176,458 167,146

Number of Originations staff 187 170 165 194
Number of Sales staff 134 110 102 132
Number of Servicing staff 404 397 448 405
Number of other staff 67 74 88 68
Total number of employees 792 751 803 799

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 ~~were $25.9~~was $23.2 million for the six months ended June 30, 2023, an increase of $6.7 million from ~~$23.0~~$16.5 million in the ~~previous~~prior year ~~and represented 17.4% of total operating expenses.~~
Interest expense for the nine months ended September 30, 2022 were $58.7 million and represented 39.4% of total operating expenses, compared to $58.3 million in the previous year, when it was 37.1% of total operating expenses.
period.

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Interest expense for the six months ended June 30, 2023 was $68.5 million, compared to $35.2 million in the previous year, an increase of $33.3 million.
Interest on securitization trust debt ~~decreased~~increased by ~~$2.8~~$26.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the prior period. The average balance of securitization trust debt increased to ~~$1,959.5~~$2,308.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$1,842.7~~$1,922.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. The annualized average rate on our securitization trust debt was ~~3.3%~~4.8% for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~3.7%~~3.0% in the prior year period. The blended interest rates on new term securitizations have been increasing since 2022. 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 ~~2018~~ ~~3.46%~~
~~April 2018~~ ~~3.98%~~
~~July 2018~~ ~~4.18%~~
~~October 2018~~ ~~4.25%~~
~~January 2019~~ ~~4.22%~~
~~April 2019~~ ~~3.95%~~
~~July 2019~~ ~~3.36%~~
~~October 2019~~ ~~2.95%~~
~~January~~ 2020 3.08%
June 2020 4.09%
September 2020 2.39%
January 2021 1.11%
April 2021 1.65%
July 2021 1.55%
October 2021 2.09%
January 2022 2.54%
April 2022 4.83%
July 2022 6.02%
October 2022 8.48%
January 2023 6.48%
April 2023 7.17%

Interest expense on warehouse credit line debt ~~was $5.9~~increased by $7.3 million to $9.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$3.3~~$2.5 million in the prior year period. ~~Lower rates were offset by~~The increase was due to the higher utilization of our credit lines and higher rates on the debt during the ~~quarter~~six month period compared to last year. The average balance of our warehouse debt was ~~$108.7~~$194.2 million during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$46.7~~$76.1 million for the same period in ~~2021.~~2022. The annualized average rate on our credit line debt was 10.2% for the six months ended June 30, 2023 compared to 6.7% in the prior year period.

Interest expense on subordinated renewable notes ~~decreased by $198,000.~~was $985,000 for the six months ended June 30, 2023. The average balance of the outstanding subordinated debt ~~increased 9.2%~~decreased by $3.5 million to ~~$26.9~~$23.2 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$24.6~~$26.6 million for the ~~nine months ended September 30, 2021.~~prior year. The average yield of subordinated notes decreased to ~~8.8% in the nine-month period ended September 30, 2022~~8.5% compared to ~~10.7%~~9.1% in the prior period.

~~On May 16, 2018,~~In June 2021, we completed a ~~$40.0 million securitization~~residual interest financing of our residual interests from previously issued ~~securitizations. On June 30, 2021, we completed a $50 million securitization~~securitizations in the amount of ~~residual from other previously issued securitizations.~~$50.0 million. Interest expense on ~~these~~this residual interest ~~financings were $3.2~~financing was $2.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022 compared to $2.4 million in the prior year period.~~
2023 and 2022.

3335

The following table presents the components of interest income and interest expense and a net interest yield analysis for the ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021:~~2022:

Nine Months Ended September 30, Six Months Ended June 30,
2022 2021 2023 2022
(Dollars in thousands) (Dollars in thousands)
Annualized Annualized Annualized Annualized
Average Average Average Average Average Average Average Average
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
Interest Earning Assets
Finance receivables gross (2) $ 167,041 $ 29,343 23.4% $ 375,642 $ 56,669 20.1%
Finance receivables at fair value 2,296,841 196,204 11.4% 1,757,787 141,882 10.8%
2,463,882 225,547 12.2% 2,133,429 198,551 12.4%
Loan portfolio $ 2,880,293 $ 162,699 11.3% $ 2,371,719 $ 145,730 12.3%
$
Interest Bearing Liabilities $
Warehouse lines of credit $ 108,709 $ 5,887 7.2% $ 46,709 $ 3,265 9.3% $ 194,159 9,856 10.2% $ 76,085 2,544 6.7%
Residual interest financing 50,652 3,193 8.4% 36,101 2,446 9.0% 50,000 2,100 8.4% 50,984 2,144 8.4%
Securitization trust debt 1,959,452 47,792 3.3% 1,842,694 50,568 3.7% 2,308,128 55,524 4.8% 1,922,914 29,273 3.0%
Subordinated renewable notes 26,910 1,783 8.8% 24,637 1,981 10.7% 23,158 985 8.5% 26,607 1,210 9.1%
$ 2,145,723 58,655 3.6% $ 1,950,141 58,260 4.0% $ 2,575,445 68,465 5.3% $ 2,076,590 35,171 3.4%
$
Net interest income/spread $ $ 166,892 $ 140,291 $ 94,234 $ 110,559
Net interest yield (3) $ 8.6% 8.4%
Net interest yield (2) 6.0% 8.9%

Ratio of average interest earning assets to average interest bearing liabilities $ 115% 109% 112% 114%

     (1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
     (2)  ~~Net of deferred fees and direct costs.~~
     ~~(3)~~  Annualized net interest income divided by average interest earning assets.

Nine Months Ended September 30, 2022
Compared to September 30, 2021 Six Months Ended June 30, 2023
Compared to June 30, 2022
Total Change Due Change Due Total Change Due Change Due
Change to Volume to Rate Change to Volume to Rate
(In thousands) (In thousands)
Interest Earning Assets $
Finance receivables gross $ (27,326 ) $ (32,850 ) $ 5,524
Finance receivables at fair value 54,322 39,907 14,415
26,996 7,057 19,939
Loan portfolio $ 16,969 $ 27,468 $ (10,499 )
Interest Bearing Liabilities $
Warehouse lines of credit 2,622 4,905 (2,283 ) 7,312 584 6,728
Residual interest financing 747 1,065 (318 ) (44 ) (38 ) (6 )
Securitization trust debt (2,776 ) 5,198 (7,974 ) 26,251 (14,523 ) 40,774
Subordinated renewable notes (198 ) 310 (508 ) (225 ) (90 ) (135 )
395 11,478 (11,083 ) 33,294 (14,067 ) 47,361

Net interest income/spread $ 26,601 $ (4,421 ) $ 31,022 $ (16,325 ) $ 41,535 $ (57,860 )

3436

~~The annualized yield on our finance receivables was 12.2% for~~For the ~~nine~~six months ended ~~September~~June 30, 2022 and 12.4% for the same period in 2021. 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 average balance of these fair value receivables was $2,296.8 million for the nine months ended September 30, 2022 compared to $1,757.8 million in the prior year period.
~~For the nine months ended September 30, 2022,~~2023, we recorded a reduction to provision for credit losses on finance receivables in the amount of ~~$23.4~~$18.7 million. The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from improved credit performance as our previous estimates for future losses exceeded actual incurred losses. ~~In the prior year period,~~This compares to $17.4 million in reductions to provision for credit losses ~~were $1.6 million.~~for the six months ended June 30, 2022.

