PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes for Q1 2022 [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets rose to $2,277,550 thousand by March 31, 2022, driven by finance receivables and increased liabilities | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Total Assets | $2,277,550 | $2,159,578 | | Cash and cash equivalents | $21,726 | $29,928 | | Restricted cash and equivalents | $164,550 | $146,620 | | Finance receivables at fair value | $1,903,857 | $1,749,098 | | Finance receivables, net | $141,744 | $176,184 | | Total Liabilities | $2,093,682 | $1,989,371 | | Securitization trust debt | $1,813,478 | $1,759,972 | | Warehouse lines of credit | $147,026 | $105,610 | | Total Shareholders' Equity | $183,868 | $170,207 | [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Net income significantly increased to $21,115 thousand for Q1 2022, driven by higher revenues and reduced credit loss provisions | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Total Revenues | $74,366 | $63,112 | +17.8% | | Interest income | $70,060 | $66,093 | +6.0% | | Mark to finance receivables at fair value | $2,400 | $(4,417) | N/A | | Other income | $1,906 | $1,436 | +32.7% | | Total Expenses | $45,038 | $55,168 | -18.4% | | Provision for credit losses | $(9,400) | $0 | N/A | | Interest expense | $16,400 | $20,946 | -21.7% | | Income before income tax expense | $29,328 | $7,944 | +269.2% | | Income tax expense | $8,213 | $2,780 | +195.4% | | Net Income | $21,115 | $5,164 | +308.9% | | Basic Earnings per share | $0.99 | $0.23 | +330.4% | | Diluted Earnings per share | $0.75 | $0.21 | +257.1% | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for Q1 2022 was $21,115 thousand, matching net income with no other comprehensive items | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net income | $21,115 | $5,164 | | Comprehensive income | $21,115 | $5,164 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, investing activities used cash for receivables, and financing activities provided cash from debt | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | $68,300 | $65,350 | | Net cash provided by (used in) investing activities | $(139,517) | $23,890 | | Net cash provided by (used in) financing activities | $80,945 | $(64,791) | | Increase in cash and cash equivalents | $9,728 | $24,449 | | Cash and restricted cash at end of period | $186,276 | $168,601 | [Unaudited Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased to $183,868 thousand by March 31, 2022, due to net income, partially offset by repurchases | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Retained Earnings, beginning of period | $116,531 | $69,007 | | Net income | $21,115 | $5,164 | | Retained Earnings, end of period | $137,646 | $74,171 | | Common Stock, beginning of period | $55,298 | $72,926 | | Common stock issued (options/warrants) | $5,860 | $298 | | Repurchase of common stock | $(14,104) | $(755) | | Stock-based compensation | $790 | $408 | | Common Stock, end of period | $47,844 | $72,877 | | Total Shareholders' Equity, end of period | $183,868 | $138,477 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Details accounting policies, fair value measurements, credit losses, debt, income taxes, legal proceedings, and subsequent events [(1) Summary of Significant Accounting Policies](index=8&type=section&id=(1)%20Summary%20of%20Significant%20Accounting%20Policies) Outlines business model, accounting policies for fair value, income, stock compensation, financial covenants, and COVID-19 impact - The company specializes in purchasing and servicing retail automobile installment sale contracts from licensed motor vehicle dealers for sub-prime customers, providing indirect financing[27](index=27&type=chunk) - Effective January 1, 2018, the company adopted the fair value method for finance receivables acquired on or after that date, recognizing interest income on a level yield basis and re-evaluating fair value each period[31](index=31&type=chunk)[32](index=32&type=chunk) | Other Income Component | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Direct mail revenues | $774 | $979 | | Convenience fee revenue | $80 | $240 | | Recoveries on previously charged-off | $20 | $15 | | Sales tax refunds | $144 | $171 | | Other | $888 | $31 | | Total Other Income | $1,906 | $1,436 | - The company recorded stock-based compensation costs of **$790,000** for the three months ended March 31, 2022, an increase from **$408,000** in the prior year, with **$8.4 million** in unrecognized costs remaining[45](index=45&type=chunk) - The company was in compliance with all financial covenants related to its securitization transactions, warehouse credit facilities, and residual interest financing as of March 31, 2022[52](index=52&type=chunk) - The COVID-19 pandemic may cause significant changes in fair value measurements due to potential impacts on the U.S. economy and obligors, affecting estimates for net charge-offs and portfolio amortization[54](index=54&type=chunk) [(2) Finance Receivables](index=13&type=section&id=(2)%20Finance%20Receivables) Details finance receivables portfolio, impairment evaluation, fair value measurement, credit loss allowance, and delinquency reporting - Finance receivables measured at fair value are recorded separately and excluded from credit loss provisions, as anticipated credit losses are embedded in the level yield computation[34](index=34&type=chunk)[56](index=56&type=chunk) | Delinquency Status | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------- | :---------------------------- | :------------------------------- | | Current | $152,949 | $186,625 | | 31 - 60 days | $22,426 | $30,980 | | 61 - 90 days | $9,252 | $12,070 | | 91 + days | $2,118 | $2,715 | | Total | $186,745 | $232,390 | - Finance receivables totaling **$2.1 million** (March 31, 2022) and **$2.7 million** (December 31, 2021) were on non-accrual status due to delinquency[58](index=58&type=chunk) [Allowance for Credit Losses – Finance Receivables](index=14&type=section&id=Allowance%20for%20Credit%20Losses%20%E2%80%93%20Finance%20Receivables) Credit loss allowance is based on historical data; Q1 2022 saw a $9.4 million reduction due to improved credit performance - The allowance for credit losses is estimated using historical loss experience from vintage pools, with adjustments for qualitative factors, and applies only to the legacy portfolio originated through December 2017[60](index=60&type=chunk)[61](index=61&type=chunk)[65](index=65&type=chunk)[150](index=150&type=chunk) | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Balance at beginning of period | $56,206 | $80,790 | | Provision for credit losses | $(9,400) | $0 | | Charge-offs | $(5,359) | $(12,122) | | Recoveries | $3,554 | $4,829 | | Balance at end of period | $45,001 | $73,497 | - The **$9.4 million** reduction in provision for credit losses was primarily due to decreased lifetime expected credit losses from improved credit performance, an improved macroeconomic outlook, and higher used car prices[67](index=67&type=chunk) [(3) Securitization Trust Debt](index=16&type=section&id=(3)%20Securitization%20Trust%20Debt) Details securitization trust debt, totaling $1,813,478 thousand at March 31, 2022, with compliance to covenants and new securitization | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------------- | | Securitization trust debt | $1,813,478 | $1,759,972 | | Receivables Pledged at March 31, 2022 | $2,003,373 | N/A | | Initial Principal (Total) | $4,851,034 | N/A | | Outstanding Principal at March 31, 2022 | $1,826,016 | N/A | | Outstanding Principal at Dec 31, 2021 | N/A | $1,771,953 | - The company was in compliance with all financial covenants related to securitization agreements and warehouse credit facilities as of March 31, 2022[74](index=74&type=chunk) - Restricted cash held as additional collateral for securitization agreements totaled approximately **$164.6 million** as of March 31, 2022[75](index=75&type=chunk) [(4) Debt](index=17&type=section&id=(4)%20Debt) Summarizes other debt, which increased to $224,936 thousand by March 31, 2022, mainly from warehouse lines of credit | Debt Type | Interest Rate (March 31, 2022) | Maturity (March 31, 2022) | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------- | :----------------------------- | :------------------------ | :---------------------------- | :------------------------------- | | Warehouse lines of credit | 3.00% over one month Libor (Min 3.75%) / 3.50% over commercial paper rate (Min 4.50%) | December 2022 / January 2024 | $147,026 | $105,610 | | Residual interest financing | 8.60% / 7.86% | January 2026 / June 2026 | $50,000 | $54,311 | | Subordinated renewable notes | Weighted average 8.65% | Weighted average March 2024 | $26,756 | $26,459 | | Total Other Debt | N/A | N/A | $224,936 | $186,780 | [(5) Interest Income and Interest Expense](index=18&type=section&id=(5)%20Interest%20Income%20and%20Interest%20Expense) Details interest income and expense components; total interest income rose to $72.5 million, while total interest expense decreased to $16.4 million | Interest Income Component | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Interest on finance receivables | $11,314 | $22,099 | | Interest on finance receivables at fair