Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2023March 31, 2024

 

Commission file number: 1-11416

 

CONSUMER PORTFOLIO SERVICES, INC.

(Exact name of registrant as specified in its charter)

 

California33-0459135
(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)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 ClassTrading SymbolName of Each Exchange on Which Registered
Common Stock, no par valueCPSSThe 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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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

 

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 No

 

As of August 3, 2023May 6, 2024 the registrant had 21,164,58021,021,354 common shares outstanding.

 

 

 1 

 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended June 30, 2023March 31, 2024

 

  Page
PART I –I. FINANCIAL INFORMATION
   
Item 1.Financial Statements 
 Unaudited Condensed Consolidated Balance Sheets as of June 30, 2023March 31, 2024 and December 31, 202220233
 Unaudited Condensed Consolidated Statements of Operations for the three-month and six-month periods ended June 30,March 31, 2024 and 2023 and 20224
 Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month and six-month periods ended June 30,March 31, 2024 and 2023 and 20225
 Unaudited Condensed Consolidated Statements of Cash Flows for the six-monththree-month periods ended June 30,March 31, 2024 and 2023 and 20226
 Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month and six-month periods ended June 30,March 31, 2024 and 2023 and 20227
 Notes to Unaudited Condensed Consolidated Financial Statements8
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations27
Item 4.Controls and Procedures4440
 
PART II –II. OTHER INFORMATION
   
Item 1.Legal Proceedings4541
Item 1A.Risk Factors4541
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds4741
Item 5.Other Information42
Item 6.Exhibits4742
 Signatures

48

43

 

 

 

 

 

 2 

 

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 

         
  March 31,  December 31, 
  2024  2023 
ASSETS        
Cash and cash equivalents $13,249  $6,174 
Restricted cash and equivalents  137,706   119,257 
Finance receivables measured at fair value  2,791,373   2,722,662 
         
Finance receivables  18,781   27,553 
Less: Allowance for finance credit losses  (1,890)  (2,869)
Finance receivables, net  16,891   24,684 
         
Furniture and equipment, net  1,268   1,372 
Deferred tax assets, net  3,485   3,736 
Other assets  42,554   25,861 
Total Assets  $3,006,526  $2,903,746 
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Liabilities        
Accounts payable and accrued expenses $79,122  $62,544 
Warehouse lines of credit  249,522   234,025 
Residual interest financing  98,968   49,875 
Securitization trust debt  2,277,676   2,265,446 
Subordinated renewable notes  22,140   17,188 
Total Liabilities  2,727,428   2,629,078 
COMMITMENTS AND CONTINGENCIES      
Shareholders' Equity        
Preferred stock, $1 par value; authorized 4,998,130 shares; none issued      
Series A preferred stock, $1 par value; authorized 5,000,000 shares; none issued      
Series B preferred stock, $1 par value; authorized 1,870 shares; none issued      
Common stock, no par value; authorized 75,000,000 shares; 21,147,743 and 21,174,856 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively  28,518   28,678 
Retained earnings  252,447   247,857 
Accumulated other comprehensive loss  (1,867)  (1,867)
Total stockholders' equity  279,098   274,668 
         
Total liabilities and stockholders' equity $3,006,526  $2,903,746 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

 3 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

         
  Three Months Ended 
  March 31, 
  2024  2023 
Revenues:      
Interest income $84,288  $80,062 
Mark to finance receivables measured at fair value  5,000    
Other income  2,456   3,038 
Total revenues  91,744   83,100 
         
Expenses:        
Employee costs  24,416   22,033 
General and administrative  13,753   11,396 
Interest  41,968   32,759 
Provision for credit losses  (1,635)  (9,000)
Sales  4,870   5,724 
Occupancy  1,600   1,526 
Depreciation and amortization  215   231 
Total operating expenses  85,187   64,669 
Income before income tax expense  6,557   18,431 
Income tax expense  1,967   4,608 
Net income $4,590  $13,823 
         
Earnings per share:        
Basic $0.22  $0.68 
Diluted  0.19   0.54 
         
Number of shares used in computing earnings per share:        
Basic  21,143   20,418 
Diluted  24,602   25,392 

                 
  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.

 

 

 

 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 

 

       
  Three Months Ended 
  March 31, 
  2024  2023 
       
Net income $4,590  $13,823 
         
Other comprehensive income/(loss); change in funded status of pension plan      
Comprehensive income $4,590  $13,823 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 5 

 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

         
  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 

         
  Three Months Ended 
  March 31, 
  2024  2023 
Cash flows from operating activities:        
Net income $4,590  $13,823 
Adjustments to reconcile net income to net cash provided by operating activities:        
Net interest income accretion on fair value receivables  54,247   47,472 
Depreciation and amortization  215   231 
Amortization of deferred financing costs  (672)  2,403 
Mark to finance receivables measured at fair value  (5,000)   
Provision for credit losses  (1,635)  (9,000)
Stock-based compensation expense  832   912 
Changes in assets and liabilities:        
Deferred tax assets, net  251   385 
Other assets  (16,702)  4,511 
Accounts payable and accrued expenses  16,579   4,404 
Net cash provided by operating activities  52,705   65,141 
         
Cash flows from investing activities:        
Payments received on finance receivables held for investment  9,428   24,746 
Purchases of finance receivables measured at fair value  (328,893)  (352,598)
Payments received on finance receivables at fair value  210,935   206,626 
Change in repossessions held in inventory  9   101 
Purchase of furniture and equipment  (111)  (34)
Net cash used in investing activities  (108,632)  (121,159)
         
Cash flows from financing activities:        
Proceeds from issuance of securitization trust debt  280,924   324,768 
Proceeds from issuance of subordinated renewable notes  5,489    
Payments on subordinated renewable notes  (537)  (1,820)
Net proceeds from (repayments of) warehouse lines of credit  17,176   (7)
Net Proceeds from (repayment of) residual interest financing debt  50,000    
Repayment of securitization trust debt  (268,710)  (258,224)
Payment of financing costs  (1,899)  (2,072)
Purchase of common stock  (1,697)  (7,293)
Exercise of options and warrants  705   6,960 
Net cash provided by financing activities  81,451   62,312 
Increase in cash and cash equivalents  25,524   6,294 
Cash and restricted cash  at beginning of period  125,431   162,789 
Cash and restricted cash at end of period $150,955  $169,083 
         
Supplemental disclosure of cash flow information:        
Cash paid during the period for:        
Interest $42,145  $29,658 
Income taxes $29  $25 
Non-cash financing activities:        
Right-of-use asset, net $(23,267) $(3,013)
Lease liability $23,782  $3,313 
Deferred office rent $(515) $(300)

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)

 

                 
  Three Months Ended  Six Months Ended 
  June 30,  June 30, 
  2023  2022  2023  2022 
Common Stock (Shares Outstanding)                
Balance, beginning of period  20,496   21,292   20,131   21,144 
Common stock issued upon exercise of options and warrants  1,718   1,529   2,805   2,895 
Repurchase of common stock  (1,062)  (1,614)  (1,784)  (2,832)
Balance, end of period  21,152   21,207   21,152   21,207 
                 
Common Stock                
Balance, beginning of period $29,485  $47,844  $28,906  $55,298 
Common stock issued upon exercise of options and warrants  8,718   8,556   15,678   14,416 
Repurchase of common stock  (11,171)  (20,181)  (18,464)  (34,285)
Stock-based compensation  905   728   1,817   1,518 
Balance, end of period $27,937  $36,947  $27,937  $36,947 
                 
Retained Earnings                
Balance, beginning of period $216,337  $137,646  $202,514  $116,531 
Net income  13,954   25,320   27,777   46,435 
Balance, end of period $230,291  $162,966  $230,291  $162,966 
                 
Accumulated Other Comprehensive Loss                
Balance, beginning of period $(3,031) $(1,622) $(3,031) $(1,622)
Pension benefit obligation            
Balance, end of period $(3,031) $(1,622) $(3,031) $(1,622)
Balance, beginning of period        228,389    
Pension benefit obligation            
Total Shareholders' Equity $255,197  $198,291  $255,197  $198,291 

         
  Three Months Ended 
  March 31, 
  2024  2023 
Common Stock (Shares Outstanding)        
Balance, beginning of period  21,175   20,131 
Common stock issued upon exercise of options and warrants  180   1,086 
Repurchase of common stock  (207)  (721)
Balance, end of period  21,148   20,496 
         
Common Stock        
Balance, beginning of period $28,678  $28,906 
Common stock issued upon exercise of options and warrants  705   6,960 
Repurchase of common stock  (1,697)  (7,293)
Stock-based compensation  832   912 
Balance, end of period $28,518  $29,485 
         
Retained Earnings        
Balance, beginning of period $247,857  $202,514 
Net income  4,590   13,823 
Balance, end of period $252,447  $216,337 
         
Accumulated Other Comprehensive Loss        
Balance, beginning of period $(1,867) $(3,031)
Pension benefit obligation      
Balance, end of period $(1,867) $(3,031)
Balance, beginning of period  274,668   228,389 
Pension benefit obligation      
         
Total Shareholders' Equity $279,098  $242,791 

 

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

 

 

 

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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 six-monthnine-month period ended June 30, 2023March 31, 2024 are not necessarily indicative of the operating results to be expected for the full year.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted from these Unaudited Condensed Consolidated Financial Statements. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2022.2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of income and expenses during the reported periods.

 

Finance Receivables Measured at Fair Value

 

Effective January 1, 2018, we adopted the fair value method of accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the price paid on the purchase date as the fair value for such receivable. We estimate the cash to be received in the future with respect to such receivables, based on our experience with similar receivables acquired in the past. We then compute the internal rate of return that results in the present value of those estimated cash receipts being equal to the purchase date fair value. Thereafter, we recognize interest income on such receivables on a level yield basis using that internal rate of return as the applicable interest rate. Cash received with respect to such receivables is applied first against such interest income, and then to reduce the recorded value of the receivables.

 

 

 

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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 first quarter include no mark down reversal to the carrying value of the portion of the receivables portfolio accounted for at fair value. Mark downs are reflected as a reduction in revenue.