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of ~~September~~June 30, 2022. Although we have not yet seen a meaningful deterioration in the credit performance for these receivables, worsening economic conditions, inflation and a reversion to the mean for used car pricing could negatively affect credit performance in the future.2023.

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.

Sales expense consists 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 and sales of ancillary products and services that we offer our ~~dealers, such as training programs, internet lead sales, and direct mail products.~~dealers. Sales expense ~~increased by $4.7~~was $11.2 million ~~to $17.2 million during~~for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~represented 11.5% of total operating expenses.~~2022. We purchased ~~$1,426.3~~$733.5 million of new contracts during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$818.3~~$958.1 million in the prior year period.

Occupancy expenses was ~~$5.8~~$3.2 million for the ~~nine~~six months ending ~~September~~June 30, ~~2022 compared to $5.9~~2023, which is down from $3.8 million for the same period in ~~2021.~~2022.

Depreciation and amortization expenses decreased to ~~$1.2 million~~$442,000 compared to ~~$1.3 million~~$802,000 in the previous ~~year and represented 0.8% of total operating expenses.~~year.
For the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we recorded income tax expense of ~~$26.0~~$9.3 million, representing a ~~27%~~25% effective tax rate. In the prior period, our income tax expense was ~~$12.8~~$17.1 million, representing a ~~31%~~27% 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.

3537

Delinquency, Repossession and Extension Experience (1)
Total Owned Portfolio

September 30, 2022 September 30, 2021 December 31, 2021 June 30, 2023 June 30, 2022 December 31, 2022
Number of Number of Number of Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount
(Dollars in thousands) (Dollars in thousands)
Delinquency Experience
Gross servicing portfolio (1) 166,370 $ 2,687,308 156,456 $ 2,184,142 154,151 $ 2,209,430 176,458 $ 2,910,288 162,296 $ 2,554,855 170,658 $ 2,795,383
.
Period of delinquency (2) 31-60 days 11,642 $ 170,712 9,621 $ 127,900 10,895 $ 146,904
Period of delinquency (2)
31-60 days 12,273 189,384 10,721 149,520 13,434 201,764
61-90 days 4,672 65,935 3,371 42,997 3,939 51,069 5,261 79,302 4,096 54,505 5,481 80,145
91+ days 1,795 24,527 961 11,745 1,171 14,280 2,082 29,707 1,302 16,996 2,148 31,036
Total delinquencies (2) 18,109 261,174 13,953 182,642 16,005 212,253 19,616 298,393 16,119 221,021 21,063 312,946
Amount in repossession (3) 2,331 30,479 1,792 21,803 1,882 22,912 2,920 42,897 2,028 26,988 2,904 41,401
Total delinquencies and amount in repossession (2) 20,440 $ 291,653 15,745 $ 204,445 17,887 $ 235,165 22,536 $ 341,290 18,147 $ 248,009 23,967 $ 354,347

Delinquencies as a percentage of gross servicing portfolio 10.9% 9.7% 8.9% 8.4% 10.4% 9.6% 11.1% 10.3% 9.9% 8.7% 12.3% 11.2%
.
Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 12.3% 10.9% 10.1% 9.4% 11.6% 10.6% 12.8% 11.7% 11.2% 9.7% 14.0% 12.7%

Extension Experience
Contracts with one extension, accruing 29,683 $ 397,622 23,730 $ 320,330 23,740 $ 328,128 31,878 $ 575,139 23,231 $ 341,794 27,584 $ 464,323
Contracts with two or more extensions, accruing 58,254 794,789 48,840 548,609 46,541 513,183 39,569 464,605 41,636 445,839 38,714 417,682
87,937 1,192,411 72,570 868,939 70,281 841,311 71,447 1,039,744 64,867 787,633 66,298 882,005

Contracts with one extension, non-accrual (4) 833 9,958 530 6,440 597 7,736 1,338 22,497 643 8,946 981 14,792
Contracts with two or more extensions, non-accrual (4) 2,558 33,133 1,210 13,376 1,414 15,128 1,236 13,821 1,355 15,009 1,485 15,395
3,391 43,091 1,740 19,816 2,011 22,864 2,574 36,318 1,998 23,955 2,466 30,187

Total contracts with extensions 91,328 $ 1,235,502 74,310 $ 888,755 72,292 $ 864,175 74,021 $ 1,076,062 66,865 $ 811,588 68,764 $ 912,192
(1) All amounts and percentages are based on the amount remaining to be repaid on each automobile ~~contract, including, for pre-computed automobile contracts, any unearned interest.~~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.

3638

Net Charge-Off Experience (1)
Total Owned Portfolio

Finance Receivables Portfolio
June 30, June 30, December 31,
2023 2022 2022
(Dollars in thousands)
Average servicing portfolio outstanding $ 2,903,988 $ 2,469,955 $ 2,539,110
Annualized net charge-offs as a percentage of average servicing portfolio (2) 6.3% 3.6% 4.5%

Finance Receivables Portfolio
September 30, September 30, December 31,
2022 2021 2021
(Dollars in thousands)
Average servicing portfolio outstanding $ 263,309 $ 305,820 $ 345,021

Annualized net charge-offs as a percentage of average servicing portfolio (2) 5.8% 3.8% 7.7%
Fair Value Receivables Portfolio
September 30, September 30, December 31,
2022 2021 2021
(Dollars in thousands)
Average servicing portfolio outstanding $ 2,517,663 $ 1,837,138 $ 1,802,590

Annualized net charge-offs as a percentage of average servicing portfolio (2) 4.9% 2.7% 3.1%
Total Owned Portfolio
September 30, September 30, December 31,
2022 2021 2021
(Dollars in thousands)
Average servicing portfolio outstanding $ 2,648,209 $ 2,142,958 $ 2,147,611

Annualized net charge-offs as a percentage of average servicing portfolio (2) 4.9% 2.8% 4.7%
_________________________
(1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile ~~contract, net of unearned income on pre-computed automobile contracts.~~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. ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022 percentages represent three months ended ~~September~~June 30, ~~2022~~2023 and ~~September~~June 30, ~~2021~~2022 annualized. December 31, ~~2021~~2022 represents 12 months ended December 31, ~~2021.~~2022.

