UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

~~[X]~~

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

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

For the quarterly period ended September 30, ~~2017~~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)

California	33-0459135
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

3800 Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada	89169
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including Area Code: (949)753-6800

Former name, former address and former fiscal year, if changed since last report: N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, no par value	CPSS	The NASDAQ Stock Market LLC (Global Market)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~[X]~~ ☒ No ~~[ ]~~☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ~~[X]~~ ☒ 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, or an emerging growth~~ company. See ~~the definitions~~definition of ~~“large accelerated filer,”~~ “accelerated filer”, “large accelerated filer” and “smaller reporting ~~company”, and “emerging growth~~ company” in Rule 12b-2 of the Exchange Act. ~~(Check one)~~

Large accelerated ~~filer [ ]~~Filer ☐	Accelerated ~~filer [X]~~Filer ☐
Non-accelerated ~~filer [ ] (Do not check if a smaller reporting company)~~Filer ☒	Smaller reporting company ~~[ ]~~☒
Emerging Growth 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~~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 ~~[X]~~ ☒

As of ~~October 30, 2017~~November 1, 2021 the registrant had ~~21,775,158~~21,073,571 common shares outstanding.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended September 30, ~~2017~~2021

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of September 30, ~~2017~~2021 and December 31, ~~2016~~2020	3
	Unaudited Condensed Consolidated Statements of Operations for the three-month and nine-month periods ended September 30, ~~2017~~2021 and ~~2016~~2020	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month and nine-month periods ended September 30, ~~2017~~2021 and ~~2016~~2020	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, ~~2017~~2021 and ~~2016~~2020	6
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month and nine-month periods ended September 30, 2021 and 2020	7
	Notes to Unaudited Condensed Consolidated Financial Statements	78
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2026
Item 4.	Controls and Procedures	3544



PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	3645
Item 1A.	Risk Factors	3645

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3747
Item 6.	Exhibits	3847
	Signatures	39
		48

PART I. FINANCIAL INFORMATION

Item 1.Financial Statements

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	September 30,			December 31,
	2021			2020
ASSETS
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		282,640			492,133
Less: Allowance for finance credit losses		(68,724	)		(80,790	)
Finance receivables, net		213,916			411,343

Furniture and equipment, net		1,121			828
Deferred tax assets, net		25,366			28,512
Accrued interest receivable		2,930			5,017
Other assets		22,308			32,317
Total asset	$	2,106,599		$	2,145,895

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses	$	51,921		$	43,112
Warehouse lines of credit		97,768			118,999
Residual interest financing		64,589			25,426
Securitization trust debt		1,703,465			1,803,673
Subordinated renewable notes		27,462			21,323
Total liabilities		1,945,205			2,012,533
COMMITMENTS AND CONTINGENCIES		–			–
Shareholders' Equity
Preferred stock, $1 par value; authorized 4,998,130 shares; NaN issued		0			0
Series A preferred stock, $1 par value; authorized 5,000,000 shares; NaN issued		0			0
Series B preferred stock, $1 par value; authorized 1,870 shares; NaNissued		0			0
Common stock, 0 par value; authorized 75,000,000 shares; 23,000,200 and 22,737,342 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		72,399			72,926
Retained earnings		97,566			69,007
Accumulated other comprehensive loss		(8,571	)		(8,571	)
Total stockholders’ equity		161,394			133,362

Total liability and stockholder’ equity	$	2,106,599		$	2,145,895

September 30, December 31,
2017 2016
ASSETS
Cash and cash equivalents $ 12,038 $ 13,936
Restricted cash and equivalents 115,026 112,754

Finance receivables 2,317,727 2,267,943
Less: Allowance for finance credit losses (108,619 ) (95,578 )
Finance receivables, net 2,209,108 2,172,365

Furniture and equipment, net 1,910 2,017
Deferred tax assets, net 47,652 42,845
Accrued interest receivable 42,148 36,233
Other assets 22,503 30,252
$ 2,450,385 $ 2,410,402

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 29,262 $ 24,977
Warehouse lines of credit 106,632 103,358
Securitization trust debt 2,103,567 2,080,900
Subordinated renewable notes 16,229 14,949
2,255,690 2,224,184
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; 21,868,887 and 23,587,126 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively 71,889 77,128
Retained earnings 129,488 115,772
Accumulated other comprehensive loss (6,682 ) (6,682 )
194,695 186,218
$ 2,450,385 $ 2,410,402

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Revenues:
Interest income	$	67,018		$	72,582		$	198,551		$	227,271
Mark to finance receivables measured at fair value		0			(3,152	)		(4,417	)		(23,051	)
Other income		1,547			1,239			4,312			4,508
Total revenues		68,565			70,669			198,446			208,728

Expenses:
Employee costs		18,170			19,155			57,777			60,826
General and administrative		7,455			7,846			23,034			24,352
Interest		18,334			24,901			58,260			78,377
Provision for credit losses		(1,590	)		7,400			(1,590	)		14,113
Sales		4,288			3,202			12,475			10,710
Occupancy		1,952			1,838			5,870			5,362
Depreciation and amortization		409			438			1,254			1,344
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

Earnings per share:
Basic	$	0.59		$	0.17		$	1.25		$	0.77
Diluted		0.52			0.16			1.12			0.74

Number of shares used in computing earnings per share:
Basic		23,011			22,666			22,866			22,630
Diluted		26,218			23,908			25,439			23,825

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Revenues:
Interest income $ 107,014 $ 105,376 $ 319,074 $ 303,748
Other income 2,474 3,140 8,084 10,351
109,488 108,516 327,158 314,099

Expenses:
Employee costs 18,455 16,688 53,807 47,510
General and administrative 6,355 6,316 20,096 18,216
Interest 23,317 20,893 68,641 58,442
Provision for credit losses 47,336 46,262 143,053 134,881
Marketing 3,807 4,463 11,757 13,864
Occupancy 1,865 1,237 5,258 3,608
Depreciation and amortization 244 202 692 568
101,379 96,061 303,304 277,089
Income before income tax expense 8,109 12,455 23,854 37,010
Income tax expense 3,446 5,107 10,138 15,175
Net income $ 4,663 $ 7,348 $ 13,716 $ 21,835

Earnings per share:
Basic $ 0.21 $ 0.31 $ 0.60 $ 0.89
Diluted 0.17 0.26 0.50 0.75

Number of shares used in computing earnings per share:
Basic 22,473 23,894 23,019 24,574
Diluted 26,779 28,503 27,606 29,253

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)


	Three Months Ended				Nine Months Ended				Three Months Ended				Nine Months Ended
	September 30,				September 30,				September 30,				September 30,
	2017		2016		2017		2016		2021		2020		2021		2020

Net income	$	4,663	$	7,348	$	13,716	$	21,835	$	13,683	$	3,768	$	28,559	$	17,532

Other comprehensive income/(loss); change in funded status of pension plan		–		–		–		–		0		0		0		0
Comprehensive income	$	4,663	$	7,348	$	13,716	$	21,835	$	13,683	$	3,768	$	28,559	$	17,532

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)


	Nine Months Ended
	September 30,
	2021			2020
Cash flows from operating activities:
Net income	$	28,559		$	17,532
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of deferred acquisition fees and origination costs		651			910
Net interest income accretion on fair value receivables		100,676			98,060
Depreciation and amortization		1,254			1,344
Amortization of deferred financing costs		5,360			6,128
Mark to finance receivables measured at fair value		4,417			23,051
Provision for credit losses		(1,590	)		14,113
Stock-based compensation expense		1,265			1,437
Purchases of finance receivables held-for-sale		(23,700	)		–
Sale of finance receivables held-for-sale		23,513			–
Changes in assets and liabilities:
Accrued interest receivable		2,087			5,354
Deferred tax assets, net		3,146			18,985
Other assets		8,629			1,673
Accounts payable and accrued expenses		8,809			1,979
Net cash provided by operating activities		163,076			190,566

Cash flows from investing activities:
Payments received on finance receivables held for investment		198,366			260,804
Purchases of finance receivables measured at fair value		(795,457	)		(572,938	)
Payments received on finance receivables at fair value		546,897			354,910
Change in repossessions held in inventory		1,567			3,435
Purchase of furniture and equipment		(1,547	)		(820	)
Net cash provided by (used in) investing activities		(50,174	)		45,391

Cash flows from financing activities:
Proceeds from issuance of securitization trust debt		761,545			714,543
Proceeds from issuance of subordinated renewable notes		7,416			5,120
Payments on subordinated renewable notes		(1,277	)		(2,412	)
Repayments of warehouse lines of credit		(22,089	)		(104,685	)
Net Proceeds from (repayment of) residual interest financing debt		39,705			(7,757	)
Repayment of securitization trust debt		(861,045	)		(764,075	)
Payment of financing costs		(5,752	)		(4,861	)
Purchase of common stock		(3,959	)		(967	)
Exercise of options and warrants		2,167			470
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 beginning of period		144,152			140,832
Cash and restricted cash at end of period	$	173,765		$	212,165

Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest	$	53,931		$	72,565
Income taxes	$	8,997		$	(17,561	)

Nine Months Ended
September 30,
2017 2016
Cash flows from operating activities:
Net income $ 13,716 $ 21,835
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of deferred acquisition fees and origination costs 619 (2,686 )
Amortization of discount on securitization trust debt – 20
Depreciation and amortization 692 568
Amortization of deferred financing costs 6,559 6,214
Provision for credit losses 143,053 134,881
Stock-based compensation expense 4,266 4,004
Changes in assets and liabilities:
Accrued interest receivable (5,915 ) (1,531 )
Deferred tax assets, net (4,807 ) (5,600 )
Other assets 5,784 (2,627 )
Accounts payable and accrued expenses 4,285 4,054
Net cash provided by operating activities 168,252 159,132

Cash flows from investing activities:
Purchases of finance receivables held for investment (668,284 ) (873,499 )
Payments received on finance receivables held for investment 487,869 490,486
Payments received on receivables portfolio at fair value 4 54
Change in repossessions held in inventory 1,961 3,136
Change in restricted cash and cash equivalents, net (2,272 ) (10,349 )
Purchase of furniture and equipment (585 ) (771 )
Net cash used in investing activities (181,307 ) (390,943 )

Cash flows from financing activities:
Proceeds from issuance of securitization trust debt 656,315 980,650
Proceeds from issuance of subordinated renewable notes 2,793 1,303
Payments on subordinated renewable notes (1,513 ) (2,088 )
Net advances of warehouse lines of credit 2,951 (112,725 )
Repayments of residual interest financing debt – (2,186 )
Repayment of securitization trust debt (634,171 ) (625,499 )
Payment of financing costs (5,713 ) (7,645 )
Purchase of common stock (10,536 ) (8,013 )
Exercise of options and warrants 1,031 186
Net cash provided by financing activities 11,157 223,983
Increase (decrease) in cash and cash equivalents (1,898 ) (7,828 )

Cash and cash equivalents at beginning of period 13,936 19,322
Cash and cash equivalents at end of period $ 12,038 $ 11,494

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 61,756 $ 51,785
Income taxes $ 6,157 $ 16,900

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

CONSUMER PORTFOLIO SERVICES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(In thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Common Stock (Shares Outstanding)
Balance, beginning of period		23,055			22,715			22,737			22,531
Common stock issued upon exercise of options and warrants		379			13			1,055			269
Repurchase of common stock		(434	)		(219	)		(792	)		(291	)
Balance, end of period		23,000			22,509			23,000			22,509

Common Stock
Balance, beginning of period	$	73,204		$	72,402		$	72,926		$	71,257
Common stock issued upon exercise of options and warrants		1,042			18			2,167			470
Repurchase of common stock		(2,377	)		(762	)		(3,959	)		(967	)
Stock-based compensation		530			539			1,265			1,437
Balance, end of period	$	72,399		$	72,197		$	72,399		$	72,197

Retained Earnings
Balance, beginning of period	$	83,884		$	61,100		$	69,007		$	139,805
Cumulative change in accounting principle (Note 2)		–			–			–			(92,469	)
Balance, beginning of period (as adjusted for change in accounting principle)	$	83,884		$	61,100		$	69,007		$	47,336
Net income		13,683			3,768			28,559			17,532
Balance, end of period	$	97,566		$	64,868		$	97,566		$	64,868

Accumulated Other Comprehensive Loss
Balance, beginning of period	$	(8,571	)	$	(8,421	)	$	(8,571	)	$	(8,421	)
Pension benefit obligation		–			–			–			–
Balance, end of period	$	(8,571	)	$	(8,421	)	$	(8,571	)	$	(8,421	)

Balance, beginning of period		–			–			133,362			–
Pension benefit obligation		0			0			0			0
Total Shareholders' Equity	$	161,394		$	128,644		$	161,394		$	128,644

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) ~~acquired installment purchase contracts in four merger and acquisition transactions,~~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) ~~lent money directly to consumers for an immaterial amount of loans secured by vehicles.~~acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts."

Basis of Presentation

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the ~~nine month~~nine-month period ended September 30, ~~2017~~2021 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, ~~2016.~~2020.

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.

~~Other Income~~Finance Receivables Measured at Fair Value

~~The following table presents~~Effective January 1, 2018, we adopted the ~~primary components~~fair value method of ~~Other Income~~accounting for finance receivables acquired on or after that date. For each finance receivable acquired after 2017, we consider the ~~three-month~~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 ~~nine-month periods ending September 30, 2017 and 2016:~~then to reduce the recorded value of the receivables.

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands) (In thousands)
Direct mail revenues $ 1,628 $ 2,080 $ 5,261 $ 7,302
Convenience fee revenue 430 520 1,510 1,625
Recoveries on previously charged-off contracts 140 268 464 634
Sales tax refunds 224 204 636 605
Other 52 68 213 185
Other income for the period $ 2,474 $ 3,140 $ 8,084 $ 10,351

78

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~Warrants~~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. There are no adjustments to the carrying value of the portion of the receivables portfolio accounted for at fair value in the third quarter of 2021. Results for the third quarter of 2020 include a $3.2 million mark down. Mark downs of $4.4 million and $23.1 million were included in the results for the nine months ending September 30, 2021 and 2020, respectively. The mark down is an estimate based on our evaluation of 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. Mark downs are reflected as a reduction in revenue.

~~In connection~~Anticipated credit losses are included in our estimation of cash to be received with respect to receivables. Because such credit losses are included in our computation of the ~~amendment~~appropriate level yield, we do not thereafter make periodic provision for credit losses, as our best estimate of the lifetime aggregate of credit losses is included in that initial computation. Also, because we include anticipated credit losses in our computation of the level yield, the computed level yield is materially lower than the average contractual rate applicable to the receivables. Because our initial recorded value is fixed as the price we pay for the receivable, rather than as the contractual principal balance, we do not record acquisition fees as an amortizing asset related to the receivables, nor do we capitalize costs of acquiring the receivables. Rather we recognize the costs of acquisition as expenses in the period incurred.
Other Income
The following table presents the primary components of Other Income for the three-month and partial repayment of our residual interest financing in July 2008, we issued warrants exercisable for 2,500,000 common shares for $4,071,429. The warrants represent the right to purchase 2,500,000 CPS common shares at a nominal exercise price, at any time prior to July 10, 2018. In March 2010 we repurchased warrants for 500,000 of these shares for $1.0 million. Warrants to purchase 2,000,000 shares remain outstanding as ofnine-month periods ending September 30, ~~2017.~~2021 and 2020:
Schedule of other income
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
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
Other income for the period $ 1,547 $ 1,239 $ 4,312 $ 4,508
Leases

The Company has operating leases for corporate offices, equipment, software and hardware. The Company has entered into operating leases for the majority of its real estate locations, primarily office space. These leases are generally for periods of three to seven years with various renewal options. The depreciable life of leased assets is limited by the expected lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.
9
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the supplemental balance sheet information related to leases:
Supplemental balance sheet information related to leases
September 30, December 31,
2021 2020
(In thousands)
Operating Leases
Operating lease right-of-use assets $ 25,820 $ 23,735
Less: Accumulated amortization right-of-use assets (16,238 ) (12,792 )
Operating lease right-of-use assets, net $ 9,582 $ 10,943

Operating lease liabilities $ (10,471 ) $ (12,096 )

Finance Leases
Property and equipment, at cost $ 3,407 $ 3,407
Less: Accumulated depreciation (2,069 ) (1,226 )
Property and equipment, net $ 1,338 $ 2,181

Finance lease liabilities $ (1,408 ) $ (2,243 )

Weighted Average Discount Rate
Operating lease 5.0% 5.0%
Finance lease 6.5% 6.5%
Maturities of leases
Maturities of lease liabilities were as follows:
(In thousands) Operating Finance
Year Ending December 31, Lease Lease
2021 (excluding the nine months ended September 30, 2021) $ 1,811 $ 305
2022 6,433 1,050
2023 1,888 84
2024 921 26
2025 794 9
Thereafter 1,661 –
Total undiscounted lease payments 13,508 1,474
Less amounts representing interest (3,037 ) (66 )
Lease Liability $ 10,471 $ 1,408
10
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:
Lease information
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
Operating lease cost $ 1,768 $ 1,885 $ 5,398 $ 5,654
Finance lease cost 308 299 924 871
Total lease cost $ 2,076 $ 2,184 $ 6,322 $ 6,525
The following table presents the supplemental cash flow information related to leases:
Supplemental cash flow information related to leases
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
Cash paid for amounts included in the measurement of lease liabilities: (In thousands) (In thousands)
Operating cash flows from operating leases $ 1,840 $ 1,945 $ 5,662 $ 5,803
Operating cash flows from finance leases 283 256 834 737
Financing cash flows from finance leases 25 42 90 133
Stock-based Compensation

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

For the three and nine months ended September 30, ~~2017,~~2021, we recorded stock-based compensation costs in the amount of ~~$1.7 million~~ $530,000 and ~~$4.3~~$1.3 million, respectively. These stock-based compensation costs were ~~$1.4 million~~$539,000 and ~~$4.0~~$1.4 million for the three and nine months ended September 30, ~~2016.~~2020. As of September 30, ~~2017,~~2021, unrecognized stock-based compensation costs to be recognized over future periods equaled ~~$7.2~~ $5.6 million. This amount will be recognized as expense over a weighted-average period of ~~2.0 years.~~
~~The following represents stock option activity for the nine months ended September 30, 2017:~~

Number of
Shares
(in thousands)

Weighted
Average
Exercise Price

Weighted Average
Remaining
Contractual Term

Options outstanding at the beginning of period 12,595 $ 4.56 N/A
   Granted 1,470 4.35 N/A
   Exercised (619 ) 1.67 N/A
   Forfeited (283 ) 5.62 N/A
Options outstanding at the end of period 13,163 $ 4.65 4.70 years

Options exercisable at the end of period 8,668 $ 4.50 4.24 years
At September 30, 2017, the aggregate intrinsic value of options outstanding and exercisable was $12.9 million and $11.2 million, respectively. There were 618,773 options exercised for the nine months ended September 30, 2017 compared to 127,350 for the comparable period in 2016. The total intrinsic value of options exercised was $1.8 million and $379,000 for the nine-month periods ended September 30, 2017 and 2016. There were 2.5 ~~million shares available for future stock option grants under existing plans as of September 30, 2017.~~
~~Purchases of Company Stock~~
During the nine-month period ended September 30, 2017, we purchased 2,337,012 shares of our common stock, at an average price of $4.51. We purchased 2,292,070 shares of our stock in the open market at an average price of $4.51. The remaining purchases of 44,942 shares were related to net exercises of outstanding stock options where the holders of options to purchase 100,000 shares of our common stock paid the aggregate $209,000 exercise price by surrender to us of 44,942 of such 100,000 shares.
~~During the nine-month period ended September 30, 2016, we purchased 1,978,012 shares of our stock in the open market at an average price of $4.05.~~
years.