 

Anticipated credit losses are included in our estimation of cash to be received with respect to receivables. Because suchIn accordance with the fair value accounting standards, credit losses are included in our computation of the appropriate level yield, therefore we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.

 

Other Income

 

The following table presents the primary components of Other Income for the three-month and six-month periods ending June 30, 2023March 31, 2024 and 2022: 2023:

Schedule of other income                        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)  (In thousands) 
Origination and servicing fees from third party receivables $1,924  $1,408  $4,661  $2,252  $2,144  $2,738 
Direct mail revenues           774 
Sales tax refunds  264   159   524   303   289   260 
Other  33   81   74   225   23   40 
Other income for the period $2,221  $1,648  $5,259  $3,554  $2,456  $3,038 

 

Leases

 

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

 

 

 

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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, 
Schedule of supplemental balance sheet information related to leases        
 2023  2022  March 31, December 31, 
 (In thousands)  2024  2023 
      (In thousands) 
Operating Leases                
Operating lease right-of-use assets $29,575  $28,397  $51,093  $29,575 
Less: Accumulated amortization right-of-use assets  (24,649)  (22,613)  (27,902)  (26,651)
Operating lease right-of-use assets, net $4,926  $5,784  $23,191  $2,924 
                
Operating lease liabilities $(5,271) $(6,234) $(23,702) $(3,220)
                
Finance Leases                
Property and equipment, at cost $3,454  $3,407   3,474   3,474 
Less: Accumulated depreciation  (3,357)  (3,301)  (3,398)  (3,385)
Property and equipment, net $97  $106  $76  $89 
                
Finance lease liabilities $(102) $(177) $(80) $(93)
        
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             
Maturities of lease liabilities were as follows: $    
(In thousands) Operating Finance  Operating Finance 
Year Ending June 30, Lease  Lease 
2023 $2,775  $30 
2024  1,787   37 
Year Ending December 31, Lease  Lease 
2024 (excluding the three months ended March 31, 2024) $2,422  $27 
2025  737   20   5,233   45 
2026  455   11   5,084   15 
2027  452   11   5,242   15 
2028  5,408   4 
Thereafter  565   1   4,747    
Total undiscounted lease payments  6,771   110   28,136   106 
Less amounts representing interest  (1,500)  (8)  (4,434)  (26)
Lease Liability $5,271  $102  $23,702  $80 

 

 

 

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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                
Schedule of lease expense        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)   (In thousands) 
Operating lease cost $1,411  $1,760  $2,771  $3,630  $1,374 $1,360 
Finance lease cost  24   257   125   555   14   101 
Total lease cost $1,435  $2,017  $2,896  $4,185  $1,388 $1,461 

 

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 
Schedule of supplemental cash flow information related to leases        
 June 30,  June 30,  Three Months Ended 
 2023  2022  2023  2022  March 31, 
 (In thousands)  (In thousands)  2024  2023 
Cash paid for amounts included in the measurement of lease liabilities:          (In thousands) 
Operating cash flows from operating leases $1,441  $1,907  $2,771  $3,965  $1,374  $1,360 
Operating cash flows from finance leases  23   245   122   527  $13  $99 
Financing cash flows from finance leases  2   12   4   28  $1  $2 

 

Stock-based Compensation

 

We recognize compensation costs in the financial statements for all share-based payments based on the grant date fair value estimated in accordance with the provisions of ASC 718 “Stock Compensation”.

 

For the three and six months ended June 30,March 31, 2024 and 2023, we recorded stock-based compensation costs in the amount of $905,000832,000 and $1.8912,000 million,, respectively. These stock-based compensation costs were $728,000 and $1.5 million for the three and six months ended June 30, 2022. As of June 30, 2023,March 31, 2024, unrecognized stock-based compensation costs to be recognized over future periods equaled $7.65.1 million. This amount will be recognized as expense over a weighted-average period of 2.01.5 years.

The following represents stock option activity for the three months ended March 31, 2024:

Schedule of stock option activity          
        Weighted
  Number of  Weighted  Average
  Shares  Average  Remaining
  (in thousands)  Exercise Price  Contractual Term
Options outstanding at the beginning of period  8,125  $5.11  N/A
Granted       N/A
Exercised  (180)  3.92  N/A
Forfeited       N/A
Options outstanding at the end of period  7,945  $5.14  2.95 years
           
Options exercisable at the end of period  6,070  $4.51  2.47 years

 

 

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The following represents stock option activity for the six months ended June 30, 2023:

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 for the years ended June 30, 2023March 31, 2024 and December 31, 2022: 2023:

Schedule of stock options outstanding and exercisable                
Schedule of price distribution of stock options                
 Number of shares as of Number of shares as of  Number of shares as of Number of shares as of 
 June 30, 2023  December 31, 2022  March 31, 2024  December 31, 2023 
 Outstanding  Exercisable  Outstanding  Exercisable  Outstanding  Exercisable  Outstanding  Exercisable 
Range of exercise prices: (In thousands) (In thousands)  (In thousands) (In thousands) 
$2.00 - $2.99  1,440   1,105   1,445   775   1,410   1,083   1,410   1,082 
$3.00 - $3.99  2,543   2,253   3,785   3,495   2,383   2,383   2,473   2,473 
$4.00 - $4.99  2,669   1,732   2,739   1,802   2,450   1,839   2,539   1,929 
$5.00 - $5.99            
$6.00 - $6.99        740   740             
$7.00 - $7.99        748   748             
$10.00 - $10.99  1,710   585   1,710   210   1,702   765   1,703   578 
Total shares  8,362   5,675   11,167   7,770   7,945   6,070   8,125   6,062 

 

At June 30, 2023March 31, 2024 the aggregate intrinsic value of options outstanding and exercisable was $55.123.9 million and $41.820.6 million, respectively. There were 2.8180,000 million options exercised for the sixthree months ended June 30, 2023March 31, 2024 compared to 2.91,086,000 million for the comparable period in 2022.2023. The total intrinsic value of options exercised was $13.3716,000 million and $12.23.8 million for the six-monththree-month periods ended June 30, 2023March 31, 2024 and 2022.2023. There were 2,661,0002,684,000 shares available for future stock option grants under existing plans as of June 30, 2023.March 31, 2024.

 

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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 sixthree months ended June 30, 2023March 31, 2024 and 2022: 2023:

Schedule of purchases of company stock                
Schedule of purchase of our common stock                
 Six Months Ended  Three Months Ended 
 June 30, 2023  June 30, 2022  March 31, 2024  March 31, 2023 
 Shares  Avg. Price  Shares  Avg. Price  Shares  Avg. Price  Shares  Avg. Price 
Open market purchases  564,202  $10.36   1,938,637  $11.42   101,355  $8.51   263,185  $10.42 
Shares redeemed upon net exercise of stock options  1,220,044   10.34   893,153   13.56   105,758   7.89   458,392   9.93 
Total stock purchases  1,784,246  $10.35   2,831,790  $12.09   207,113  $8.19   721,577  $10.11 

 

Reclassifications

 

Some items in the prior year financial statements were reclassified to conform to the current presentation. Reclassifications had no effect on net income or shareholders’ equity.

12

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

Financial Covenants

 

Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of June 30, 2023,March 31, 2024, we were in compliance with all such covenants. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness.

 

Provision for Contingent Liabilities

 

We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Our legal counsel has advised us on such matters where, based on information available at the time of this report, there is an indication that it is both probable that a liability has been incurred and the amount of the loss can be reasonably determined.

 

Adoption of NewRecent Accounting StandardsPronouncements

 

In March 2022,November 2023, the Financial Accounting Standards Board (“FASB”)FASB issued Accounting Standards Update ("ASU") 2022-02, known asASU No. 2023-07, "Segment Reporting (Topic 280)," which is intended to enhance the Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures. ASU 2022-02 eliminates the accounting guidance for TDRs in ASC 310-40disclosures 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.reportable segments. This guidance isnew standard will be effective for fiscal yearsannual reporting periods beginning after December 15, 2022, and2023, with early adoption permitted. The Company is currently evaluating the adoptionimpact of ASU 2023-07; however, at the current time, the Company does not believe this guidance did notASU will have a material impact on the condensedits consolidated financial statements.

 

In December 2023, the FASB issued ASU No. 2023-09, "Income Taxes (Topic 740)," which is intended to provide greater transparency in various income tax components that affect the rate reconciliation based on the applicable taxing jurisdictions, as well as the qualitative and quantitative aspects of those components. This new standard will be effective for annual reporting periods beginning on or after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of ASU 2023-09; however, at the current time, the Company does not believe this ASU will have a material impact on its consolidated financial statements.

 

13

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(2) Finance Receivables

 

Our portfolio of finance receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on a portfolio basis according to delinquency status. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. We report delinquency on a contractual basis. Once a contract becomes greater than 90 days delinquent, we do not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days delinquent. Any payments received on a contract that is greater than 90 days delinquent are first applied to accrued interest and then to principal reduction.

 

In January 2018 the Company adopted the fair value method of accounting for finance receivables acquired after 2017. Finance receivables measured at fair value are recorded separately on the Company’s Balance Sheet and are excluded from all tables in this footnote.

 

13

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended within limits specified in the servicing agreements. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable. Automobile contracts less than 31 days delinquent are not included.reported as delinquent. In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems.extensions. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In certain limited cases, a two-month extension may be granted. There are no other concessions, such as a reduction in interest rate, forgiveness of principal or of accrued interest. Automobile finance receivables, net of unearned interest was $52.1 million and $92.3 million as of June 30, 2023 and December 31, 2022, respectively.Accordingly, we consider such extensions to be insignificant delays in payments. The following table summarizes the delinquency status of finance receivables as of June 30, 2023March 31, 2024 and December 31, 2022: 2023:

Schedule of delinquency status of finance receivables                
 June 30,  December 31,  March 31, December 31, 
 2023  2022  2024  2023 
 (In thousands) 
Deliquency Status        
Delinquency Status (In thousands) 
Current $37,553  $65,764  $12,629  $17,771 
31 - 60 days  9,100   16,796 
61 - 90 days  4,339   7,756 
31-60 days  3,618   5,626 
61-90 days  2,065   3,087 
91 + days  1,088   1,988   469   1,069 
 $52,080  $92,304  $18,781  $27,553 

 

Finance receivables totaling $1.1469,000 million and $2.01.1 million at June 30, 2023March 31, 2024 and December 31, 2022,2023, 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.