value | $58,740 | $43,988 | | Mark to finance receivables at fair value | $2,400 | $(4,417) | | Total Interest Income | $72,460 | $61,676 | | Interest Expense Component | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Securitization trust debt | $13,528 | $18,453 | | Warehouse lines of credit | $1,158 | $1,314 | | Residual interest financing | $1,094 | $566 | | Subordinated renewable notes | $620 | $613 | | Total Interest Expense | $16,400 | $20,946 | [(6) Earnings Per Share](index=19&type=section&id=(6)%20Earnings%20Per%20Share) Details basic and diluted EPS calculation; basic EPS increased to $0.99 and diluted EPS to $0.75 for Q1 2022 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Basic Earnings per share | $0.99 | $0.23 | | Diluted Earnings per share | $0.75 | $0.21 | | Weighted average basic shares outstanding | 21,221 | 22,741 | | Weighted average diluted shares outstanding | 28,197 | 24,967 | [(7) Income Taxes](index=19&type=section&id=(7)%20Income%20Taxes) Income tax expense for Q1 2022 was $8.2 million, with an effective tax rate of 28%, and a net deferred tax asset of $18.9 million | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------- | :----------------------------------------------- | :----------------------------------------------- | | Income tax expense | $8,213 | $2,780 | | Effective income tax rate | 28% | 35% | - The company had a recognized net deferred tax asset of **$18.9 million** as of March 31, 2022, consisting of **$11.6 million** federal and **$7.3 million** state deferred tax assets[86](index=86&type=chunk) [(8) Legal Proceedings](index=20&type=section&id=(8)%20Legal%20Proceedings) Describes legal proceedings, including two civil actions with potential material liability; probable losses are $3.4 million, possible up to $11.3 million - Two civil actions, a Connecticut deficiency judgment cross-claim and a California wage and hour lawsuit, could potentially result in material class action liabilities[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) - The estimated total probable incurred losses for legal contingencies as of March 31, 2022, is **$3.4 million**, with a reasonably possible loss range not exceeding **$11.3 million**[95](index=95&type=chunk) [(9) Fair Value Measurements](index=20&type=section&id=(9)%20Fair%20Value%20Measurements) Explains fair value measurements for finance receivables, classified as Level 3 due to unobservable inputs; totaled $1,903,857 thousand at March 31, 2022 - Finance receivables acquired since January 2018 are valued using the fair value method, classified as Level 3 measurements due to significant unobservable inputs such as discount rate and cumulative net losses[100](index=100&type=chunk)[102](index=102&type=chunk)[105](index=105&type=chunk) | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :----------------------------------------- | :---------------------------- | :------------------------------- | | Finance receivables measured at fair value | $1,903,857 | $1,749,098 | | Contractual Balance | $2,133,969 | $1,972,699 | | Unobservable Inputs | March 31, 2022 | December 31, 2021 | | :------------------------ | :------------- | :---------------- | | Discount rate | 9.9% - 11.3% | 10.6% - 11.3% | | Cumulative net losses | 10.0% - 18.4% | 10.00% - 18.4% | [(10) Subsequent Events](index=24&type=section&id=(10)%20Subsequent%20Events) Describes a subsequent event: the April 20, 2022, securitization of $395.6 million in asset-backed notes secured by $430.0 million in receivables - On April 20, 2022, the company executed the CPS Auto Receivables Trust 2022-B securitization, selling **$395.6 million** of asset-backed notes secured by **$430.0 million** in automobile receivables[110](index=110&type=chunk) - The 2022-B transaction has initial credit enhancement of **1.00%** cash deposit and **8.00%** overcollateralization, with accelerated principal payments to reach **9.00%** of original pool balance or **25.80%** of outstanding balance[111](index=111&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides business overview, discusses financing, analyzes Q1 2022 operations, credit experience, liquidity, and forward-looking statements [Overview](index=25&type=section&id=Overview) The company finances and services sub-prime auto contracts, originating $18.5 billion and managing a $2.38 billion portfolio by March 31, 2022 - The company specializes in purchasing and servicing retail automobile contracts for sub-prime customers, primarily through franchised dealers, and has originated approximately **$18.5 billion** in contracts since March 1991[113](index=113&type=chunk) | Period | Contracts Purchased in Period (in thousands) | Managed Portfolio at Period End (in thousands) | | :-------------------------- | :------------------------------------------- | :--------------------------------------------- | | 2016 | $1,088,785 | $2,308,070 | | 2017 | $859,069 | $2,333,530 | | 2018 | $902,416 | $2,380,847 | | 2019 | $1,002,782 | $2,416,042 | | 2020 | $742,584 | $2,174,972 | | 2021 | $1,146,321 | $2,249,069 | | Three months ended Mar 31, 2022 | $409,961 | $2,381,588 | - The company began purchasing contracts for immediate sale to a third-party in May 2021, earning origination and servicing fees. For Q1 2022, **$20.6 million** was originated under this third-party program, with a managed portfolio of **$57.2 million**[114](index=114&type=chunk) [Securitization and Warehouse Credit Facilities](index=25&type=section&id=Securitization%20and%20Warehouse%20Credit%20Facilities) Finances auto contracts via securitizations and warehouse credit facilities; 19 active securitizations and $200 million short-term funding capacity - The company finances automobile contracts through securitizations (long-term) and warehouse credit facilities (interim), with all active securitizations structured as secured financings[117](index=117&type=chunk)[122](index=122&type=chunk) - Since 1994, the company has completed **92** term securitizations, with **19** currently active as secured financings[123](index=123&type=chunk) | Period | Number of Term Securitizations | Receivables Pledged in Term Securitizations (in thousands) | | :----- | :----------------------------- | :--------------------------------------------------------- | | 2016 | 4 | $1,214,997 | | 2017 | 4 | $870,000 | | 2018 | 4 | $883,452 | | 2019 | 4 | $1,014,124 | | 2020 | 3 | $741,867 | | 2021 | 4 | $1,145,002 | - The company currently has a short-term funding capacity of **$200 million** from warehouse credit facilities[125](index=125&type=chunk) [Financial Covenants](index=27&type=section&id=Financial%20Covenants) The company must meet financial covenants for securitization and credit facilities, including liquidity and leverage, and was compliant as of March 31, 2022 - The company must comply with financial covenants for securitization transactions and warehouse credit facilities, including maintaining minimum liquidity and net worth and not exceeding maximum leverage levels[129](index=129&type=chunk) - As of March 31, 2022, the company was in compliance with all financial covenants[129](index=129&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q1 2022 revenues rose 17.8% to $74.4 million, driven by fair value receivables; expenses decreased 18.4% to $45.0 million due to lower interest and credit losses | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | | :----------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Total Revenues | $74,366 | $63,112 | +17.8% | | Mark to finance receivables at fair value | $2,400 | $(4,417) | N/A | | Average balance of fair value receivables | $2,067,286 | $1,687,232 | +22.5% | | Other income (from third-party fees) | $1,906 (incl. $844) | $1,436 | +32.7% | | Total Operating Expenses | $45,038 | $55,168 | -18.4% | [Revenues](index=29&type=section&id=Revenues) Revenues increased 17.8% to $74.4 million, driven by fair value receivables mark-up and balance growth; other income rose 32.7% - Revenues increased by **17.8%** to **$74.4 million**, driven by a **$2.4 million** mark-up reversal on fair value receivables (vs. **$4.4 million** mark-down in prior year) and a **22.5%** increase in their average balance[131](index=131&type=chunk)[132](index=132&type=chunk) - Other income increased by **32.7%** to **$1.9 million**, primarily due to **$844,000** in origination and servicing fees from third-party receivables, a new program started in May 2021[132](index=132&type=chunk) [Expenses](index=29&type=section&id=Expenses) Total operating expenses decreased 18.4% to $45.0 million, primarily from lower interest expense and a $9.4 million reduction in credit loss provision - Total operating expenses decreased by **18.4%** to **$45.0 million**, primarily due to a **$4.9 million** decrease in securitization trust debt interest expense and a **$9.4 million** reduction in the provision for credit losses[135](index=135&type=chunk)[138](index=138&type=chunk)[148](index=148&type=chunk) | Expense Category | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (YoY) | | :------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------- | | Employee costs | $22,152 | $20,159 | +9.9% | | General and administrative | $8,231 | $7,748 | +6.2% | | Interest expense | $16,400 | $20,946 | -21.7% | | Provision for credit