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 six 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. Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled debt restructurings. Because financial regulatory authorities have encouraged obligors to expect payment deferrals as a response to the pandemic, we may seek amendments or waivers of our securitization agreements to relax the limits on extensions; however, we have not sought such changes in terms as of the date of this report, and if we do seek such changes, there can be no assurance that the other parties to our securitization agreements will agree to such amendments or waivers, nor as to the effect on credit performance that may result if such amendments or waivers are agreed to.
37

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.

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 ~~September~~June 30, ~~2022,~~2023, for accounts that received extensions from ~~2008~~2010 through ~~2020:~~2022:
Period of Extension # Extensions Granted Active or Paid Off at September 30, 2022 % Active or Paid Off at September 30, 2022 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

2008       35,588        10,708 30.1%       20,060 56.4%             4,819 13.5% 19

2009       32,226        10,273 31.9%       16,170 50.2%             5,783 17.9% 17

2010       26,167        12,159 46.5%       12,009 45.9%             1,999 7.6% 19

2011       18,786        10,972 58.4%         6,882 36.6%                932 5.0% 19

2012       18,783        11,320 60.3%         6,667 35.5%                796 4.2% 18

2013       23,398        11,147 47.6%       11,275 48.2%                976 4.2% 23

2014       25,773        10,494 40.7%       14,453 56.1%                826 3.2% 25

2015       53,319        22,434 42.1%       29,803 55.9%             1,082 2.0% 26

2016       80,897        37,032 45.8%       41,932 51.8%             1,933 2.4% 26

2017     133,881        62,142 46.4%       64,813 48.4%             6,926 5.2% 22

2018     121,531        66,971 55.1%       48,553 40.0%             6,007 4.9% 19

2019       71,548        51,658 72.2%       17,948 25.1%             1,942 2.7% 17

2020       83,170        66,338 79.8%       13,601 16.4%             2,099 2.5% 14
39
Period of Extension # Extensions Granted Active or Paid Off at June 30, 2023 % Active or Paid Off at June 30, 2023 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

2010 26,167 12,159 46.5% 12,006 45.9% 1,999 7.6% 19
2011 18,786 10,972 58.4% 6,882 36.6% 932 5.0% 19
2012 18,783 11,320 60.3% 6,667 35.5% 796 4.2% 18
2013 23,398 11,143 47.6% 11,279 48.2% 976 4.2% 23
2014 25,773 10,475 40.6% 14,472 56.2% 826 3.2% 25
2015 53,319 22,279 41.8% 29,958 56.2% 1,082 2.0% 26
2016 80,897 36,449 45.1% 42,515 52.6% 1,933 2.4% 26
2017 133,881 60,432 45.1% 66,523 49.7% 6,926 5.2% 22
2018 121,531 64,608 53.2% 50,916 41.9% 6,007 4.9% 19
2019 71,548 49,448 69.1% 20,158 28.2% 1,942 2.7% 18
2020 83,170 62,322 74.9% 14,593 17.5% 2,099 2.5% 15
2021 47,029 38,041 80.9% 7,273 15.5% 1,236 2.6% 11
2022 56,271 50,133 89.1% 4,054 7.2% 1,955 3.5% 8
______________________
Note: Table excludes extensions on portfolios serviced for third parties
38
We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in ~~2018, 55.1%~~2019, 69.1% were either paid in full or active and performing as of ~~September~~June 30, ~~2022.~~2023. 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.
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 2012 that subsequently charged off, such charge offs occurred, on average, 18 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:

Nine Months Ended September 30, Year Ended December 31, Nine Months Ended September 30, Six Months Ended June 30, Six Months Ended June 30, Year Ended December 31,
2022 2021 2021 2023 2022 2022

Average number of extensions granted per month 4,433 3,918 3,656 6,342 4,164 4,869

Average number of outstanding accounts 159,910 157,076 157,976 174,937 157,273 162,264

Average monthly extensions as % of average outstandings 2.8% 2.5% 2.3% 3.6% 2.6% 3.0%

______________________
Note: Table excludes portfolios originated and owned by third parties

September 30, 2022 September 30, 2021 December 31, 2021
Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount
(Dollars in thousands)

Contracts with one extension 30,516 $ 407,580 24,260 $ 326,770 24,337 $ 335,864
Contracts with two extensions 22,795 310,724 16,888 216,878 15,861 200,705
Contracts with three extensions 17,058 235,319 12,155 144,035 11,755 136,970
Contracts with four extensions 11,282 155,514 9,379 97,391 9,272 95,182
Contracts with five extensions 6,332 84,695 6,782 63,531 6,531 59,651
Contracts with six extensions 3,345 41,669 4,846 40,149 4,536 35,803
91,328 $ 1,235,501 74,310 $ 888,754 72,292 $ 864,175

Managed portfolio (excluding originated and owned by 3rd parties) 166,370 $ 2,687,308 156,456 $ 2,184,142 154,151 $ 2,209,430
40
June 30, 2023 June 30, 2022 December 31, 2022
Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount
(Dollars in thousands)

Contracts with one extension 33,216 $ 597,635 23,874 $ 350,740 28,565 $ 479,114
Contracts with two extensions 15,797 238,071 14,125 177,498 13,730 180,547
Contracts with three extensions 9,426 108,609 10,692 121,038 9,837 108,986
Contracts with four extensions 7,269 69,027 8,543 84,683 7,938 76,219
Contracts with five extensions 5,284 43,004 5,819 50,235 5,425 45,519
Contracts with six extensions 3,029 19,715 3,812 27,393 3,269 21,806
74,021 $ 1,076,061 66,865 $ 811,587 68,764 $ 912,191

Managed portfolio (excluding originated and owned by 3rd parties) 166,370 $ 2,687,308 162,296 $ 2,554,855 154,151 $ 2,209,430
______________________
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 for the nine month period ended September 30, 2022.~~granted.
39

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).
41
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 ~~nine-month~~six-month period ended ~~September~~June 30, ~~2022~~2023 was ~~$164.7~~$120.7 million, ~~an increase~~a decrease of ~~$1.6~~$1.0 million, compared to net cash provided by operating activities for the ~~nine-month~~six-month period ended ~~September~~June 30, ~~2021~~2022 of ~~$163.1~~$119.7 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 ~~$566.5~~$193.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022.~~2023 compared to $398.4 million in the prior year period. Net cash provided by investing activities for the nine-month period ended September 30, 2021 was $50.2 million. Cash provided by investing activities primarily results from principal payments and other proceeds received on finance receivables. Cash used in investing activities generally relates to new purchases of automobile ~~contracts.~~contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were ~~$1,426.3~~$658.0 million and ~~$818.3~~$904.5 million during the first ~~nine~~six months of 2023 and 2022, ~~and 2021,~~ respectively.
40

Net cash provided by financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~$397.9~~$64.8 million compared to ~~net cash used in financing activities of $83.3~~$270.5 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 ~~nine~~six months of ~~2022,~~2023, we issued ~~$1,104.0~~$657.7 million in new securitization trust debt compared to ~~$761.5~~$712.4 million infor the same period ~~of 2021.~~in 2022. We repaid ~~$804.8~~$541.0 million in securitization trust debt in the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to repayments of securitization trust debt of ~~$861.0~~$536.8 million in the prior year period. In the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we had net ~~advances~~repayments on warehouse lines of credit of ~~$139.5~~$41.0 million, compared to net ~~repayments~~advances from warehouse lines of ~~$22.1~~credit of $124.6 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.