811

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

The following represents stock option activity for the nine months ended September 30, 2021:
Share-based Payment Arrangement, Option, Activity
Weighted
Number of Weighted Average
Shares Average Remaining
(in thousands) Exercise Price Contractual Term
Options outstanding at the beginning of period 15,977 $ 4.46 N/A
Granted 1,460 4.95 N/A
Exercised (1,055 ) 2.06 N/A
Forfeited (2,071 ) 6.31 N/A
Options outstanding at the end of period 14,311 $ 4.42 2.89 years
Options exercisable at the end of period 10,916 $ 4.61 1.97 years
The following table presents the price distribution of stock options outstanding and exercisable for the years ended September 30, 2021 and December 31, 2020:
Schedule of stock options outstanding and exercisable
Number of shares as of Number of shares as of
September 30, 2021 December 31, 2020
Outstanding Exercisable Outstanding Exercisable
Range of exercise prices: (In thousands) (In thousands)
$0.95 - $1.99 1,257 1,257 1,904 1,904
$2.00 - $2.99 1,525 497 1,570 180
$3.00 - $3.99 4,479 3,572 4,973 3,306
$4.00 - $4.99 2,925 1,465 1,540 1,217
$5.00 - $5.99 0 0 0 0
$6.00 - $6.99 2,935 2,935 4,770 4,770
$7.00 - $7.99 1,190 1,190 1,220 1,220
Total shares 14,311 10,916 15,977 12,597
At September 30, 2021 the aggregate intrinsic value of options outstanding and exercisable was $24.1 million and $17.4 million, respectively. There were 1,054,541 options exercised for the nine months ended September 30, 2021 compared to 269,100 for the comparable period in 2020. The total intrinsic value of options exercised was $1.1 million and $308,000 for the nine-month periods ended September 30, 2021 and 2020. There were 881,000 shares available for future stock option grants under existing plans as of September 30, 2021.
12
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Purchases of Company Stock
The table below describes the purchase of our common stock for the nine-month ended September 30, 2021 and 2020:
Schedule of purchases of company stock
Nine Months Ended
September 30, 2021 September 30, 2020
Shares Avg. Price Shares Avg. Price
Open market purchases 734,700 $ 5.03 44,247 $ 2.94
Shares redeemed upon net exercise of stock options 56,983 4.47 46,909 2.86
Other purchases 0 0 200,000 3.51
Total stock purchases 791,683 $ 4.99 291,156 $ 3.32
Reclassifications

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

Financial Covenants

Certain of our securitization transactions, our warehouse credit facilities and our residual interest financing contain various financial covenants requiring minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. As of September 30, ~~2017,~~2021, 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.

We record at each measurement date, most recently as of September 30, 2017, our best estimate of probable incurred losses for legal contingencies. The amount of losses that may ultimately be incurred cannot be estimated with certainty.
~~New Accounting Pronouncements~~Coronavirus Pandemic

In ~~May 2014,~~December 2019, a new strain of coronavirus (the “COVID-19 virus”) originated in Wuhan, China. Since its discovery, the ~~FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue~~COVID-19 virus has spread throughout the world, and the outbreak has been declared to be a pandemic by the World Health Organization. We refer from ~~Contracts~~time to time in this report to the outbreak and spread of the COVID-19 virus as “the pandemic.”
We measure our portfolio of finance receivables carried at fair value with ~~Customers (Topic 606), superseding~~consideration for unobservable inputs that reflect our own assumptions about the ~~revenue recognition requirements~~factors that market participants use in ~~ASC 605. This ASU requires an entity to recognize revenue~~pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the ~~transfer~~magnitude and timing of ~~promised goods or services to customers in an amount that reflects~~net charge-offs and the ~~consideration to which the entity expects to be entitled in exchange for those goods or services. The amendment includes a five-step process to assist an entity in achieving the main principle(s)~~rate of ~~revenue recognition under ASC 605. In August 2015, the FASB issued ASU 2015-14, which formalized the deferral~~amortization of the ~~effective date of~~portfolio. The pandemic and the amendment for a period of one year from the original effective date. Following the issuance of ASU 2015-14, the amendment will be effective for the Company for the first annual period beginning after December 15, 2017. In March 2016, the FASB also issued ASU 2016-08, an amendment to the guidance in ASU 2014-09, which revises the structure of the indicators to determine whether the entity is the principal or agent in a revenue transaction, and eliminated two of the indicators (“the entity’s consideration is in the form of a commission” and “the entity is not exposed to credit risk”) in making that determination. This amendment also clarifies that each indicatoradverse effect it may ~~be more or less relevant to the assessment depending~~have on the ~~terms~~U.S. economy and ~~conditions~~our obligors may cause us to consider significant changes in any of ~~the contract. In April 2016, the FASB also issued ASU 2016-10,~~those inputs, which ~~clarifies the implementation guidance~~in turn may have a significant effect on identifying promised goods or services and on determining whether an entity's promise to grant a license with either a right to use the entity's intellectual property (which is satisfied at a point in time) or a right to access the entity's intellectual property (which is satisfied over time). In May 2016, the FASB issued ASU 2016-12, an amendment to ASU 2014-09, which provided practical expedients related to disclosures of remaining performance obligations, as well as other amendments to guidance on transition, collectability, non-cash consideration and the presentation of sales and other similar taxes. In December 2016, the FASB issued ASU 2016-20, a separate update for technical corrections and improvements to Topic 606 and other Topics amended by Update 2014-09, to increase stakeholders’ awareness of the proposals and to expedite improvements to Update 2014-09. The amendments, collectively, should be applied retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.
our fair value measurement.

913

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

The Company does not expect the new guidance to have a material impact on its Consolidated Statements of Operations. The Company expects to adopt this ASU in the first quarter of 2018 using a modified retrospective approach with a cumulative-effect adjustment to opening retained earnings. The Company’s ongoing implementation efforts include the identification of other revenue streams that are within the scope of the new guidance and reviewing related contracts with customers to determine whether any accounting changes will be required. The timing and classification of certain contract costs presented in the Consolidated Statements of Operations is under evaluation and could change upon adoption. Finally, the Company is evaluating changes that will be required to applicable disclosures.
(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.
The following table presents the components of Finance Receivables, net of unearned interest:
Schedule of finance receivables
September 30, December 31,
2021 2020
Finance receivables (In thousands)
Automobile finance receivables, net of unearned interest $ 282,744 $ 491,307
Unearned acquisition fees and originations costs (104 ) 826
Finance receivables $ 282,640 $ 492,133

September 30, December 31,
2017 2016
Finance receivables (In thousands)

Automobile finance receivables, net of unearned interest $ 2,312,363 $ 2,266,619
Unearned acquisition fees and originations costs 5,364 1,324
Finance receivables $ 2,317,727 $ 2,267,943
We consider an automobile contract delinquent when an obligor fails to make at least 90% of a contractually due payment by the following due date, which date may have been extended within limits specified in the servicing agreements. The period of delinquency is based on the number of days payments are contractually past due, as extended where applicable. Automobile contracts less than 31 days delinquent are not included. In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In certain limited cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled debt restructurings. The following table summarizes the delinquency status of finance receivables as of September 30, ~~2017~~2021 and December 31, ~~2016:~~2020:
Schedule of delinquency status of finance receivables
September 30, December 31, September 30, December 31,
2017 2016 2021 2020
(In thousands) (In thousands)
Deliquency Status
Delinquency Status
Current $ 2,103,509 $ 2,053,759 $ 234,782 $ 406,693
31 - 60 days 130,457 116,073 33,929 56,572
61 - 90 days 51,912 52,404 11,734 22,660
91 + days 26,485 44,383 2,299 5,382
$ 2,312,363 $ 2,266,619 $ 282,744 $ 491,307

Finance receivables totaling ~~$26.5~~ $2.3 million and ~~$44.4~~$5.4 million at September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively, including all receivables greater than 90 days delinquent, have been placed on non-accrual status as a result of their delinquency status.

1014

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Credit Losses – Finance Receivables
The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of finance receivables to present the net amount expected to be collected. Charge offs are deducted from the allowance when management believes that collectability is unlikely.
Management estimates the allowance using relevant available information, from internal and external sources, relating to past events, current conditions and, reasonable and supportable forecasts. We believe our historical credit loss experience provides the best basis for the estimation of expected credit losses. Consequently, we use ahistorical loss ~~allowance methodology commonly referred to as~~"~~static pooling,~~" ~~which stratifies our finance receivable portfolio~~experience for older receivables, aggregated into ~~separately identified~~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 ~~origination. Using analytical~~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 ~~formula driven techniques,~~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 ~~estimate~~do not believe there are significant differences in risk characteristics between various segments of our portfolio.
Our methodology incorporates historical pools that are sufficiently seasoned to capture the magnitude and trends of losses within those vintage pools. Furthermore, the historical period encompasses a substantial volume of receivables over periods that include fluctuations in the competitive landscape, the Company’s rates of growth, size of our managed portfolio and fluctuations in economic growth and unemployment.
In consideration of the depth and breadth of the historical period, and the homogeneity of our portfolio, we generally do not adjust historical loss information for differences in risk characteristics such as credit or structural composition of segments of the portfolio or for changes in environmental conditions such as changes in unemployment rates, collateral values or other factors. However, we have considered how certain qualitative factors may affect future credit losses and have incorporated our judgement of the effect of such factors into our estimates.
Effective January 1, 2020, the Company adopted Accounting Standards Codification ("ASC") 326, which changes the criteria under which credit losses on financial instruments (such as the Company’s finance receivables) are measured. ASC 326 introduced a new credit reserving model known as the Current Expected Credit Loss (“CECL”) model, which replaces the incurred loss impairment methodology previously used under U.S. GAAP with a methodology that records currently the expected lifetime credit losses on financial instruments. The adoption of CECL required that we establish an allowance for the remaining expected lifetime credit losses on the portion of the Company’s receivable portfolio for which the Company was not already using fair value accounting. We refer to that portion, which is those receivables that were originated prior to January 2018, as our “legacy portfolio”. To comply with CECL, the Company recorded an addition to its allowance for finance credit losses ~~which we believe is adequate for probable incurred credit losses that can be reasonably estimated in our portfolio~~ of ~~automobile contracts.~~$127.0 million. The estimate for probable incurred credit losses is reduced by our estimate for future recoveries on previously incurred losses. Provision for credit losses is charged to our consolidated statement of operations. Net losses incurred on finance receivables are chargedoffset to the ~~allowance. We establish~~addition to the allowance for ~~new~~finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method.
15
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amortized cost basis of our finance receivables ~~over the 12-month period following their acquisition.~~by annual vintage as of September 30, 2021 and December 31, 2020.
Schedule of amortized cost basis of finance receivables
September 30, December 31,
2021 2020
(In thousands)
Annual Vintage Pool
2012 and prior $ 203 $ 608
2013 1,575 4,483
2014 9,382 23,115
2015 38,397 78,457
2016 94,092 163,677
2017 139,095 220,967
$ 282,744 $ 491,307

The following table presents a summary of the activity for the allowance for finance credit losses for the three-month and nine-month periods ended September 30, ~~2017~~2021 and ~~2016:~~2020:
Schedule of allowance for finance credit losses
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
Balance at beginning of period $ 72,242 $ 98,602 $ 80,790 $ 11,640
Early adoption of CECL 0 0 0 127,000
Provision for credit losses on finance receivables (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

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands) (In thousands)
Balance at beginning of period $ 107,315 $ 90,168 $ 95,578 $ 75,603
Provision for credit losses on finance receivables 47,336 46,262 143,053 134,881
Charge-offs (53,628 ) (46,839 ) (152,401 ) (134,674 )
Recoveries 7,596 7,252 22,389 21,033
Balance at end of period $ 108,619 $ 96,843 $ 108,619 $ 96,843
For the three and nine months ended September 30, 2021, we recorded a reduction to provision for credit losses on finance receivables in the amount of $1.6 million. The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from improved credit performance. The Company made additional provisions for credit losses of $7.4 million and $14.1 million for the three-month and nine-month periods ended September 30, 2020, respectively. Those reserve increases were made in consideration for the uncertainty associated with the pandemic.

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:
September 30, December 31,
2017 2016
(In thousands)
Gross balance of repossessions in inventory $ 32,032 $ 40,069
Allowance for losses on repossessed inventory (22,848 ) (28,924 )
Net repossessed inventory included in other assets $ 9,184 $ 11,145
Schedule of allowance for losses on repossessed inventory
September 30, December 31,
2021 2020
(In thousands)
Gross balance of repossessions in inventory $ 4,642 $ 15,589
Allowance for losses on repossessed inventory (2,410 ) (11,790 )
Net repossessed inventory included in other assets $ 2,232 $ 3,799

1116

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(3)Securitization Trust Debt

We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:
Schedule of Long-term Debt Instruments
Weighted
Average
Final Receivables Outstanding Outstanding Contractual
Scheduled Pledged at Principal at Principal at Interest Rate at
Payment September 30, Initial September 30, December 31, September 30,
Series Date (1) 2021 (2) Principal 2021 2020 2021
(Dollars in thousands)
CPS 2016-A March 2023 0 329,460 0 37,158 0
CPS 2016-B June 2023 0 332,690 0 46,079 0
CPS 2016-C September 2023 26,578 318,500 25,373 47,325 8.39%
CPS 2016-D April 2024 22,636 206,325 19,402 36,455 6.86%
CPS 2017-A April 2024 25,943 206,320 22,163 40,619 6.84%
CPS 2017-B December  2023 32,980 225,170 17,592 39,016 5.75%
CPS 2017-C September 2024 35,175 224,825 30,272 47,553 5.40%
CPS 2017-D June 2024 36,323 196,300 31,136 49,297 4.77%
CPS 2018-A March 2025 40,366 190,000 34,447 53,549 4.54%
CPS 2018-B December  2024 49,034 201,823 42,028 66,955 4.98%
CPS 2018-C September 2025 55,619 230,275 49,803 77,345 5.14%
CPS 2018-D June 2025 67,792 233,730 57,940 88,228 4.98%
CPS 2019-A March 2026 84,896 254,400 72,357 114,373 4.76%
CPS 2019-B June 2026 83,881 228,275 72,804 118,982 4.42%
CPS 2019-C September 2026 98,171 243,513 88,668 142,080 3.62%
CPS 2019-D December  2026 126,247 274,313 115,544 181,485 3.09%
CPS 2020-A March 2027 121,595 260,000 117,252 184,944 3.18%
CPS 2020-B June 2027 127,469 202,343 104,048 164,403 4.18%
CPS 2020-C November 2027 172,254 252,200 162,049 231,961 2.11%
CPS 2021-A March 2028 186,415 230,545 171,918 0 0.88%
CPS 2021-B June 2028 211,244 240,000 203,796 0 1.14%
CPS 2021-C September 2028 286,516 291,000 276,228 0 1.04%
$ 1,891,134 $ 5,372,007 $ 1,714,820 $ 1,767,807
_________________

Series
Final Scheduled
Payment Date (1)

Receivables
Pledged at
September 30,
2017 (2)
Initial Principal
Outstanding Principal at
September 30,
2017

Outstanding Principal at
December 31,
2016

Weighted
Average
Contractual
Interest Rate at
September 30,
2017

(Dollars in thousands)
CPS 2012-C December 2019 $ – $ 147,000 $ – $ 14,421 –
CPS 2012-D March 2020 – 160,000 – 17,865 –
CPS 2013-A June 2020 18,270 185,000 16,015 28,661 1.70%
CPS 2013-B September 2020 25,007 205,000 22,374 37,570 2.13%
CPS 2013-C December 2020 30,755 205,000 29,939 46,830 5.58%
CPS 2013-D March 2021 31,306 183,000 29,557 46,345 4.77%
CPS 2014-A June 2021 37,687 180,000 35,414 54,988 4.06%
CPS 2014-B September 2021 52,509 202,500 51,099 75,140 3.49%
CPS 2014-C December 2021 82,954 273,000 81,051 116,280 3.72%
CPS 2014-D March 2022 90,853 267,500 89,368 127,307 4.02%
CPS 2015-A June 2022 98,727 245,000 97,395 134,466 3.50%
CPS 2015-B September 2022 115,193 250,000 114,161 153,893 3.43%
CPS 2015-C December 2022 156,908 300,000 155,261 207,636 3.94%
CPS 2016-A March 2023 200,682 329,460 198,375 262,260 4.25%
CPS 2016-B June 2023 226,642 332,690 220,324 284,752 4.29%
CPS 2016-C September 2023 228,946 318,500 222,544 285,618 3.85%
CPS 2016-D December 2023 166,557 206,325 162,871 200,221 3.01%
CPS 2017-A April 2024 179,926 206,320 174,942 – 3.18%
CPS 2017-B September 2024 212,943 225,170 201,190 – 2.81%
CPS 2017-C September 2024 220,464 224,825 214,519 – 2.74%
$ 2,176,329 $ 4,646,290 $ 2,116,399 $ 2,094,253
~~_________________~~
(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 ~~$229.7 million in 2017, $829.4 million in 2018, $549.1 million in 2019, $318.9 million in 2020, $156.9~~ $208.3 million in 2021, ~~$32.4~~ $606.7 million in ~~2022.~~2022, $516.1 million in 2023, $129.9 million in 2024, $146.5 million in 2025, $73.9 million in 2026, and $21.5 million in 2027.