losses | $(9,400) | $0 | N/A | | Sales expense | $5,386 | $3,986 | +35.1% | | Occupancy | $1,852 | $1,901 | -2.6% | | Depreciation and amortization | $417 | $428 | -2.6% | - Interest expense on securitization trust debt decreased by **$4.9 million** due to a lower average balance (**$1,808.5 million** vs. **$1,876.8 million**) and a reduced annualized average rate (**3.0%** vs. **3.9%**)[139](index=139&type=chunk) - Sales expense increased by **$1.4 million** to **$5.4 million**, driven by a significant increase in new contracts purchased (**$410.0 million** in Q1 2022 vs. **$205.5 million** in Q1 2021)[151](index=151&type=chunk) [Credit Experience](index=34&type=section&id=Credit%20Experience) Analyzes credit performance; delinquencies (31+ days) rose to 8.3%, total delinquencies and repossessions to 9.6%, while net charge-offs decreased to 3.3% | Metric | March 31, 2022 (in thousands) | March 31, 2021 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------------------- | :---------------------------- | :---------------------------- | :------------------------------- | | Gross servicing portfolio | $2,324,354 | $2,119,073 | $2,209,430 | | Total delinquencies (31+ days) | $173,197 | $134,280 | $212,253 | | Amount in repossession | $26,442 | $30,353 | $22,912 | | Delinquencies as % of gross servicing portfolio | 8.3% | 7.5% | 9.6% | | Total delinquencies & repossession as % of gross servicing portfolio | 9.6% | 8.1% | 10.6% | | Portfolio Type | Average Servicing Portfolio Outstanding (March 31, 2022, in thousands) | Annualized Net Charge-offs as % of Average Servicing Portfolio (March 31, 2022) | Average Servicing Portfolio Outstanding (March 31, 2021, in thousands) | Annualized Net Charge-offs as % of Average Servicing Portfolio (March 31, 2021) | | :----------------------------- | :--------------------------------------------------------------------- | :------------------------------------------------------------------------------ | :--------------------------------------------------------------------- | :------------------------------------------------------------------------------ | | Finance Receivables Portfolio | $206,197 | 0.8% | $451,425 | 12.6% | | Fair Value Receivables Portfolio | $2,067,286 | 3.5% | $1,687,232 | 4.6% | | Total Owned Portfolio | $2,273,483 | 3.3% | $2,138,657 | 6.3% | [Extensions](index=36&type=section&id=Extensions) The company grants one-month payment extensions, limited by agreements, which are effective in mitigating losses, with 56.7% of 2018 extensions active or paid off - The company grants one-month payment extensions, typically limited to two per 12-month period and six over the contract life, to assist obligors with temporary cash flow issues[161](index=161&type=chunk) - The extension program is considered effective; for example, **56.7%** of accounts granted extensions in 2018 were active or paid off by March 31, 2022[167](index=167&type=chunk) | Metric | Three Months Ended March 31, 2022 | Year Ended December 31, 2021 | Three Months Ended March 31, 2021 | | :-------------------------------------------- | :-------------------------------- | :--------------------------- | :-------------------------------- | | Average number of extensions granted per month | 4,061 | 3,918 | 3,535 | | Average monthly extensions as % of average outstandings | 2.6% | 2.5% | 2.2% | [Non-Accrual Receivables](index=39&type=section&id=Non-Accrual%20Receivables) Contracts over 90 days past due are non-accrual; restored if delinquency falls below 90 days, independent of extensions - Contracts are placed on non-accrual status when greater than **90** days past due, as resolution is unlikely, and no interest income is recognized[171](index=171&type=chunk) - Accounts are restored to full accrual status if delinquency falls below the **90**-day threshold, and the non-accrual policy is independent of extension grants[172](index=172&type=chunk)[173](index=173&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) Cash is sourced from securitizations and customer payments; Q1 2022 saw operating cash flow of $68.3 million, investing used $139.5 million, and financing provided $80.9 million - Primary cash sources include securitization proceeds, warehouse credit facilities, customer payments, and origination fees; primary uses are contract purchases, debt repayment, and operating expenses[174](index=174&type=chunk) | Cash Flow Activity | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | $68,300 | $65,350 | | Net cash used in investing activities | $(139,517) | $23,890 | | Net cash provided by financing activities | $80,945 | $(64,791) | | Purchases of finance receivables | $393,407 | $205,500 | | New securitization trust debt issued | $316,800 | $230,500 | | Net advances on warehouse lines of credit | $42,200 | $(48,300) | - As of March 31, 2022, the company had **$21.7 million** in unrestricted cash and **$53.0 million** in available borrowings under warehouse credit facilities, with **$93.9 million** in eligible collateral[181](index=181&type=chunk) - The company had approximately **$2,036.7 million** of debt outstanding at March 31, 2022, primarily **$1,813.5 million** in securitization trust debt and **$147.0 million** in warehouse lines of credit[184](index=184&type=chunk) [Forward Looking Statements](index=41&type=section&id=Forward%20Looking%20Statements) Highlights forward-looking statements on credit losses, fair value, and financial results, subject to economic, financing, and regulatory risks - Forward-looking statements include provisions for credit losses, fair value valuations, and future financial results, which are dependent on estimates of future charge-offs, recovery rates, and cash receipts[187](index=187&type=chunk)[198](index=198&type=chunk) - Key risk factors affecting forward-looking statements include changes in general economic conditions, financing availability and terms, interest rates, competition, credit loss levels, and regulatory requirements[196](index=196&type=chunk)[198](index=198&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms effective internal controls and procedures as of March 31, 2022, with no material changes during the quarter - The company's disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022, by the principal executive and financial officers[188](index=188&type=chunk) - There have been no material changes in internal controls over financial reporting during the most recently completed fiscal quarter[188](index=188&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) Incorporates legal proceedings from Note 8, detailing consumer litigation with probable losses of $3.4 million and a possible range up to $11.3 million - The information on legal proceedings is incorporated by reference from Note 8 of the Unaudited Condensed Consolidated Financial Statements[191](index=191&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, emphasizing substantial indebtedness of $2,036.7 million at March 31, 2022, impacting financial condition and flexibility - The company has substantial indebtedness, totaling approximately **$2,036.7 million** at March 31, 2022, primarily from securitization trust debt (**$1,813.5 million**) and warehouse lines of credit (**$147.0 million**)[193](index=193&type=chunk) - Substantial indebtedness increases vulnerability to adverse economic conditions, reduces cash flow for operations, limits business flexibility, creates a competitive disadvantage, and restricts ability to borrow additional funds[194](index=194&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 922,363 common shares at an average of $11.19 per share during Q1 2022 under an authorization program | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :---------- | :------------------------------- | :--------------------------- | | January 2022 | 119,000 | $11.68 | | February 2022 | 254,492 | $11.04 | | March 2022 | 548,871 | $11.16 | | Total | 922,363 | $11.19 | - The board of directors authorized an additional **$15.0 million** for stock repurchases in January and March 2022, bringing the total authorized under the program to **$103.2 million** since 2002[202](index=202&type=chunk) [Item 6. Exhibits](index=44&type=section&id=Item%206.%20Exhibits) Lists exhibits filed with Form 10-Q, including debt instruments, CEO/CFO certifications, and Inline XBRL documents - The exhibits include certifications from the CEO and CFO (Rule 13a-14(a) and Section 1350) and Inline XBRL documents for financial data[205](index=205&type=chunk) [Signatures](index=45&type=section&id=Signatures) The report was signed by Charles E. Bradley, Jr. (President and CEO) and Jeffrey P. Fritz (EVP and CFO) on May 4, 2022 - The report was signed by Charles E. Bradley, Jr. (President and CEO) and Jeffrey P. Fritz (EVP and CFO) on May 4, 2022[211](index=211&type=chunk)[212](index=212&type=chunk)

Consumer Portfolio Services, Inc. (NASDAQ:CPSS) Q1 2022 Earnings Conference Call April 19, 2022 1:00 PM ET Company Participants Charles Bradley – Chief Executive Officer Jeffrey Fritz – Chief Financial Officer Conference Call Participants Operator Good day, everyone, and welcome to the Consumer Portfolio Services 2022 First Quarter Operating Results Conference Call. Today's call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking st ...