42
We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital. As of ~~September~~June 30, ~~2022,~~2023, we had unrestricted cash of ~~$12.9~~$7.1 million and ~~$157.6~~$154.7 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of ~~September~~June 30, ~~2022,~~2023, we had approximately ~~$40.3~~$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 ~~nine-month~~six-month period ended ~~September~~June 30, ~~2022,~~2023, we completed ~~three~~two securitizations aggregating ~~$1,104.0~~$657.7 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 ~~September~~June 30, ~~2022,~~2023, we were in compliance with all such financial covenants.

We have and will continue to have a substantial amount of indebtedness. At ~~September~~June 30, ~~2022,~~2023, we had approximately ~~$2,376.4~~$2,541.3 million of debt outstanding. Such debt consisted primarily of ~~$2,057.1~~$2,225.1 million of securitization trust debt and ~~$242.4~~$245.3 million of debt from warehouse lines of credit. Our securitization trust debt has increased by ~~$297.1~~$116.3 million while our warehouse lines of credit debt has ~~increased~~decreased by ~~$136.8~~$40.0 million since December 31, ~~2021~~2022 (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 ~~$27.2~~$21.2 million and ~~$26.5~~$25.3 million in subordinated renewable notes outstanding at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. As of ~~September~~June 30, ~~2022,~~2023, all $50.0 million of this debt remains outstanding.
41

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.
43

Forward Looking Statements
This report on Form 10-Q includes certain “forward-looking statements.” Forward-looking statements may be identified by the use of words such as “anticipates,” “expects,” “plans,” “estimates,” or words of like meaning. Our provision for credit losses is a forward-looking statement, as it is dependent on our estimates as to future chargeoffs and recovery rates. Factors that could affect charge-offs and recovery rates include changes in the general economic climate, which could affect the willingness or ability of obligors to pay pursuant to the terms of automobile contracts, changes in laws respecting consumer finance, which could affect our ability to enforce rights under automobile contracts, and changes in the market for used vehicles, which could affect the levels of recoveries upon sale of repossessed vehicles. Our valuation of receivables measured at fair value is a forward-looking statement, as it is dependent, among other things, on our estimates of cash to be received in the future with respect to such receivables. Each of the factors listed above as affecting charge-offs and recovery rates could have a similar effect on cash to be received in the future with respect to receivables measured at fair value. Factors that could affect our revenues in the current year include the levels of cash releases from existing pools of automobile contracts, which would affect our ability to purchase automobile contracts, the terms on which we are able to finance such purchases, the willingness of dealers to sell automobile contracts to us on the terms that we offer, and the terms on which and whether we are able to complete term securitizations once automobile contracts are acquired. Factors that could affect our expenses in the current year include competitive conditions in the market for qualified personnel and interest rates (which affect the rates that we pay on notes issued in our securitizations). The factors identified in this and other reports as “Risk Factors” could affect our revenues, expenses, liquidity and financial condition, and the timing and amount of cash received with respect to our automobile contracts.

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.

4244

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 15, ~~2022.~~2023. 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 ~~September~~June 30, ~~2022,~~2023, we had approximately ~~$2,376.4~~$2,541.3 million of debt outstanding. Such debt consisted primarily of ~~$2,057.1~~$2,225.1 million of securitization trust debt and ~~$242.4~~$245.3 million of debt from warehouse lines of credit. Our securitization trust debt has increased by ~~$297.1~~$116.3 million while our warehouse lines of credit debt has ~~increased~~decreased by ~~$136.8~~$40.0 million since December 31, ~~2021~~2022 (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 ~~$27.2~~$21.2 million and ~~$26.5~~$25.3 million in subordinated renewable notes outstanding at ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. As of ~~September~~June 30, ~~2022,~~2023, all $50.0 million of this 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.

4345

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. These forward-looking statements relate to, among other things, expectations of the business environment in which we operate, projections of future performance, perceived opportunities in the market and statements regarding our mission and vision. You can generally identify forward-looking statements as statements containing the words "will," "would," "believe," "may," "could," "expect," "anticipate," "intend," "estimate," "assume" or other similar expressions. Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. The discussion under "Risk Factors" identifies some of the factors that might cause such a difference, including the following:

· changes in general economic conditions;
· our ability or inability to obtain necessary financing, and the terms of any such financing;
· changes in interest rates, especially as applicable to securitization trust debt;
· our ability to generate sufficient operating and financing cash flows;
· competition;
· level of future provisioning for receivables losses;
· the levels of actual losses on receivables; and
· regulatory requirements.

Forward-looking statements in this report also include our recorded figures representing allowances for remaining expected lifetime credit losses, our markdown of the recorded value for the portion of our portfolio accounted for at fair value, our charge to the provision for credit losses for the our legacy portfolio, our estimates of fair value (most significantly for our receivables accounted for at fair value), our entries offsetting the preceding, and figures derived from any of the preceding. In each case, such figures are forward-looking statements because they are dependent on our estimates of cash to be received and losses to be incurred in the future. The accuracy of such estimates may be adversely affected by various factors, which include (in addition to risks relating to the COVD-19 pandemic and to the economy generally) the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect our ability to service our portfolio; possible increases in the rate of consumer bankruptcy filings, which could adversely affect our rights to collect payments from our portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect our realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. The accuracy of such estimates may also be affected by the effects of the COVID-19 pandemic and of governmental responses to said pandemic, which have included prohibitions on certain means of enforcement of receivables, and may include additional restrictions, as yet unknown, in the future. Any or all of such factors also may affect our future financial results, as to which there can be no assurance. Any implication that past results or past consecutive earnings are indicative of future results or future earnings is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to losses to be incurred in the future may affect future performance.

Forward-looking statements are not guarantees of performance. 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 documents incorporated by reference in this report. 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.

