UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒

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

~~Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934~~

~~For the transition period from __________ to __________~~

For the quarterly period ended ~~September 30, 2020~~March 31, 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(s)	Name of each exchange on which registered
Common Stock, no par value	CPSS	The ~~Nasdaq~~NASDAQ Stock Market LLC (Global Market)

Securities registered pursuant to Section 12(g) of the Act: None

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

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 28, 2020~~May 3, 2021 the registrant had ~~22,565,112~~22,668,520 common shares outstanding.

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

INDEX TO FORM 10-Q

For the Quarterly Period Ended ~~September 30, 2020~~March 31, 2021

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3
	Unaudited Condensed Consolidated Statements of Operations for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	6
	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the three-month ~~and nine-month~~ periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	7
	Notes to Unaudited Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 4.	Controls and Procedures	4640


PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4741
Item 1A.	Risk Factors	4741

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5043
Item 6.	Exhibits	5043
	Signatures	5144

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

March 31, December 31,
2021 2020
ASSETS
Cash and cash equivalents $ 9,197 $ 13,466
Restricted cash and equivalents 159,404 130,686
Finance receivables measured at fair value 1,533,723 1,523,726

Finance receivables 411,109 492,133
Less: Allowance for finance credit losses (73,497 ) (80,790 )
Finance receivables, net 337,612 411,343

Furniture and equipment, net 826 828
Deferred tax assets, net 27,503 28,512
Accrued interest receivable 3,744 5,017
Other assets 23,798 32,317
Total Assets $ 2,095,807 $ 2,145,895

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 50,370 $ 43,112
Warehouse lines of credit 71,097 118,999
Residual interest financing 20,540 25,426
Securitization trust debt 1,791,583 1,803,673
Subordinated renewable notes 23,740 21,323
Total Liabilities 1,957,330 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; NaN issued 0 0
Common stock, no par value; authorized 75,000,000 shares; 22,656,229 and 22,737,342 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively 72,877 72,926
Retained earnings 74,171 69,007
Accumulated other comprehensive loss (8,571 ) (8,571 )
Total stockholders' equity 138,477 133,362

Total liabilities and stockholders' equity $ 2,095,807 $ 2,145,895
September 30, December 31,
2020 2019
ASSETS
Cash and cash equivalents $ 11,253 $ 5,295
Restricted cash and equivalents 200,912 135,537
Finance receivables measured at fair value 1,540,955 1,444,038

Finance receivables 577,281 897,530
Less: Allowance for finance credit losses (94,218 ) (11,640 )
Finance receivables, net 483,063 885,890

Furniture and equipment, net 988 1,512
Deferred tax assets, net 31,026 15,480
Accrued interest receivable 6,291 11,645
Other assets 34,744 39,852
Total Assets $ 2,309,232 $ 2,539,249

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 49,056 $ 47,077
Warehouse lines of credit 31,201 134,791
Residual interest financing 32,000 39,478
Securitization trust debt 2,048,089 2,097,728
Subordinated renewable notes 20,242 17,534
Total Liabilities 2,180,588 2,336,608
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; NaN issued 0 0
Common stock, 0 par value; authorized 75,000,000 shares; 22,508,862 and 22,530,918 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively 72,197 71,257
Retained earnings 64,868 139,805
Accumulated other comprehensive loss (8,421 ) (8,421 )
Total stockholders' equity 128,644 202,641

Total liabilities and stockholders' equity $ 2,309,232 $ 2,539,249

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
3

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

Three Months Ended Nine Months Ended Three Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
Revenues:
Interest income $ 72,582 $ 82,924 $ 227,271 $ 253,218 $ 66,093 $ 79,136
Mark to finance receivables measured at fair value (3,152 ) 604 (23,051 ) 604 (4,417 ) (10,350 )
Other income 1,239 1,994 4,508 6,255 1,436 1,981
Total revenues 70,669 85,522 208,728 260,077 63,112 70,767