Funding and Financing - Current short-term funding capacity is $200 million, comprising two credit facilities, each with a maximum credit limit of $100 million[125]. - The company depends on its ability to securitize automobile contracts for permanent financing, which is subject to market conditions and other factors beyond its control[127]. - The company completed 36 securitizations from 2010 to 2019, but faced challenges in 2020 due to the pandemic, leading to postponed securitizations[128]. - The company’s results of operations are significantly affected by cash flows from residual interests in securitization programs and warehouse credit facilities[130]. - If interest rates rise, the company expects increased interest expenses, which could materially affect future results of operations[135]. - The company is subject to risk retention rules requiring retention of at least 5% of credit risk for asset-backed securities, potentially increasing capital requirements[156]. Competition and Market Risks - The automobile financing business is highly competitive, with competitors having greater financial resources and access to capital markets[137]. - The company specializes in sub-prime automobile contracts, which carry higher risks of nonperformance and defaults[139]. - Economic downturns, particularly in states like California, Ohio, Texas, and Florida, could lead to increased delinquencies and adversely affect operations[183]. - The COVID-19 pandemic has caused significant economic disruptions, potentially impacting obligors' ability to make timely payments[184]. - Natural disasters in key states like California and Texas could lead to job losses and damage to vehicles securing automobile contracts, affecting revenue[188]. Financial Condition and Indebtedness - As of December 31, 2021, the company had approximately $1,945.7 million in outstanding debt, primarily consisting of $1,760.0 million in securitization trust debt[167]. - The company's substantial indebtedness may increase vulnerability to adverse economic conditions and limit flexibility in business planning[168]. - The company maintains an allowance for credit losses on automobile contracts, which could adversely affect results if inadequate[141]. - The company's profitability is largely determined by the "spread" between the effective interest rate on automobile contracts and the interest rates payable under warehouse credit facilities and asset-backed securities[190]. - An increase in prevailing interest rates could reduce excess spread cash flows from automobile contracts, adversely affecting earnings and cash flows[190]. - The company acknowledges that a recession or depression in local, regional, or national economies would likely increase delinquencies and losses, negatively impacting financial condition[189]. Legal and Compliance Risks - Compliance with laws and regulations is critical, as failure to comply could result in penalties and adversely affect financial condition[151]. - The company faces litigation risks that could materially affect financial position and results of operations, with potential claims for substantial damages[158]. - The company has recorded loss contingencies only for matters where losses are probable and can be reasonably estimated, but actual losses may exceed reserves[159]. Shareholder Information - As of December 31, 2021, directors and executive officers collectively owned 6.4 million shares of common stock, representing approximately 30% ownership[191]. - The company has never declared or paid any cash dividends on its common stock and intends to retain future earnings without expecting to pay dividends in the foreseeable future[192]. - Limited trading volume of the company's common stock contributes to more volatile price fluctuations, with no assurance against stock price decline[191]. Forward-Looking Statements - Forward-looking statements in the report involve risks and uncertainties, including unexpected events, changes in economic conditions, and competition[194]. - The company does not guarantee performance based on forward-looking statements, as actual results may differ due to various uncontrollable factors[194]. - The company undertakes no obligation to publicly update any forward-looking information, advising consultation of periodic reports filed with the SEC for additional disclosures[195].

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%2E%20FINANCIAL%20INFORMATION) Presents the company's unaudited condensed consolidated financial statements and related notes for the specified periods [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements for Consumer Portfolio Services, Inc. and its subsidiaries, including the balance sheets, statements of operations, comprehensive income, cash flows, and shareholders' equity, along with detailed notes explaining significant accounting policies, financial instruments, debt, and other relevant financial information for the periods ended September 30, 2021, and December 31, 2020 [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates **Key Balance Sheet Data (in thousands):** | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $28,799 | $13,466 | | Restricted cash and equivalents | $144,966 | $130,686 | | Finance receivables measured at fair value | $1,667,193 | $1,523,726 | | Finance receivables, net | $213,916 | $411,343 | | Total assets | $2,106,599 | $2,145,895 | | Total liabilities | $1,945,205 | $2,012,533 | | Total stockholders' equity | $161,394 | $133,362 | - Total assets decreased by approximately **$39.3 million** from December 31, 2020, to September 30, 2021, primarily due to a reduction in net finance receivables not measured at fair value, partially offset by an increase in fair value receivables[10](index=10&type=chunk) - Total liabilities decreased by approximately **$67.3 million**, driven mainly by a reduction in securitization trust debt and warehouse lines of credit[10](index=10&type=chunk) - Shareholders' equity increased by **$28.0 million**, reflecting an increase in retained earnings[11](index=11&type=chunk) [Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income for the three and nine months ended September 30, 2021 and 2020 **Key Operations Data (in thousands, except per share data):** | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total revenues | $68,565 | $70,669 | $198,446 | $208,728 | | Total operating expenses | $49,018 | $64,780 | $157,080 | $195,084 | | Income before income tax expense (benefit) | $19,547 | $5,889 | $41,366 | $13,644 | | Income tax expense (benefit) | $5,864 | $2,121 | $12,807 | $(3,888) | | Net income | $13,683 | $3,768 | $28,559 | $17,532 | | Basic EPS | $0.59 | $0.17 | $1.25 | $0.77 | | Diluted EPS | $0.52 | $0.16 | $1.12 | $0.74 | - Net income significantly increased for both the three-month and nine-month periods ended September 30, 2021, compared to the prior year, driven by lower operating expenses, particularly reduced provision for credit losses and interest expense[13](index=13&type=chunk) - Total revenues decreased year-over-year for both periods, primarily due to a decrease in interest income from the legacy finance receivables portfolio, partially offset by increased interest income from fair value receivables and other income[13](index=13&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Presents the company's net income and other comprehensive income components for the specified periods **Comprehensive Income (in thousands):** | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $13,683 | $3,768 | $28,559 | $17,532 | | Comprehensive income | $13,683 | $3,768 | $28,559 | $17,532 | - Comprehensive income mirrors net income, with no other comprehensive income or loss components reported for the periods presented[15](index=15&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Outlines the cash inflows and outflows from operating, investing, and financing activities **Key Cash Flow Data (in thousands):** | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $163,076 | $190,566 | | Net cash provided by (used in) investing activities | $(50,174) | $45,391 | | Net cash used in financing activities | $(83,289) | $(164,624) | | Increase in cash and cash equivalents | $29,613 | $71,333 | | Cash and restricted cash at end of period | $173,765 | $212,165 | - Operating cash flow decreased by **$27.5 million** year-over-year, while investing activities shifted from providing cash to using cash, primarily due to increased purchases of finance receivables measured at fair value[17](index=17&type=chunk) - Cash used in financing activities significantly decreased, mainly due to higher proceeds from securitization trust debt and residual interest financing, coupled with lower repayments of warehouse lines of credit[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Shareholders' Equity](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity) Tracks changes in the company's equity accounts over the nine-month periods **Shareholders' Equity (in thousands):** | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Common Stock (Shares Outstanding) - End of period | 23,000 | 22,509 | | Common Stock (Value) - End of period | $72,399 | $72,197 | | Retained Earnings - End of period | $97,566 | $64,868 | | Total Shareholders' Equity - End of period | $161,394 | $128,644 | - Total shareholders' equity increased by **$32.75 million** for the nine months ended September 30, 2021, primarily driven by an increase in retained earnings due to net income[19](index=19&type=chunk) - The company repurchased common stock totaling **$3.96 million** for the nine months ended September 30, 2021, compared to **$0.97 