4446

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended ~~September~~June 30, ~~2022,~~2023, we repurchased ~~678,911~~301,017 shares from existing shareholders, as reflected in the table below.

Issuer Purchases of Equity Securities

Period(1) Total Number of Shares Purchased Average Price Paid per Share Shares Purchased as Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Value of Shares that Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2)

July 2022 400,011 $ 11.23 400,011 $ 15,599,147
August 2022 6,000 $ 11.30 6,000 $ 15,531,377
September 2022 272,900 $ 9.63 272,900 $ 12,903,598
Total 678,911 $ 10.59 678,911
Total Number of Shares
Average
Price Paid
Total Number of Shares Purchased as Part of Publicly Announced Plans or Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or
Period(1) Purchased per Share Programs Programs (2)

April 2023 158,160 $ 9.83 158,160 $ 4,044,567
May 2023 125,415 10.73 125,415 $ 2,699,239
June 2023 17,442 11.62 17,442 $ 2,496,497
Total 301,017 $ 10.31 301,017
____________________
(1) Each monthly period is the calendar month.
(2) ~~Our board of directors authorized the purchase of an additional $5.0 million, $10.0 million and $20 million of our outstanding securities in January, March and July 2022, respectively.~~ Through ~~September~~June 30, ~~2022,~~2023, our board of directors had authorized the purchase of up to $103.2 million of our outstanding securities, under a program first announced in our annual report for the year 2002, filed on June 26, 2003. All purchases described in the table above were under the program announced in June 2003, which has no fixed expiration date.
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.~~registrant.
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of the ~~registrant.~~registrant.
32
Section 1350 ~~Certifications.~~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 ~~Label~~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.
4547

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: ~~November 14, 2022~~August 8, 2023

~~By:~~ ~~/s/   CHARLES E. BRADLEY, JR.~~
~~Charles E. Bradley, Jr.~~
~~President and Chief Executive Officer~~
~~(Principal Executive Officer)~~
By: /s/   CHARLES E. BRADLEY, JR.
Charles E. Bradley, Jr.
Chief Executive Officer
(Principal Executive Officer)

Date: ~~November 14, 2022~~August 8, 2023

By: /s/   DENESH BHARWANI
~~By:~~ ~~/s/   DENESH BHARWANI~~
~~Denesh Bharwani~~
~~Senior Vice President and Chief Financial Officer~~
~~(Principal Financial Officer)~~
Denesh Bharwani
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

4648


	June 30,			December 31,
	2023			2022
ASSETS
Cash and cash equivalents	$	7,081		$	13,490
Restricted cash and equivalents		148,063			149,299
Finance receivables measured at fair value		2,618,420			2,476,617

Finance receivables		52,080			92,304
Less: Allowance for finance credit losses		(5,721	)		(21,753	)
Finance receivables, net		46,359			70,551

Furniture and equipment, net		1,284			1,660
Deferred tax assets, net		7,367			10,177
Other assets		25,304			30,974
Total Assets	$	2,853,878		$	2,752,768

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses	$	57,384		$	55,421
Warehouse lines of credit		245,272			285,328
Residual interest financing		49,749			49,623
Securitization trust debt		2,225,072			2,108,744
Subordinated renewable notes		21,204			25,263
Total liabilities		2,598,681			2,524,379
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; 21,151,966 and 20,131,323 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively		27,937			28,906
Retained earnings		230,291			202,514
Accumulated other comprehensive loss		(3,031	)		(3,031	)
Total stockholders’ equity		255,197			228,389

Total liability and stockholder’ equity	$	2,853,878		$	2,752,768


	September 30,			December 31,
	2022			2021
ASSETS
Cash and cash equivalents	$	12,944		$	29,928
Restricted cash and equivalents		159,762			146,620
Finance receivables measured at fair value		2,343,253			1,749,098

Finance receivables		117,686			232,390
Less: Allowance for finance credit losses		(27,996	)		(56,206	)
Finance receivables, net		89,690			176,184

Furniture and equipment, net		1,700			1,129
Deferred tax assets, net		14,570			19,575
Accrued interest receivable		776			2,269
Other assets		27,829			34,775
Total Assets	$	2,650,524		$	2,159,578

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses	$	55,982		$	43,648
Warehouse lines of credit		242,449			105,610
Residual interest financing		49,560			53,682
Securitization trust debt		2,057,100			1,759,972
Subordinated renewable notes		27,249			26,459
Total liabilities		2,432,340			1,989,371
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; 20,607,286 and 21,143,764 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively		31,427			55,298
Retained earnings		188,379			116,531
Accumulated other comprehensive loss		(1,622	)		(1,622	)
Total stockholders’ equity		218,184			170,207

Total liability and stockholder’ equity	$	2,650,524		$	2,159,578


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Revenues:
Interest income	$	82,637		$	75,670		$	162,699		$	145,730
Mark to finance receivables measured at fair value		–			4,700			–			7,100
Other income		2,221			1,648			5,259			3,554
Total revenues		84,858			82,018			167,958			156,384

Expenses:
Employee costs		21,147			20,591			43,180			42,743
General and administrative		11,783			8,280			23,180			16,511
Interest		35,706			18,771			68,465			35,171
Provision for credit losses		(9,700	)		(8,000	)		(18,700	)		(17,400	)
Sales		5,463			5,838			11,186			11,224
Occupancy		1,644			1,937			3,170			3,789
Depreciation and amortization		211			385			442			802
Total operating expenses		66,254			47,802			130,923			92,840
Income before income tax expense		18,604			34,216			37,035			63,544
Income tax expense		4,650			8,896			9,258			17,109
Net income	$	13,954		$	25,320		$	27,777		$	46,435

Earnings per share:
Basic	$	0.67		$	1.18		$	1.35		$	2.18
Diluted	$	0.55		$	0.91		$	1.09		$	1.66

Number of shares used in computing earnings per share:
Basic		20,866			21,370			20,643			21,296
Diluted		25,373			27,687			25,384			27,943


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2022			2021			2022			2021
Revenues:
Interest income	$	79,817		$	67,018		$	225,547		$	198,551
Mark to finance receivables measured at fair value		8,183			–			15,283			(4,417	)
Other income		2,305			1,547			5,859			4,312
Total revenues		90,305			68,565			246,689			198,446

Expenses:
Employee costs		20,671			18,170			63,414			57,777
General and administrative		9,408			7,455			25,920			23,034
Interest		23,483			18,334			58,654			58,260
Provision for credit losses		(6,000	)		(1,590	)		(23,400	)		(1,590	)
Sales		5,962			4,288			17,186			12,475
Occupancy		2,031			1,952			5,820			5,870
Depreciation and amortization		406			409			1,207			1,254
Total operating expenses		55,961			49,018			148,801			157,080
Income before income tax expense		34,344			19,547			97,888			41,366
Income tax expense		8,931			5,864			26,040			12,807
Net income	$	25,413		$	13,683		$	71,848		$	28,559