Expenses:
Employee costs 19,155 20,251 60,826 59,030 20,159 21,842
General and administrative 7,846 8,185 24,352 25,109 7,748 8,669
Interest 24,901 27,940 78,377 82,933 20,946 26,991
Provision for credit losses 7,400 19,874 14,113 64,319 0 3,613
Sales 3,202 4,407 10,710 13,877 3,986 4,430
Occupancy 1,838 1,760 5,362 5,745 1,901 1,691
Depreciation and amortization 438 276 1,344 789 428 419
Total operating expenses 64,780 82,693 195,084 251,802 55,168 67,655
Income before income tax expense (benefit) 5,889 2,829 13,644 8,275 7,944 3,112
Income tax expense (benefit) 2,121 991 (3,888 ) 2,898 2,780 (7,680 )
Net income $ 3,768 $ 1,838 $ 17,532 $ 5,377 $ 5,164 $ 10,792

Earnings per share:
Basic $ 0.17 $ 0.08 $ 0.77 $ 0.24 $ 0.23 $ 0.48
Diluted 0.16 0.08 0.74 0.22 0.21 0.45

Number of shares used in computing earnings per share:
Basic 22,666 22,526 22,630 22,378 22,741 22,539
Diluted 23,908 24,066 23,825 24,102 24,967 23,879

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
4

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net income $ 3,768 $ 1,838 $ 17,532 $ 5,377

Other comprehensive income/(loss); change in funded status of pension plan 0 0 0 0
Comprehensive income $ 3,768 $ 1,838 $ 17,532 $ 5,377

Three Months Ended
March 31,
2021 2020

Net income $ 5,164 $ 10,792

Other comprehensive income/(loss); change in funded status of pension plan 0 0
Comprehensive income $ 5,164 $ 10,792

See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

5

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

Nine Months Ended Three Months Ended
September 30, March 31,
2020 2019 2021 2020
Cash flows from operating activities:
Net income $ 17,532 $ 5,377 $ 5,164 $ 10,792
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of deferred acquisition fees and origination costs 910 1,374 251 339
Net interest income accretion on fair value receivables 98,060 64,131 35,025 29,715
Depreciation and amortization 1,344 789 428 419
Amortization of deferred financing costs 6,128 6,226 1,873 2,097
Mark to finance receivables measured at fair value 23,051 (604 )
Mark to fair value of finance receivables measured at fair value 4,417 10,350
Provision for credit losses 14,113 64,319 0 3,613
Stock-based compensation expense 1,437 1,496 408 487
Changes in assets and liabilities:
Accrued interest receivable 5,354 19,240 1,273 2,850
Deferred tax assets, net 18,985 3,063 1,009 (8,364 )
Other assets 1,673 2,708 8,244 1,901
Accounts payable and accrued expenses 1,979 1,870 7,258 9,855
Net cash provided by operating activities 190,566 169,989 65,350 64,054

Cash flows from investing activities:
Payments received on finance receivables held for investment 260,804 379,365 73,480 94,535
Purchases of finance receivables measured at fair value (572,938 ) (756,555 ) (205,459 ) (265,282 )
Payments received on finance receivables at fair value 354,910 200,889 156,020 109,558
Change in repossessions held in inventory 3,435 (733 ) 275 382
Purchase of furniture and equipment (820 ) (654 ) (426 ) (295 )
Net cash provided by (used in) investing activities 45,391 (177,688 ) 23,890 (61,102 )

Cash flows from financing activities:
Proceeds from issuance of securitization trust debt 714,543 726,188 230,545 260,000
Proceeds from issuance of subordinated renewable notes 5,120 1,452 2,750 1,114
Payments on subordinated renewable notes (2,412 ) (3,213 ) (333 ) (326 )
Net advances (repayments) of warehouse lines of credit (104,685 ) 20,914 (48,256 ) 6,837
Repayment of residual interest financing debt (7,757 ) 0 (4,979 ) (1,658 )
Repayment of securitization trust debt (764,075 ) (723,205 ) (242,489 ) (266,056 )
Payment of financing costs (4,861 ) (6,099 ) (1,572 ) (1,674 )
Purchase of common stock (967 ) (1,440 ) (755 ) 0
Exercise of options and warrants 470 347 298 48
Net cash provided by (used in) financing activities (164,624 ) 14,944
Net cash used in financing activities (64,791 ) (1,715 )
Increase in cash and cash equivalents 71,333 7,245 24,449 1,237
Cash and restricted cash at beginning of period 140,832 130,110 144,152 140,832
Cash and restricted cash at end of period $ 212,165 $ 137,355 $ 168,601 $ 142,069