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,Throughout our history we have observed how events such as extreme weather, political unrest, and other qualitative factors have influenced the performance of our portfolio. Consequently, we have considered how certainsuch qualitative factors may affect future credit losses and have incorporated our judgement of the effect of suchthose factors into our estimates.

 

The following table presents the amortized cost basis of our finance receivables by annual vintage as of June 30, 2023March 31, 2024 and December 31, 2022. 2023:

Schedule of amortized cost basis of finance receivables        
Schedule of annual vintage     
 June 30,  December 31,  March 31, December 31, 
 2023  2022  2024  2023 
 (In thousands)  (In thousands) 
Annual Vintage Pool             
2014 and prior $876  $1,865 
2014 and prior. $237  $370 
2015  4,019   8,627   1,141   1,788 
2016  15,609   28,632   4,991   7,673 
2017  31,576   53,180   12,412   17,722 
 $52,080  $92,304  $18,781  $27,553 

 

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 periods ended June 30, 2023March 31, 2024 and 2022: 2023:

Schedule of allowance for finance credit losses                        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)  (In thousands) 
Balance at beginning of period $14,728  $45,001  $21,753  $56,206  $2,869 $21,753 
Provision for credit losses on finance receivables  (9,700)  (8,000)  (18,700)  (17,400) (1,635)  (9,000)
Charge-offs  (1,897)  (4,446)  (4,914)  (9,805)  (1,001)  (3,018)
Recoveries  2,590   3,117   7,582   6,671   1,657   4,993 
Balance at end of period $5,721  $35,672  $5,721  $35,672  $1,890 $14,728 

 

15

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table presents the gross charge-offs by year of origination of our finance receivables for the three-month periods ended March 31, 2024 and six-month ended June 30, 2023 and 2022: 2023:

Schedule of charge-offs for financed receivables                
Schedule of gross charge-off        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
Annual Vintage Pool (In thousands) (In thousands)  (In thousands) 
2014 and prior $67  $243  $208  $535  $70  $141 
2015  297   653   741   1,742   115   444 
2016  713   1,514   2,034   3,539   377   1,321 
2017  1,230   2,131   2,732   4,303   481   1,502 
Applied against repos in inventory (net)  (410)  (95)  (801)  (314)  (42)  (390)
 $1,897  $4,446  $4,914  $9,805  $1,001  $3,018 

 

Excluded from finance receivables are contracts that were previously classified as finance receivables but were reclassified as other assets because we have repossessed the vehicle securing the Contract. The following table presents a summary of such repossessed inventory together with the allowance for losses in repossessed inventory that is not included in the allowance for finance credit losses:

Schedule of allowance for losses on repossessed inventory        
Schedule of allowance for losses in repossessed inventory        
 June 30,  December 31,  March 31, December 31, 
 2023  2022  2024  2023 
 (In thousands)  (In thousands) 
Gross balance of repossessions in inventory $1,003  $1,894  $546  $597 
Allowance for losses on repossessed inventory  (655)  (1,323)  (429)  (472)
Net repossessed inventory included in other assets $348  $571  $117  $125 

 

 

 

 16 

 

 

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                      
Series 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)   
CPS 2018-A March 2025 $  $190,000  $  $12,939    
CPS 2018-B December 2024     201,823      17,077    
CPS 2018-C September 2025     230,275      20,222   6.07% 
CPS 2018-D June 2025  20,498   233,730   16,011   25,563   5.82% 
CPS 2019-A March 2026  26,513   254,400   21,680   32,898   5.73% 
CPS 2019-B June 2026  28,679   228,275   24,730   33,897   5.56% 
CPS 2019-C September 2026  34,151   243,513   30,129   41,515   4.55% 
CPS 2019-D December 2026  45,068   274,313   39,936   53,625   3.86% 
CPS 2020-A March 2027  42,267   260,000   38,057   52,705   4.18% 
CPS 2020-B June 2027  48,747   202,343   31,860   41,736   6.36% 
CPS 2020-C November 2027  66,427   252,200   56,227   72,894   3.45% 
CPS 2021-A March 2028  70,683   230,545   51,064   72,076   1.49% 
CPS 2021-B June 2028  89,355   240,000   76,336   101,206   2.01% 
CPS 2021-C September 2028  131,240   291,000   113,606   147,593   1.70% 
CPS 2021-D December 2028  178,689   349,202   162,778   209,277   2.00% 
CPS 2022-A April 2029  196,998   316,800   176,857   222,613   2.29% 
CPS 2022-B October 2029  295,399   395,600   266,669   325,907   4.28% 
CPS 2022-C 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% 
    $2,377,595  $5,750,290  $2,239,614  $2,122,919     

Schedule of securitization trust debt                        
                 Weighted 
                 Average 
  Final  Receivables     Outstanding  Outstanding  Contractual Debt 
  Scheduled  Pledged at     Principal at  Principal at  Interest Rate at 
  Payment  March 31,  Initial  March 31,  December 31,  March 31, 
Series Date (1)  2024 (2)  Principal  2024  2023  2024 
  (Dollars in thousands)    
CPS 2019-B  June 2026  $  $228,275  $  $15,742    
CPS 2019-C  September 2026   20,050   243,513   15,489   19,725   5.26% 
CPS 2019-D  December 2026   27,023   274,313   21,811   27,445   4.50% 
CPS 2020-A  March 2027   26,213   260,000   21,459   26,382   4.95% 
CPS 2020-B  June 2027   31,296   202,343   20,745   24,197   7.38% 
CPS 2020-C  November 2027   44,231   252,200   37,586   43,487   4.25% 
CPS 2021-A  March 2028   48,164   230,545   34,383   39,039   1.90% 
CPS 2021-B  June 2028   61,128   240,000   47,473   55,684   2.71% 
CPS 2021-C  September 2028   93,137   291,000   73,693   85,563   2.16% 
CPS 2021-D  December 2028   126,773   349,202   110,294   126,059   2.71% 
CPS 2022-A  April 2029   141,660   316,800   120,884   137,479   2.93% 
CPS 2022-B  October 2029   218,246   395,600   191,200   213,779   5.07% 
CPS 2022-C  April 2030   253,043   391,600   205,529   230,273   5.97% 
CPS 2022-D  June 2030   211,067   307,018   185,573   205,583   8.10% 
CPS 2023-A  August 2030   251,394   324,768   208,585   231,906   6.41% 
CPS 2023-B  November 2030   275,600   332,885   241,966   268,172   6.66% 
CPS 2023-C  February 2031   259,928   291,732   236,937   257,568   6.70% 
CPS 2023-D  May 2031   275,342   286,149   252,383   271,939   7.29% 
CPS 2024-A  August 2031   287,710   280,924   266,246      6.09% 
     $2,652,004  $5,498,867  $2,292,235  $2,280,021     

_________________

(1)The Final Scheduled Payment Date represents final legal maturity of the securitization trust debt. Securitization trust debt is expected to become due and to be paid prior to those dates, based on amortization of the finance receivables pledged to the trusts. Expected payments, which will depend on the performance of such receivables, as to which there can be no assurance, are $409.3 million in 2023, $747.0644.3 million in 2024, $463.2691.9 million in 2025, $288.1435.8 million in 2026, $193.9284.8 million in 2027, $102.9169.4 million in 2028, and $20.751.5 million in 2029.

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

 

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Debt issuance costs of $14.514.6 million and $14.2 million as of June 30, 2023March 31, 2024 and December 31, 2022, respectively,2023 have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the Securitization trust debt on our Consolidated Balance Sheets.

 

All of the securitization trust debt was sold in private placement transactions to qualified institutional buyers. The debt was issued through our wholly-owned bankruptcy remote subsidiaries and is secured by the assets of such subsidiaries, but not by our other assets.

 

17

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The terms of the securitization agreements related to the issuance of the securitization trust debt and the warehouse credit facilities require that we meet certain delinquency and credit loss criteria with respect to the pool of receivables, and certain of the agreements require that we maintain minimum levels of liquidity and not exceed maximum leverage levels. As of June 30, 2023,March 31, 2024, we were in compliance with all such covenants.

 

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of June 30, 2023,March 31, 2024, restricted cash under the various agreements totaled approximately $148.1137.7 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

 

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

 

(4) Debt

The terms and amounts of our other debt outstanding at March 31, 2024 and December 31, 2023 are summarized below:

 Schedule of debt outstanding            
      Amount Outstanding at 
      March 31,  December 31, 
      2024  2023 
      (In thousands) 
Description Interest Rate Maturity      
           
Warehouse lines of credit 3.00% over CP yield rate (Minimum 3.75%) 8.42% and 8.58% at March 31, 2024 and December 31 2023, respectively July 2024 $184,079  $165,628 
             
  4.50% over a commercial paper rate (Minimum 7.50%) 9.94% and 9.63% at March 31 2024, and December 31 2023, respectively March 2026  67,721   68,997 
             
Residual interest financing 7.86% June 2026  50,000   50,000 
             
Residual interest financing 11.50% March 2029  50,000    
             
Subordinated renewable notes Weighted average rate of 9.01% and 8.45% at March 31, 2024 and December 31, 2023, respectively Weighted average maturity of May 2026 and February 2026 at March 31, 2024 and December 31, 2023, respectively  22,140   17,188 
             
      $373,940  $301,813 

 

 

 18 

 

 

CONSUMER PORTFOLIO SERVICES, INC. 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,March 29, 2024, we renewed our two-year $200 million revolving credit agreement with Ares Agent Services, L.P. There was $144.9 million outstanding under this facility at June 30, 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. The revolving period for this facility was extended to January 2024March 2026 followed by an amortization period through JanuaryMarch 2028 for any receivables pledged at the end of the revolving period. There was $67.7 million outstanding under this facility at March 31, 2024.

On March 22, 2024, we completed a $50 million securitization of residual interests from previously issued securitizations. In the transaction, a qualified institutional buyer purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in five CPS securitizations issued from January 2022 through January 2023. The sold notes (“2024-1 Notes”), issued by CPS Auto Securitization Trust 2024-1, consist of a single class with a coupon of 11.50%. At March 31, 2024 there was $50.0 million outstanding under this facility.