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

17
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Debt issuance costs of ~~$12.8~~ $11.4 million and ~~$13.4~~ $10.6 million as of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, respectively, have been excluded from the table above. These debt issuance costs are presented as a direct deduction to the carrying amount of the securitization trust debt on our Unaudited Condensed 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.

12
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~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 September 30, ~~2017,~~2021, we were in compliance with all such covenants.

We are responsible for the administration and collection of the automobile contracts. The securitization agreements also require certain funds be held in restricted cash accounts to provide additional collateral for the borrowings, to be applied to make payments on the securitization trust debt or as pre-funding proceeds from a term securitization prior to the purchase of additional collateral. As of September 30, ~~2017,~~2021, restricted cash under the various agreements totaled approximately ~~$115.0~~$145.0 million. Interest expense on the securitization trust debt consists of the stated rate of interest plus amortization of additional costs of borrowing. Additional costs of borrowing include facility fees, amortization of deferred financing costs and discounts on notes sold. Deferred financing costs and discounts on notes sold related to the securitization trust debt are amortized using a level yield method. Accordingly, the effective cost of the securitization trust debt is greater than the contractual rate of interest disclosed above.

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

(4)Debt

The terms and amounts of our other debt outstanding at September 30, ~~2017~~2021 and December 31, ~~2016~~2020 are summarized below:
Schedule of debt outstanding
Amount Outstanding at
September December 31,
2021 2020
(In thousands)
Description Interest Rate Maturity

Warehouse lines of credit 5.50% over one month Libor (Minimum 6.50%) N/A $ 0 $ 42,558

3.00% over one month Libor (Minimum 3.75%) December 2022 60,713 45,689

4.00% over a commercial paper rate (Minimum 5.00%) December 2021 37,710 32,265

Residual interest financing 8.60% January 2026 15,281 25,576

7.86% June 2026 50,000 0

Subordinated renewable notes Weighted average rate of 9.35% and 10.09% at September 30, 2021 and December 31, 2020, respectively Weighted average maturity of  October 2023 and  January 2023 at September 30, 2021 and December 31, 2020, respectively 27,462 21,323

$ 191,166 $ 167,411
Amount Outstanding at
September 30, December 31,
2017 2016
(In thousands)
Description Interest Rate Revolving Maturity

Warehouse lines of credit 5.50% over one month Libor (Minimum 6.50%) April 2019 $ 30,418 $ 64,352

5.50% over one month Libor (Minimum 6.25%) August 2018 51,586 26,445

6.75% over a commercial paper rate (Minimum 7.75%) November 2017 25,912 14,168

Subordinated renewable notes Weighted average rate of 7.85% and 7.50% at September 30, 2017 and December 31, 2016, respectively Weighted average maturity of October 2019 and January 2019 at September 30, 2017 and December 31, 2016, respectively 16,229 14,949

$ 124,145 $ 119,914

1318

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~Debt~~As of December 31, 2020, we had short-term funding capacity of $300 million, comprising three credit facilities. We repaid the outstanding balance for the facility first established in April 2015 at its maturity date in February 2021 and elected not to renew it. As of September 30, 2021, our short-term funding capacity is $200 million, comprising two credit facilities.
Unamortized debt issuance costs of ~~$1.3 million~~$692,000 and ~~$1.6~~$150,000 as of September 30, 2021 and December 31, 2020, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $655,000 and $1.5 million as of September 30, ~~2017~~2021 and December 31, ~~2016,~~2020, 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 ~~Warehouse lines of credit~~debt on our Unaudited Condensed Consolidated Balance Sheets.

In April 2017, we renewed our $100 million warehouse credit line that was first established in May 2012. There was $30.4 million outstanding under this facility at September 30, 2017. The revolving period for this facility was extended to April 2019 followed by an amortization period through April 2021 for any receivables pledged at the end of the revolving period.
(5)Interest Income and Interest Expense

The following table presents the components of interest income:
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands) (In thousands)

Interest on finance receivables $ 106,830 $ 105,296 $ 318,670 $ 303,548
Other interest income 184 80 404 200
Interest income $ 107,014 $ 105,376 $ 319,074 $ 303,748
Schedule of interest income
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
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 0 (3,152 ) (4,417 ) (23,051 )
Other interest income 5 21 17 665
Interest income $ 67,018 $ 69,430 $ 194,134 $ 204,220

The following table presents the components of interest expense:
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands) (In thousands)

Securitization trust debt $ 20,973 $ 18,228 $ 61,589 $ 49,867
Warehouse lines of credit 1,994 2,111 6,081 6,777
Residual interest financing – 227 – 744
Subordinated renewable notes 350 327 971 1,054
Interest expense $ 23,317 $ 20,893 $ 68,641 $ 58,442
Schedule of interest expense
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
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
Interest expense $ 18,334 $ 24,901 $ 58,260 $ 78,377

1419

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(6)Earnings Per Share
Earnings per share for the three-month and nine-month periods ended September 30, ~~2017~~2021 and ~~2016~~2020 were calculated using the weighted average number of shares outstanding for the related period. The following table reconciles the number of shares used in the computations of basic and diluted earnings per share for the three-month and nine-month periods ended September 30, ~~2017~~2021 and ~~2016:~~2020:
Computation of earnings per share
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share 23,011 22,666 22,866 22,630
Incremental common shares attributable to exercise of outstanding options and warrants 3,207 1,242 2,573 1,195
Weighted average number of common shares used to compute diluted earnings per share 26,218 23,908 25,439 23,825

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017 2016 2017 2016
(In thousands) (In thousands)

Weighted average number of common shares outstanding during the period used to compute basic earnings per share 22,473 23,894 23,019 24,574

Incremental common shares attributable to exercise of outstanding options and warrants 4,306 4,609 4,587 4,679

Weighted average number of common shares used to compute diluted earnings per share 26,779 28,503 27,606 29,253
If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the three-month and nine-month periods ended September 30, ~~2017~~2021 would have included an additional ~~9.7~~5.6 million and ~~7.3~~5.8 million shares, respectively, attributable to the exercise of outstanding options and warrants. For the three-month and nine-month periods ended September 30, ~~2016,~~2020, an additional ~~8.6~~14.2 million and ~~7.7~~13.5 million 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 2013.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was adopted, providing wide ranging economic relief for individuals and businesses. One component of the CARES Act provides the Company with an opportunity to carry back net operating losses (“NOLs”) arising from 2018, 2019 and 2020 to the prior five tax years. The Company has such NOLs reflected on its balance sheet as a portion of deferred tax assets. The Company has previously valued its NOLs at the federal corporate income tax rate of 21%. However, the provisions of the CARES Act provide for NOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect for the carryback years. Consequently, the Company has revalued the benefit from its NOLs to reflect a 35% tax rate. The result of the revaluation of NOLs and other tax adjustments is a net tax benefit of $8.8 million, which is reflected in income taxes for the nine-month period ending September 30, 2020.
As of September 30, ~~2017~~2021, and December 31, ~~2016,~~2020, we had no0 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.
20
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of ~~$47.7~~$25.4 million as of September 30, ~~2017~~2021 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of ~~$47.7~~$25.4 million consists of approximately ~~$40.6~~$14.6 million of net U.S. federal deferred tax assets and ~~$7.1~~$10.8 million of net state deferred tax assets.

15
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
Income tax expense was ~~$3.4~~ $5.9 million and ~~$10.1~~$12.8 million for the three months and nine months ended September 30, ~~2017~~2021, representing effective income tax rates of 30% and ~~represents~~31%, respectively. Income tax expense was $2.1 million for the three months ended September 30, 2020. Income tax benefit was $3.9 million for the nine months ended September 30, 2020, which includes net tax benefits of $8.8 million. Excluding the tax benefit, income tax expense would have been $8.7 million for the nine months ended September 30, 2020, representing an effective income tax rate of ~~43%, compared to income tax expense of $5.1 million and $15.2 million for the three months and nine months ended September 30, 2016, and represents an effective income tax rate of and 41%~~36%.

(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.
~~Department~~ There are as of ~~Justice Subpoena.~~In January 2015, we were served with a subpoena by the U.S. Department of Justice (the “DOJ”) directing us to produce certain documents relating to our and our subsidiaries’ and affiliates’ origination and securitization of sub-prime automobile contracts since 2005, in connection with an investigation by the DOJ in contemplation of a civil proceeding for potential violations of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. The DOJ in its investigation has requested information relating, among other matters, to the underwriting criteria used to originate these automobile contracts and to the representations and warranties relating to those underwriting criteria that were made in connection with the securitization of the automobile contracts. We are among several other securitizers of sub-prime automobile receivables who received such subpoenas in 2014, 2015 and 2016. We are investigating these matters internally and are cooperating with the DOJ. The investigation has continued through the date of this report ~~with~~two civil ~~discovery. We are unaware~~actions that could possibly result in a material liability, if resolved adversely and on a class basis, as the respective plaintiffs allege would be appropriate.
Following our filing of ~~any material developments~~a complaint for a deficiency judgment in the ~~government’s investigation subsequent~~Superior Court at Waterbury, Connecticut, the defendant filed a cross-claim alleging that our deficiency notices were not compliant with Connecticut law, and seeking relief on behalf of a class of Connecticut obligors whose vehicles we had repossessed. The defendant’s contract provides for resolution of disputes exclusively by arbitration, and exclusively on an individual basis, not a class basis. In August 2021, the court denied our motion to ~~its initiation. The investigation could~~compel arbitration, without opinion. As of the date of this report, no motion for certification of a class has been filed or granted.
Also in August 2021, an obligor in Florida filed a complaint in the ~~future result~~Circuit Court of Miami-Dade County, alleging that our assessment and computation of late fees was deceptive and unfair, and also alleging that resolution on a class basis would be appropriate. The plaintiff is bound by an agreement to arbitrate all claims, and to resolve claims on an individual basis and not on a class basis. The Company has removed the case to the federal district court, and plans to file a motion to compel arbitration, on an individual basis in accordance with the terms of the plaintiff’s agreement.
21
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Wage and Hour Claim. On September 24, 2018, a former employee filed a lawsuit against us in the ~~imposition~~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, ~~fines or civil or criminal claims and/or penalties. No assurance can be given as~~and attorney fees and interest. The plaintiff purports to ~~the ultimate outcome~~act on behalf of a class of similarly situated employees and ex-employees. As of the ~~investigation~~date of this report, no motion for class certification has been filed or ~~any resulting proceeding(s), which might materially~~granted.
We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. Accordingly, we have defended and ~~adversely affect us.~~intend to continue to defend this lawsuit. We have not recorded a liability with respect to this claim on the accompanying consolidated financial statements.

In ~~General~~General.. There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of September 30, ~~2017,~~2021, our best estimate of probable incurred losses for legal contingencies, including ~~each of~~ the matters ~~described or referenced above.~~identified above, and consumer claims. The amount of losses that may ultimately be incurred cannot be estimated with certainty. However, based on such information as is available to us, we believe that the total of probable incurred losses for legal contingencies as of September 30, 2021 is immaterial, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or ~~referenced~~identified above, as of September 30, ~~2017~~2021 does not exceed $1$5.8 million.

Accordingly, we believe that the ultimate resolution of such legal proceedings and contingencies should not have a material adverse effect on our consolidated financial condition. We note, however, that in light of the uncertainties inherent in contested proceedings ~~the wide discretion vested in the DOJ and other government agencies, and the deference that courts may give to assertions made by government litigants,~~ 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)~~Employee Benefits~~
On March 8, 2002 we acquired MFN Financial Corporation and its subsidiaries in a merger. We sponsor the MFN Financial Corporation Benefit Plan (the “Plan”). Plan benefits were frozen June 30, 2001. The table below sets forth the Plan’s net periodic benefit cost for the three-month and nine-month periods ended September 30, 2017 and 2016.
16
~~CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
(In thousands) (In thousands)

Components of net periodic cost (benefit)
Service cost $ – $ – $ – $ –
Interest cost 214 221 642 663
Expected return on assets (287 ) (300 ) (861 ) (900 )
Amortization of transition (asset)/obligation – – – –
Amortization of net (gain) / loss 101 138 303 414
   Net periodic cost (benefit) $ 28 $ 59 $ 84 $ 177
~~We did not make any contributions to the Plan during the nine-month periods ended September 30, 2017 and 2016. We do not anticipate making any contributions for the remainder of 2017.~~
~~(10)~~ 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.
22
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.
For the quarter ended September 30, 2021, 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.
The table below presents a reconciliation of the finance receivables measured at fair value on a recurring basis using significant unobservable inputs:
Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 2021 2020
(In thousands) (In thousands)
Balance at beginning of period $ 1,582,175 $ 1,537,649 $ 1,523,726 $ 1,444,038
Finance receivables at fair value acquired during period 310,340 173,209 795,457 572,938
Payments received on finance receivables at fair value (191,458 ) (132,847 ) (546,897 ) (354,910 )
Net interest income accretion on fair value receivables (33,864 ) (33,904 ) (100,676 ) (98,060 )
Mark to fair value 0 (3,152 ) (4,417 ) (23,051 )
Balance at end of period $ 1,667,193 $ 1,540,955 $ 1,667,193 $ 1,540,955
The table below compares the fair values of these finance receivables to their contractual balances for the periods shown:
Schedule of finance receivables to their contractual balances
September 30, 2021 December 31, 2020
Contractual Fair Contractual Fair
Balance Value Balance Value
(In thousands)
Finance receivables measured at fair value $ 1,874,111 $ 1,667,193 $ 1,668,076 $ 1,523,726
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
September 30, December 31, September 30, December 31,
2021 2020 Unobservable Inputs 2021 2020
(In thousands)
Assets:
Finance receivables measured at fair value $ 1,667,193 $ 1,523,726 Discount rate 10.9% - 11.3% 10.4% - 11.1%
Cumulative net losse 10.3% - 18.4% 15.3% - 18.4%
23
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the delinquency status of these finance receivables measured at fair value as of September 30, 2021 and December 31, 2020:
Schedule of delinquency status of finance receivables measured at fair value
June 30, December 31,
2021 2020
(In thousands)
Delinquency Status
Current $ 1,722,619 $ 1,505,486
31 - 60 days 93,723 96,296
61 - 90 days 31,221 36,436
91 + days 9,445 9,607
Repo 17,103 20,251
$ 1,874,111 $ 1,668,076
Repossessed vehicle inventory, which is included in Other assets on our unaudited condensed consolidated balance sheet, is measured at fair value using level 2 assumptions based on our actual loss experience on sale of repossessed vehicles. At September 30, ~~2017~~2021 the finance receivables related to the repossessed vehicles in inventory totaled ~~$32.0~~$4.6 million. We have applied a valuation adjustment, or loss allowance, of ~~$22.8~~ $2.4 million, which is based on a recovery rate of approximately ~~29%~~48%, resulting in an estimated fair value and carrying amount of ~~$9.2~~$2.2 million. The fair value and carrying amount of the repossessed inventory at December 31, ~~2016~~2020 was ~~$11.1~~$3.8 million after applying a valuation adjustment of ~~$28.9~~$11.8 million.

There were no transfers in or out of level 1, level 2 or level 23 assets and liabilities for the ~~three~~nine months ended September 30, ~~2017~~2021 and ~~2016. We have no material level 3 assets that are measured at fair value on a non-recurring basis.~~2020.