Earnings per share:
Basic	$	1.22		$	0.59		$	3.39		$	1.25
Diluted		0.95			0.52			2.61			1.12

Number of shares used in computing earnings per share:
Basic		20,911			23,011			21,166			22,866
Diluted		26,654			26,218			27,512			25,439

Schedule of other income
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
	(In thousands)				(In thousands)				(In thousands)				(In thousands)
Origination and servicing fees from third party receivables	$	2,016	$	495	$	4,268	$	611	$	1,924	$	1,408	$	4,661	$	2,252
Direct mail revenues		–		779		774		2,648		–		–		–		774
Convenience fee revenue		50		120		170		540
Recoveries on previously charged-off contracts		10		18		54		78
Sales tax refunds		209		134		512		423		264		159		524		303
Other		20		1		81		12		33		81		74		225
Other income for the period	$	2,305	$	1,547	$	5,859	$	4,312	$	2,221	$	1,648	$	5,259	$	3,554

Supplemental balance sheet information related to leases
							June 30,			December 31,
	September 30,			December 31,			2023			2022
	2022			2021			(In thousands)
	(In thousands)
Operating Leases
Operating lease right-of-use assets	$	25,819		$	25,819		$	29,575		$	28,397
Less: Accumulated amortization right-of-use assets		(21,599	)		(17,624	)		(24,649	)		(22,613	)
Operating lease right-of-use assets, net	$	4,220		$	8,195		$	4,926		$	5,784
		$
Operating lease liabilities	$	(4,749	)	$	(9,058	)	$	(5,271	)	$	(6,234	)
		$
Finance Leases		$
Property and equipment, at cost		3,407			3,407		$	3,454		$	3,407
Less: Accumulated depreciation		(3,086	)		(2,348	)		(3,357	)		(3,301	)
Property and equipment, net	$	321		$	1,059		$	97		$	106
		$
Finance lease liabilities	$	(348	)	$	(1,124	)	$	(102	)	$	(177	)
		$
Weighted Average Discount Rate
Operating lease		5.0%			5.0%
Finance lease		6.5%			6.5%

Schedule of maturities of lease liabilities
(In thousands)	Operating			Finance			Operating			Finance
Year Ending September 30,	Lease			Lease
2022	$	817		$	238
Year Ending June 30,							Lease			Lease
2023		1,888			84		$	2,775		$	30
2024		921			26			1,787			37
2025		794			9			737			20
2026		501			–			455			11
2027								452			11
Thereafter		1,160			–			565			1
Total undiscounted lease payments		6,081			357			6,771			110
Less amounts representing interest		(1,332	)		(9	)		(1,500	)		(8	)
Lease Liability	$	4,749		$	348		$	5,271		$	102

Lease information
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
	(In thousands)				(In thousands)				(In thousands)				(In thousands)
Operating lease cost	$	1,767	$	1,768	$	5,288	$	5,398	$	1,411	$	1,760	$	2,771	$	3,630
Finance lease cost		257		308		813		924		24		257		125		555
Total lease cost	$	2,024	$	2,076	$	6,101	$	6,322	$	1,435	$	2,017	$	2,896	$	4,185

Supplemental cash flow information related to leases
									Three Months Ended				Six Months Ended
	Three Months Ended				Nine Months Ended				June 30,				June 30,
	September 30,				September 30,				2023		2022		2023		2022
	2022		2021		2022		2021		(In thousands)				(In thousands)
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)				(In thousands)
Operating cash flows from operating leases	$	1,921	$	1,840	$	5,616	$	5,662	$	1,441	$	1,907	$	2,771	$	3,965
Operating cash flows from finance leases	$	249	$	283	$	776	$	834		23		245		122		527
Financing cash flows from finance leases	$	8	$	25	$	36	$	90		2		12		4		28

Share-based payment arrangement option activity
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining
	(in thousands)			Exercise Price		Contractual Term
Options outstanding at the beginning of period		13,075		$	4.54	N/A
Granted		1,710			10.28	N/A
Exercised		(2,975	)		4.94	N/A
Forfeited		(520	)		7.26	N/A
Options outstanding at the end of period		11,290		$	5.18	3.29 years

Options exercisable at the end of period		7,708		$	4.39	2.13 years

Schedule of option activity
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining
	(in thousands)			Exercise Price		Contractual Term
Options outstanding at the beginning of period		11,167		$	5.21	N/A
Granted		–			–	N/A
Exercised		(2,805	)		5.59	N/A
Forfeited		–			–	N/A
Options outstanding at the end of period		8,362		$	5.09	3.61 years

Options exercisable at the end of period		5,675		$	4.31	2.94 years

Schedule of stock options outstanding and exercisable
	Number of shares as of				Number of shares as of				Number of shares as of				Number of shares as of
	September 30, 2022				December 31, 2021				June 30, 2023				December 31, 2022
	Outstanding		Exercisable		Outstanding		Exercisable		Outstanding		Exercisable		Outstanding		Exercisable
Range of exercise prices:	(In thousands)				(In thousands)				(In thousands)				(In thousands)
$0.95 - $1.99		–		–		577		577
$2.00 - $2.99		1,445		775		1,517		489		1,440		1,105		1,445		775
$3.00 - $3.99		3,933		3,638		4,285		3,382		2,543		2,253		3,785		3,495
$4.00 - $4.99		2,738		1,801		2,870		1,410		2,669		1,732		2,739		1,802
$5.00 - $5.99		–		–		–		–		–		–		–		–
$6.00 - $6.99		746		746		2,651		2,652		–		–		740		740
$7.00 - $7.99		748		748		1,175		1,175		–		–		748		748
$8.00 - $11.00		1,680		–		–		–

$10.00 - $10.99										1,710		585		1,710		210
Total shares		11,290		7,708		13,075		9,685		8,362		5,675		11,167		7,770

Schedule of purchases of company stock
	Nine Months Ended
	September 30, 2022				September 30, 2021
	Shares		Avg. Price		Shares		Avg. Price
Open market purchases		2,617,548	$	11.20		734,700	$	5.03
Shares redeemed upon net exercise of stock options		893,153		13.56		56,983		4.47
Total stock purchases		3,510,701	$	11.80		791,683	$	4.99

Schedule of delinquency status of finance receivables
	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
	(In thousands)				(In thousands)
Deliquency Status
Current	$	89,041	$	186,625	$	37,553	$	65,764
31 - 60 days		18,090		30,980		9,100		16,796
61 - 90 days		8,047		12,070		4,339		7,756
91 + days		2,508		2,715		1,088		1,988
	$	117,686	$	232,390	$	52,080	$	92,304