 

On July 15, 2022, we renewed our two-year revolving credit agreement with Citibank, N.A., and doubled the capacity from $100 million to $200 million. There was $101.9 million outstanding under this facility at June 30, 2023. The revolving period for this facility was extended to July 2024 followed by an amortization period through July 2025 for any receivables pledged at the end of the revolving period.

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CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS There was $184.1 million outstanding under this facility at March 31, 2024.

 

Unamortized debt issuance costs of $251,0001.0 million and $377,000125,000 as of June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $1.62.3 million and $2.6599,000 million as of June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively, have been excluded from the Warehouse lines of credit amounts in the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the debt on our Unaudited Condensed Consolidated Balance Sheets.

 

(5) Interest Income and Interest Expense

 

The following table presents the components of interest income:

Schedule of interest income                        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)  (In thousands) 
Interest on finance receivables $4,378  $9,832  $9,040  $21,146  $2,337  $4,662 
Interest on finance receivables at fair value  76,735   65,730   150,793   124,470   80,505   74,058 
Other interest income  1,524   108   2,866   114   1,446   1,342 
        
Interest income $82,637  $75,670  $162,699  $145,730  $84,288  $80,062 

 

The following table presents the components of interest expense:

Schedule of interest expense                        
 Three Months Ended Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)  (In thousands) 
Securitization trust debt $29,171  $15,745  $55,524  $29,273  $35,932  $26,353 
Warehouse lines of credit  5,008   1,386   9,856   2,544   4,321   4,848 
Residual interest financing  1,050   1,050   2,100   2,144   1,209   1,050 
Subordinated renewable notes  477   590   985   1,210   506   508 
        
Interest expense $35,706  $18,771  $68,465  $35,171  $41,968  $32,759 

 

 

 

 2019 

 

 

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 six-month periods ended June 30,March 31, 2024 and 2023 and 2022 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2023March 31, 2024 and 2022:2023:

Computation of earnings per share                
Schedule of earnings per share        
 Three Months Ended
June 30,
 Six Months Ended
June 30,
 Three Months Ended 
 2023  2022  2023  2022 March 31, 
 (In thousands) (In thousands)  2024  2023 
         (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   21,143   20,418 
                
Incremental common shares attributable to exercise of outstanding options and warrants  4,507   6,317   4,741   6,647   3,459   4,974 
                
Weighted average number of common shares used to compute diluted earnings per share  25,373   27,687   25,384   27,943   24,602   25,392 

 

If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-monththree-months ended March 31, 2024 and six-month periods ended June 30, 2023 would have included an additional 1.51.7 million and 1.5 million shares respectively, attributable to the exercise of outstanding options and warrants. For the three-month and six-month periods ended June 30, 2022, 824,000 and 692,000 shares, respectively, would be included in the diluted earnings per share calculation.

 

(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 June 30, 2023,March 31,2024 and December 31, 2022,2023, we had no unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

 

The Company and its subsidiaries file a consolidated federal income tax return and combined or stand-alone state franchise tax returns for certain states. We utilize the asset and liability method of accounting for income taxes, under which deferred income taxes are recognized for the future tax consequences attributable to the differences between the financial statement values of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

 

21

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 $7.43.5 million as of June 30, 2023March 31, 2024 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $7.4$3.5 million consists of approximately $4.82.2 million of net U.S. federal deferred tax assets and $2.61.3 million of net state deferred tax assets.

 

20

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense was $4.72 million and $9.3.0 million for the three months and six months ended June 30, 2023,March 31, 2024, representing effective income tax rates of 2530%, compared to. For the prior year period, income tax expense ofwas $8.9 million and $17.14.6 million for the three months and six months ended June 30, 2022, and representsMarch 31, 2023 representing an effective income tax ratesrate of 2625% and 27% respectively..

 

(8) Legal Proceedings

 

Consumer Litigation.We are routinely involved in various legal proceedings resulting from our consumer finance activities and practices, both continuing and discontinued. Consumers can and do initiate lawsuits against us alleging violations of law applicable to collection of receivables, and such lawsuits sometimes allege that resolution as a class action is appropriate. For the most part, we have legal and factual defenses to consumer claims, which we routinely contest or settle (for immaterial amounts) depending on the particular circumstances of each case.

 

Following our filing of a complaint for a deficiency judgment in the Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim on October 16, 2019 alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. The complaint seeks primarily damages, injunctive relief, waiver of contract deficiencies, and attorney fees and interest. The defendant’s contract provided for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. Nevertheless, in August 2021, the court denied our motion to compel arbitration, without opinion. In April 2022,2024, a motion for certification of a class was filed but has not been ruled upon. It is reasonable to expect that resolution of these claims will be on a class basis.

Wage and Hour Claim.Claim. On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. In August 2023, the parties settled by agreement the claims of the plaintiff and a California settlement class andfor $1.1 million. The settlement was preliminarily approved by the settlementcourt on March 1, 2024 and remains subject to final court approval.

 

Massachusetts Civil Investigative Demand. In September 2021, we received a civil investigative demand from the Office of the Attorney General of the Commonwealth of Massachusetts relating to the Company’s communications with and repossession notices sent to Massachusetts customers. We are cooperatingOn December 28, 2023 and without admitting any wrongdoing, the Company entered into an assurance of discontinuance with the inquiry.Office of the Attorney General of the Commonwealth of Massachusetts, reflecting the parties’ agreements to settle and fully resolve allegations of the Company’s noncompliance with Massachusetts law. Under the settlement the Company paid, after March 31, 2024, $1.24 million to an independent trust for the purposes of making payments to eligible consumers, paying costs of implementation, and paying the Attorney General’s costs of investigation. In addition, the Company agreed to pay $75,000 for the fees and costs of a trustee to oversee the trust.

 

In General.There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of June 30, 2023,March 31, 2024, our best estimate of probable incurred losses for legal contingencies, including the matters identified above. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of June 30, 2023March 31, 2024 is $3.83.6 million, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of June 30, 2023March 31, 2024 does not exceed $7.35.6 million.

 

 

 

 2221 

 

 

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 June 30, 2023,March 31, 2024, the Company evaluated the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses on the portfolio of finance receivables carried at fair value and did not record a mark down to that portfolio.

 

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 Six Months Ended  Three Months Ended 
 June 30,  June 30,  March 31, 
 2023  2022  2023  2022  2024  2023 
 (In thousands) (In thousands)  (In thousands) 
Balance at beginning of period $2,575,117  $1,903,857  $2,476,617  $1,749,098  $2,722,662 $2,476,617 
Finance receivables at fair value acquired during period  305,450   511,068   658,048   904,475   328,893   352,598 
Payments received on finance receivables at fair value  (215,314)  (215,930)  (421,940)  (425,774)  (210,935)  (206,626)
Net interest income accretion on fair value receivables  (46,833)  (29,562)  (94,305)  (60,766)  (54,247)  (47,472)
Mark to fair value     4,700      7,100   5,000    
Balance at end of period $2,618,420  $2,174,133  $2,618,420  $2,174,133  $2,791,373 $2,575,117 

 

22

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:

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 

Schedule of finance receivables to their contractual balances            
  March 31, 2024  December 31, 2023 
  Contractual  Fair  Contractual  Fair 
  Balance  Value  Balance  Value 
  (In thousands) 
Finance receivables measured at fair value $3,001,859  $2,791,373  $2,941,915  $2,722,662 

 

The following table provides certain qualitative information about our level 3 fair value measurements:

Schedule of level 3 fair value measurements              
Financial Instrument Fair Values as of    Inputs as of
  June 30,  December 31,    June 30, December 31,
  2023  2022  Unobservable 2023 2022
  (In thousands)       
Assets:            
Finance receivables measured at fair value $2,618,420  $2,476,617  Discount rate 11.0% - 11.5% 11.0% - 11.3%
          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

Schedule of level 3 fair value measurements                  
Financial Instrument Fair Values as of    Inputs as of 
  March 31,  December 31,    March 31,  December 31, 
  2024  2023  Unobservable Inputs 2024  2023 
   (In thousands)           
Assets:                  
Finance receivables measured at fair value  2,791,373   2,722,662  Discount rate  11.0% - 11.9%   11.0% - 11.7% 
         Cumulative net losses  10.0% - 22.4%   10.0% - 21.7% 

 

The following table summarizes the delinquency status of these finance receivables measured at fair value as of June 30, 2023March 31, 2024 and December 31, 2022: 2023:

Schedule of delinquency status of finance receivables measured at fair value                
 June 30,  December 31,  March 31, December 31, 
 2023  2022  2024  2023 
 (In thousands)  (In thousands) 
Delinquency Status             
Current $2,531,445  $2,375,271  $2,634,116  $2,520,158 
31 - 60 days  180,284   184,968   168,807   204,574 
61 - 90 days  74,963   72,390   83,273   101,057 
91 + days  28,619   29,048   43,348   49,541 
Repo  41,894   39,507   72,315   66,585 
 $2,857,205  $2,701,184  $3,001,859  $2,941,915 

 

Repossessed vehicle inventory, which is included in Other Assetsassets 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 June 30, 2023March 31, 2024, the finance receivables related to the repossessed vehicles in inventory totaled $1.0 million.$546,000. We have applied a valuation adjustment, or loss allowance, of $655,000,$429,000, which is based on a recovery rate of approximately 35%21%, resulting in an estimated fair value and carrying amount of $348,000.$117,000. The fair value and carrying amount of the repossessed inventory at December 31, 20222023 was $1.9 million$597,000 after applying a valuation adjustment of $1.3 million.$472,000.

 

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended June 30, 2023March 31, 2024 and 2022.2023.