Supplemental disclosure of cash flow information:
Cash paid (received) during the period for:
Interest $ 72,565 $ 76,269 $ 19,252 $ 24,739
Income taxes $ (17,561 ) $ (3,231 ) $ (123 ) $ (410 )
Non-cash financing activities:
Right-of-use asset, net $ 0 $ (21,869 )
Lease liability $ 0 $ 23,327
Deferred office rent $ 0 $ (1,458 )
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
6

CONSUMER PORTFOLIO SERVICES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(In thousands)

Three Months Ended
March 31,
2021 2020
Common Stock (Shares Outstanding)
Balance, beginning of period 22,737 22,531
Common stock issued upon exercise of options and warrants 98 28
Repurchase of common stock (179 ) –
Balance, end of period 22,656 22,559

Common Stock
Balance, beginning of period $ 72,926 $ 71,257
Common stock issued upon exercise of options and warrants 298 48
Repurchase of common stock (755 ) –
Stock-based compensation 408 487
Balance, end of period $ 72,877 $ 71,792

Retained Earnings
Balance, beginning of period $ 69,007 $ 139,805
Cumulative change in accounting principle (Note 2) – (92,469 )
Balance, beginning of period (as adjusted for change in accounting principle) $ 69,007 $ 47,336
Net income 5,164 10,792
Balance, end of period $ 74,171 $ 58,128

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

Balance, beginning of period 133,362
Pension benefit obligation 0
Total Shareholders' Equity $ 138,477 $ 121,499
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Common Stock (Shares Outstanding)
Balance, beginning of period 22,715 22,526 22,531 22,422
Common stock issued upon exercise of options and warrants 13 0 269 483
Repurchase of common stock (219 ) 0 (291 ) (379 )
Balance, end of period 22,509 22,526 22,509 22,526

Common Stock
Balance, beginning of period $ 72,402 $ 70,299 $ 71,257 $ 70,273
Common stock issued upon exercise of options and warrants 18 0 470 347
Repurchase of common stock (762 ) 0 (967 ) (1,440 )
Stock-based compensation 539 377 1,437 1,496
Balance, end of period $ 72,197 $ 70,676 $ 72,197 $ 70,676

Retained Earnings
Balance, beginning of period $ 61,100 $ 137,938 $ 139,805 $ 134,399
Cumulative change in accounting principle (Note 2) 0 0 (92,469 ) 0
Balance, beginning of period (as adjusted for change in accounting principle) $ 61,100 $ 137,938 $ 47,336 $ 134,399
Net income 3,768 1,838 17,532 5,377
Balance, end of period $ 64,868 $ 139,776 $ 64,868 $ 139,776

Accumulated Other Comprehensive Loss
Balance, beginning of period $ (8,421 ) $ (7,554 ) $ (8,421 ) $ (7,554 )
Pension benefit obligation 0 0 0 0
Balance, end of period $ (8,421 ) $ (7,554 ) $ (8,421 ) $ (7,554 )

Balance, beginning of period 0
Pension benefit obligation 0
Total Shareholders' Equity $ 128,644 $ 202,898 $ 128,644 $ 202,898
See accompanying Notes to Unaudited Condensed Consolidated Financial Statements.
7

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

(1) Summary of Significant Accounting Policies

Description of Business

We were formed in California on March 8, 1991. We specialize in purchasing and servicing retail automobile installment sale contracts (“automobile contracts” or “finance receivables”) originated by licensed motor vehicle dealers located throughout the United States (“dealers”) in the sale of new and used automobiles, light trucks and passenger vans. Through our purchases, we provide indirect financing to dealer customers for borrowers with limited credit histories or past credit problems (“sub-prime customers”). We serve as an alternative source of financing for dealers, allowing sales to customers who otherwise might not be able to obtain financing. In addition to purchasing installment purchase contracts directly from dealers, we have also (i) lent money directly to consumers for loans secured by vehicles, (ii) purchased immaterial amounts of vehicle purchase money loans from non-affiliated lenders, and (iii) acquired installment purchase contracts in four merger and acquisition transactions. In this report, we refer to all of such contracts and loans as "automobile contracts."