million** in the prior year period[19](index=19&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of significant accounting policies and financial statement line items [Summary of Significant Accounting Policies](index=8&type=section&id=Summary%20of%20Significant%20Accounting%20Policies) Describes the key accounting principles and methods used in preparing the financial statements - The company specializes in purchasing and servicing retail automobile installment sale contracts from dealers, providing indirect financing to sub-prime customers, and also originates direct loans to consumers and has acquired contracts through M&A[21](index=21&type=chunk) - Finance receivables acquired after January 1, 2018, are measured at fair value, with interest income recognized on a level yield basis that incorporates anticipated credit losses, and no separate provision for credit losses is made for these receivables[25](index=25&type=chunk)[28](index=28&type=chunk) **Other Income Components (in thousands):** | Component | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Direct mail revenues | $779 | $760 | $2,648 | $2,444 | | Convenience fee revenue | $120 | $280 | $540 | $1,340 | | Recoveries on previously charged-off contracts | $18 | $4 | $78 | $79 | | Sales tax refunds | $134 | $192 | $423 | $601 | | Other | $496 | $3 | $623 | $44 | | Total Other Income | $1,547 | $1,239 | $4,312 | $4,508 | - Stock-based compensation costs were **$530,000** and **$1.3 million** for the three and nine months ended September 30, 2021, respectively, with **$5.6 million** in unrecognized costs to be expensed over a weighted-average period of 2.5 years[36](index=36&type=chunk) - The company repurchased **791,683 shares** of common stock for **$4.99 million** during the nine months ended September 30, 2021, compared to **291,156 shares** for **$3.32 million** in the prior year period[40](index=40&type=chunk) - The company was in compliance with all financial covenants related to its securitization transactions, warehouse credit facilities, and residual interest financing as of September 30, 2021[42](index=42&type=chunk) - The COVID-19 pandemic may significantly affect fair value measurements of finance receivables due to potential changes in net charge-offs and portfolio amortization rates, though no material adjustments were made in Q3 2021[44](index=44&type=chunk) [Finance Receivables](index=14&type=section&id=Finance%20Receivables) Details the composition, delinquency, and credit loss allowance for the company's finance receivables portfolio - The finance receivables portfolio is homogenous, with impairment evaluated collectively based on delinquency status, and contracts over 90 days delinquent are placed on non-accrual status[46](index=46&type=chunk) **Finance Receivables Delinquency Status (in thousands):** | Delinquency Status | Sep 30, 2021 | Dec 31, 2020 | | :----------------- | :----------- | :----------- | | Current | $234,782 | $406,693 | | 31 - 60 days | $33,929 | $56,572 | | 61 - 90 days | $11,734 | $22,660 | | 91 + days | $2,299 | $5,382 | | Total Finance Receivables | $282,744 | $491,307 | - The allowance for credit losses is estimated using historical loss experience for older receivables, aggregated into vintage pools, and the CECL model was adopted on January 1, 2020, requiring an initial addition of **$127.0 million** to the allowance for the legacy portfolio (pre-2018 originations)[51](index=51&type=chunk)[56](index=56&type=chunk) **Allowance for Finance Credit Losses Activity (in thousands):** | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at beginning of period | $72,242 | $98,602 | $80,790 | $11,640 | | Early adoption of CECL | – | – | – | $127,000 | | Provision for credit losses | $(1,590) | $7,400 | $(1,590) | $14,113 | | Charge-offs | $(6,336) | $(15,574) | $(25,157) | $(73,096) | | Recoveries | $4,408 | $3,790 | $14,681 | $14,561 | | Balance at end of period | $68,724 | $94,218 | $68,724 | $94,218 | - A reduction in the provision for credit losses of **$1.6 million** was recorded for the three and nine months ended September 30, 2021, due to improved credit performance, contrasting with provisions made in 2020 due to pandemic uncertainty[59](index=59&type=chunk) [Securitization Trust Debt](index=17&type=section&id=Securitization%20Trust%20Debt) Outlines the company's securitization trust debt, including outstanding principal and compliance with covenants **Securitization Trust Debt (in thousands):** | Series | Outstanding Principal at Sep 30, 2021 | Outstanding Principal at Dec 31, 2020 | Weighted Average Contractual Interest Rate at Sep 30, 2021 | | :----------------- | :------------------------------------ | :------------------------------------ | :--------------------------------------------------------- | | CPS 2016-C | $25,373 | $47,325 | 8.39% | | CPS 2016-D | $19,402 | $36,455 | 6.86% | | CPS 2017-A | $22,163 | $40,619 | 6.84% | | CPS 2017-B | $17,592 | $39,016 | 5.75% | | CPS 2017-C | $30,272 | $47,553 | 5.40% | | CPS 2017-D | $31,136 | $49,297 | 4.77% | | CPS 2018-A | $34,447 | $53,549 | 4.54% | | CPS 2018-B | $42,028 | $66,955 | 4.98% | | CPS 2018-C | $49,803 | $77,345 | 5.14% | | CPS 2018-D | $57,940 | $88,228 | 4.98% | | CPS 2019-A | $72,357 | $114,373 | 4.76% | | CPS 2019-B | $72,804 | $118,982 | 4.42% | | CPS 2019-C | $88,668 | $142,080 | 3.62% | | CPS 2019-D | $115,544 | $181,485 | 3.09% | | CPS 2020-A | $117,252 | $184,944 | 3.18% | | CPS 2020-B | $104,048 | $164,403 | 4.18% | | CPS 2020-C | $162,049 | $231,961 | 2.11% | | CPS 2021-A | $171,918 | – | 0.88% | | CPS 2021-B | $203,796 | – | 1.14% | | CPS 2021-C | $276,228 | – | 1.04% | | Total Outstanding Principal | $1,714,820 | $1,767,807 | | - Securitization trust debt decreased from **$1,767.8 million** at December 31, 2020, to **$1,714.8 million** at September 30, 2021, reflecting ongoing amortization and new issuances[62](index=62&type=chunk) - The company was in compliance with all securitization agreement covenants, which require meeting certain delinquency and credit loss criteria and maintaining minimum liquidity and leverage levels[68](index=68&type=chunk) [Debt](index=18&type=section&id=Debt) Presents details on the company's other debt, including warehouse lines of credit and residual interest financing **Other Debt Outstanding (in thousands):** | Description | Sep 30, 2021 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | | Warehouse lines of credit | $97,768 | $118,999 | | Residual interest financing | $65,281 | $25,576 | | Subordinated renewable notes | $27,462 | $21,323 | | Total | $190,511 | $165,898 | - Short-term funding capacity decreased from **$300 million** to **$200 million** after not renewing a **$100 million** credit facility in February 2021[73](index=73&type=chunk) - Residual interest financing significantly increased from **$25.6 million** to **$65.3 million**, primarily due to a new **$50.0 million** securitization completed in June 2021[71](index=71&type=chunk) [Interest Income and Interest Expense](index=20&type=section&id=Interest%20Income%20and%20Interest%20Expense) Analyzes the components and trends of the company's interest income and expense **Interest Income (in thousands):** | Component | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Interest on finance receivables | $16,062 | $29,753 | $56,652 | $101,333 | | Interest on finance receivables at fair value | $50,951 | $42,808 | $141,882 | $125,273 | | Mark to finance receivables measured at fair value | – | $(3,152) | $(4,417) | $(23,051) | | Other interest income | $5 | $21 | $17 | $665 | | Total Interest Income | $67,018 | $69,430 | $194,134 | $204,220 | **Interest Expense (in thousands):** | Component | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Securitization trust debt | $15,292 | $21,605 | $50,568 | $67,770 | | Warehouse lines of credit | $929 | $1,856 | $3,264 | $6,294 | | Residual interest financing | $1,413 | $876 | $2,446 | $2,734 | | Subordinated renewable notes | $700 | $564 | $1,982 | $1,579 | | Total Interest Expense | $18,334 | $24,901 | $58,260 | $78,377 | - Interest income decreased for both periods, primarily due to the runoff of the legacy finance receivables portfolio, despite an increase in interest from fair value receivables[75](index=75&type=chunk) - Interest expense significantly decreased for both periods, mainly driven by lower securitization trust debt and warehouse lines of credit interest, reflecting reduced average balances and lower blended interest rates[75](index=75&type=chunk) [Earnings Per Share](index=21&type=section&id=Earnings%20Per%20Share) Provides the calculation of basic and diluted earnings per share for the reporting periods **Earnings Per Share Calculation (in thousands):** | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Weighted average common shares outstanding (Basic) | 23,011 | 22,666 | 22,866 | 22,630 | | Incremental common shares attributable to options/warrants | 3,207 | 1,242 | 2,573 | 1,195 | | Weighted average common shares (Diluted) | 26,218 | 23,908 | 25,439 | 23,825 | - Diluted EPS increased to **$0.52** for the three months and **$1.12** for the nine months ended September 30, 2021, from **$0.16** and **$0.74** respectively in the prior year, reflecting higher net income[13](index=13&type=chunk) [Income Taxes](index=21&type=section&id=Income%20Taxes) Discusses the company's income tax expense, benefits, and deferred tax assets - The CARES Act allowed the company to carry back net operating losses (NOLs) from 2018-2020 to prior tax years at a **35% rate**, resulting in a net tax benefit of **$8.8 million** for the nine months ended September 30, 2020[79](index=79&type=chunk) - Income