23

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The estimated fair values of financial assets and liabilities at June 30, 2023March 31, 2024 and December 31, 2022,2023, were as follows:

Schedule of estimated fair values of financial assets and liabilities                    
Schedule of fair values of financial assets and liabilities                    
 As of June 30, 2023  As of March 31, 2024 
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 $7,081  $7,081  $  $  $7,081  $13,249  $13,249  $  $  $13,249 
Restricted cash and equivalents  148,063   148,063         148,063   137,706   137,706         137,706 
Finance receivables, net  46,359         42,495   42,495   16,891         15,034   15,034 
Accrued interest receivable  93         93   93   191         191   191 
Liabilities:                                        
Warehouse lines of credit $245,272  $  $  $245,272  $245,272  $249,522  $  $  $249,522  $249,522 
Residual interest financing  49,749           49,749   49,749   98,968           98,968   98,968 
Accrued interest payable  7,243         7,243   7,243   8,423         8,423   8,423 
Securitization trust debt  2,225,072         2,137,162   2,137,162   2,277,676         2,252,211   2,252,211 
Subordinated renewable notes  21,204         21,204   21,204   22,140         22,140   22,140 

 

25

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                        
 As of December 31, 2022  As of December 31, 2023 
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 $13,490  $13,490  $  $  $13,490  $6,174  $6,174  $  $  $6,174 
Restricted cash and equivalents  149,299   149,299         149,299   119,257   119,257         119,257 
Finance receivables, net  70,551         60,063   60,063   24,684         20,848   20,848 
Accrued interest receivable  649         649   649   292         292   292 
Liabilities:                                        
Warehouse lines of credit $285,328  $  $  $285,328  $285,328  $234,025  $  $  $234,025  $234,025 
Accrued interest payable  6,190         6,190   6,190   7,928         7,928   7,928 
Securitization trust debt  2,108,744         1,957,995   1,957,995   2,265,446         2,183,331   2,183,331 
Subordinated renewable notes  25,263         25,263   25,263   17,188         17,188   17,188 

 

(10) Subsequent Events

 

On July 25, 2023April 23, 2024 we executed our thirdsecond securitization of 2023.2024. In the transaction, qualified institutional buyers purchased $291.7$319.9 million of asset-backed notes secured by $312.7$337.2 million in automobile receivables originated by CPS. The sold notes, issued by CPS Auto Receivables Trust 2023-C,2024-B, consist of five classes. Ratings of the notes were provided by Standard & Poor’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer. The weighted average yield on the notes is approximately 7.13%6.69%.

24

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

The 2023-C2024-B transaction has initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 6.70%5.15%. The transaction agreements require accelerated payment of principal on the notes to reach overcollateralization of the lesser of 9.70%8.40% of the original receivable pool balance, or 21.50%23.15% of the then outstanding pool balance. The transaction was a private offering of securities, not registered under the Securities Act of 1933, or any state securities law.

 

On April 10, 2024, our Compensation Committee evaluated and determined the non-equity incentive plan payment amounts earned under the Executive Management Bonus Plan for each of our executive officers for fiscal year ended December 2023. The Company thereafter paid those amounts in April 2024, including $3,005,000 for Charles E. Bradley, Jr., $582,063 for Michael T. Lavin, $385,655 for Danny Bharwani, $413,406 for Teri L. Robinson, and $367,472 for Laurie A. Straten.

Cautionary Note Regarding Forward-Looking Statements

Discussions of certain matters contained in this report may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act, and as such, may involve risks and uncertainties. You can generally identify forward-looking statements as statements containing the words “will,” “would,” “believe,” “may,” “could,” “expect,” “anticipate,” “intend,” “estimate,” “assume,” “plans,” “goals, “strategy,” “future,” “likely,” “should” or other similar expressions.

Examples of forward-looking statements include, among others, statements we make regarding:

·charge-offs and recovery rates;
·the willingness or ability of obligors to pay pursuant to contractual terms;
·our ability to enforce rights under contracts;
·our ability to and rates at which we plan to acquire automobile contracts;
·the anticipated levels of recoveries upon sale of repossessed vehicles;
·revenues or expenses;
·provisions for credit losses;
·expected industry and general economic trends;
·accrued losses for legal contingencies;
·anticipated deferred tax assets;
·estimates of taxable income;
·our ability to service and repay our debt;
·the structuring of securitization transactions as secured financings and the effects of such structures on financial items and future profitability; or
·the effect of the change in structure on our profitability and the duration of the period in which our profitability would be affected by the change in securitization structure.

25

CONSUMER PORTFOLIO SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Our actual results, performance and achievements may differ materially from the results, performance and achievements expressed or implied in such forward-looking statements. Some of the factors that might cause such a difference include, but are not limited to, the following:

·unexpected exogenous events, such as a widespread public health emergency;
·mandates imposed in reaction to such events, such as prohibitions of otherwise permissible activity;
·changes in general economic conditions;
·changes in performance of our automobile contracts
·increases in interest rates;
·our ability to generate sufficient operating and financing cash flows;
·competition;
·the level of losses incurred on contracts in our managed portfolio;
·adverse decisions by courts or regulators;
·regulatory changes with respect to consumer finance;
·changes in the market for used vehicles;
·levels of cash releases from existing pools of contracts;
·the terms on which we are able to finance contract purchases;
·the willingness or ability of dealers to assign contracts to us on acceptable terms;
·the terms on which we are able to complete term securitizations once contracts are acquired;
·any breach in the security of our systems; and
·such other factors as discussed through the “Risk Factors” section of this report.

Forward-looking statements are neither historical facts nor guarantees of performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy and other uncertain conditions. Because forward-looking statements relate to the future, they involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond our ability to control or predict, including those described herein, and in any documents incorporated by reference in this report. Therefore, you should not rely on any of these forward-looking statements. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

We undertake no obligation to publicly update any forward-looking information. You are advised to consult any additional disclosure we make in our periodic reports filed with the SEC.

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

We are a specialty finance company. Our business is to purchase and service retail automobile contracts originated primarily by franchised automobile dealers and, to a lesser extent, by select independent dealers in the United States in the sale of new and used automobiles, light trucks and passenger vans. Through our automobile contract purchases, we provide indirect financing to the customers of dealers who have limited credit histories or past credit problems, who we refer to as sub-prime customers. We serve as an alternative source of financing for dealers, facilitating sales to customers who otherwise might not be able to obtain financing from traditional sources, such as commercial banks, credit unions and the captive finance companies affiliated with major automobile manufacturers. In addition to purchasing installment purchase contracts directly from dealers, we have also originate(i) originated vehicle purchase money loans by lending directly to consumers, and have (i)(ii) acquired installment purchase contracts in four merger and acquisition transactions, and (ii)(iii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders. In this report, we refer to all of such contracts and loans as "automobile contracts."

 

We were incorporated and began our operations in March 1991. From inception through June 30, 2023,March 31, 2024, we have originated a total of approximately $20.7$21.5 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

 

Contract Purchases and Outstanding Managed Portfolio

Contract Purchases and Outstanding Managed Portfolio
  $ in thousands 
Period Contracts Purchased in Period  Managed Portfolio at Period End 
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  1,854,385   3,001,308 
2023  1,357,752   3,194,623 
Three months ended March 31, 2024  346,305   3,243,390 

 

  $ 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 sixthree months ended June 30, 2023,March 31, 2024, we originated $70.8$16.1 million under this third-party program. As of June 30, 2023,March 31, 2024, our managed portfolio includes $239.8$222.2 million of such third-party receivables.

 

Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California. Credit and underwriting functions are performed primarily in that California branch with certain of these functions also performed in our Florida, Nevada, and NevadaVirginia 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.

 

 

 

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Securitization and Warehouse Credit Facilities

 

Throughout the period for which information is presented in this report, we have purchased automobile contracts with the intention of financing them on a long-term basis through securitizations, and on an interim basis through warehouse credit facilities. All such financings have involved identification of specific automobile contracts, sale of those automobile contracts (and associated rights) to one of our special-purpose subsidiaries, and issuance of asset-backed securities to be purchased by institutional investors. Depending on the structure, these transactions may be accounted for under generally accepted accounting principles as sales of the automobile contracts or as secured financings. All of our active securitizations are structured as secured financings.

 

When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet. We then periodically (i) recognize interest and fee income on the contracts, and (ii) recognize interest expense on the securities issued in the transaction. For automobile contracts acquired after 2017 we take account of estimated credit losses in our computation of a level yield used to determine recognition of interest on the contracts. For contracts acquired before 2018, we adopted CECL on January 1, 2020 and we may, as circumstances warrant, record or reverse expense provisions for credit losses.

 

Since 1994 we have conducted 97100 term securitizations of automobile contracts that we originated. As of June 30, 2023,March 31, 2024, 18 of those securitizations are active and all are structured as secured financings. We have generally conductedconduct our securitizations on a quarterly basis, near the endbeginning of each calendar quarter, resulting in four securitizations per calendar year. However, we completed only three securitizations in 2020. In April 2020 we closed only three termpostponed our planned securitization transactionsdue to the onset of the pandemic and the effective closure of the capital markets in that calendar year rather than four.which our securitizations are executed. Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through April 2024.

 

Our recent history of term securitizations is summarized in the table below:

 

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

Recent Asset-Backed Term Securitizations
  $ in thousands 
Period Number of Term Securitizations  Receivables Pledged in Term Securitizations 
2018  4   883,452 
2019  4   1,014,124 
2020  3   741,867 
2021  4   1,145,002 
2022  4   1,537,383 
2023  4   1,352,114 
Three months ended March 31, 2024  1   300,614 

 

Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. We currently have short-term funding capacity of $400 million 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,March 2024, extending the revolving period to January 2024,March 2026, followed by an amortization period to January 2026.March 2028. In June 2022, we doubled the capacity for this facility from $100 million to $200 million.

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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.

 

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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 June 30, 2023,March 31, 2024, we were in compliance with all such covenants.

Results of Operations

 

Comparison of Operating Results for the three months ended June 30, 2023March 31, 2024 with the three months ended June 30, 2022March 31, 2023

 

Revenues.  During the three months ended June 30, 2023,March 31, 2024, our revenues were $84.9$91.7 million, an increase of $2.9$8.6 million, or 3.5%10.4%, from the prior year revenue of $82.0$83.1 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the prior year periodthree months ended March 31, 2024 include a $4.7$5.0 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. Our evaluationIn the current period, our re-evaluation of the financefair values of these receivables measured atresulted in a mark up for certain older receivables and a mark down to the fair values of newer receivables. The fair value resultedmark up on the older receivables exceeded the mark down to the newer receivables resulting in a net mark up of $5.0 million. Based on this evaluation, there was no mark up or mark down to the fair value portfolio in the currentprior year period.