The estimated fair values of financial assets and liabilities at September 30, 2021 and December 31, 2020, were as follows:
Schedule of estimated fair values of financial assets and liabilities
As of September 30, 2021
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 28,799 $ 28,799 $ 0 $ 0 $ 28,799
Restricted cash and equivalents 144,966 144,966 0 0 144,966
Finance receivables, net 213,916 0 0 219,530 219,530
Accrued interest receivable 2,930 0 0 2,930 2,930
Liabilities:
Warehouse lines of credit $ 97,768 $ 0 $ 0 $ 97,768 $ 97,768
Accrued interest payable 3,888 0 0 3,888 3,888
Securitization trust debt 1,703,465 0 0 1,445,461 1,445,461
Subordinated renewable notes 27,462 0 0 27,462 27,462

1724

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

As of December 31, 2020
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 13,466 $ 13,466 $ 0 $ 0 $ 13,466
Restricted cash and equivalents 130,686 130,686 0 0 130,686
Finance receivables, net 411,343 0 0 429,972 429,972
Accrued interest receivable 5,017 0 0 5,017 5,017
Liabilities:
Warehouse lines of credit $ 118,999 $ 0 $ 0 $ 118,999 $ 118,999
Accrued interest payable 4,919 0 0 4,919 4,919
Securitization trust debt 1,803,673 0 0 1,862,630 1,862,630
Subordinated renewable notes 21,323 0 0 21,323 21,323
~~The estimated fair values of financial assets and liabilities at September 30, 2017 and December 31, 2016, were as follows:~~(10) Subsequent Events

As of September 30, 2017
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 12,038 $ 12,038 $ – $ – $ 12,038
Restricted cash and equivalents 115,026 115,026 – – 115,026
Finance receivables, net 2,209,108 – – 2,169,916 2,169,916
Accrued interest receivable 42,148 – – 42,148 42,148
Liabilities:
Warehouse lines of credit $ 106,632 $ – $ – $ 106,632 $ 106,632
Accrued interest payable 4,401 – – 4,401 4,401
Securitization trust debt 2,103,567 – – 2,117,841 2,117,841
Subordinated renewable notes 16,229 – – 16,229 16,229
As of December 31, 2016
Financial Instrument (In thousands)
Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 13,936 $ 13,936 $ – $ – $ 13,936
Restricted cash and equivalents 112,754 112,754 – – 112,754
Finance receivables, net 2,172,365 – – 2,104,503 2,104,503
Accrued interest receivable 36,233 – – 36,233 36,233
Liabilities:
Warehouse lines of credit $ 103,358 $ – $ – $ 103,358 $ 103,358
Accrued interest payable 3,715 – – 3,715 3,715
Securitization trust debt 2,080,900 – – 2,138,892 2,138,892
Subordinated renewable notes 14,949 – – 14,949 14,949
On October 20, 2021, the Company purchased 1,999,995 shares of its stock for a purchase price of $12.5 million. The ~~following summary presents~~shares were acquired by the seller in 2018 upon the exercise of a ~~description~~warrant that the Company issued to its lender upon the 2008 amendment and partial repayment of outstanding debt under a residual interest financing. The shares purchased, which represent approximately 8.7% of the ~~methodologies~~common shares outstanding prior to the transaction, have been cancelled and assumptions used to estimate the fair value of our financial instruments. Much of the information used to determine fair value is highly subjective. When applicable, readily available market information has been utilized. However, for a significant portion of our financial instruments, active markets do not exist. Therefore, significant elements of judgment were required in estimating fair value for certain items. The subjective factors include, among other things, the estimated timing and amount of cash flows, risk characteristics, credit quality and interest rates, all of which are subject to change. Since the fair value is estimated as of September 30, 2017 and December 31, 2016, the amounts that will actually be realized or paid at settlement or maturity of the instruments could be significantly different.
retired.

18
~~Cash, Cash Equivalents and Restricted Cash and Equivalents~~
~~The carrying value equals fair value.~~
~~Finance Receivables, net~~
~~The fair value of finance receivables is estimated by discounting future cash flows expected to be collected using current rates at which similar receivables could be originated.~~
~~Accrued Interest Receivable and Payable~~
~~The carrying value approximates fair value.~~
~~Warehouse Lines of Credit and Subordinated Renewable Notes~~
~~The carrying value approximates fair value because the related interest rates are estimated to reflect current market conditions for similar types of secured instruments.~~
~~Securitization Trust Debt~~
~~The fair value is estimated by discounting future cash flows using interest rates that we believe reflect the current market rates.~~
1925

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 ~~low incomes~~ or past credit problems, who we refer to as sub-prime customers. We serve as an alternative source of financing for dealers, facilitating sales to customers who otherwise might not be able to obtain financing from traditional sources, such as commercial banks, credit unions and the captive finance companies affiliated with major automobile manufacturers. In addition to purchasing installment purchase contracts directly from dealers, we also originate vehicle purchase money loans by lending directly to consumers and have ~~also~~ (i) acquired installment purchase contracts in four merger and acquisition transactions, and (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated ~~lenders, and (iii) directly originated an immaterial amount of vehicle purchase money loans by lending money directly to consumers.~~lenders. In this report, we refer to all of such contracts and loans as "automobile contracts."

We were incorporated and began our operations in March 1991. From inception through September 30, ~~2017,~~2021, we have originated a total of approximately ~~$13.9~~$17.8 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 ~~most recently, in September~~ 2011. The September 2011 acquisition consisted of approximately $217.8 million of automobile contracts that we purchased from Fireside Bank of Pleasanton, California. In 2004 and 2009, we were appointed as a third-party servicer for certain portfolios of automobile contracts originated and owned by non-affiliated entities. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

$ 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
Contract Purchases and Outstanding Managed Portfolio
$ in thousands
Period
Contracts Purchased
in Period

Managed
Portfolio
at Period End

2008 $ 296,817 $ 1,664,122
2009 8,599 1,194,722
2010 113,023 756,203
2011 284,236 794,649
2012 551,742 897,575
2013 764,087 1,231,422
2014 944,944 1,643,920
2015 1,060,538 2,031,136
2016 1,088,785 2,308,070
Nine months ended September 30, 2017 668,284 2,345,998
In May 2021, we entered into arrangements with two non-affiliated entities for whom we originate certain receivables with the intention of selling them to the respective non-affiiliates. Depending on the program, we may or may not continue to service receivables after they are sold. Under these programs, we earn fees for originating the receivable and also servicing fees in the case where we retain the servicing. For the nine months ended September 30, 2021, we originated $23.7 million under these third-party programs. As of September 30, 2021, our managed portfolio includes $22.6 million of such third-party receivables.

Our principal executive offices are in Las Vegas, Nevada. Most of our operational and administrative functions take place in Irvine, California. Credit and underwriting functions are performed primarily in that California branch with certain of these functions also performed in our Florida and Nevada branches. We service our automobile contracts from our California, Nevada, Virginia, Florida and Illinois branches.

The programs we offer to dealers and consumers are intended to serve a wide range of sub-prime customers, primarily through franchised new car dealers. We originate automobile contracts with the intention of financing them on a long-term basis through securitizations. Securitizations are transactions in which we sell a specified pool of contracts to a special purpose subsidiary of ours, which in turn issues asset-backed securities to fund the purchase of the pool of contracts from us.

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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.
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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~~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 ~~(iii)~~we may, as circumstances warrant, record as expense ~~a provision~~provisions for credit losses, onas we did during the ~~contracts.~~year ended December 31, 2020 because of the uncertainty related to the pandemic.

Since 1994 we have conducted 7590 term securitizations of automobile contracts that we originated. As of September 30, ~~2017, 18~~2021, 20 of those securitizations are active and all are structured as secured financings. ~~From 1994 through April 2008 we generally utilized financial guarantees for the senior asset-backed notes issued in the securitization.~~ Since September 2010 we have utilized senior subordinated structures without any financial guarantees. We have generally conducted our securitizations on a quarterly basis, near the end of each calendar quarter, resulting in four securitizations per calendar year. However, in 2015 and 2020, we ~~elected to defer what would have been our December~~closed only three term securitization transactions in ~~favor of a securitization in January 2016, and since that time have generally conducted our securitizations near the beginning of~~ each calendar ~~quarter.~~year rather than four.

Our recent history of term securitizations ~~over the most recent ten years,~~ is summarized in the table below:

Recent Asset-Backed Term Securitizations
$ in thousands
Period
Number of
Term
Securitizations

Receivables
Pledged in Term Securitizations

2006 4 $ 957,681
2007 4 1,118,097
2008 2 509,022
2009 0 –
2010 1 103,772
2011 3 335,593
2012 4 603,500
2013 4 778,000
2014 4 923,000
2015 3 795,000
2016 4 1,214,997
Nine months ended September 30, 2017 3 670,000
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

Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. ~~Our current~~We previously had short-term funding capacity isof $300 million, comprising three credit facilities. The first $100 million credit facility was established in May 2012. This facility was most recently renewed in ~~August 2016,~~December 2020, extending the revolving period to ~~August 2018,~~December 2022, with an optional amortization period through December 2023. In November 2015, we entered into another $100 million facility. This facility was renewed in November 2017 and ~~adding~~again in December 2019, extending the revolving period to December 2021, followed by an amortization period ~~through August 2019.~~to December 2023. In April 2015, we entered into a $100 million facility ~~with a revolving period extending to April 2017, followed by an amortization period to April 2019. That facility~~that was renewed in April 2017 ~~extending~~and again in February 2019. We repaid the ~~revolving period~~outstanding balance for this facility at its maturity date in February 2021 and elected not to April 2019, followed by an amortization period to April 2021. In November 2015, we entered into a third $100 million facility, with a revolving period extending to November 2017, followed by an amortization period to November 2019.renew it. We currently have short-term funding capacity of $200 million.

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.
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Financial Covenants

Certain of our securitization transactions and our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of September 30, ~~2017,~~2021, we were in compliance with all such covenants.

Results of Operations

Comparison of Operating Results for the three months ended September 30, ~~2017~~2021 with the three months ended September 30, ~~2016~~2020

Revenues.  During the three months ended September 30, ~~2017,~~2021, our revenues were ~~$109.5~~$68.6 million, ~~an increase~~a decrease of ~~$971,000,~~$2.1 million, or ~~.9%~~3.0%, from the prior year revenue of ~~$108.5~~$70.7 million. The primary reason for the ~~increase~~decrease in revenues is ~~an increase~~a decrease in interest income. Interest income for the three months ended September 30, ~~2017 increased $1.6~~2021 decreased $5.6 million, or ~~1.6%~~7.7%, to ~~$107.0~~$67.0 million from ~~$105.4~~$72.6 million in the prior year. The primary reason for the ~~increase~~decrease in interest income is the continued runoff of our legacy portfolio of finance receivables originated prior to January 2018, the average balance of which decreased by 51.0% from the prior period. The decrease in interest from that legacy portion of our portfolio was partially offset by the increase in our portfolio of receivables measured at fair value, which are those originated since January 2018. 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 held by consolidated subsidiaries.~~receivables. The table below shows the ~~outstanding and~~ average balances and interest yields of the two components of our loan portfolio ~~held by consolidated subsidiaries~~ for the three months ended September 30, ~~2017~~2021 and ~~2016:~~2020:

September 30, 2017 September 30, 2016
Amount Amount
Finance Receivables Owned by ($ in millions)
Consolidated Subsidiaries
   Average balance for the three-month period $ 2,344.9 $ 2,281.5

   Ending balance for the period $ 2,346.0 $ 2,291.7
Three Months Ended September 30,
2021 2020
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
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%

InRevenues for the three months ended September 30, ~~2017, other income~~2020 are net of ~~$2.5~~a mark down of $3.2 million ~~decreased by $667,000, or 21.2%~~to the recorded value of the finance receivables measured at fair value. The mark downs are estimates based on our evaluation of 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 arising from the ~~prior year. The three-month period~~pandemic. Our evaluation of these finance receivables measured at fair value for the three months ended September 30, ~~2017 includes a decrease of $453,000~~2021 indicated that no adjustment was required for the period.
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Other income was $1.5 million for the three months ended September 30, 2021 compared to $1.2 million for the comparable period in ~~revenue associated with direct mail~~2020. This 24.9% increase was primarily driven by the origination and ~~other related products and services~~servicing fees we earned from third party receivables that ~~we offer to our dealers, a decrease of $90,000~~began in ~~payments from third-party providers of convenience~~May 2021. These fees ~~paid by our customers~~were $495,000 for web based and other electronic payments, and a decrease of $150,000 on payments to us for our interest in certain sold charge offs and acquired third-party portfolios, Those decreases were somewhat offset by an increase of $21,000 on sales tax refunds.the quarter ended September 30, 2021.

Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, ~~interest expense,~~ employee costs, ~~marketing~~sales and general and administrative expenses. Provision for credit losses is affected by the balance and ~~interest~~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 ~~are~~is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and by the ~~outstanding balance~~use of our warehouse facilities and asset-backed securitizations to finance ~~receivables held by consolidated subsidiaries.~~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 ~~processed~~purchased and serviced.

Other operating expenses consist largely of facilities expenses, telephone and other communication services, credit services, computer services, ~~marketing~~sales and advertising expenses, and depreciation and amortization.

Total operating expenses were ~~$101.4~~$49.0 million for the three months ended September 30, ~~2017,~~2021, compared to ~~$96.1~~$64.8 million for the prior period, ~~an increase~~a decrease of ~~$5.3~~$15.8 million, or ~~5.5%~~24.3%. The ~~increase~~decrease is primarily due to ~~the increase in our consolidated portfolio and associated servicing costs, and the related increases~~decreases in interest expense and ~~in our provision~~provisions for credit losses.

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Employee costs ~~increased by $1.8 million or 10.6%, to $18.5~~were $18.2 million during the three months ended September 30, ~~2017, representing 18.2% of total operating expenses, from $16.7~~2021 compared to $19.2 million for the same quarter in the prior ~~year, or 17.4% of total operating expenses.~~year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the three-month periods ended, September 30, ~~2017~~2021 and ~~2016:~~2020:

September 30, 2017 September 30, 2016
Amount Amount
($ in millions)
Contracts purchased (dollars) $ 204.7 $ 242.1
Contracts purchased (units) 12,589 14,706
Managed portfolio outstanding (dollars) $ 2,346.0 $ 2,291.9
Managed portfolio outstanding (units) 174,383 167,636

Number of Originations staff 210 225
Number of Marketing staff 117 98
Number of Servicing staff 564 521
Number of other staff 93 110
Total number of employees 984 954
Three Months Ended September 30,
2021 2020
(Dollars in millions)
Contracts purchased (dollars) $ 326.8 $ 174.0
Contracts purchased (units) 14,741 9,106
Managed portfolio outstanding (dollars) $ 2,184.1 $ 2,250.4
Managed portfolio outstanding (units) 156,456 168,071

Number of Originations staff 170 161
Number of Sales staff 110 94
Number of Servicing staff 397 472
Number of other staff 74 73
Total number of employees 751 800

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses were ~~$6.40~~$7.5 million, ~~an increase of $39,000, or .6% compared to~~a decrease from $7.8 million in the previous year and represented ~~6.3%~~15.2% of total operating expenses.
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Interest expense for the three months ended September 30, ~~2017 increased by $2.4~~2021 were $18.3 million ~~to $23.3 million, or 11.6%~~ and represented ~~23.0%~~37.4% of total operating expenses, compared to ~~$20.9~~$24.9 million in the previous year, when it was ~~21.7%~~38.4% of total operating expenses.

Interest on securitization trust debt ~~increased~~decreased by ~~$2.7~~$6.3 million ~~or 15.1%,~~ for the three months ended September 30, ~~2017~~2021 compared to the prior period. The average balance of securitization trust debt ~~increased 1.4%~~decreased to ~~$2,184.2~~$1,819.8 million for the three months ended September 30, ~~2017~~2021 compared to ~~$2,154.4~~$1,979.5 million for the three months ended September 30, ~~2016.~~2020. In addition, the blended interest rates on new term securitizations have ~~generally increased since June 2014. As a result,~~declined in 2020 and 2021. The annualized average rate on our securitization trust debt was 3.4% for the ~~cost of securitization debt during the three-month period~~three months ended September 30, ~~2017 was 3.8%,~~2021 compared to ~~3.4%~~4.4% in the prior year period. For ~~any particular~~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 ~~a general trend toward higher~~fluctuations in our securitization trust debt interest ~~costs since June 2014, although that trend has reversed somewhat since July 2016.~~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
~~Blended Cost of Funds on Recent Asset-Backed Term Securitizations~~
Period Blended Cost of Funds
January 2018 3.46%
April 2018 3.98%
July 2018 4.18%
October 2018 4.25%
January 2019 4.22%
April 2019 3.95%
July 2019 3.36%
October 2019 2.95%
January 2020 3.08%
June ~~2014~~2020 ~~2.37%~~ 4.09%
September ~~2014~~2020 ~~2.71%~~
~~December 2014~~ ~~3.07%~~
~~March 2015~~ ~~3.04%~~
~~June 2015~~ ~~3.18%~~
~~September 2015~~ ~~3.78%~~ 2.39%
January ~~2016~~2021 ~~4.34%~~ 1.11%
April ~~2016~~2021 ~~4.65%~~ 1.65%
July ~~2016~~2021 ~~4.48%~~
~~October 2016~~ ~~3.66%~~
~~January 2017~~ ~~3.90%~~
~~April 2017~~ ~~3.45%~~
~~July 2017~~ ~~3.52%~~ 1.55%
Interest expense on warehouse credit line debt decreased by $928,000 to $929,000 for the three months ended September 30, 2021 compared to $1.9 million in the prior year period. The decrease was due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $39.4 million during the three months ended September 30, 2021 compared to $90.7 million for the same period in 2020.
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Interest expense on subordinated renewable notes increased by ~~$23,000, or 7.1%.~~$137,000. The ~~increase is due to an increase in the~~ average balance of ~~$1.4~~the outstanding subordinated debt increased 36.1% to $26.9 million ~~or 9.3%,~~ for the three months ended September 30, ~~2017~~2021 compared to $19.7 million for the ~~prior period. That increase was somewhat offset by a decrease in the~~three months ended September 30, 2020. The average yield of subordinated notes decreased to ~~8.7%~~10.4% in the three-month period ended September 30, ~~2017~~2021 compared to ~~8.9%~~11.4% in the prior period.