tax expense for the three and nine months ended September 30, 2021, was **$5.9 million** (**30% effective rate**) and **$12.8 million** (**31% effective rate**), respectively[84](index=84&type=chunk) - The company recognized a net deferred tax asset of **$25.4 million** as of September 30, 2021, believing its realization is more likely than not based on forecasted future net earnings[83](index=83&type=chunk) [Legal Proceedings](index=22&type=section&id=Legal%20Proceedings) Summarizes the company's involvement in legal actions and potential liabilities - The company is routinely involved in consumer litigation and a wage and hour claim, with two civil actions potentially resulting in material liability if resolved adversely on a class basis[85](index=85&type=chunk)[86](index=86&type=chunk)[90](index=90&type=chunk) - The estimated total probable incurred losses for legal contingencies as of September 30, 2021, are immaterial, with a range of reasonably possible losses not exceeding **$5.8 million**[92](index=92&type=chunk) [Fair Value Measurements](index=23&type=section&id=Fair%20Value%20Measurements) Explains the methodology and inputs used for fair value measurements of finance receivables - Finance receivables acquired after January 2018 are valued using the fair value method (Level 3 inputs), which relies on unobservable inputs like estimated net charge-offs and amortization rates[96](index=96&type=chunk)[99](index=99&type=chunk) **Fair Value of Finance Receivables (in thousands):** | Metric | Sep 30, 2021 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | | Contractual Balance | $1,874,111 | $1,668,076 | | Fair Value | $1,667,193 | $1,523,726 | | Discount rate (unobservable input) | 10.9% - 11.3% | 10.4% - 11.1% | | Cumulative net losses (unobservable input) | 10.3% - 18.4% | 15.3% - 18.4% | - No mark-down was recorded for finance receivables measured at fair value for the quarter ended September 30, 2021, indicating no material adjustment was required based on the company's evaluation[100](index=100&type=chunk) [Subsequent Events](index=26&type=section&id=Subsequent%20Events) Reports significant events that occurred after the reporting period but before financial statement issuance - On October 20, 2021, the company repurchased and cancelled **1,999,995 shares** of its common stock for **$12.5 million**, representing approximately **8.7%** of outstanding shares prior to the transaction[106](index=106&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides an overview of the company's business, its financing strategies through securitizations and warehouse credit facilities, and a detailed analysis of its financial performance for the three and nine months ended September 30, 2021, compared to the prior year. It also discusses credit experience, liquidity, capital resources, and forward-looking statements [Overview](index=27&type=section&id=Overview) Provides a general description of the company's business model and contract purchasing activities - Consumer Portfolio Services, Inc. is a specialty finance company that purchases and services retail automobile contracts, primarily from franchised dealers, providing indirect financing to sub-prime customers[108](index=108&type=chunk) **Contract Purchase Volumes and Managed Portfolio Levels (in thousands):** | Period | Contracts Purchased in Period | Managed Portfolio at Period End | | :----------------------------------- | :---------------------------- | :------------------------------ | | 2015 | $1,060,538 | $2,031,136 | | 2016 | $1,088,785 | $2,308,070 | | 2017 | $859,069 | $2,333,530 | | 2018 | $902,416 | $2,380,847 | | 2019 | $1,002,782 | $2,416,042 | | 2020 | $742,584 | $2,174,972 | | Nine months ended September 30, 2021 | $818,341 | $2,184,142 | - The company originated **$23.7 million** under third-party programs for receivables with the intention of selling them, earning origination and servicing fees[108](index=108&type=chunk) [Securitization and Warehouse Credit Facilities](index=28&type=section&id=Securitization%20and%20Warehouse%20Credit%20Facilities) Explains the company's primary financing mechanisms for automobile contract purchases - The company finances automobile contract purchases through long-term securitizations and interim warehouse credit facilities, with all active securitizations structured as secured financings[112](index=112&type=chunk) **Recent Asset-Backed Term Securitizations (in thousands):** | Period | Number of Term Securitizations | Receivables Pledged in Term Securitizations | | :----------------------------------- | :----------------------------- | :------------------------------------------ | | 2015 | 3 | $795,000 | | 2016 | 4 | $1,214,997 | | 2017 | 4 | $870,000 | | 2018 | 4 | $883,452 | | 2019 | 4 | $1,014,124 | | 2020 | 3 | $741,867 | | Nine months ended September 30, 2021 | 3 | $785,000 | - Short-term funding capacity was reduced from **$300 million** to **$200 million** after a **$100 million** facility matured and was not renewed in February 2021[116](index=116&type=chunk) [Financial Covenants](index=29&type=section&id=Financial%20Covenants%20%28MD%26A%29) Confirms the company's compliance with debt-related financial covenants - The company was in compliance with all financial covenants as of September 30, 2021, which include maintaining minimum liquidity and net worth and not exceeding maximum leverage levels[121](index=121&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, including revenues and expenses, for the reporting periods [Comparison of Operating Results for the three months ended September 30, 2021 with the three months ended September 30, 2020](index=29&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20three%20months%20ended%20September%2030%2C%202021%20with%20the%20three%20months%20ended%20September%2030%2C%202020) Compares the company's financial performance for the three-month periods, highlighting key changes in revenues and expenses - Total revenues decreased by **3.0%** to **$68.6 million**, primarily due to a **7.7%** decrease in interest income from the runoff of the legacy portfolio, partially offset by increased interest from fair value receivables and a **24.9%** increase in other income[122](index=122&type=chunk)[124](index=124&type=chunk) **Interest Earning Assets & Yields (3 Months Ended Sep 30, in thousands):** | Asset Type | 2021 Average Balance | 2021 Interest | 2021 Interest Yield | 2020 Average Balance | 2020 Interest | 2020 Interest Yield | | :----------------------------------- | :------------------- | :------------ | :------------------ | :------------------- | :------------ | :------------------ | | Finance receivables | $305,820 | $16,067 | 21.0% | $624,532 | $29,775 | 19.1% | | Finance receivables measured at fair value | $1,837,138 | $50,951 | 11.1% | $1,646,022 | $42,807 | 10.4% | | Total | $2,142,958 | $67,018 | 12.5% | $2,270,554 | $72,582 | 12.8% | - Total operating expenses decreased by **24.3%** to **$49.0 million**, mainly driven by a **$6.3 million** decrease in interest expense and a **$9.0 million** reduction in provision for credit losses[127](index=127&type=chunk)[131](index=131&type=chunk)[143](index=143&type=chunk) **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% | - Sales expense increased by **$1.1 million** to **$4.3 million** due to a significant increase in new contract purchases (**$326.8 million** in Q3 2021 vs. **$174.0 million** in Q3 2020)[146](index=146&type=chunk) [Comparison of Operating Results for the nine months ended September 30, 2021 with the nine months ended September 30, 2020](index=34&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20nine%20months%20ended%20September%2030%2C%202021%20with%20the%20nine%20months%20ended%20September%2030%2C%202020) Compares the company's financial performance for the nine-month periods, detailing changes in revenues and expenses - Total revenues decreased by **4.9%** to **$198.4 million**, primarily due to a **12.6%** decrease in interest income from the legacy portfolio, partially offset by increased interest from fair value receivables[150](index=150&type=chunk) **Interest Earning Assets & Yields (9 Months Ended Sep 30, in thousands):** | Asset Type | 2021 Average Balance | 2021 Interest | 2021 Interest Yield | 2020 Average Balance | 2020 Interest | 2020 Interest Yield | | :----------------------------------- | :------------------- | :------------ | :------------------ | :------------------- | :------------ | :------------------ | | Finance receivables | $375,642 | $56,669 | 20.1% | $734,195 | $101,998 | 18.5% | | Finance receivables measured at fair value | $1,757,787 | $141,882 | 10.8% | $1,619,399 | $125,273 | 10.3% | | Total | $2,133,429 | $198,551 | 12.4% | $2,353,594 | $227,271 | 12.9% | - Total operating expenses decreased by **19.5%** to **$157.1 million**, driven by a **$20.1 million** decrease in interest expense, a **$15.7 million** reduction in provision for credit losses, and a **$3.0 million** decrease in employee costs[156](index=156&type=chunk)[157](index=157&type=chunk)[158](index=158&type=chunk)[170](index=170&type=chunk) **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% | - Sales expense increased by **$1.8 million** to **$12.5 million**, reflecting higher contract purchases (**$818.3 million** in 9M 2021 vs. **$575.9 million** in 9M 2020) as volumes returned to pre-pandemic levels[174](index=174&type=chunk) [Credit Experience](index=39&type=section&id=Credit%20Experience) Examines the company's portfolio credit quality, including delinquency, repossession, and charge-off trends [Delinquency, Repossession and Extension