 

Interest income for the three months ended June 30, 2023March 31, 2024 increased $7.0$4.2 million, or 9.2%5.3%, to $82.6$84.3 million from $75.7$80.1 million in the prior year. The primary reason for the increase in interest income is the 17.6%4.8% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreasedincreased from 12.3%11.2% in the prior year period to 11.4%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.period. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The table below shows the average balance and interest yield of our loan portfolio for the three months ended June 30, 2023March 31, 2024 and 2022:2023:

 

 Three Months Ended June 30,  Three Months Ended March 31, 
 2023  2022  2024  2023 
 (Dollars in thousands)  (Dollars in thousands) 
 Average     Interest Average     Interest  Average     Interest Average     Interest 
 Balance  Interest  Yield  Balance  Interest  Yield  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%  $2,993,816   $84,288   11.3%  $2,856,598  $80,062   11.2% 

 

29

Other income was $2.2$2.5 million for the three months ended June 30, 2023March 31, 2024 compared to $1.6$3.0 million for the comparable period in 2022.2023. This 34.8% increase19.2% decrease was primarily driven by the increasedecrease in origination and servicing fees we earned from third party receivables. These fees were $1.9$2.1 million for the quarter ended June 30, 2023March 31, 2024 compared to $1.2$2.7 million in the prior year period.

29

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 $66.3$85.2 million for the three months ended June 30, 2023,March 31, 2024, compared to $47.8$64.7 million for the prior period, an increase of $18.5$20.5 million, or 38.6%31.7%. The increase is primarily due to increases in interest expense and general and administrative expenses.

 

Employee costs were $21.1$24.4 million during the three months ended June 30, 2023March 31, 2024 compared to $20.6$22.0 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, June 30, 2023March 31, 2024 and 2022:2023:

 

  Three Months Ended June 30, 
  2023  2022 
  (Dollars in millions) 
Contracts purchased (dollars) $318.4  $548.1 
Contracts purchased (units)  15,296   23,261 
Managed portfolio outstanding (dollars) $2,910.3  $2,650.9 
Managed portfolio outstanding (units)  176,458   167,146 
         
Number of Originations staff  165   194 
Number of Sales staff  102   132 
Number of Servicing staff  448   405 
Number of other staff  88   68 
Total number of employees  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 was $11.8 million, an increase of $3.5 million from $8.3 million in the prior year period.

30

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

Interest on securitization trust debt increased by $13.4 million for the three months ended June 30, 2023 compared to the prior period. The average balance of securitization trust debt increased to $2,333.0 million for the three months ended June 30, 2023 compared to $2,037.3 million for the three months ended June 30, 2022. The annualized average rate on our securitization trust debt was 5.0% for the three months ended June 30, 2023 compared to 3.1% 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:

PeriodBlended Cost of Funds
January 20203.08%
June 20204.09%
September 20202.39%
January 20211.11%
April 20211.65%
July 20211.55%
October 20212.09%
January 20222.54%
April 20224.83%
July 20226.02%
October 20228.48%
January 20236.48%
April 20237.17%

Interest expense on warehouse credit line debt increased by $3.6 million to $5.0 million for the three months ended June 30, 2023 compared to $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 $193.4 million during the three months ended June 30, 2023 compared to $85.6 million for the same period in 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.

Interest expense on subordinated renewable notes was $477,000 for the three months ended June 30, 2023. The average balance of the outstanding subordinated debt decreased by $4.5 million to $22.2 million for the three months ended June 30, 2023 compared to $26.7 million for the prior year. The average yield of subordinated notes decreased to 8.6% compared to 8.8% in the prior period.

In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense on this residual interest financing was $1.1 million for the three months ended June 30, 2023 and 2022.

31

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

  Three Months Ended June 30, 
  2023  2022 
  (Dollars in thousands) 
        Annualized        Annualized 
  Average     Average  Average     Average 
  Balance (1)  Interest  Yield/Rate  Balance (1)  Interest  Yield/Rate 
Interest Earning Assets                        
Loan Portfolio $2,903,988  $82,637   11.4%  $2,469,955  $75,670   12.3% 
                         
Interest Bearing Liabilities                        
Warehouse lines of credit $193,408  $5,008   10.4%  $85,598  $1,387   6.5% 
Residual interest financing  50,000   1,050   8.4%   50,000   1,050   8.4% 
Securitization trust debt  2,332,997   29,171   5.0%   2,037,327   15,745   3.1% 
Subordinated renewable notes  22,208   477   8.6%   26,688   590   8.8% 
  $2,598,613   35,706   5.5%  $2,199,613   18,772   3.4% 
                         
Net interest income/spread     $46,931          $56,898     
Net interest yield (2)          5.9%           8.9% 
   ��                     
Ratio of average interest earning assets to average interest bearing liabilities          112%           112% 

     (1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.

     (2)  Annualized net interest income divided by average interest earning assets.

  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)

32

For the three months ended June 30, 2023, we recorded a reduction to provision for credit losses on finance receivables in the amount of $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 $8.0 million in reductions to provision for credit losses for the three months ended June 30, 2022.

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of June 30, 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. Sales expense decreased to $5.5 million during the three months ended June 30, 2023 from $5.8 million in the same quarter in 2022. We purchased $318.4 million of new contracts during the three months ended June 30, 2023 compared to $548.1 million in the prior year period.

Occupancy expenses was $1.6 million for the three months ending June 30, 2023, which is down from the $1.9 million in the first quarter of 2022.

Depreciation and amortization expenses decreased to $211,000 compared to $385,000 in the previous year.

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

Comparison of Operating Results for the six months ended June 30, 2023 with the six months ended June 30, 2022

Revenues.  During the six months ended June 30, 2023, our revenues were $168.0 million, an increase of $11.6 million, or 7.4%, from the prior year revenue of $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. Revenues for the prior year period include a $7.1 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. Our evaluation of the finance receivables measured at fair value resulted in no mark up or mark down to the fair value portfolio in the current year period.

Interest income for the six months ended June 30, 2023 increased $17.0 million, or 11.6%, to $162.7 million from $145.7 million in the prior year. The primary reason for the increase in interest income is the 21.4% increase in the average balance of 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 balance and interest yield of our loan portfolio for the six months ended June 30, 2023 and 2022:

  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% 

33

Other income was $5.3 million for the six months ended June 30, 2023 compared to $3.6 million for the 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 June 30, 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.

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 $130.9 million for the six months ended June 30, 2023, compared to $92.8 million for the prior period, an increase of $38.1 million, or 41.0%. The increase is primarily due to increases in interest expense and general and administrative expenses.

Employee costs were $43.2 million during the six months ended June 30, 2023 compared to $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 six-month periods ended, June 30, 2023 and 2022:

 Three Months Ended March 31, 
 Six Months Ended June 30,  2024  2023 
 2023  2022  (Dollars in millions) 
 (Dollars in millions)    
Contracts purchased (dollars) $733.5  $958.1  $346.3  $415.2 
Contracts purchased (units)  36,184   41,059   16,414   20,175 
Managed portfolio outstanding (dollars) $2,910.3  $2,650.9  $3,021.2  $2,881.8 
Managed portfolio outstanding (units)  176,458   167,146   181,650   175,197 
                
Number of Originations staff  165   194   191   184 
Number of Sales staff  102   132   101   108 
Number of Servicing staff  448   405   427   401 
Number of other staff  88   68   183   86 
Total number of employees  803   799   902   779 

 

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 $23.2$13.8 million, for the six months ended June 30, 2023, an increase of $6.7$2.4 million from $16.5$11.4 million in the prior year period.

 

 

 

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Interest expense for the sixthree months ended June 30, 2023March 31, 2024 was $68.5$42.0 million and represented 49.3% of total operating expenses, compared to $35.2$32.8 million in the previous year, an increasewhen it was 50.7% of $33.3 million.total operating expenses.

 

Interest on securitization trust debt increased by $26.3$9.6 million for the sixthree months ended June 30, 2023March 31, 2024 compared to the prior period. The average balance of securitization trust debt increased to $2,308.0$2,388.1 million for the sixthree months ended June 30, 2023March 31, 2024 compared to $1,922.9$2,283.3 million for the sixthree months ended June 30, 2022.March 31, 2023. The annualized average rate on our securitization trust debt was 4.8%6.0% for the sixthree months ended June 30, 2023March 31, 2024 compared to 3.0%4.6% 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 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%
July 20237.13%
October 20237.89%
January 20246.51%

 

Interest expense on warehouse credit line debt increaseddecreased by $7.3 million$528,000 to $9.9$4.3 million for the sixthree months ended June 30, 2023March 31, 2024 compared to $2.5$4.8 million in the prior year period. The increasedecrease was due to the higherlower utilization of our credit lines and higher rates on the debt during the six month periodquarter compared to last year. The average balance of our warehouse debt was $194.2$164.9 million during the sixthree months ended June 30, 2023March 31, 2024 compared to $76.1$194.9 million for the same period in 2022.2023. The annualized average rate on our credit line debt was 10.2%10.5% for the sixthree months ended June 30, 2023March 31, 2024 compared to 6.7%9.9% in the prior year period.

 

Interest expense on subordinated renewable notes was $985,000$506,000 for the sixthree months ended June 30, 2023.March 31, 2024. The average balance of the outstanding subordinated debt decreased by $3.5$3.3 million to $23.2$20.8 million for the sixthree months ended June 30, 2023March 31, 2024 compared to $26.6$24.1 million for the prior year. The average yield of subordinated notes decreasedincreased to 8.5%9.7% compared to 9.1%8.4% in the prior period.

 

In June 2021, we completed a residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. In March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. Interest expense on thisthe residual interest financing was $2.1$1.2 million for the sixthree months ended June 30, 2023 and 2022.March 31, 2024 compared to $1.1 for the same period in 2023.