Schedule of amortized cost basis of finance receivables
	September 30,		December 31,		June 30,		December 31,
	2022		2021		2023		2022
	(In thousands)				(In thousands)
Annual Vintage Pool
2012 and prior	$	39	$	131
2013		335		1,091
2014		2,349		6,881
2014 and prior					$	876	$	1,865
2015		11,987		29,695		4,019		8,627
2016		37,268		76,728		15,609		28,632
2017		65,708		117,864		31,576		53,180
	$	117,686	$	232,390	$	52,080	$	92,304

Schedule of allowance for finance credit losses
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
	(In thousands)						(In thousands)						(In thousands)						(In thousands)
Balance at beginning of period	$	35,672		$	72,242		$	56,206		$	80,790		$	14,728		$	45,001		$	21,753		$	56,206
Provision for credit losses on finance receivables		(6,000	)		(1,590	)		(23,400	)		(1,590	)		(9,700	)		(8,000	)		(18,700	)		(17,400	)
Charge-offs		(4,375	)		(6,336	)		(14,181	)		(25,157	)		(1,897	)		(4,446	)		(4,914	)		(9,805	)
Recoveries		2,699			4,408			9,371			14,681			2,590			3,117			7,582			6,671
Balance at end of period	$	27,996		$	68,724		$	27,996		$	68,724		$	5,721		$	35,672		$	5,721		$	35,672

Schedule of charge-offs for financed receivables
	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2023			2022			2023			2022
Annual Vintage Pool	(In thousands)						(In thousands)
2014 and prior	$	67		$	243		$	208		$	535
2015		297			653			741			1,742
2016		713			1,514			2,034			3,539
2017		1,230			2,131			2,732			4,303
Applied against repos in inventory (net)		(410	)		(95	)		(801	)		(314	)
	$	1,897		$	4,446		$	4,914		$	9,805

Schedule of allowance for losses on repossessed inventory
	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
	(In thousands)						(In thousands)
Gross balance of repossessions in inventory	$	2,250		$	4,341		$	1,003		$	1,894
Allowance for losses on repossessed inventory		(1,474	)		(1,871	)		(655	)		(1,323	)
Net repossessed inventory included in other assets	$	776		$	2,470		$	348		$	571

Schedule of Long-term Debt Instruments
										Weighted
										Average
	Final	Receivables				Outstanding		Outstanding		Contractual Debt
	Scheduled	Pledged at				Principal at		Principal at		Interest Rate at
	Payment	September 30,		Initial		September 30,		December 31,		September 30,
Series	Date (1)	2022 (2)		Principal		2022		2021		2022		Final Scheduled Payment Date (1)	Receivables Pledged at June 30, 2023 (2)		Initial Principal		Outstanding Principal at June 30, 2023		Outstanding Principal at December 31, 2022		Weighted Average Contractual Debt Interest Rate at June 30, 2023
	(Dollars in thousands)											(Dollars in thousands)
CPS 2017-A	April 2024		–		206,320		–		17,644		–
CPS 2017-B	December 2023		–		225,170		–		12,491		–
CPS 2017-C	September 2024		–		224,825		–		25,846		–
CPS 2017-D	June 2024		17,526		196,300		13,892		26,744		5.30%
CPS 2018-A	March 2025		20,221		190,000		16,770		29,518		5.17%	March 2025	$	–	$	190,000	$	–	$	12,939		–
CPS 2018-B	December 2024		24,742		201,823		21,179		36,092		5.61%	December 2024		–		201,823		–		17,077		–
CPS 2018-C	September 2025		29,131		230,275		24,879		42,765		5.90%	September 2025		–		230,275		–		20,222		6.07%
CPS 2018-D	June 2025		35,386		233,730		30,545		49,634		5.61%	June 2025		20,498		233,730		16,011		25,563		5.82%
CPS 2019-A	March 2026		44,846		254,400		38,693		62,667		5.32%	March 2026		26,513		254,400		21,680		32,898		5.73%
CPS 2019-B	June 2026		46,255		228,275		39,622		61,730		5.15%	June 2026		28,679		228,275		24,730		33,897		5.56%
CPS 2019-C	September 2026		54,352		243,513		48,110		75,065		4.19%	September 2026		34,151		243,513		30,129		41,515		4.55%
CPS 2019-D	December 2026		69,792		274,313		61,562		98,625		3.58%	December 2026		45,068		274,313		39,936		53,625		3.86%
CPS 2020-A	March 2027		64,894		260,000		60,828		99,485		3.83%	March 2027		42,267		260,000		38,057		52,705		4.18%
CPS 2020-B	June 2027		72,574		202,343		47,591		87,048		5.87%	June 2027		48,747		202,343		31,860		41,736		6.36%
CPS 2020-C	November 2027		97,439		252,200		84,204		138,899		3.03%	November 2027		66,427		252,200		56,227		72,894		3.45%
CPS 2021-A	March 2028		103,253		230,545		86,058		147,516		1.29%	March 2028		70,683		230,545		51,064		72,076		1.49%
CPS 2021-B	June 2028		127,433		240,000		116,429		179,856		1.71%	June 2028		89,355		240,000		76,336		101,206		2.01%
CPS 2021-C	September 2028		183,844		291,000		168,163		250,003		1.50%	September 2028		131,240		291,000		113,606		147,593		1.70%
CPS 2021-D	December 2028		249,729		349,202		236,820		330,325		1.70%	December 2028		178,689		349,202		162,778		209,277		2.00%
CPS 2022-A	April 2029		266,687		316,800		247,530		–		2.04%	April 2029		196,998		316,800		176,857		222,613		2.29%
CPS 2022-B	October 2029		384,556		395,600		356,044		–		4.05%	October 2029		295,399		395,600		266,669		325,907		4.28%
CPS 2022-C	April 2030		420,885		391,600		372,262		–		5.17%	April 2030		332,262		391,600		285,595		346,714		5.34%
CPS 2022-D												June 2030		278,221		307,018		250,805		292,461		7.45%
CPS 2023-A												August 2030		196,998		324,768		281,081		–		6.13%
CPS 2023-B												November 2030		295,399		332,885		316,192		–		6.46%
		$	2,313,545	$	5,638,234	$	2,071,179	$	1,771,953				$	2,377,595	$	5,750,290	$	2,239,614	$	2,122,919


(2)	Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.