Experience](index=40&type=section&id=Delinquency%2C%20Repossession%20and%20Extension%20Experience) Provides detailed statistics on the company's delinquency, repossession, and payment extension rates **Delinquency and Repossession Experience (Total Owned Portfolio, in thousands):** | Metric | Sep 30, 2021 | Sep 30, 2020 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | :----------- | | Gross servicing portfolio | $2,184,142 | $2,250,395 | $2,174,972 | | Total delinquencies (31+ days) | $182,642 | $199,114 | $226,953 | | Amount in repossession | $21,803 | $32,383 | $35,839 | | Total delinquencies and amount in repossession | $204,445 | $231,497 | $262,792 | | Delinquencies as % of gross servicing portfolio | 8.4% | 8.8% | 10.4% | | Total delinquencies and repossession as % of gross servicing portfolio | 9.4% | 10.3% | 12.1% | **Extension Experience (Total Owned Portfolio, in thousands):** | Metric | Sep 30, 2021 | Sep 30, 2020 | Dec 31, 2020 | | :----------------------------------- | :----------- | :----------- | :----------- | | Total contracts with extensions | $888,755 | $1,154,911 | $1,123,516 | | Contracts with one extension, accruing | $320,330 | $441,306 | $417,347 | | Contracts with two or more extensions, accruing | $548,609 | $675,607 | $665,572 | | Contracts with one extension, non-accrual | $6,440 | $9,872 | $12,408 | | Contracts with two or more extensions, non-accrual | $13,376 | $28,126 | $28,189 | - Delinquencies and amounts in repossession decreased significantly from December 31, 2020, to September 30, 2021, indicating improved credit performance[181](index=181&type=chunk) [Net Charge-Off Experience](index=41&type=section&id=Net%20Charge-Off%20Experience) Presents the annualized net charge-off rates for different segments of the company's portfolio **Annualized Net Charge-Offs as % of Average Servicing Portfolio:** | Portfolio Type | Sep 30, 2021 (3 months annualized) | Sep 30, 2020 (3 months annualized) | Dec 31, 2020 (12 months) | | :----------------------------------- | :--------------------------------- | :--------------------------------- | :----------------------- | | Finance Receivables (legacy) | 3.8% | 14.1% | 11.7% | | Fair Value Receivables | 2.7% | 3.5% | 4.3% | | Total Managed Portfolio | 2.8% | 6.4% | 6.5% | - Net charge-off rates for both legacy and fair value receivables, as well as the total managed portfolio, decreased significantly for the three months ended September 30, 2021, compared to the prior year[184](index=184&type=chunk) [Extensions](index=41&type=section&id=Extensions) Describes the company's payment extension program and its effectiveness in mitigating losses - The company grants one-month payment extensions to obligors facing temporary cash flow problems, with limits generally set by securitization agreements (max two in 12 months, six over contract life)[185](index=185&type=chunk) - The extension program is considered effective in mitigating losses, with **59.2%** of accounts granted extensions in 2018 either paid in full or active and performing as of September 30, 2021[189](index=189&type=chunk) **Average Monthly Extensions as % of Average Outstandings:** | Period | Average number of extensions granted per month | Average number of outstanding accounts | Average monthly extensions as % of average outstandings | | :----------------------------------- | :------------------------------------------- | :------------------------------------- | :------------------------------------------------------ | | Nine Months Ended September 30, 2021 | 3,656 | 157,976 | 2.3% | | Year Ended December 31, 2020 | 6,931 | 172,129 | 4.0% | | Nine Months Ended September 30, 2020 | 7,256 | 174,549 | 4.2% | - The company has attempted to reduce extensions since January 2019 by being more selective and exhausting other payment possibilities[193](index=193&type=chunk) [Non-Accrual Receivables](index=44&type=section&id=Non-Accrual%20Receivables) Explains the policy for placing and restoring finance receivables on non-accrual status - Contracts greater than 90 days past due are placed on non-accrual status, as it is unlikely the delinquency will be resolved without a charge-off, and if payments reduce delinquency below 90 days, the contract is restored to full accrual[194](index=194&type=chunk)[195](index=195&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Assesses the company's cash flow, funding sources, and overall financial flexibility - Net cash provided by operating activities decreased to **$163.1 million** for the nine months ended September 30, 2021, from **$190.6 million** in the prior year[198](index=198&type=chunk) - Net cash used in investing activities was **$50.2 million**, a shift from **$45.4 million** provided in the prior year, primarily due to increased purchases of finance receivables[199](index=199&type=chunk) - Net cash used in financing activities decreased to **$83.3 million** from **$164.6 million**, driven by higher securitization trust debt issuance (**$761.5 million** vs. **$714.5 million**) and lower warehouse line repayments[201](index=201&type=chunk) - As of September 30, 2021, the company had **$28.8 million** in unrestricted cash and **$102.2 million** in available borrowings under warehouse credit facilities, with **$95.6 million** in eligible collateral[204](index=204&type=chunk) - The company had substantial indebtedness of **$1,893.3 million** at September 30, 2021, primarily from securitization trust debt (**$1,703.5 million**) and warehouse lines of credit (**$97.8 million**)[208](index=208&type=chunk) [Forward Looking Statements](index=46&type=section&id=Forward%20Looking%20Statements) Highlights the inherent uncertainties and risks associated with the company's future financial projections - The report contains forward-looking statements, including provisions for credit losses and fair value measurements, which are dependent on estimates of future charge-offs, recovery rates, and cash receipts[210](index=210&type=chunk) - Factors that could affect these estimates include changes in economic conditions, interest rates, financing availability, competition, regulatory requirements, and the impact of the COVID-19 pandemic[210](index=210&type=chunk) [Item 4. Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's principal executive and financial officers concluded that the disclosure controls and procedures were effective as of September 30, 2021, ensuring timely and accurate reporting of material information. No material changes to internal controls over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2021, by the principal executive and financial officers[211](index=211&type=chunk) - No material changes in internal controls over financial reporting occurred during the most recently completed fiscal quarter[211](index=211&type=chunk) [PART II — OTHER INFORMATION](index=47&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) Contains additional information not included in the financial statements, such as legal proceedings and risk factors [Item 1. Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates by reference the detailed discussion of legal proceedings from Note 8 to the Unaudited Condensed Consolidated Financial Statements, which outlines ongoing consumer litigation and a wage and hour claim - Information regarding legal proceedings is incorporated by reference from Note 8 of the financial statements[214](index=214&type=chunk) [Item 1A. Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section updates previously disclosed risk factors, emphasizing the significant risk posed by the company's substantial indebtedness and reiterating the inherent uncertainties in forward-looking statements, particularly concerning credit losses and fair value measurements - The company has substantial indebtedness, totaling approximately **$1,893.3 million** at September 30, 2021, which includes securitization trust debt and warehouse lines of credit[216](index=216&type=chunk) - This substantial debt increases vulnerability to adverse economic conditions, reduces cash flow for operations, limits business flexibility, creates a competitive disadvantage, and restricts the ability to borrow additional funds[217](index=217&type=chunk) - Forward-looking statements, such as provisions for credit losses and fair value measurements, are subject to risks including changes in economic conditions, financing availability, interest rates, competition, actual losses on receivables, and regulatory requirements[220](index=220&type=chunk)[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases during the three months ended September 30, 2021, and a significant repurchase event that occurred subsequent to the quarter end **Issuer Purchases of Equity Securities (3 Months Ended Sep 30, 2021):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | :----------------- | :------------------------------- | :--------------------------- | :------------------------------------------------------------------------------- | | July 2021 | 94,800 | $4.82 | 94,800 | | August 2021 | 150,825 | $5.54 | 150,825 | | September 2021 | 187,987 | $5.73 | 187,987 | | Total | 433,612 | $5.47 | 433,612 | - All purchases were made under a program authorized by the board of directors in 2003, with approximately **$1.29 million** remaining for purchases under the program as of September 30, 2021[226](index=226&type=chunk) - Subsequent to the quarter, on October 20, 2021, the company purchased and cancelled **1,999,995 shares** of its common stock for **$12.5 million**[227](index=227&type=chunk) [Item 6. Exhibits](index=49&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the report, including certifications and Inline XBRL documents - The report includes various exhibits such as Rule 13a-14(a) Certifications from the CEO and CFO, Section 1350 Certifications, and Inline XBRL documents[228](index=228&type=chunk) [Signatures](index=50&type=section&id=Signatures) The report is duly signed on behalf of Consumer Portfolio Services, Inc. by its President and Chief Executive Officer, Charles E. Bradley, Jr., and its Executive Vice President and Chief Financial Officer, Jeffrey P. Fritz, on November 10, 2021 - The report was signed by Charles E. Bradley, Jr., President and Chief Executive Officer, and Jeffrey P. Fritz, Executive Vice President and Chief Financial Officer, on November 10, 2021[231](index=231&type=chunk)