 

 

 

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The following table presents the components of interest income and interest expense and a net interest yield analysis for the six-monththree-month periods ended June 30, 2023March 31, 2024 and 2022:2023:

 

 Six Months Ended June 30,  Three Months Ended March 31,
 2023  2022  2024 2023
 (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                                       
Loan portfolio $2,880,293  $162,699   11.3%  $2,371,719  $145,730   12.3% 
Loan Portfolio $2,993,816 $84,288   11.3%  $2,856,598  $80,062  11.2%
                                            
Interest Bearing Liabilities                                            
Warehouse lines of credit $194,159   9,856   10.2%  $76,085   2,544   6.7%  $164,883 $4,321   10.5%  $194,918  $4,848  9.9%
Residual interest financing  50,000   2,100   8.4%   50,984   2,144   8.4%   67,033   1,209   7.2%   50,000   1,050  8.4%
Securitization trust debt  2,308,128   55,524   4.8%   1,922,914   29,273   3.0%   2,388,146   35,932   6.0%   2,283,258   26,353  4.6%
Subordinated renewable notes  23,158   985   8.5%   26,607   1,210   9.1%   20,842   506   9.7%   24,119   508  8.4%
 $2,575,445   68,465   5.3%  $2,076,590   35,171   3.4%  $2,640,904   41,968   6.4%  $2,552,295   32,759  5.1%
                                              
Net interest income/spread     $94,234          $110,559          $42,320          $47,303   
Net interest yield (2)          6.0%           8.9%           4.9%          6.1%
                        
Ratio of average interest earning assets to average interest bearing liabilities          112%           114%           113%          112%

(1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
(2)  Annualized net interest income divided by average interest earning assets.

 

     (1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.

     (2)  Annualized net interest income divided by average interest earning assets.

Three Months Ended March 31, 2024 
 Six Months Ended June 30, 2023
Compared to June 30, 2022
 Compared to March 31, 2023 
 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             $      
Loan portfolio $16,969  $27,468  $(10,499)
Loan Portfolio $4,226  $3,478  $748 
            
Interest Bearing Liabilities                        
Warehouse lines of credit  7,312   584   6,728   (527)  (774)  247 
Residual interest financing  (44)  (38)  (6)  159   360   (201)
Securitization trust debt  26,251   (14,523)  40,774   9,579   1,220   8,359 
Subordinated renewable notes  (225)  (90)  (135)  (2)  (70)  68 
  33,294   (14,067)  47,361   9,209   736   8,473 
                        
Net interest income/spread $(16,325) $41,535  $(57,860) $(4,983) $2,742  $(7,725)

 

 

 

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For the sixthree months ended June 30, 2023,March 31, 2024, we recorded a reduction to provision for credit losses on finance receivables in the amount of $18.7$1.6 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 $17.4$9.0 million in reductions to provision for credit losses for the sixthree months ended June 30, 2022.March 31, 2023.

 

Our evaluation of the allowance for credit losses indicated that the reserves against future losses are adequate as of June 30, 2023.March 31, 2024.

 

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 consistsexpenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers. Sales expense was $11.2decreased to $4.9 million forduring the sixthree months ended June 30, 2023 and 2022.March 31, 2024 from $5.7 million in the same quarter in 2023. We purchased $733.5$346.3 million of new contracts during the sixthree months ended June 30, 2023March 31, 2024 compared to $958.1$415.2 million in the prior year period.

 

Occupancy expenses was $3.2$1.6 million for the sixthree months ending June 30, 2023,March 31, 2024, which is downup from $3.8the $1.5 million forin the same period in 2022.first quarter of 2023.

 

Depreciation and amortization expenses decreased to $442,000$215,000 compared to $802,000$231,000 in the previous year.

 

For the sixthree months ended June 30, 2023,March 31, 2024, we recorded income tax expense of $9.3$2.0 million, representing a 25%30% effective tax rate. In the prior period, our income tax expense was $17.1$4.6 million, representing a 27%25% 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.

 

 

 

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Delinquency, Repossession and Extension Experience (1)

Total OwnedManaged Portfolio (Excludes Third Party Portfolio)

 

  June 30, 2023  June 30, 2022  December 31, 2022 
  Number of     Number of     Number of    
  Contracts  Amount  Contracts  Amount  Contracts  Amount 
  (Dollars in thousands) 
Delinquency Experience                        
Gross servicing portfolio (1)  176,458  $2,910,288   162,296  $2,554,855   170,658  $2,795,383 
Period of delinquency (2)                        
31-60 days  12,273   189,384   10,721   149,520   13,434   201,764 
61-90 days  5,261   79,302   4,096   54,505   5,481   80,145 
91+ days  2,082   29,707   1,302   16,996   2,148   31,036 
Total delinquencies (2)  19,616   298,393   16,119   221,021   21,063   312,946 
Amount in repossession (3)  2,920   42,897   2,028   26,988   2,904   41,401 
Total delinquencies and amount in repossession (2)  22,536  $341,290   18,147  $248,009   23,967  $354,347 
                         
Delinquencies as a percentage of gross servicing portfolio  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  12.8%   11.7%   11.2%   9.7%   14.0%   12.7% 
                         
                         
Extension Experience                        
Contracts with one extension, accruing  31,878  $575,139   23,231  $341,794   27,584  $464,323 
Contracts with two or more extensions, accruing  39,569   464,605   41,636   445,839   38,714   417,682 
   71,447   1,039,744   64,867   787,633   66,298   882,005 
                         
Contracts with one extension, non-accrual (4)  1,338   22,497   643   8,946   981   14,792 
Contracts with two or more extensions, non-accrual (4)  1,236   13,821   1,355   15,009   1,485   15,395 
   2,574   36,318   1,998   23,955   2,466   30,187 
                         
Total contracts with extensions  74,021  $1,076,062   66,865  $811,588   68,764  $912,192 

  March 31, 2024  March 31, 2023  December 31, 2023 
  Number of     Number of     Number of    
  Contracts  Amount  Contracts  Amount  Contracts  Amount 
  (Dollars in thousands) 
Delinquency Experience            
Gross servicing portfolio (1)  181,650  $3,021,185   175,197  $2,881,844   179,198  $2,970,066 
Period of delinquency (2)                        
31-60 days  10,992   172,425   10,057   151,743   13,337   210,200 
61-90 days  5,443   85,338   4,306   62,557   6,717   104,144 
91+ days  2,792   43,816   1,660   23,839   3,252   50,610 
Total delinquencies (2)  19,227   301,579   16,023   238,139   23,306   364,954 
Amount in repossession (3)  5,020   72,861   3,246   47,710   4,653   67,182 
Total delinquencies and amount in repossession (2)  24,247  $374,440   19,269  $285,849   27,959  $432,136 
Delinquencies as a percentage of gross servicing portfolio  10.6%   10.0%   9.1%   8.3%   13.0%   12.3% 
                         
Total delinquencies and amount in repossession as a percentage of gross servicing portfolio  13.3%   12.4%   11.0%   9.9%   15.6%   14.5% 
                         
Extension Experience                        
Contracts with one extension, accruing  33,481  $593,699   30,126  $530,950   33,920  $610,617 
                         
Contracts with two or more extensions, accruing  43,748   601,574   38,838   431,936   42,462   563,308 
   77,229   1,195,273   68,964   962,886   76,382   1,173,925 
                         
Contracts with one extension, non-accrual (4)  2,628   42,315   1,072   16,770   2,367   38,933 
                         
Contracts with two or more extensions, non-accrual (4)  2,022   28,015   1,167   12,641   2,081   27,497 
   4,650   70,330   2,239   29,411   4,448   66,430 
                         
Total contracts with extensions  81,879  $1,265,603   71,203  $992,297   80,830  $1,240,355 

(1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract. The information in the table represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold in securitization transactions that we continue to service. The table does not include certain contracts we have serviced for third parties on which we earn servicing fees only and have no credit risk._________________________

(1)All amounts and percentages are based on the amount remaining to be repaid on each automobile contract. The information in the table represents the gross principal amount of all automobile contracts we have purchased, including automobile contracts subsequently sold in securitization transactions that we continue to service. The table does not include certain contracts we have serviced for third parties on which we earn servicing fees only and have no credit risk.
(2)We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended within limits specified in the Servicing Agreements. The period of delinquency is based on the number of days payments are contractually past due. Automobile contracts less than 31 days delinquent are not included. The delinquency aging categories shown in the tables reflect the effect of extensions.
(3)Amount in repossession represents financed vehicles that have been repossessed but not yet liquidated.
(4)(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.

 

 

 3834 

 

 

Net Charge-Off Experience (1)

Total OwnedManaged Portfolio (Excludes Third Party 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 
  March 31,  March 31,  December 31, 
  2024  2023  2023 
  (Dollars in thousands) 
Average servicing portfolio outstanding $2,993,816  $2,856,598  $2,913,571 
Annualized net charge-offs as a percentage of average servicing portfolio (2)  7.8%   5.2%   6.5% 

_________________________

(1)All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract.
(2)Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying interim consolidated financial statements. March 31, 2024 and March 31, 2023 percentages represent three months ended March 31, 2024 and March 31, 2023 annualized. December 31, 2022 represents 12 months ended December 31, 2023.

(1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract.

(2) Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying interim consolidated financial statements. June 30, 2023 and June 30, 2022 percentages represent three months ended June 30, 2023 and June 30, 2022 annualized. December 31, 2022 represents 12 months ended December 31, 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.

 

The basic question in deciding to grant an extension is whether or not we will (a) be delaying the inevitable repossession and liquidation or (b) risk losing the vehicle as a result of not being able to locate the obligor and vehicle. In both of those situations, the loss would likely be higher than if the vehicle had been repossessed without the extension. The benefits of granting an extension include minimizing current losses and delinquencies, minimizing lifetime losses, getting the obligor’s account current (or close to it) and building goodwill so that the obligor might prioritize us over other creditors on future payments. Our servicing staff are trained to identify when a past due obligor is facing a temporary problem that may be resolved with an extension. In some cases, the extension will be granted in conjunction with our receiving all or a portion of a past due payment from the obligor, thereby indicating an additional monetary and psychological commitment to the contract on the obligor’s part.