In May 2018 and June 2021, we completed two residual interest financings of our residual interests from previously issued securitizations in the amounts of $40.0 million and $50.0 million, respectively. Interest expense on ~~warehouse debt increased by $117,000, or 5.6%,~~these residual interest financings was $1.4 million for the three months ended September 30, ~~2017~~2021 compared to ~~the prior period. When possible, we hold contracts with our own cash rather than pledging them to one of our warehouse facilities to minimize interest expense.~~
In$876,000 in the prior year ~~period, we incurred $227,000 in interest expense on a residual interest financing facility which was repaid in full in November of 2016.~~period.
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The following table presents the components of interest income and interest expense and a net interest yield analysis for the three-month periods ended September 30, ~~2017~~2021 and ~~2016:~~2020:

Three Months Ended September 30,
2021 2020
Three Months Ended September 30, (Dollars in thousands)
2017 2016 Annualized Annualized
(Dollars in thousands) Average Average Average Average

Average
Balance (1)
Interest
Annualized
Average
Yield/Rate

Average
Balance (1)
Interest
Annualized Average
Yield/Rate
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
Interest Earning Assets
Finance receivables gross (2) $ 2,313,083 $ 107,014 18.5% $ 2,247,917 $ 105,376 18.8% $ 305,820 $ 16,067 21.0% $ 624,532 $ 29,775 19.1%
Finance receivables at fair value 1,837,138 50,951 11.1% 1,646,022 42,807 10.4%
2,142,958 67,018 12.5% 2,270,554 72,582 12.8%

Interest Bearing Liabilities
Warehouse lines of credit (3) $ 66,514 1,994 11.9% $ 74,602 2,111 11.2%
Warehouse lines of credit $ 39,447 929 9.4% $ 90,697 1,857 8.2%
Residual interest financing – – – 7,055 227 12.9% 66,824 1,413 8.5% 36,407 876 9.6%
Securitization trust debt 2,184,164 20,973 3.8% 2,154,424 18,228 3.4% 1,819,789 15,292 3.4% 1,979,491 21,605 4.4%
Subordinated renewable notes 16,113 350 8.7% 14,739 327 8.9% 26,868 700 10.4% 19,737 563 11.4%
$ 2,266,791 23,317 4.1% $ 2,250,820 20,893 3.7% $ 1,952,928 18,334 3.8% $ 2,126,332 24,901 4.7%

Net interest income/spread $ 83,697 $ 84,483 $ 48,684 $ 47,681
Net interest yield (4) 14.4% 15.2%

Net interest yield (3) 8.7% 8.1%
Ratio of average interest earning assets to average interest bearing liabilities 102% 100% 110% 107%

(1) Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
(2) Net of deferred fees and direct costs.
(3) Annualized net interest income divided by average interest earning assets.
~~(1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.~~
     ~~(2)  Net of deferred fees and direct costs.~~
     ~~(3)  Interest expense includes deferred financing costs and non-utilization fees.~~
     ~~(4)  Annualized net interest income divided by average interest earning assets.~~
Three Months Ended September 30, 2021
Compared to September 30, 2020
Total Change Due Change Due
Change to Volume to Rate
(In thousands)
Interest Earning Assets
Finance receivables gross $ (13,708 ) $ (15,161 ) $ 1,453
Finance receivables at fair value 8,144 4,929 3,215
(5,564 ) (10,232 ) 4,668
Interest Bearing Liabilities
Warehouse lines of credit (928 ) (1,046 ) 118
Residual interest financing 537 721 (184 )
Securitization trust debt (6,313 ) (1,764 ) (4,549 )
Subordinated renewable notes 137 204 (67 )
(6,567 ) (1,885 ) (4,682 )

Net interest income/spread $ 1,003 $ (8,347 ) $ 9,350

2431

Three Months Ended September 30, 2017
Compared to September 30, 2016
Total
Change Change Due
to Volume Change Due
to Rate
(In thousands)
Interest Earning Assets
Finance receivables gross $ 1,638 $ 3,373 $ (1,735 )

Interest Bearing Liabilities
Warehouse lines of credit (117 ) (233 ) 116
Residual interest financing (227 ) (227 ) –
Securitization trust debt 2,745 561 2,184
Subordinated renewable notes 23 31 (8 )
2,424 131 2,293

Net interest income/spread $ (786 ) $ 3,241 $ (4,027 )

The reduction in the annualized yield on our finance receivables for the three months ended September 30, ~~2017~~2021 compared to the prior year period is the result of ~~our decision~~the lower interest yield on the receivables measured at fair value. The interest yield on receivables measured at fair value is reduced to ~~offer dealers slightly lower acquisition fees~~take account of expected losses and ~~also to require slightly lower contract interest rates~~is therefore less than the yield on ~~a portion~~other finance receivables. The average balance of ~~the contracts we purchase.~~
~~Provision for credit losses~~these receivables was ~~$47.3~~$1,837.1 million for the three months ended September 30, ~~2017, an increase of $1.1~~2021 compared to $1,646.0 million ~~or 2.3% compared to~~in the prior year ~~and represented 46.7%~~period.
Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses: Measurement of ~~total operating expenses.~~Credit Losses on Financial Instruments. The ~~provision~~amendment introduces a new credit reserving model known as the Current Expected Credit Loss model, generally referred to as CECL. Adoption of CECL required the establishment of an allowance for the remaining expected lifetime credit losses ~~maintains~~on the portion of the Company’s receivable portfolio that was originated prior to January 2018. The Company recorded an addition to its allowance for finance credit losses of $127.0 million upon its adoption of CECL in January 2020. In accordance with the rules for adopting CECL, the offset to the addition to the allowance for finance credit losses ~~at levels that~~was a tax affected reduction to retained earnings using the modified retrospective method.
For the three months ended September 30, 2021, we ~~feel are adequate for probable incurred credit losses that can be reasonably estimated. Our approach for establishing the allowance requires greater amounts of~~recorded a reduction to provision for credit losses ~~early~~on finance receivables in the ~~terms~~amount of $1.6 million. The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from improved credit performance. Provision for credit losses was $7.4 million for the three months ended September 30, 2020. That provision represented our ~~finance receivables. In addition, we monitor~~estimate in 2020 of additional forecasted losses that might be incurred as a result of the ~~delinquency and net charge off rates~~pandemic in our portfolio ~~to consider how such rates may affect~~of finance receivables. Such losses were not considered in our initial estimate of remaining lifetime losses that we recorded upon our adoption of CECL in January 2020.
Our evaluation of the allowance for ~~finance~~ credit ~~losses. Consequently,~~losses indicated that the ~~increase~~reserves against future losses are adequate as of September 30, 2021. Although we have not yet seen a deterioration in ~~provision expense is~~ the credit performance for these receivables as a result of the ~~increase in contract purchases,~~pandemic, we expect that the ~~larger portfolio owned by our consolidated subsidiaries,~~absence of any additional government stimulus payments, the expiration of the eviction moratorium and ~~somewhat higher delinquency and charge off rates compared~~a reversion to the ~~prior year.~~mean for used car pricing could negatively affect credit performance in the future.

~~Marketing expenses consist~~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 ~~marketing~~sales representatives. Our ~~marketing~~sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers, such as training programs, internet lead sales, and direct mail products. ~~Marketing expenses decreased~~Sales expense increased by ~~$656,000, or 14.7%,~~$1.1 million to ~~$3.8~~$4.3 million during the three months ended September 30, ~~2017, compared to $4.5 million in the prior year period,~~2021 and represented ~~3.8%~~8.7% of total operating expenses. ~~For~~We purchased $326.8 million of new contracts during the three months ended September 30, ~~2017, we purchased 12,589 contracts representing $204.7 million in receivables~~2021 compared to ~~14,706 contracts representing $242.1~~$174.0 million ~~in receivables~~ in the prior year period. In our second quarter of 2020, we experienced a significant reduction in contract purchases due to the pandemic and partial shutdown of the economy. Since then, our contract purchase volumes have gradually increased to pre-pandemic levels.

Occupancy expenses ~~increased by $627,000 or 50.7%, to $1.9~~was $2.0 million for the three months ending September 30, 2021 compared to ~~$1.2~~$1.8 million in the prior year period.
Depreciation and amortization expenses decreased to $409,000 compared to $438,000 in the previous year and represented 1.8% of total operating expenses. In July 2015, we entered into a lease for additional office space in Irvine, California. We then occupied that space, and incurred incremental occupancy expense, in phases. The first phase was in July 2015 and the second and final phase was in April 2016. In May 2017, we acquired additional office space in Las Vegas, Nevada.
~~Depreciation and amortization expenses increased by $42,000 or 20.9%, to $244,000 compared to $202,000 in the previous year and represented 0.2%~~0.8% of total operating expenses.

For the three months ended September 30, ~~2017,~~2021, we recorded income tax expense of ~~$3.4~~$5.9 million, representing a ~~42.5%~~30% effective ~~income~~ tax rate. In the prior ~~year~~ period, ~~we recorded $5.1 million in~~our income tax expense was $2.1 million, representing a ~~41.0%~~36% effective ~~income~~ tax rate.

2532

Comparison of Operating Results for the nine months ended September 30, ~~2017~~2021 with the nine months ended September 30, ~~2016~~2020
Revenues.  During the nine months ended September 30, ~~2017,~~2021, our revenues were ~~$327.2~~$198.4 million, ~~an increase~~a decrease of ~~$13.1~~$10.3 million, or ~~4.2%~~4.9%, from the prior year revenue of ~~$314.1~~$208.7 million. The primary reason for the ~~increase~~decrease in revenues is ~~an increase~~a decrease in interest income. Interest income for the nine months ended September 30, ~~2017 increased $15.3~~2021 decreased $28.7 million, or ~~5.0%~~12.6%, to ~~$319.0~~$198.6 million from ~~$303.7~~$227.3 million in the prior year. The primary reason for the ~~increase~~decrease in interest income is the continued runoff of our legacy portfolio of finance receivables originated prior to January 2018, the average balance of which decreased by 44.4% from the prior period. The decrease in interest from that legacy portion of our portfolio was partially offset by the increase in our portfolio of receivables measured at fair value, which are those originated since January 2018. 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 held by consolidated subsidiaries.~~receivables. The table below shows the ~~outstanding and~~ average balances and interest yields of the two components of our loan portfolio ~~held by consolidated subsidiaries~~ for the nine months ended September 30, ~~2017~~2021 and ~~2016:~~2020:

September 30, 2017 September 30, 2016
Amount Amount
Finance Receivables Owned by ($ in millions)
Consolidated Subsidiaries
   Average balance for the six-month period $ 2,332.3 $ 2,157.3

   Ending balance for the period $ 2,346.0 $ 2,291.7
Nine Months Ended September 30,
2021 2020
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
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%

InRevenues for the nine months ended September 30, ~~2017, other income~~2021 and 2020 are net of ~~$8.1~~a mark downs of $4.4 million ~~decreased by $2.3~~and $23.1 million, ~~or 21.9%~~respectively, to the recorded value of the finance receivables measured at fair value. The mark downs are estimates based on our evaluation of 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 arising from the ~~prior year. The nine-month period~~pandemic.
Other income was $4.3 million for the nine months ended September 30, ~~2017 includes a decrease of $2.0~~2021 compared to $4.5 million in revenue associated with direct mail and other related products and services that we offer to our dealers, a decrease of $115,000 in payments from third-party providers of convenience fees paid by our customers for web based and other electronic payments, and a decrease of $142,000 on payments to us for our interest in certain sold charge offs and acquired third-party portfolios. Those decreases were somewhat offset by an increase of $32,000 on sales tax refunds.the nine months ended September 30, 2020.

Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, ~~interest expense,~~ employee costs, ~~marketing~~sales and general and administrative expenses. Provision for credit losses is affected by the balance and ~~interest~~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 ~~are~~is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and by the ~~outstanding balance~~use of our warehouse facilities and asset-backed securitizations to finance ~~receivables held by consolidated subsidiaries.~~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 ~~processed~~purchased and serviced.

Other operating expenses consist largely of facilities expenses, telephone and other communication services, credit services, computer services, ~~marketing~~sales and advertising expenses, and depreciation and amortization.

33
Total operating expenses were ~~$303.3~~$157.1 million for the nine months ended September 30, ~~2017,~~2021, compared to ~~$277.1~~$195.1 million for the prior period, ~~an increase~~a decrease of ~~$26.2~~$38.0 million, or ~~9.5%~~19.5%. The ~~increase~~decrease is primarily due to ~~the increase in our consolidated portfolio and associated servicing costs, and the related increases~~decreases in interest expense, ~~and in our provision~~provisions for credit ~~losses.~~losses and employee costs.
26

Employee costs ~~increased~~decreased by ~~$6.3~~$3.0 million or ~~13.3%~~5.0%, to ~~$53.8~~$57.8 million during the nine months ended September 30, ~~2017,~~2021, representing ~~17.7%~~36.8% of ~~total~~ operating expenses, from ~~$47.5~~$60.8 million for the prior ~~year, or 17.1% of total operating expenses.~~year. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the nine-month periods ended, September 30, ~~2017~~2021 and ~~2016:~~2020:

September 30, 2017 September 30, 2016
Amount Amount
($ in millions)
Contracts purchased (dollars) $ 668.3 $ 873.5
Contracts purchased (units) 41,137 53,244
Managed portfolio outstanding (dollars) $ 2,346.0 $ 2,291.9
Managed portfolio outstanding (units) 174,383 167,636

Number of Originations staff 210 225
Number of Marketing staff 117 98
Number of Servicing staff 564 521
Number of other staff 93 110
Total number of employees 984 954
Nine Months Ended September 30,
2021 2020
(Dollars in millions)
Contracts purchased (dollars) $ 818.3 $ 575.9
Contracts purchased (units) 39,929 31,475
Managed portfolio outstanding (dollars) $ 2,184.1 $ 2,250.4
Managed portfolio outstanding (units) 156,456 168,071

Number of Originations staff 170 161
Number of Sales staff 110 94
Number of Servicing staff 397 472
Number of other staff 74 73
Total number of employees 751 800

General and administrative expenses include costs associated with purchasing and servicing our portfolio of finance receivables, including expenses for facilities, credit services, and telecommunications. General and administrative expenses were ~~$20.1~~$23.0 million, ~~an increase of $1.9~~a decrease from $24.4 million ~~or 10.3% compared to~~in the previous year and represented ~~6.6%~~14.7% of total operating expenses.

Interest expense for the nine months ended September 30, ~~2017 increased by $10.2~~2021 were $58.3 million ~~to $68.6 million, or 17.5%~~ and represented ~~22.6%~~37.1% of total operating expenses, compared to ~~$58.4~~$78.4 million in the previous year, when it was ~~21.1%~~40.2% of total operating expenses.

Interest on securitization trust debt ~~increased~~decreased by ~~$11.7~~$17.2 million ~~or 23.5%,~~ for the nine months ended September 30, ~~2017~~2021 compared to the prior period. The average balance of securitization trust debt ~~increased 6.2%~~decreased to ~~$2,173.4~~$1,842.7 million for the nine months ended September 30, ~~2017~~2021 compared to ~~$2,046.8~~$2,058.1 million for the nine months ended September 30, ~~2016.~~2020. In addition, the blended interest rates on new term securitizations have ~~generally increased since September 2014. As a result,~~declined in 2020 and 2021. The annualized average rate on our securitization trust debt was 3.7% for the ~~cost of securitization debt during the nine-month period~~nine months ended September 30, ~~2017 was 3.8%,~~2021 compared to ~~3.2%~~4.4% in the prior year period. For ~~any particular~~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 ~~a general trend toward higher~~fluctuations in our securitization trust debt interest ~~costs since September 2014, although that trend has reversed somewhat since July 2016.~~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~~
~~June 2014~~ ~~2.37%~~
~~September 2014~~ ~~2.71%~~
~~December 2014~~ ~~3.07%~~
~~March 2015~~ ~~3.04%~~
~~June 2015~~ ~~3.18%~~
~~September 2015~~ ~~3.78%~~
~~January 2016~~ ~~4.34%~~
~~April 2016~~ ~~4.65%~~
~~July 2016~~ ~~4.48%~~
~~October 2016~~ ~~3.66%~~
~~January 2017~~ ~~3.90%~~
~~April 2017~~ ~~3.45%~~
~~July 2017~~ ~~3.52%~~

2734

Blended Cost of Funds on Recent Asset-Backed Term Securitizations
Period Blended Cost of Funds
January 2018 3.46%
April 2018 3.98%
July 2018 4.18%
October 2018 4.25%
January 2019 4.22%
April 2019 3.95%
July 2019 3.36%
October 2019 2.95%
January 2020 3.08%
June 2020 4.09%
September 2020 2.39%
January 2021 1.11%
April 2021 1.65%
July 2021 1.55%
Interest expense on ~~subordinated renewable notes~~warehouse credit line debt decreased by ~~$83,000, or 7.9%. The decrease is due~~$3.0 million to a decrease in the average yield on our subordinated renewable notes to 8.2% for the nine-month period ended September 30, 2017 compared to the prior year when the average yield on our subordinated renewable notes was 9.3%. The decrease in the average yield on our subordinated renewable notes offset an increase in the average balance of $713,000, or 3.9%,$3.3 million for the nine months ended September 30, ~~2017~~2021 compared to $6.3 million in the prior year period. The decrease was primarily due to the lower utilization of our credit lines during the quarter compared to last year. The average balance of our warehouse debt was $46.7 million during the nine months ended September 30, 2021 compared to $107.4 million for the same period in 2020.