Schedule of debt outstanding
			Amount Outstanding at
			September 30,		December 31,
			2022		2021
			(In thousands)
Description	Interest Rate	Maturity

Warehouse lines of credit	3.00% over one month Libor (Minimum 3.75%)	July 2024	$	138,596	$	70,590

	4.15% over a commercial paper rate (Minimum 5.15%)	January 2024		106,891		35,420

Residual interest financing	8.60%	January 2026		–		4,311

Residual interest financing	7.86%	June 2026		50,000		50,000

Subordinated renewable notes	Weighted average rate of 7.67% and 8.93% at September 30, 2022 and December 31, 2021, respectively	Weighted average maturity of July 2024 and January 2024 at September 30, 2022 and December 31, 2021, respectively		27,249		26,459

			$	322,736	$	186,780

Schedule of interest income
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Interest on finance receivables	$	7,620	$	16,062	$	28,766	$	56,652
Interest on finance receivables at fair value		71,734		50,951		196,204		141,882
Other interest income		463		5		577		17
		$
Interest income	$	79,817	$	67,018	$	225,547	$	198,551

Schedule of interest expense
	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2022		2021		2022		2021		2023		2022		2023		2022
	(In thousands)				(In thousands)				(In thousands)				(In thousands)
Securitization trust debt	$	18,519	$	15,292	$	47,792	$	50,568	$	29,171	$	15,745	$	55,524	$	29,273
Warehouse lines of credit		3,342		929		5,887		3,264		5,008		1,386		9,856		2,544
Residual interest financing		1,050		1,413		3,193		2,446		1,050		1,050		2,100		2,144
Subordinated renewable notes		572		700		1,782		1,982		477		590		985		1,210
		$
Interest expense	$	23,483	$	18,334	$	58,654	$	58,260	$	35,706	$	18,771	$	68,465	$	35,171

Computation of earnings per share
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
	(In thousands)				(In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share		20,911		23,011		21,166		22,866

Incremental common shares attributable to exercise of outstanding options and warrants		5,743		3,207		6,346		2,573

Weighted average number of common shares used to compute diluted earnings per share		26,654		26,218		27,512		25,439

Computation of earnings per share
	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(In thousands)				(In thousands)

Weighted average number of common shares outstanding during the period used to compute basic earnings per share		20,866		21,370		20,643		21,296

Incremental common shares attributable to exercise of outstanding options and warrants		4,507		6,317		4,741		6,647

Weighted average number of common shares used to compute diluted earnings per share		25,373		27,687		25,384		27,943

Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis
	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2022			2021			2022			2021			2023			2022			2023			2022
	(In thousands)						(In thousands)						(In thousands)						(In thousands)
Balance at beginning of period	$	2,174,133		$	1,582,175		$	1,749,098		$	1,523,726		$	2,575,117		$	1,903,857		$	2,476,617		$	1,749,098
Finance receivables at fair value acquired during period		407,260			310,340			1,311,735			795,457			305,450			511,068			658,048			904,475
Payments received on finance receivables at fair value		(209,627	)		(191,458	)		(635,401	)		(546,897	)		(215,314	)		(215,930	)		(421,940	)		(425,774	)
Net interest income accretion on fair value receivables		(36,696	)		(33,864	)		(97,462	)		(100,676	)		(46,833	)		(29,562	)		(94,305	)		(60,766	)
Mark to fair value		8,183			–			15,283			(4,417	)		–			4,700			–			7,100
Balance at end of period	$	2,343,253		$	1,667,193		$	2,343,253		$	1,667,193		$	2,618,420		$	2,174,133		$	2,618,420		$	2,174,133

Schedule of level 3 fair value measurements
Financial Instrument	Fair Values as of					Inputs as of		Fair Values as of					Inputs as of
	September 30,		December 31,			September 30,	December 31,	June 30,		December 31,			June 30,	December 31,
	2022		2021		Unobservable Inputs	2022	2021	2023		2022		Unobservable	2023	2022
	(In thousands)							(In thousands)
Assets:
Finance receivables measured at fair value	$	2,343,253	$	1,749,098	Discount rate	8.9% - 11.3%	8.9% - 11.3%	$	2,618,420	$	2,476,617	Discount rate	11.0% - 11.5%	11.0% - 11.3%
					Cumulative net losses	10.0% - 18.4%	10.0% - 18.4%					Cumulative net losses	10.0% - 21.5%	13.4% - 19.4%

Schedule of estimated fair values of financial assets and liabilities
	As of June 30, 2023
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	7,081	$	7,081	$	–	$	–	$	7,081
Restricted cash and equivalents		148,063		148,063		–		–		148,063
Finance receivables, net		46,359		–		–		42,495		42,495
Accrued interest receivable		93		–		–		93		93
Liabilities:
Warehouse lines of credit	$	245,272	$	–	$	–	$	245,272	$	245,272
Residual interest financing		49,749						49,749		49,749
Accrued interest payable		7,243		–		–		7,243		7,243
Securitization trust debt		2,225,072		–		–		2,137,162		2,137,162
Subordinated renewable notes		21,204		–		–		21,204		21,204

Schedule of estimated fair values of financial assets and liabilities
	As of September 30, 2022
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	12,944	$	12,944	$	–	$	–	$	12,944
Restricted cash and equivalents		159,762		159,762		–		–		159,762
Finance receivables, net		89,690		–		–		79,700		79,700
Accrued interest receivable		776		–		–		776		776
Liabilities:
Warehouse lines of credit	$	242,449	$	–	$	–	$	242,449	$	242,449
Residual interest financing		49,560						49,560		49,560
Accrued interest payable		5,063		–		–		5,063		5,063
Securitization trust debt		2,057,100		–		–		1,969,599		1,969,599
Subordinated renewable notes		27,249		–		–		27,249		27,249


	As of December 31, 2021										As of December 31, 2022
Financial Instrument	(In thousands)										(In thousands)
	Carrying		Fair Value Measurements Using:								Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	29,928	$	29,928	$	–	$	–	$	29,928	$	13,490	$	13,490	$	–	$	–	$	13,490
Restricted cash and equivalents		146,620		146,620		–		–		146,620		149,299		149,299		–		–		149,299
Finance receivables, net		176,184		–		–		178,795		178,795		70,551		–		–		60,063		60,063
Accrued interest receivable		2,269		–		–		2,269		2,269		649		–		–		649		649
Liabilities:
Warehouse lines of credit	$	105,610	$	–	$	–	$	105,610	$	105,610	$	285,328	$	–	$	–	$	285,328	$	285,328
Residual interest financing		53,682						53,682		53,682
Accrued interest payable		3,568		–		–		3,568		3,568		6,190		–		–		6,190		6,190
Securitization trust debt		1,759,972		–		–		1,740,901		1,740,901		2,108,744		–		–		1,957,995		1,957,995
Subordinated renewable notes		26,459		–		–		26,459		26,459		25,263		–		–		25,263		25,263