 

The credit assessment for granting an extension is initially made by our collector, who bases the recommendation on the collector’s discussions with the obligor. In such assessments the collector will consider, among other things, the following factors: (1) the reason the obligor has fallen behind in payment; (2) whether or not the reason for the delinquency is temporary, and if it is, have conditions changed such that the obligor can begin making regular monthly payments again after the extension; (3) the obligor's past payment history, including past extensions if applicable; (4) the obligor’s willingness to communicate and cooperate on resolving the delinquency; and (5) a numeric score from our internal risk assessment system that indicating the likelihood that the extension will prove beneficial. If the collector believes the obligor is a good candidate for an extension, an approval is obtained from a supervisor, who will review the same factors stated above prior to offering the extension to the obligor. After receiving an extension, an account remains subject to our normal policies and procedures for interest accrual, reporting delinquency and recognizing charge-offs.

35

We believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables. The table below summarizes the status, as of June 30, 2023,March 31, 2024, for accounts that received extensions from 2010 through 2022:2023:

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

Period of Extension # Extensions Granted Active or Paid Off at March 31, 2024 % Active or Paid Off at March 31, 2024 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 11,138 47.6% 11,277 48.2% 979 4.2% 23
                 
2014 25,773 10,460 40.6% 14,477 56.2% 833 3.2% 25
                 
2015 53,319 22,153 41.5% 30,027 56.3% 1,139 2.1% 26
                 
2016 80,897 35,856 44.3% 42,810 52.9% 2,231 2.8% 27
                 
2017 133,847 58,289 43.5% 67,566 50.5% 7,992 6.0% 23
                 
2018 121,531 61,646 50.7% 52,364 43.1% 7,521 6.2% 21
                 
2019 71,548 46,719 65.3% 21,554 30.1% 3,275 4.6% 20
                 
2020 83,170 59,151 71.1% 21,470 25.8% 2,549 3.1% 20
                 
2021 47,010 35,369 75.2% 10,405 22.1% 1,236 2.6% 17
                 
2022 56,142 43,918 78.2% 10,270 18.3% 1,954 3.5% 12
                 
2023 83,113 76,279 91.8% 4,042 4.9% 2,792 3.4% 6

______________________

Note: Table excludes extensions on portfolios serviced for third parties

We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in 2019, 69.1%65.3% were either paid in full or active and performing as of June 30, 2023.March 31, 2024. Each of these successful accounts represent continued payments of interest and principal (including payment in full in many cases), where without the extension we likely would have incurred a substantial loss and no interest revenue after the extension.

36

For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 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:

 

 Six Months Ended June 30, Six Months Ended June 30, Year Ended December 31,  Three Months Ended March 31, Three Months Ended March 31, Year Ended December 31, 
 2023 2022 2022  2024 2023 2023 
              
Average number of extensions granted per month  6,342   4,164   4,869   6,760   6,089   6,926 
                        
Average number of outstanding accounts  174,937   157,273   162,264   180,332   173,731   176,438 
                        
Average monthly extensions as % of average outstandings  3.6%   2.6%   3.0%   3.7%   3.5%   3.9% 

__________________________________________

Note: Table excludes portfolios originated and owned by third parties

 

  March 31, 2024  March 31, 2023  December 31, 2023 
  Number of Contracts  Amount  Number of Contracts  Amount  Number of Contracts  Amount 
        (Dollars in thousands)       
                   
Contracts with one extension  36,109  $636,014   31,198  $547,720   36,287  $649,551 
Contracts with two extensions  20,228   345,488   14,365   201,960   19,335   326,552 
Contracts with three extensions  10,758   153,331   9,557   105,955   10,109   133,207 
Contracts with four extensions  6,648   69,027   7,672   72,951   6,784   67,735 
Contracts with five extensions  5,017   40,981   5,295   43,085   5,197   42,734 
Contracts with six extensions  3,119   20,762   3,116   20,626   3,118   20,576 
   81,879  $1,265,603   71,203  $992,297   80,830  $1,240,355 
                         
Managed portfolio (excluding originated and owned by 3rd parties)  181,650  $3,021,185   175,197  $2,881,844   179,198  $2,970,066 

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.

 

37

Non-Accrual Receivables

 

It is not uncommon for our obligors to fall behind in their payments. However, with the diligent efforts of our Servicing staff and systems for managing our collection efforts, we regularly work with our customers to resolve delinquencies. Our staff are trained to employ a counseling approach to assist our customers with their cash flow management skills and help them to prioritize their payment obligations in order to avoid losing their vehicle to repossession. Through our experience, we have learned that once a customer becomes greater than 90 days past due, it is not likely that the delinquency will be resolved and will ultimately result in a charge-off. As a result, we do not recognize any interest income for contracts that are greater than 90 days past due.

If a contract exceeds the 90 days past due threshold at the end of one period, and then makes the necessary payments such that it becomes less than or equal to 90 days delinquent at the end of a subsequent period, it would be restored to full accrual status for our financial reporting purposes. At the time a contract is restored to full accrual in this manner, there can be no assurance that full repayment of interest and principal will ultimately be made. However, we monitor each obligor’s payment performance and are aware of the severity of his delinquency at any time. The fact that the delinquency has been reduced below the 90-day threshold is a positive indicator. Should the contract again exceed the 90-day delinquency level at the end of any reporting period, it would again be reflected as a non-accrual account.

Our policy for placing a contract on non-accrual status is independent of our policy to grant an extension. In practice, it would be an uncommon circumstance where an extension was granted and the account remained in a non-accrual status, since the goal of the extension is to bring the contract current (or nearly current).

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 six-monththree-month period ended June 30, 2023March 31, 2024 was $120.7$52.7 million, a decrease of $1.0$12.4 million, compared to net cash provided by operating activities for the six-monththree-month period ended June 30, 2022March 31, 2023 of $119.7$65.1 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 $193.1$108.6 million for the sixthree months ended June 30, 2023March 31, 2024 compared to $398.4$121.2 million in the prior year period. Net cash used in investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were $658.0$353.9 million and $904.5$353.9 million during the first sixthree months of 2024 and 2023, and 2022, respectively.

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Net cash provided by financing activities for the sixthree months ended June 30, 2023March 31, 2024 was $64.8$81.5 million compared to $270.5$62.3 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 sixthree months of 2023,2024, we issued $657.7$280.9 million in new securitization trust debt compared to $712.4$324.8 million for the same period in 2022.2023. We repaid $541.0$268.7 million in securitization trust debt in the sixthree months ended June 30, 2023March 31, 2024 compared to repayments of securitization trust debt of $536.8$258.2 million in the prior year period. In the sixthree months ended June 30, 2023,March 31, 2024, we had net repayments on warehouse lines of credit of $41.0$17.2 million, compared to net advancesproceeds from warehouse lines of credit of $124.6 million$7,000 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 June 30, 2023,March 31, 2024, we had unrestricted cash of $7.1$13.2 million and $154.7$150.5 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of June 30, 2023,March 31, 2024, we had approximately $23.5$39.5 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 six-monththree-month period ended June 30, 2023,March 31, 2024, we completed two securitizationsone securitization aggregating $657.7$280.9 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 June 30, 2023,March 31, 2024, we were in compliance with all such financial covenants.

39

 

We have and will continue to have a substantial amount of indebtedness. At June 30, 2023,March 31, 2024, we had approximately $2,541.3$2,648.3 million of debt outstanding. Such debt consisted primarily of $2,225.1$2,277.7 million of securitization trust debt and $245.3$249.5 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $116.3$12.2 million while our warehouse lines of credit debt has decreasedincreased by $40.0$15.5 million since December 31, 20222023 (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 $21.2$22.1 million and $25.3$17.2 million in subordinated renewable notes outstanding at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. On March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. As of June 30, 2023,March 31, 2024, all $50.0$100.0 million of this debt remains outstanding.

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 4440 

 

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, 2023.2024. 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 June 30, 2023,March 31, 2024, we had approximately $2,541.3$2,648.3 million of debt outstanding. Such debt consisted primarily of $2,225.1$2,277.7 million of securitization trust debt and $245.3$249.5 million of debt from warehouse lines of credit. Our securitization trust debt has increased by $116.3$12.2 million while our warehouse lines of credit debt has decreasedincreased by $40.0$15.5 million since December 31, 20222023 (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 $21.2$22.1 million and $25.3$17.2 million in subordinated renewable notes outstanding at June 30, 2023March 31, 2024 and December 31, 2022,2023, respectively. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. On March 2024, we completed a new residual interest financing of our residual interests from previously issued securitizations in the amount of $50.0 million. As of June 30, 2023,March 31, 2024, all $50.0$100.0 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.

 

45

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.

46

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

During the three months ended June 30, 2023,March 31, 2024, we repurchased 301,017101,355 shares from existing shareholders, as reflected in the table below.

 

41

Issuer Purchases of Equity Securities

 

  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     

Period (1) Total Number of Shares Purchased  Average Price Paid per Share  Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs  Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2) 
             
January 2024  17,718  $8.83   17,718  $1,343,845 
February 2024  27,119  $9.05   27,119  $1,098,333 
March 2024  56,518  $8.15   56,518  $637,823 
Total  101,355  $8.51   101,355     

____________________

(1)Each monthly period is the calendar month.
(2)Through June 30, 2023,March 31, 2024, 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 5. Other Information

During the quarter ended March 31, 2024, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

Item 6. Exhibits

The Exhibits listed below are filed with this report.

 

4.14Instruments 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.
31.1Rule 13a-14(a) Certification of the Chief Executive Officer of the registrantregistrant..
31.2Rule 13a-14(a) Certification of the Chief Financial Officer of the registrantregistrant..
32

Section 1350 CertificationsCertifications..*

101.INSInline 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.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Definition Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover 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.

 4742 

 

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: August 8, 2023

By: /s/   CHARLES E. BRADLEY, JR.

Charles E. Bradley, Jr.

CONSUMER PORTFOLIO SERVICES, INC.
(Registrant)
Date: May 10, 2024
By:

/s/ CHARLES E. BRADLEY, JR.

Charles E. Bradley, Jr.
Chief Executive Officer

(Principal Executive Officer)

Date: August 8, 2023

May 10, 2024

By:/s/ DENESH BHARWANI

Denesh Bharwani

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

48

43