Interest expense on ~~warehouse~~subordinated renewable notes increased by $401,000. The average balance of the outstanding subordinated debt ~~decreased by $696,000, or 10.3%,~~increased 30.7% to $24.6 million for the nine months ended September 30, ~~2017~~2021 compared to $18.8 million for the nine months ended September 30, 2020. The average yield of subordinated notes decreased to 10.7% in the nine-month period ended September 30, 2021 compared to 11.2% in the prior period. ~~When possible, we hold contracts with our own cash rather than pledging them to one of our warehouse facilities to minimize interest expense.~~

In May 2018 and June 2021, we completed two residual interest financings of our residual interests from previously issued securitizations in the amounts of $40.0 million and $50.0 million, respectively. Interest expense on these residual interest financings was $2.4 million for the nine months ended September 30, 2021 compared to $2.7 million in the prior year ~~period, we incurred $744,000 in interest expense on a residual interest financing facility which was repaid in full in November of 2016.~~period.

The following table presents the components of interest income and interest expense and a net interest yield analysis for the nine-month periods ended September 30, ~~2017~~2021 and ~~2016:~~2020:

Nine Months Ended September 30,
2021 2020
Nine Months Ended September 30, (Dollars in thousands)
2017 2016 Annualized Annualized
(Dollars in thousands) Average Average Average Average

Average
Balance (1)
Interest
Annualized Average
Yield/Rate

Average
Balance (1)
Interest
Annualized
Average
Yield/Rate
Balance (1) Interest Yield/Rate Balance (1) Interest Yield/Rate
Interest Earning Assets
Finance receivables gross (2) $ 2,297,218 $ 319,074 18.5% $ 2,162,357 $ 303,748 18.7% $ 375,642 $ 56,669 20.1% $ 734,195 $ 101,998 18.5%
Finance receivables at fair value 1,757,787 141,882 10.8% 1,619,399 125,273 10.3%
2,133,429 198,551 12.4% 2,353,594 227,271 12.9%

Interest Bearing Liabilities
Warehouse lines of credit (3) $ 63,827 6,081 12.7% $ 85,364 6,777 10.6%
Warehouse lines of credit $ 46,709 3,265 9.3% $ 107,388 6,294 7.8%
Residual interest financing – – – 7,811 744 12.7% 36,101 2,446 9.0% 37,959 2,734 9.6%
Securitization trust debt 2,173,365 61,589 3.8% 2,046,847 49,867 3.2% 1,842,694 50,568 3.7% 2,058,110 67,770 4.4%
Subordinated renewable notes 15,868 971 8.2% 15,155 1,054 9.3% 24,637 1,981 10.7% 18,847 1,580 11.2%
$ 2,253,060 68,641 4.1% $ 2,155,177 58,442 3.6% $ 1,950,141 58,260 4.0% $ 2,222,304 78,378 4.7%

Net interest income/spread $ 250,433 $ 245,306 $ 140,291 $ 148,893
Net interest yield (4) 14.4% 15.1%

Net interest yield (3) 8.4% 8.2%
Ratio of average interest earning assets to average interest bearing liabilities 102% 100% 109% 106%

(1) Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.
(2) Net of deferred fees and direct costs.
(3) Annualized net interest income divided by average interest earning assets.
     ~~(1)  Average balances are based on month end balances except for warehouse lines of credit, which are based on daily balances.~~
     ~~(2)  Net of deferred fees and direct costs.~~
     ~~(3)  Interest expense includes deferred financing costs and non-utilization fees.~~
     ~~(4)  Annualized net interest income divided by average interest earning assets.~~

2835

Nine Months Ended September 30, 2017
Compared to September 30, 2016

Total
Change

Change Due
to Volume

Change Due
to Rate

(In thousands)
Interest Earning Assets
Finance receivables gross $ 15,326 $ 18,772 $ (3,446 )

Interest Bearing Liabilities
Warehouse lines of credit (696 ) (1,701 ) 1,005
Residual interest financing (744 ) (744 ) –
Securitization trust debt 11,722 1,942 9,780
Subordinated renewable notes (83 ) 48 (131 )
10,199 (455 ) 10,654

Net interest income/spread $ 5,127 $ 19,227 $ (14,100 )
Nine Months Ended September 30, 2021
Compared to September 30, 2020
Total Change Due Change Due
Change to Volume to Rate
(In thousands)
Interest Earning Assets
Finance receivables gross $ (45,329 ) $ (51,307 ) $ 5,978
Finance receivables at fair value 16,609 8,738 7,871
(28,720 ) (42,569 ) 13,849
Interest Bearing Liabilities
Warehouse lines of credit (3,029 ) (3,732 ) 703
Residual interest financing (288 ) (82 ) (206 )
Securitization trust debt (17,202 ) (3,724 ) (13,478 )
Subordinated renewable notes 401 513 (112 )
(20,118 ) (7,025 ) (13,093 )

Net interest income/spread $ (8,602 ) $ (35,544 ) $ 26,942

The reduction in the annualized yield on our finance receivables for the nine months ended September 30, ~~2017~~2021 compared to the prior year period is the result of ~~our decision~~the lower interest yield on the receivables measured at fair value. The interest yield on receivables measured at fair value is reduced to ~~offer dealers slightly lower acquisition fees~~take account of expected losses and ~~also to require slightly lower contract interest rates~~is therefore less than the yield on ~~a portion~~other finance receivables. The average balance of ~~the contracts we purchase.~~
~~Provision for credit losses~~these receivables was ~~$143.1~~$1,757.8 million for the nine months ended September 30, ~~2017, an increase of $8.2~~2021 compared to $1,619.4 million ~~or 6.1% compared to~~in the prior year ~~and represented 47.2%~~period.
Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses: Measurement of ~~total operating expenses.~~Credit Losses on Financial Instruments. The ~~provision~~amendment introduces a new credit reserving model known as the Current Expected Credit Loss model, generally referred to as CECL. Adoption of CECL required the establishment of an allowance for the remaining expected lifetime credit losses ~~maintains~~on the portion of the Company’s receivable portfolio that was originated prior to January 2018. The Company recorded an addition to its allowance for finance credit losses of $127.0 million upon its adoption of CECL in January 2020. In accordance with the rules for adopting CECL, the offset to the addition to the allowance for finance credit losses ~~at levels that~~was a tax affected reduction to retained earnings using the modified retrospective method.
For the nine months ended September 30, 2021, we ~~feel are adequate for probable incurred credit losses that can be reasonably estimated. Our approach for establishing the allowance requires greater amounts of~~recorded a reduction to provision for credit losses ~~early~~on finance receivables in the ~~terms~~amount of $1.6 million. The reserve decrease was primarily due to a decrease in lifetime expected credit losses resulting from improved credit performance. Provision for credit losses was $14.1 million for the nine months ended September 30, 2020. That provision represented our estimate in 2020 of additional forecasted losses that might be incurred as a result of the pandemic on our portfolio of finance receivables. ~~In addition, we monitor the delinquency and net charge off rates~~Such losses were not considered in our ~~portfolio to consider how such rates may affect~~initial estimate of remaining lifetime losses that we recorded upon our adoption of CECL in January 2020.
Our evaluation of the allowance for ~~finance~~ credit ~~losses. Consequently,~~losses indicated that the ~~increase~~reserves against future losses are adequate as of September 30, 2021. Although we have not yet seen a deterioration in ~~provision expense is~~ the credit performance for these receivables as a result of the ~~increase in contract purchases,~~pandemic, we expect that the ~~larger portfolio owned by our consolidated subsidiaries,~~absence of any additional government stimulus payments, the expiration of the eviction moratorium and ~~somewhat higher delinquency and charge off rates compared~~a reversion to the ~~prior year.~~mean for used car pricing could negatively affect credit performance in the future.

~~Marketing expenses consist~~
36
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 ~~marketing~~sales representatives. Our ~~marketing~~sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers, such as training programs, internet lead sales, and direct mail products. ~~Marketing expenses decreased~~Sales expense increased by ~~$2.1~~$1.8 million ~~or 15.2%,~~ to ~~$11.8~~$12.5 million during the nine months ended September 30, ~~2017, compared to $13.9 million in the prior year period,~~2021 and represented ~~3.9%~~7.9% of total operating expenses. ~~For~~We purchased $818.3 million of new contracts during the nine months ended September 30, ~~2017, we purchased 41,137 contracts representing $668.3 million in receivables~~2021 compared to ~~53,244 contracts representing $873.5~~$575.9 million ~~in receivables~~ in the prior year period. In our second quarter of 2020, we experienced a significant reduction in contract purchases due to the pandemic and partial shutdown of the economy. Since then, our contract purchase volumes have gradually increased to pre-pandemic levels.

Occupancy expenses ~~increased by $1.7~~was $5.9 million ~~or 45.7%, to $5.3 million~~for the nine months ending September 30, 2021 compared to ~~$3.6million~~$5.4 million in the ~~previous~~prior year and represented 1.7% of total operating expenses. In July 2015, we entered into a lease for additional office space in Irvine, California. We then occupied that space, and incurred incremental occupancy expense, in phases. The first phase was in July 2015 and the second and final phase was in April 2016. In May 2017, we acquired additional office space in Las Vegas, Nevada.period.

Depreciation and amortization expenses ~~increased~~decreased by ~~$124,000 or 21.8%,~~$90,000 to ~~$692,000 compared to $568,000 in the previous year~~$1.3 million and represented ~~0.2%~~0.8% of total operating expenses.

For the nine months ended September 30, ~~2017,~~2021 we recorded income tax expense of ~~$10.1~~$12.8 million, representing a ~~42.5%~~31% effective tax rate. For the nine months ended September 30, 2020, we recorded a net income tax benefit of $3.9 million. On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was passed into law, providing wide ranging economic relief for individuals and businesses. One component of the CARES Act provides the Company with an opportunity to carry back net operating losses (“NOLs”) arising from 2018, 2019 and 2020 to the prior five tax years. The Company has previously valued its NOLs at the federal corporate income tax rate of 21%. However, the CARES Act provides for NOL carryback claims to be calculated based on a rate of 35%, which was the federal corporate tax rate in effect for the carryback years. The result of the revaluation of NOLs and other tax adjustments is a net tax benefit of $8.8 million. Excluding the tax benefit, income tax expense for the nine months ended September 30, 2020 would have been $4.9 million, representing an effective income tax ~~rate. In the prior year period, we recorded $15.2 million in income tax expense, representing a 41.0% effective income tax rate.~~rate of 36%.
29

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. Recent effects of the pandemic include higher volumes of payment extensions requested by our customers and, in some states, temporary suspension of our rights to repossess automobiles. The pandemic may have a negative effect on our delinquency and charge off experience in the future, which is not yet reflected in the tables ~~do not include the experience of third party originated and owned portfolios.~~below.
37

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

September 30, 2017 September 30, 2016 December 31, 2016 September 30, 2021 September 30, 2020 December 31, 2020
Number of Number of Number of Number of Number of Number of
Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount Contracts Amount
(Dollars in thousands) (Dollars in thousands)
Delinquency Experience
Gross servicing portfolio (1) 174,382 $ 2,345,992 167,629 $ 2,291,854 169,720 $ 2,308,058 156,456 $ 2,184,142 168,071 $ 2,250,395 163,117 $ 2,174,972
Period of delinquency (2)
31-60 days 9,607 $ 130,456 8,843 $ 119,283 8,673 $ 116,073 9,621 $ 127,900 9,883 $ 133,671 11,357 $ 152,868
61-90 days 3,989 51,912 3,882 50,248 3,998 52,403 3,371 42,997 3,771 49,376 4,525 59,096
91+ days 2,182 26,485 2,780 36,277 3,407 44,384 961 11,745 1,413 16,067 1,290 14,989
Total delinquencies (2) 15,778 208,853 15,505 205,808 16,078 212,860 13,953 182,642 15,067 199,114 17,172 226,953
Amount in repossession (3) 2,473 32,032 2,632 33,837 3,162 40,125 1,792 21,803 2,733 32,383 2,979 35,839
Total delinquencies and amount in repossession (2) 18,251 $ 240,885 18,137 $ 239,645 19,240 $ 252,985 15,745 $ 204,445 17,800 $ 231,497 20,151 $ 262,792

Delinquencies as a percentage of gross servicing portfolio 9.0% 8.9% 9.2% 9.0% 9.5% 9.2% 8.9% 8.4% 9.0% 8.8% 10.5% 10.4%
.
Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 10.5% 10.3% 10.8% 10.5% 11.3% 11.0% 10.1% 9.4% 10.6% 10.3% 12.4% 12.1%

Extension Experience
Contracts with one extension, accruing ~~(4)~~ 33,013 $ 449,904 31,213 $ 431,533 34,354 $ 479,237 23,730 $ 320,330 30,912 $ 441,306 29,709 $ 417,347
Contracts with two or more extensions, accruing ~~(4)~~ 49,461 677,496 25,246 334,563 30,450 407,631 48,840 548,609 56,204 675,607 55,885 665,572
82,474 1,127,400 56,459 766,096 64,804 886,868 72,570 868,939 87,116 1,116,913 85,594 1,082,919

Contracts with one extension, non-accrual (4) 1,093 13,502 1,314 16,948 1,676 22,335 530 6,440 761 9,872 915 12,408
Contracts with two or more extensions, non-accrual (4) 2,249 29,910 1,650 21,365 1,999 25,617 1,210 13,376 2,505 28,126 2,502 28,189
3,342 43,412 2,964 38,313 3,675 47,952 1,740 19,816 3,266 37,998 3,417 40,597

Total contracts with extensions 85,816 $ 1,170,812 59,423 $ 804,409 68,479 $ 934,820 74,310 $ 888,755 90,382 $ 1,154,911 89,011 $ 1,123,516
______________________
(1) All amounts and percentages are based on the amount remaining to be repaid on each automobile contract, including, for pre-computed automobile contracts, any unearned interest. 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) ~~Accounts~~Amount in repossession and accounts past due more than 90 days are on non-accrual.
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Net Charge-Off Experience (1)
Total Owned Portfolio

September 30,
September 30, December 31,
2017 2016 2016
(Dollars in thousands)
Average servicing portfolio outstanding $ 2,332,325 $ 2,198,906 $ 2,226,056
Annualized net charge-offs as a percentage of average servicing portfolio (2) 7.8% 7.1% 7.0%
Finance Receivables Portfolio
September 30, September 30, December 31,
2021 2020 2020
(Dollars in thousands)
Average servicing portfolio outstanding $ 305,820 $ 624,532 $ 684,259
Annualized net charge-offs as a percentage of average servicing portfolio (2) 3.8% 14.1% 11.7%
Fair Value Receivables Portfolio
September 30, September 30, December 31,
2021 2020 2020
(Dollars in thousands)
Average servicing portfolio outstanding $ 1,837,138 $ 1,646,022 $ 1,631,491
Annualized net charge-offs as a percentage of average servicing portfolio (2) 2.7% 3.5% 4.3%
Total Managed Portfolio
September 30, September 30, December 31,
2021 2020 2020
(Dollars in thousands)
Average servicing portfolio outstanding $ 2,142,958 $ 2,270,554 $ 2,315,750
Annualized net charge-offs as a percentage of average servicing portfolio (2) 2.8% 6.4% 6.5%
_________________________ ~~_________________________~~
(1) All amounts and percentages are based on the principal amount scheduled to be paid on each automobile contract, net of unearned income on pre-computed automobile contracts.
(2) Net charge-offs include the remaining principal balance, after the application of the net proceeds from the liquidation of the vehicle (excluding accrued and unpaid interest) and amounts collected subsequent to the date of charge-off, including some recoveries which have been classified as other income in the accompanying interim consolidated financial statements. September 30, ~~2017~~2021 and September 30, ~~2016~~2020 percentages represent ~~nine~~three months ended September 30, ~~2017~~2021 and September 30, ~~2016~~2020 annualized. December 31, ~~2016~~2020 represents 12 months ended December 31, ~~2016.~~2020.
Extensions

In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, ~~an obligor would not be entitled~~we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and noto more than six over the life of the contract. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In some cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled debt restructurings. Because financial regulatory authorities have encouraged obligors to expect payment deferrals as a response to the pandemic, we may seek amendments or waivers of our securitization agreements to relax the limits on extensions; however, we have not sought such changes in terms as of the date of this report, and if we do seek such changes, there can be no assurance that the other parties to our securitization agreements will agree to such amendments or waivers, nor as to the effect on credit performance that may result if such amendments or waivers are agreed to.

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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 ~~with~~so that the obligor ~~so that he~~ 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 ~~most~~some cases, the extension will be granted in conjunction with our receiving all or a portion of a past due payment ~~(and where allowed by law, a nominal fee, applied to the loan as a partial 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; ~~and~~ (4) the obligor’s willingness to communicate and cooperate on resolving the ~~delinquency.~~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, ~~he must obtain~~an approval is obtained from ~~his~~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.