Basis of Presentation

Our Unaudited Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America, with the instructions to Form 10-Q and with Article 10 of Regulation S-X of the Securities and Exchange Commission, and include all adjustments that are, in management’s opinion, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are, in the opinion of management, of a normal recurring nature. Results for the ~~nine-month~~three-month period ended ~~September 30, 2020~~March 31, 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, ~~2019.~~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.

Finance Receivables Measured at Fair Value

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

8

~~CONSUMER PORTFOLIO~~ SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

We re-evaluate the fair value of such receivables at the close of each measurement period. If the reevaluation were to yield a value materially different from the recorded value, an adjustment would be required. Results for the ~~third~~first quarter include ~~the estimated potential effect on credit performance resulting from the COVID-19 pandemic. We recorded~~ a ~~$3.2~~$4.4 million mark down to the ~~recorded~~carrying value of the portion of the receivables portfolio accounted for at fair value. The mark down is an estimate based on our evaluation of the appropriate fair value ~~in the third quarter, $9.5 million in the second quarter,~~ and ~~$10.4 million in the first quarter.~~future earnings rate of existing receivables compared to recently acquired receivables and our assessment of potential additional future net losses. The mark down is reflected as a reduction in revenue for ~~each period.~~the quarter.

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

Other Income

The following table presents the primary components of Other Income for the three-month ~~and nine-month~~ periods ending ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Schedule of other income
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands) (In thousands)
Direct mail revenues $ 760 $ 1,121 $ 2,444 $ 3,508
Convenience fee revenue 280 600 1,340 1,870
Recoveries on previously charged-off contracts 4 30 79 132
Sales tax refunds 192 200 601 631
Other 3 43 44 114
Other income for the period $ 1,239 $ 1,994 $ 4,508 $ 6,255
Schedule of other income
Three Months Ended
March 31,
2021 2020
(In thousands)
Direct mail revenues $ 979 $ 1,183
Convenience fee revenue 240 530
Recoveries on previously charged-off contracts 15 25
Sales tax refunds 171 202
Other 31 41
Other income for the period $ 1,436 $ 1,981

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
~~(In thousands)~~

The following table presents the supplemental balance sheet information related to leases:

Supplemental balance sheet information related to leases
September, December 31,
March 31, December 31,
2021 2020
2020 2019 (In thousands)
(In thousands)
Operating Leases
Operating lease right-of-use assets $ 23,735 $ 23,735 $ 23,840 $ 23,735
Less: Accumulated amortization right-of-use assets (11,280 ) (6,600 ) (14,257 ) (12,792 )
Operating lease right-of-use assets, net $ 12,455 $ 17,135 $ 9,583 $ 10,943
$
Operating lease liabilities $ (13,698 ) $ (18,527 ) $ (10,643 ) $ (12,096 )
$
Finance Leases $
Property and equipment, at cost $ 3,352 $ 876 $ 3,407 $ 3,407
Less: Accumulated depreciation (945 ) (150 ) (1,507 ) (1,226 )
Property and equipment, net $ 2,407 $ 726 $ 1,900 $ 2,181
$
Finance lease liabilities $ (2,457 ) $ (718 ) $ (1,969 ) $ (2,243 )
$
Weighted Average Discount Rate $
Operating lease 5.0 % 5.0 % 5.0% 5.0%
Finance lease 6.5 % 6.4 % 6.5% 6.5%

~~Maturities of lease liabilities were as follows:~~
Maturities of leases

(In thousands) Operating Finance
Year Ending December 31, Lease Lease
2020 (excluding the nine months ended September 30, 2020) $ 1,959 $ 305
2021 7,458 1,217
2022 6,066 1,038
2023 1,397 71
2024 419 14
Thereafter 282 0
Total undiscounted lease payments 17,581 2,645
Less amounts representing interest (4,524 ) (188 )
Lease Liability $ 13,698 $ 2,457
Maturities of leases
Maturities of lease liabilities were as follows: $
(In thousands) Operating Finance
Year Ending December 31, Lease Lease
2021 (excluding the three months ended March 31, 2021) $ 5,549 $ 921
2022 6,089 1,051
2023 1,421 84
2024 443 26
2025 305 9
Thereafter 2 0
Total undiscounted lease payments 13,809 2,091
Less amounts representing interest (3,166 ) (122 )
Lease Liability $ 10,643 $ 1,969

10

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

The following table presents the lease expense included in General and administrative and Occupancy expense on our Unaudited Condensed Consolidated Statement of Operations:

Lease information
Three Months Ended Nine Months Ended Three Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
(In thousands) (In thousands) (In thousands)
Operating lease cost $ 1,885 $ 1,884 $ 5,654 $ 5,659 $ 1,837 $ 1,885
Finance lease cost 299 46 871 90 308 278
Total lease cost $ 2,184 $ 1,930 $ 6,525 $ 5,749 $ 2,145 $ 2,163

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 Three Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
Cash paid for amounts included in the measurement of lease liabilities: (In thousands) (In thousands) (In thousands)
Operating cash flows from operating leases $ 1,945 $ 1,901 $ 5,803 $ 5,678 $ 1,930 $ 1,926
Operating cash flows from finance leases 256 37 737 73 274 231

Financing cash flows from finance leases 42 9 133 17 35 46

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,~~March 31, 2021 and 2020, we recorded stock-based compensation costs in the amount of $~~539,000~~408,000 and $~~1.4~~ 487,000~~million~~ ~~1,437~~, respectively. ~~These stock-based compensation costs were $377,000~~ ~~and $1.5~~ ~~million~~ ~~1,496~~ ~~for the three and nine months ended September 30, 2019.~~ As of ~~September 30, 2020,~~March 31, 2021, unrecognized stock-based compensation costs to be recognized over future periods equaled $~~3.7~~2.8 million. This amount will be recognized as expense over a weighted-average period of ~~2.4~~2.0 years.

The following represents stock option activity for the three months ended March 31, 2021:
Number of Shares Weighted Average Exercise Weighted Average Remaining Contractual
(in thousands) Price Term
Options outstanding at the beginning of period 15,977 $ 4.46 N/A
Granted 0 – N/A
Exercised (98 ) 3.05 N/A
Forfeited (45 ) 3.65 N/A
Options outstanding at the end of period 15,834 $ 4.47 2.58 years

Options exercisable at the end of period 12,499 $ 4.82 1.87 years

11

CONSUMER PORTFOLIO SERVICES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

The following ~~represents~~table presents the price distribution of stock ~~option activity~~options outstanding and exercisable for the ~~nine months~~years ended ~~September 30,~~March 31, 2021 and December 31, 2020:

Schedule of stock option activity Number of Shares (in thousands) Weighted Average Exercise Price Weighted Average Remaining Contractual Term
Options outstanding at the beginning of period 15,348 $ 4.59 N/A
Granted 1,600 2.47 N/A
Exercised (269 ) 1.75 N/A
Forfeited (215 ) 5.55 N/A
Options outstanding at the end of period 16,464 $ 4.41 3.07 years

Options exercisable at the end of period 12,816 $ 4.78 2.30 years
Schedule of stock options outstanding and exercisable Number of shares as of Number of shares as of
March 31, 2021 December 31, 2020
Outstanding Exercisable Outstanding Exercisable
Range of exercise prices: (In thousands) (In thousands)
$0.95 - $1.99 1,878 1,878 1,904 1,904
$2.00 - $2.99 1,570 180 1,570 180
$3.00 - $3.99 4,863 3,234 4,973 3,306
$4.00 - $4.99 1,533 1,217 1,540 1,217
$5.00 - $5.99 0 0 0 0
$6.00 - $6.99 4,770 4,770 4,770 4,770
$7.00 - $7.99 1,220 1,220 1,220 1,220
Total shares 15,834 12,499 15,977 12,597

At ~~September 30, 2020,~~March 31, 2021 the aggregate intrinsic value of options outstanding and exercisable was $~~5.5~~ 10.0million and $~~4.1~~7.0 million, respectively. There were ~~269,100~~98,000 options exercised for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~482,500~~28,000 for the comparable period in ~~2019.~~2020. The total intrinsic value of options exercised was $~~308,000~~122,000 and $~~1.4~~ 51,000~~million~~ for the ~~nine-month~~three-month periods ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~2020. There were ~~72,581~~315,000 shares available for future stock option grants under existing plans as of ~~September 30, 2020.~~March 31, 2021.