Financial Data and Key Metrics Changes - The company reported a 232% year-over-year earnings growth, with a 24% reduction in expenses during the same period [5][11] - Revenues for the quarter were $68.6 million, a 3% increase from the previous quarter but a 3% decrease compared to the same quarter last year [9] - Net income for the quarter was $13.7 million, representing a 41% increase over the previous quarter and a 261% increase year-over-year [15] Business Line Data and Key Metrics Changes - Originations grew by 14% quarter-over-quarter and 87% year-over-year, marking the highest quarter since Q2 2016 [6] - The legacy portfolio is declining rapidly, now yielding about 20% but only representing 13% of the managed portfolio [9][10] - The fair value portfolio has grown to $1.9 billion, yielding a predictable 11.1% this quarter [10] Market Data and Key Metrics Changes - Delinquency rates were reported at 9.36%, up from 8.28% in the previous quarter but down from 10.3% in the same quarter last year [23] - The net loss rate for the quarter was 2.8%, slightly up from 2.79% in the previous quarter but significantly down from 6.39% year-over-year [24] Company Strategy and Development Direction - The company is focusing on increasing its dealer base from 8,000 to 10,000 and enhancing its scorecard technology to improve customer targeting [28] - The management is optimistic about future growth as inventory issues in the market are expected to ease, which will likely lead to increased originations [27][33] - The company is actively repurchasing shares to enhance shareholder value, having bought 2.5 million shares recently [8][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's performance despite external challenges, noting that their collections remain strong even as stimulus effects wane [7][31] - The outlook for used car prices is cautiously optimistic, with expectations for supply chain improvements in the coming months [37][39] - The competitive landscape is noted to be intense, with many players needing to grow, but the company is positioned well to continue its growth trajectory [33] Other Important Information - The company achieved a negative provision for credit losses of $1.6 million, marking a first in its history [13] - The balance sheet remains strong, with significant cash releases from trusts contributing to liquidity [17] Q&A Session Summary Question: Outlook for used car prices and supply chain normalization - Management anticipates that supply chain issues will ease in the next three to six months, leading to a better year for manufacturers in 2022 [37][38] Question: Remaining life on the legacy portfolio - The legacy portfolio is seasoned 58 months with an expected remaining life of about 12 months [40]

Consumer Portfolio Services Inc. (NASDAQ:CPSS) Q2 2021 Earnings Conference Call August 12, 2021 1:00 PM ET Company Participants Charles Bradley - Chief Executive Officer Jeff Fritz - Chief Financial Officer of Consumer Portfolio Services Conference Call Participants Kyle Joseph - Jefferies Jeff Zhang - JMP Securities Operator Good day, everyone, and welcome to the Consumer Portfolio Services 2021 Second Quarter Operating Results Conference Call. Today's call is being recorded. Before we begin, management ha ...

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, 2021 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ______________ Commission file number: 1-11416 CONSUMER PORTFOLIO SERVICES, INC. (Exact name of registrant as specified in its charter) Calif ...

Consumer Portfolio Services, Inc. (NASDAQ:CPSS) Q1 2021 Earnings Conference Call May 11, 2021 1:00 PM ET Company Participants Charles Bradley - Chairman, President & CEO Jeffrey Fritz - EVP & CFO Conference Call Participants John Rowan - Janney Montgomery Scott Kyle Joseph - Jefferies Operator Good day everyone and welcome to the Consumer Portfolio Services 2021 First Quarter Operating Results Conference Call. [Operator Instructions]. Before we may begin management has asked me to inform you that this confe ...

Financial Performance - Total revenues for the three months ended March 31, 2021, were $63,112, a decrease of 10.5% from $70,767 in the same period of 2020[17]. - Net income for the three months ended March 31, 2021, was $5,164, down 52.1% from $10,792 in the same period of 2020[19]. - Basic earnings per share for the three months ended March 31, 2021, were $0.23, compared to $0.48 for the same period in 2020, a decrease of 52.1%[17]. - Other income for the three-month period ending March 31, 2021 was $1.436 million, a decrease of 27.5% compared to $1.981 million for the same period in 2020[37]. - Interest income for the three months ended March 31, 2021, was $61.7 million, compared to $68.8 million for the same period in 2020[84]. - Interest expense for the three months ended March 31, 2021, was $20.9 million, down from $27.0 million in the same period in 2020[84]. - The company reported charge-offs of $12.1 million for the three-month period ended March 31, 2021, compared to $34.2 million for the same period in 2020, showing an improvement in credit quality[68]. Assets and Liabilities - Total assets as of March 31, 2021, were $2,095,807, a decrease of 2.3% from $2,145,895 as of December 31, 2020[13]. - Finance receivables, net, decreased to $337,612 as of March 31, 2021, from $411,343 as of December 31, 2020, representing a decline of 17.9%[13]. - The total outstanding securitization trust debt was $1,949.1 million, with an initial principal of $5,391.0 million[71]. - The company had a short-term funding capacity of $200 million as of March 31, 2021, down from $300 million as of December 31, 2020[81]. - Total outstanding debt as of March 31, 2021, was approximately $1,907.0 million, consisting of $1,791.6 million in securitization trust debt and $71.1 million in warehouse lines of credit[190]. Cash Flow - The company provided $65,350 in net cash from operating activities for the three months ended March 31, 2021, compared to $64,054 in the same period of 2020[23]. - Net cash provided by operating activities for Q1 2021 was $65.4 million, an increase of $1.3 million compared to $64.1 million in Q1 2020[180]. - Net cash used in financing activities for Q1 2021 was $64.8 million, significantly higher than $1.7 million in the prior year period, indicating increased reliance on securitization trust debt[183]. Operating Expenses - Operating expenses for the three months ended March 31, 2021, totaled $55,168, down 18.5% from $67,655 in the same period of 2020[17]. - Total operating expenses decreased by $12.5 million, or 18.5%, to $55.2 million for the three months ended March 31, 2021, primarily due to decreases in interest expense, provisions for credit losses, and employee costs[135]. - Employee costs decreased by $1.7 million, or 7.7%, to $20.2 million, representing 36.5% of total operating expenses, compared to 32.3% in the prior year[136]. Credit Quality and Delinquencies - The allowance for credit losses increased by $127.0 million due to the adoption of the Current Expected Credit Loss (CECL) model, reflecting a significant adjustment in the credit loss estimation methodology[66]. - The delinquency status shows that current receivables were $360.4 million, down from $406.7 million, while receivables 31-60 days delinquent decreased from $56.6 million to $35.5 million[58]. - Total delinquencies as a percentage of the gross servicing portfolio increased to 8.1% as of March 31, 2021, compared to 7.8% in December 2020[161]. Securitization and Debt - The company completed a securitization transaction on April 28, 2021, selling $240.0 million of asset-backed notes secured by $240.0 million in automobile receivables[79]. - The company issued $230,545 from securitization trust debt during the three months ended March 31, 2021[23]. - The average balance of securitization trust debt decreased to $1,876.8 million for the three months ended March 31, 2021, compared to $2,186.8 million in the prior year[141]. Legal and Regulatory Matters - The company has been involved in various legal proceedings related to its consumer finance activities, which may impact future financial results[52]. - The ongoing COVID-19 pandemic has necessitated adjustments in the company's fair value measurements for finance receivables, reflecting potential economic impacts[53]. Future Outlook - The company anticipates that future cash flows and earnings will be influenced by economic conditions, credit loss provisions, and the market for used vehicles[192]. - The company has a risk of increased delinquencies and losses on retail installment contracts, which could adversely affect its financial condition[202].

Title of each class Trading Symbol(s) Name of each exchange on which registered Common Stock, no par value CPSS The Nasdaq Stock Market LLC (Global Market) Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ________________ FORM 10-K ☒ ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: ...