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We believe that a prudent extension program is an integral component to mitigating losses in our portfolio of sub-prime automobile receivables. The table below summarizes the status, as of September 30, ~~2017,~~2021, for accounts that received extensions from 2008 through ~~2016 (2017 extension data are not included at this time due to insufficient passage of time for meaningful evaluation of results):~~2020:

Period of Extension # Extensions Granted Active or Paid Off at September 30, 2017 % Active or Paid Off at September 30, 2017 Charged Off > 6 Months After Extension % Charged Off > 6 Months After Extension Charged Off <= 6 Months After Extension % Charged Off <= 6 Months After Extension Avg Months to Charge Off Post Extension

2008 35,588 10,710 30.1% 20,059 56.4% 4,819 13.5% 19

2009 32,226 10,277 31.9% 16,166 50.2% 5,783 17.9% 17

2010 26,167 12,168 46.5% 12,000 45.9% 1,999 7.6% 19

2011 18,786 10,986 58.5% 6,868 36.6% 932 5.0% 19

2012 18,783 11,438 60.9% 6,549 34.9% 796 4.2% 17

2013 23,398 12,316 52.6% 10,106 43.2% 976 4.2% 19

2014 25,773 13,599 52.8% 11,348 44.0% 826 3.2% 18

2015 53,319 35,008 65.7% 17,229 32.3% 1,082 2.0% 14

2016 80,897 68,011 84.1% 10,953 13.5% 1,933 2.4% 10
Period of Extension # Extensions Granted Active or Paid Off at September 30, 2021 % Active or Paid Off at September 30, 2021 Charged Off > 6 Months After Extension % Charged Off > 6 Months After Extension Charged Off <= 6 Months After Extension % Charged Off <= 6 Months After Extension Avg Months to Charge Off Post Extension
2008 35,588 10,708 30.1% 20,061 56.4% 4,819 13.5% 19
2009 32,226 10,274 31.9% 16,170 50.2% 5,783 17.9% 17
2010 26,167 12,165 46.5% 12,009 45.9% 1,999 7.6% 19
2011 18,786 10,972 58.4% 6,882 36.6% 932 5.0% 19
2012 18,783 11,320 60.3% 6,667 35.5% 796 4.2% 18
2013 23,398 11,165 47.7% 11,257 48.1% 976 4.2% 23
2014 25,773 10,564 41.0% 14,383 55.8% 826 3.2% 25
2015 53,319 22,770 42.7% 29,467 55.3% 1,082 2.0% 25
2016 80,897 38,161 47.2% 40,803 50.4% 1,933 2.4% 25
2017 133,881 64,944 48.5% 61,977 46.3% 6,926 5.2% 20
2018 121,531 70,569 58.1% 44,955 37.0% 6,007 4.9% 17
2019 71,548 54,700 76.5% 14,906 20.8% 1,942 2.7% 14
2020 83,170 72,769 87.5% 8,302 10.0% 2,099 2.5% 9

______________________
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 ~~2012, 60.9%~~2018, 59.2% were either paid in full or active and performing at September 30, ~~2017.~~2021. 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 ~~subsequent to~~after the extension.
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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, 1718 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest.

Additional information about our extensions is provided in the tables below:

Nine Months Ended September 30, Year Ended December 31,
2017 2016 2016

Average number of extensions granted per month 10,965 5,861 6,741

Average number of outstanding accounts 172,791 160,952 163,050

Average monthly extensions as % of average outstandings 6.3% 3.6% 4.1%
Nine Months Ended September 30, Year Ended December 31, Nine Months Ended September 30,
2021 2020 2020

Average number of extensions granted per month 3,656 6,931 7,256

Average number of outstanding accounts 157,976 172,129 174,549

Average monthly extensions as % of average outstandings 2.3% 4.0% 4.2%
______________________
~~Note: Table excludes portfolios originated and owned by third parties~~
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September 30, 2017 September 30, 2016 December 31, 2016
Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount
(Dollars in thousands)

Contracts with one extension 34,106 $ 463,405 32,527 $ 448,481 36,030 $ 501,572
Contracts with two extensions 23,609 327,195 15,123 202,846 17,800 242,216
Contracts with three extensions 14,428 199,959 7,424 98,438 8,794 116,929
Contracts with four extensions 7,919 106,927 3,110 39,773 4,032 52,368
Contracts with five extensions 3,985 52,015 987 11,879 1,426 17,190
Contracts with six extensions 1,769 21,311 252 2,992 397 4,545
85,816 $ 1,170,812 59,423 $ 804,409 68,479 $ 934,820

Managed portfolio (excluding originated and owned by 3rd parties) 174,382 $ 2,345,993 167,629 $ 2,291,854 169,720 $ 2,308,058
~~______________________~~
Note: Table excludes portfolios originated and owned by third parties

~~In recent years,~~
September 30, 2021 September 30, 2020 December 31, 2020
Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount
(Dollars in thousands)

Contracts with one extension 24,260 $ 326,770 31,673 $ 451,178 30,624 $ 429,754
Contracts with two extensions 16,888 216,878 19,028 252,189 19,381 259,236
Contracts with three extensions 12,155 144,035 13,228 161,303 13,117 159,447
Contracts with four extensions 9,379 97,391 11,281 130,279 10,868 122,469
Contracts with five extensions 6,782 63,531 8,801 95,481 8,548 90,322
Contracts with six extensions 4,846 40,149 6,371 64,481 6,473 62,288
74,310 $ 888,754 90,382 $ 1,154,911 89,011 $ 1,123,516

Managed portfolio (excluding originated and owned by 3rd parties) 156,456 $ 2,184,142 168,071 $ 2,250,395 163,117 $ 2,174,972
_____________________
Note: Table excludes portfolios originated and owned by third parties
Since January of 2019, we have ~~experienced an increase in the number of~~attempted to reduce extensions ~~that we grant to our customers. We attribute this to a number of factors. First, In June 2014 we entered into a consent decree~~by working with ~~the FTC that required us to make certain procedural changes in~~ our servicing ~~practices, which we believe have contributed~~staff to ~~somewhat higher delinquencies and~~be more selective in granting extensions ~~compared~~including, where appropriate, to ~~prior periods. Secondly, in recent years we have found it more difficult to communicate with our customers via outbound voice telephone calls, which have historically been our primary means~~exhaust all possibilities of ~~communicating with our customers. Consequently, we have recently developed text messaging platforms to supplement our outbound voice calling efforts. In addition, in 2016 we added features to~~payment by the customer ~~portal of our website to facilitate the process whereby the customer may request~~before granting an extension.

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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).
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Liquidity and Capital Resources

Our business requires substantial cash to support our purchases of automobile contracts and other operating activities. Our primary sources of cash have been cash flows from the proceeds from term securitization transactions and other sales of automobile contracts, amounts borrowed under various revolving credit facilities (also sometimes known as warehouse credit facilities), customer payments of principal and interest on finance receivables, fees for origination of automobile contracts, and releases of cash from securitization transactions and their related spread accounts. Our primary uses of cash have been the purchases of automobile contracts, repayment of amounts borrowed under lines of credit, securitization transactions and otherwise, operating expenses such as employee, interest, occupancy expenses and other general and administrative expenses, the establishment of spread accounts and initial overcollateralization, if any, the increase of credit enhancement to required levels in securitization transactions, and income taxes. There can be no assurance that internally generated cash will be sufficient to meet our cash demands. The sufficiency of internally generated cash will depend on the performance of securitized pools (which determines the level of releases from those pools and their related spread accounts), the rate of expansion or contraction in our managed portfolio, and the terms upon which we are able to acquire and borrow against automobile contracts.

Net cash provided by operating activities for the nine-month period ended September 30, ~~2017~~2021 was ~~$168.3~~$163.1 million, ~~an increase~~a decrease of ~~$9.2~~$27.5 million, compared to net cash provided by operating activities for the nine-month period ended September 30, ~~2016~~2020 of ~~$159.1~~$190.6 million. ~~Cash provided by~~Net cash from operating activities is ~~significantly affected~~generally provided by ~~our~~ net income ~~before provisions~~from operations adjusted for ~~credit losses. For the nine months ended September 30, 2017,~~significant non-cash items such as our ~~net income excluding provisions~~provision for credit losses and marks to finance receivables measured at fair value.
Net cash used in investing activities was ~~$156.7~~$50.2 million ~~which was equal to our net income excluding provisions for credit losses~~ for the nine months ended September 30, ~~2016.~~
2021. Net cash ~~used in~~provided by investing activities for the nine-month period ended September 30, ~~2017~~2020 was ~~$181.3 million compared to net cash used in investing activities of $390.9 million in the prior year period.~~$45.4 million. Cash provided by investing activities primarily results from principal payments and other proceeds received on finance ~~receivables held for investment.~~receivables. Cash used in investing activities generally relates to purchases of automobile contracts. Purchases of finance receivables ~~held for investment~~excluding acquisition fees were ~~$668.3~~$818.3 million and ~~$873.5~~$572.9 million during the first nine months of ~~2017~~2021 and ~~2016,~~2020, respectively.
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Net cash ~~provided by~~used in financing activities for the nine months ended September 30, ~~2017~~2021 was ~~$11.2~~$83.3 million compared to ~~net cash provided by financing activities of $224.0~~$164.6 million in the prior year period. Cash provided by financing activities is primarily related to the issuance of securitization trust debt, reduced by the amount of repayment of securitization trust debt and net proceeds or repayments on our warehouse lines of credit and other debt. In the first nine months of ~~2017,~~2021, we issued ~~$656.3~~$761.5 million in new securitization trust debt compared to ~~$980.7~~$714.5 million in the same period of ~~2016. In addition, we~~2020. We repaid ~~$634.2~~$861.0 million in securitization trust debt in the nine months ended September 30, ~~2017~~2021 compared to repayments of securitization trust debt of ~~$625.5~~$764.1 million in the prior year period. In the nine months ended September 30, ~~2017,~~2021, we had net ~~advances~~repayments on warehouse lines of credit of ~~$2.9~~$22.1 million, compared to ~~net repayments of $112.7~~$104.7 million in the prior year’s period.

We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years. ~~As a result, we~~We have been dependent on warehouse credit facilities to purchase automobile contracts and ~~on the availability~~our securitization transactions for long term financing of ~~cash from outside~~our contracts. In addition, we have accessed other sources, such as residual financings and subordinated debt in order to finance our continuing ~~operations, as well as to fund the portion of automobile contract purchase prices not financed under revolving warehouse credit facilities.~~operations.

The acquisition of automobile contracts for subsequent financing in securitization transactions, and the need to fund spread accounts and initial overcollateralization, if any, and increase credit enhancement levels when those transactions take place, results in a continuing need for capital. The amount of capital required is most heavily dependent on the rate of our automobile contract purchases, the required level of initial credit enhancement in securitizations, and the extent to which the previously established trusts and their related spread accounts either release cash to us or capture cash from collections on securitized automobile contracts. Of those, the factor most subject to our control is the rate at which we purchase automobile contracts.

We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital. As of September 30, ~~2017,~~2021, we had unrestricted cash of ~~$12.0~~$28.8 million and ~~$193.4~~$102.2 million aggregate available borrowings under our ~~three~~two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of September 30, ~~2017,~~2021, we had approximately ~~$20.4~~$95.6 million of such eligible collateral. ~~During the nine-month period ended September 30, 2017, we completed three securitizations aggregating $670.0 million of notes sold.~~ 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. IfDuring the nine-month period ended September 30, 2021, we ~~are unable to complete such~~completed three securitizations ~~we may be unable to increase our rate~~aggregating $761.5 million of ~~automobile contract purchases, in which case our interest income and other portfolio related income could decrease.~~notes sold.
34

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 ~~delinquency or~~ net losses related to the automobile contracts in the pool are below certain predetermined levels. In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may require increased credit enhancement to be accumulated for the particular pool. There can be no assurance that collections from the related trusts will continue to generate sufficient cash.

Our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of September 30, ~~2017,~~2021, we were in compliance with all such financial covenants.
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We have and will continue to have a substantial amount of indebtedness. At September 30, ~~2017,~~2021, we had approximately ~~$2,226.4~~$1,893.3 million of debt outstanding. Such debt consisted primarily of ~~$2,103.6~~$1,703.5 million of securitization trust debt and ~~$106.6~~$97.8 million of debt from warehouse lines of credit. Our securitization trust debt has ~~increased~~decreased by ~~$22.7~~$100.2 million while our warehouse lines of credit ~~have increased~~debt has decreased by ~~$3.3~~$21.2 million since ~~September 30, 2016~~December 31, 2020 (each net of deferred financing costs). ~~As of September 30, 2016, our debt included $8.3 million of residual interest financing which was repaid in full in November 2016.~~ Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from ~~nine~~six months to 10 years. We had ~~$16.2~~$27.5 million and ~~$14.9~~$21.3 million in subordinated renewable notes outstanding at September 30, ~~2017 and 2016, respectively.~~
Our recent operating results include pre-tax earnings of $23.9 million for the nine months ended September 30, 2017 and $49.7 million, $61.4 million, $52.2 million, $37.2 million and $9.2 for the years ended December 31, 2016, December 31, 2015, December 31, 2014, December 31, 20132021 and December 31, ~~2012,~~2020, respectively. ~~Those periods were preceded by pre-tax losses~~On May 16, 2018, we completed a $40.0 million securitization of ~~$14.5~~residual interests from previously issued securitizations. At September 30, 2021, $15.3 million ~~and $16.2~~of this residual interest financing debt remains outstanding. On June 30, 2021, we completed a $50.0 million ~~in 2011 and 2010, respectively. We believe that our 2011 and 2010 results were materially and adversely affected by the disruption in the capital markets that began in the fourth quarter~~securitization of ~~2007, by the recession that began in December 2007, and by related high levels~~residual interests from other previously issued securitizations. As of ~~unemployment.~~September 30, 2021, $50.0 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.

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 (Jeffrey P. Fritz) 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.

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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 ~~7, 2017.~~10, 2021. Where we are aware of material changes to such risk factors as previously disclosed, we set forth below an updated discussion of such risks. The reader should note that the other risks identified in our report on Form 10-K remain applicable.

We have substantial indebtedness.

We have and will continue to have a substantial amount of indebtedness. At September 30, ~~2017,~~2021, we had approximately ~~$2,226.4~~$1,893.3 million of debt outstanding. Such debt consisted primarily of ~~$2,103.6~~$1,703.5 million of securitization trust debt and ~~$106.6~~$97.8 million of debt from warehouse lines of credit. Our securitization trust debt has ~~increased~~decreased by ~~$30.2~~$100.2 million while our warehouse lines of credit ~~have increased~~debt has decreased by ~~$24.9~~$21.2 million since ~~September 30, 2016~~December 31, 2020 (each net of deferred financing costs). ~~As of September 30, 2016, our debt included $6.9 million of residual interest financing which was repaid in full in November 2016.~~ 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 ~~$16.2~~$27.5 million and ~~$15.0~~$21.3 million in subordinated renewable notes outstanding at September 30, ~~2017~~2021 and ~~2016,~~December 31, 2020, respectively. On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations. At September 30, 2021, $15.3 million of this residual interest financing debt remains outstanding. On June 30, 2021, we completed a $50.0 million securitization of residual interests from other previously issued securitizations. As of September 30, 2021, $50.0 million of this debt remains outstanding.
Our substantial indebtedness could adversely affect our financial condition by, among other things:

· increasing our vulnerability to general adverse economic and industry conditions;

· requiring us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing amounts available for working capital, capital expenditures and other general corporate purposes;

· limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

· placing us at a competitive disadvantage compared to our competitors that have less debt; and

· limiting our ability to borrow additional funds.

Although we believe we are able to service and repay such debt, there is no assurance that we will be able to do so. If we do not generate sufficient operating profits, our ability to make required payments on our debt would be impaired. Failure to pay our indebtedness when due could have a material adverse effect.

3645

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.
46

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.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended September 30, ~~2017,~~2021, we repurchased ~~1,189,660~~433,612 shares from existing shareholders, as reflected in the table below.

Issuer Purchases of Equity Securities

Period(1)
Total
Number of
Shares
Purchased

Average
Price Paid
per Share

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)

July 2017 246,831 $ 4.56 246,831 $ 8,340,967
August 2017 569,129 4.04 569,129 6,039,277
September 2017 373,700 4.46 373,700 4,370,795
Total 1,189,660 $ 4.28 1,189,660
Total Number of Approximate Dollar
Total Shares Purchased as Value of Shares that
Number of Average Part of Publicly May Yet be Purchased
Shares Price Paid Announced Plans or Under the Plans or
Period(1) Purchased per Share Programs Programs (2)

July 2021 94,800 $ 4.82 94,800 $ 3,207,203
August 2021 150,825 $ 5.54 150,825 $ 2,370,949
September 2021 187,987 $ 5.73 187,987 $ 1,292,953
Total 433,612 $ 5.47 433,612
____________________
(1) Each monthly period is the calendar month.
(2) Through September 30, ~~2017,~~2021, our board of directors had authorized the purchase of up to ~~$64.5~~$74.5 million of our outstanding securities, under a program first announced in our annual report for the year 2002, filed on ~~March~~June 26, 2003. All purchases described in the table above were under the program announced in ~~March~~June 2003, which has no fixed expiration date. ~~Our board of directors in May 2017 increased the aggregate authorization by $10 million from $54.5 million to $64.5 million.~~

Outside of the program described above, and after the end of the quarter (on October 20, 2021), we purchased 1,999,995 shares of our outstanding common stock for a purchase price of $12.5 million.
37

Item 6.Exhibits

The Exhibits listed below are filed with this report.

4.14 Instruments defining the rights of holders of long-term debt of certain consolidated subsidiaries of the registrant are omitted pursuant to the exclusion set forth in subdivisions (b)(iv)(iii)(A) and (b)(v) of Item 601 of Regulation S-K (17 CFR 229.601).  The registrant agrees to provide copies of such instruments to the United States Securities and Exchange Commission upon request.
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of the registrant.
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of the registrant.
32 Section 1350 Certifications.*
101.INS Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted in IXBRL, 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.

3847

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)~~
(Registrant)
Date: November ~~3, 2017~~10, 2021
By:/s/   CHARLES E. BRADLEY, JRJR.
Charles E. Bradley, Jr.
President and Chief Executive Officer
(Principal Executive Officer)

Date: November ~~3, 2017~~
10, 2021 By:/s/   JEFFREY P. FRITZ
Jeffrey P. Fritz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)

3948

Schedule of other income
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
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
Other income for the period	$	1,547	$	1,239	$	4,312	$	4,508

Supplemental balance sheet information related to leases
	September 30,			December 31,
	2021			2020
	(In thousands)
Operating Leases
Operating lease right-of-use assets	$	25,820		$	23,735
Less: Accumulated amortization right-of-use assets		(16,238	)		(12,792	)
Operating lease right-of-use assets, net	$	9,582		$	10,943

Operating lease liabilities	$	(10,471	)	$	(12,096	)

Finance Leases
Property and equipment, at cost	$	3,407		$	3,407
Less: Accumulated depreciation		(2,069	)		(1,226	)
Property and equipment, net	$	1,338		$	2,181

Finance lease liabilities	$	(1,408	)	$	(2,243	)

Weighted Average Discount Rate
Operating lease		5.0%			5.0%
Finance lease		6.5%			6.5%

Maturities of leases
Maturities of lease liabilities were as follows:
(In thousands)	Operating			Finance
Year Ending December 31,	Lease			Lease
2021 (excluding the nine months ended September 30, 2021)	$	1,811		$	305
2022		6,433			1,050
2023		1,888			84
2024		921			26
2025		794			9
Thereafter		1,661			–
Total undiscounted lease payments		13,508			1,474
Less amounts representing interest		(3,037	)		(66	)
Lease Liability	$	10,471		$	1,408

Lease information
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
Operating lease cost	$	1,768	$	1,885	$	5,398	$	5,654
Finance lease cost		308		299		924		871
Total lease cost	$	2,076	$	2,184	$	6,322	$	6,525

Supplemental cash flow information related to leases
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)				(In thousands)
Operating cash flows from operating leases	$	1,840	$	1,945	$	5,662	$	5,803
Operating cash flows from finance leases		283		256		834		737
Financing cash flows from finance leases		25		42		90		133

	Number of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Options outstanding at the beginning of period		12,595		$	4.56	N/A
Granted		1,470			4.35	N/A
Exercised		(619	)		1.67	N/A
Forfeited		(283	)		5.62	N/A
Options outstanding at the end of period		13,163		$	4.65	4.70 years

Options exercisable at the end of period		8,668		$	4.50	4.24 years

Share-based Payment Arrangement, Option, Activity
						Weighted
	Number of			Weighted		Average
	Shares			Average		Remaining
	(in thousands)			Exercise Price		Contractual Term
Options outstanding at the beginning of period		15,977		$	4.46	N/A
Granted		1,460			4.95	N/A
Exercised		(1,055	)		2.06	N/A
Forfeited		(2,071	)		6.31	N/A
Options outstanding at the end of period		14,311		$	4.42	2.89 years
Options exercisable at the end of period		10,916		$	4.61	1.97 years

Schedule of stock options outstanding and exercisable
	Number of shares as of				Number of shares as of
	September 30, 2021				December 31, 2020
	Outstanding		Exercisable		Outstanding		Exercisable
Range of exercise prices:	(In thousands)				(In thousands)
$0.95 - $1.99		1,257		1,257		1,904		1,904
$2.00 - $2.99		1,525		497		1,570		180
$3.00 - $3.99		4,479		3,572		4,973		3,306
$4.00 - $4.99		2,925		1,465		1,540		1,217
$5.00 - $5.99		0		0		0		0
$6.00 - $6.99		2,935		2,935		4,770		4,770
$7.00 - $7.99		1,190		1,190		1,220		1,220
Total shares		14,311		10,916		15,977		12,597

Schedule of purchases of company stock
	Nine Months Ended
	September 30, 2021				September 30, 2020
	Shares		Avg. Price		Shares		Avg. Price
Open market purchases		734,700	$	5.03		44,247	$	2.94
Shares redeemed upon net exercise of stock options		56,983		4.47		46,909		2.86
Other purchases		0		0		200,000		3.51
Total stock purchases		791,683	$	4.99		291,156	$	3.32

Schedule of finance receivables
	September 30,			December 31,
	2021			2020
Finance receivables	(In thousands)
Automobile finance receivables, net of unearned interest	$	282,744		$	491,307
Unearned acquisition fees and originations costs		(104	)		826
Finance receivables	$	282,640		$	492,133

Schedule of delinquency status of finance receivables
	September 30,		December 31,		September 30,		December 31,
	2017		2016		2021		2020
	(In thousands)				(In thousands)
Deliquency Status
Delinquency Status
Current	$	2,103,509	$	2,053,759	$	234,782	$	406,693
31 - 60 days		130,457		116,073		33,929		56,572
61 - 90 days		51,912		52,404		11,734		22,660
91 + days		26,485		44,383		2,299		5,382
	$	2,312,363	$	2,266,619	$	282,744	$	491,307

Schedule of amortized cost basis of finance receivables
	September 30,		December 31,
	2021		2020
	(In thousands)
Annual Vintage Pool
2012 and prior	$	203	$	608
2013		1,575		4,483
2014		9,382		23,115
2015		38,397		78,457
2016		94,092		163,677
2017		139,095		220,967
	$	282,744	$	491,307

Schedule of allowance for finance credit losses
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(In thousands)						(In thousands)
Balance at beginning of period	$	72,242		$	98,602		$	80,790		$	11,640
Early adoption of CECL		0			0			0			127,000
Provision for credit losses on finance receivables		(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

Schedule of allowance for losses on repossessed inventory
	September 30,			December 31,
	2021			2020
	(In thousands)
Gross balance of repossessions in inventory	$	4,642		$	15,589
Allowance for losses on repossessed inventory		(2,410	)		(11,790	)
Net repossessed inventory included in other assets	$	2,232		$	3,799

Schedule of Long-term Debt Instruments
										Weighted
										Average
	Final	Receivables				Outstanding		Outstanding		Contractual
	Scheduled	Pledged at				Principal at		Principal at		Interest Rate at
	Payment	September 30,		Initial		September 30,		December 31,		September 30,
Series	Date (1)	2021 (2)		Principal		2021		2020		2021
	(Dollars in thousands)
CPS 2016-A	March 2023		0		329,460		0		37,158		0
CPS 2016-B	June 2023		0		332,690		0		46,079		0
CPS 2016-C	September 2023		26,578		318,500		25,373		47,325		8.39%
CPS 2016-D	April 2024		22,636		206,325		19,402		36,455		6.86%
CPS 2017-A	April 2024		25,943		206,320		22,163		40,619		6.84%
CPS 2017-B	December 2023		32,980		225,170		17,592		39,016		5.75%
CPS 2017-C	September 2024		35,175		224,825		30,272		47,553		5.40%
CPS 2017-D	June 2024		36,323		196,300		31,136		49,297		4.77%
CPS 2018-A	March 2025		40,366		190,000		34,447		53,549		4.54%
CPS 2018-B	December 2024		49,034		201,823		42,028		66,955		4.98%
CPS 2018-C	September 2025		55,619		230,275		49,803		77,345		5.14%
CPS 2018-D	June 2025		67,792		233,730		57,940		88,228		4.98%
CPS 2019-A	March 2026		84,896		254,400		72,357		114,373		4.76%
CPS 2019-B	June 2026		83,881		228,275		72,804		118,982		4.42%
CPS 2019-C	September 2026		98,171		243,513		88,668		142,080		3.62%
CPS 2019-D	December 2026		126,247		274,313		115,544		181,485		3.09%
CPS 2020-A	March 2027		121,595		260,000		117,252		184,944		3.18%
CPS 2020-B	June 2027		127,469		202,343		104,048		164,403		4.18%
CPS 2020-C	November 2027		172,254		252,200		162,049		231,961		2.11%
CPS 2021-A	March 2028		186,415		230,545		171,918		0		0.88%
CPS 2021-B	June 2028		211,244		240,000		203,796		0		1.14%
CPS 2021-C	September 2028		286,516		291,000		276,228		0		1.04%
		$	1,891,134	$	5,372,007	$	1,714,820	$	1,767,807

Series		Final Scheduled Payment Date (1)	Receivables Pledged at September 30, 2017 (2)		Initial Principal		Outstanding Principal at September 30, 2017		Outstanding Principal at December 31, 2016		Weighted Average Contractual Interest Rate at September 30, 2017
		(Dollars in thousands)
	CPS 2012-C	December 2019	$	–	$	147,000	$	–	$	14,421		–
	CPS 2012-D	March 2020		–		160,000		–		17,865		–
	CPS 2013-A	June 2020		18,270		185,000		16,015		28,661		1.70%
	CPS 2013-B	September 2020		25,007		205,000		22,374		37,570		2.13%
	CPS 2013-C	December 2020		30,755		205,000		29,939		46,830		5.58%
	CPS 2013-D	March 2021		31,306		183,000		29,557		46,345		4.77%
	CPS 2014-A	June 2021		37,687		180,000		35,414		54,988		4.06%
	CPS 2014-B	September 2021		52,509		202,500		51,099		75,140		3.49%
	CPS 2014-C	December 2021		82,954		273,000		81,051		116,280		3.72%
	CPS 2014-D	March 2022		90,853		267,500		89,368		127,307		4.02%
	CPS 2015-A	June 2022		98,727		245,000		97,395		134,466		3.50%
	CPS 2015-B	September 2022		115,193		250,000		114,161		153,893		3.43%
	CPS 2015-C	December 2022		156,908		300,000		155,261		207,636		3.94%
	CPS 2016-A	March 2023		200,682		329,460		198,375		262,260		4.25%
	CPS 2016-B	June 2023		226,642		332,690		220,324		284,752		4.29%
	CPS 2016-C	September 2023		228,946		318,500		222,544		285,618		3.85%
	CPS 2016-D	December 2023		166,557		206,325		162,871		200,221		3.01%
	CPS 2017-A	April 2024		179,926		206,320		174,942		–		3.18%
	CPS 2017-B	September 2024		212,943		225,170		201,190		–		2.81%
	CPS 2017-C	September 2024		220,464		224,825		214,519		–		2.74%
			$	2,176,329	$	4,646,290	$	2,116,399	$	2,094,253

Schedule of debt outstanding
			Amount Outstanding at
			September		December 31,
			2021		2020
			(In thousands)
Description	Interest Rate	Maturity

Warehouse lines of credit	5.50% over one month Libor (Minimum 6.50%)	N/A	$	0	$	42,558

	3.00% over one month Libor (Minimum 3.75%)	December 2022		60,713		45,689

	4.00% over a commercial paper rate (Minimum 5.00%)	December 2021		37,710		32,265

Residual interest financing	8.60%	January 2026		15,281		25,576

	7.86%	June 2026		50,000		0

Subordinated renewable notes	Weighted average rate of 9.35% and 10.09% at September 30, 2021 and December 31, 2020, respectively	Weighted average maturity of October 2023 and January 2023 at September 30, 2021 and December 31, 2020, respectively		27,462		21,323

			$	191,166	$	167,411

Schedule of interest income
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2021		2020			2021			2020
	(In thousands)					(In thousands)
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		0		(3,152	)		(4,417	)		(23,051	)
Other interest income		5		21			17			665
Interest income	$	67,018	$	69,430		$	194,134		$	204,220

Schedule of interest expense
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
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
Interest expense	$	18,334	$	24,901	$	58,260	$	78,377

Computation of earnings per share
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2021		2020		2021		2020
	(In thousands)				(In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share		23,011		22,666		22,866		22,630
Incremental common shares attributable to exercise of outstanding options and warrants		3,207		1,242		2,573		1,195
Weighted average number of common shares used to compute diluted earnings per share		26,218		23,908		25,439		23,825


	Three Months Ended September 30,					Nine Months Ended September 30,
		2017		2016			2017		2016
		(In thousands)					(In thousands)

Weighted average number of common shares outstanding during the period used to compute basic earnings per share			22,473		23,894			23,019		24,574

Incremental common shares attributable to exercise of outstanding options and warrants			4,306		4,609			4,587		4,679

Weighted average number of common shares used to compute diluted earnings per share			26,779		28,503			27,606		29,253

Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
	(In thousands)						(In thousands)
Balance at beginning of period	$	1,582,175		$	1,537,649		$	1,523,726		$	1,444,038
Finance receivables at fair value acquired during period		310,340			173,209			795,457			572,938
Payments received on finance receivables at fair value		(191,458	)		(132,847	)		(546,897	)		(354,910	)
Net interest income accretion on fair value receivables		(33,864	)		(33,904	)		(100,676	)		(98,060	)
Mark to fair value		0			(3,152	)		(4,417	)		(23,051	)
Balance at end of period	$	1,667,193		$	1,540,955		$	1,667,193		$	1,540,955

Schedule of level 3 fair value measurements
Financial Instrument	Fair Values as of					Inputs as of
	September 30,		December 31,			September 30,	December 31,
	2021		2020		Unobservable Inputs	2021	2020
	(In thousands)
Assets:
Finance receivables measured at fair value	$	1,667,193	$	1,523,726	Discount rate	10.9% - 11.3%	10.4% - 11.1%
					Cumulative net losse	10.3% - 18.4%	15.3% - 18.4%

Schedule of delinquency status of finance receivables measured at fair value
	June 30,		December 31,
	2021		2020
	(In thousands)
Delinquency Status
Current	$	1,722,619	$	1,505,486
31 - 60 days		93,723		96,296
61 - 90 days		31,221		36,436
91 + days		9,445		9,607
Repo		17,103		20,251
	$	1,874,111	$	1,668,076

Schedule of estimated fair values of financial assets and liabilities
	As of September 30, 2021
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	28,799	$	28,799	$	0	$	0	$	28,799
Restricted cash and equivalents		144,966		144,966		0		0		144,966
Finance receivables, net		213,916		0		0		219,530		219,530
Accrued interest receivable		2,930		0		0		2,930		2,930
Liabilities:
Warehouse lines of credit	$	97,768	$	0	$	0	$	97,768	$	97,768
Accrued interest payable		3,888		0		0		3,888		3,888
Securitization trust debt		1,703,465		0		0		1,445,461		1,445,461
Subordinated renewable notes		27,462		0		0		27,462		27,462


	As of December 31, 2020
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	13,466	$	13,466	$	0	$	0	$	13,466
Restricted cash and equivalents		130,686		130,686		0		0		130,686
Finance receivables, net		411,343		0		0		429,972		429,972
Accrued interest receivable		5,017		0		0		5,017		5,017
Liabilities:
Warehouse lines of credit	$	118,999	$	0	$	0	$	118,999	$	118,999
Accrued interest payable		4,919		0		0		4,919		4,919
Securitization trust debt		1,803,673		0		0		1,862,630		1,862,630
Subordinated renewable notes		21,323		0		0		21,323		21,323

	As of September 30, 2017
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	12,038	$	12,038	$	–	$	–	$	12,038
Restricted cash and equivalents		115,026		115,026		–		–		115,026
Finance receivables, net		2,209,108		–		–		2,169,916		2,169,916
Accrued interest receivable		42,148		–		–		42,148		42,148
Liabilities:
Warehouse lines of credit	$	106,632	$	–	$	–	$	106,632	$	106,632
Accrued interest payable		4,401		–		–		4,401		4,401
Securitization trust debt		2,103,567		–		–		2,117,841		2,117,841
Subordinated renewable notes		16,229		–		–		16,229		16,229

	As of December 31, 2016
Financial Instrument	(In thousands)
	Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	13,936	$	13,936	$	–	$	–	$	13,936
Restricted cash and equivalents		112,754		112,754		–		–		112,754
Finance receivables, net		2,172,365		–		–		2,104,503		2,104,503
Accrued interest receivable		36,233		–		–		36,233		36,233
Liabilities:
Warehouse lines of credit	$	103,358	$	–	$	–	$	103,358	$	103,358
Accrued interest payable		3,715		–		–		3,715		3,715
Securitization trust debt		2,080,900		–		–		2,138,892		2,138,892
Subordinated renewable notes		14,949		–		–		14,949		14,949

	$ 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

Contract Purchases and Outstanding Managed Portfolio
		$ in thousands
Period		Contracts Purchased in Period		Managed Portfolio at Period End
	2008	$	296,817	$	1,664,122
	2009		8,599		1,194,722
	2010		113,023		756,203
	2011		284,236		794,649
	2012		551,742		897,575
	2013		764,087		1,231,422
	2014		944,944		1,643,920
	2015		1,060,538		2,031,136
	2016		1,088,785		2,308,070
	Nine months ended September 30, 2017		668,284		2,345,998