Purchases of Company Stock

The table below describes the purchase of our common stock for the ~~nine-month~~three-month ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Schedule of purchases of company stock Nine Months Ended
Three Months Ended
September 30, 2020 September 30, 2019 March 31, 2021 March 31, 2020
Shares Avg. Price Shares Avg. Price Shares Avg. Price Shares Avg. Price
Open market purchases 44,247 $ 2.94 335,546 $ 3.95 138,004 $ 4.18 0 $ –
Shares redeemed upon net exercise of stock options 46,909 2.86 18,424 3.76 40,727 4.36 0 –
Other purchases 200,000 3.51 24,500 4.20
Total stock purchases 291,156 $ 3.32 378,470 $ 3.97 178,731 $ 4.22 0 $ –

Reclassifications

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

12

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

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, 2020,~~March 31, 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.

~~Adoption of New Accounting Standards~~
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ("ASU") 2016-13, which changes the criteria under which credit losses on financial instruments (such as the Company’s finance receivables) are measured. ASU 2016-3 introduces 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. To establish such lifetime credit loss estimates, consideration of a broadened range of reasonable and supportable information to establish credit loss estimates is required. ASU 2016-13 was initially scheduled to become effective for interim and annual reporting periods beginning after December 15, 2019, however on October 16, 2019, the FASB changed the effective date for smaller reporting companies to ~~interim and annual reporting periods~~ ~~beginning after December 15, 2022, with early adoption permitted.~~
Effective January 1, 2020, the Company adopted the CECL model. 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 of $127.0 million. In accordance with the rules for adopting CECL, the offset to the addition to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method, and not a current period expense.
Coronavirus Pandemic

In December 2019, a new strain of coronavirus (the “COVID-19 virus”) originated in Wuhan, China. Since its discovery, the 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 time to time in this report to the outbreak and spread of the COVID-19 virus as “the pandemic.”
Results for the nine-month period ending September 30, 2020 include the estimated potential effect on credit performance resulting from the pandemic. We recorded a $14.1 million charge to the provision for credit losses for the legacy portfolio accounted for under CECL and a $23.1 million mark down to the recorded value of the finance receivables measured at fair value.
13
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~
The pandemic itself, if sufficient numbers of people were to be afflicted, could cause obligors under our automobile contracts to be unable to pay their contractual obligations. As the future course of the COVID-19 pandemic is as yet unknown, its direct effect on future obligor payments is likewise uncertain.
The mandatory shutdown of large portions of the United States economy pursuant to emergency restrictions has impaired and will impair the ability of obligors under our automobile contracts to pay their contractual obligations. The extent to which that ability will be impaired, and the extent to which public ameliorative measures such as stimulus payments and enhanced unemployment benefits may restore such ability, cannot be estimated.

We measure our portfolio of finance receivables carried at fair value with consideration for unobservable inputs that 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. The pandemic and the adverse effect it may have on the U.S. economy and our obligors may cause us to consider significant changes in any of those inputs, which in turn may have a significant effect on our fair value measurement.
(2) Finance Receivables
Our portfolio of finance receivables consists of small-balance homogeneous contracts comprising a single segment and class that is collectively evaluated for impairment on a portfolio basis according to delinquency status. Our contract purchase guidelines are designed to produce a homogenous portfolio. For key terms such as interest rate, length of contract, monthly payment and amount financed, there is relatively little variation from the average for the portfolio. We report delinquency on a contractual basis. Once a contract becomes greater than 90 days delinquent, we do not recognize additional interest income until the obligor under the contract makes sufficient payments to be less than 90 days delinquent. Any payments received on a contract that is greater than 90 days delinquent are first applied to accrued interest and then to principal reduction.

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

13
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the components of Finance Receivables, net of unearned interest:

Schedule of finance receivables September 30, December 31, March 31, December 31,
2020 2019 2021 2020
Finance receivables (In thousands)
(In thousands)
Finance receivables
Automobile finance receivables, net of unearned interest $ 576,227 $ 895,566 $ 410,623 $ 491,307
Unearned acquisition fees and originations costs 1,054 1,964 486 826
Finance receivables $ 577,281 $ 897,530 $ 411,109 $ 492,133

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, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

14
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~

Schedule of amortized cost basis of finance receivables
September 30, December 31,
2020 2019
(In thousands)
Delinquency Status
Current $ 490,096 $ 698,870
31 - 60 days 57,463 107,951
61 - 90 days 21,760 57,395
91 + days 6,908 31,350
$ 576,227 $ 895,566
Schedule of delinquency status of finance receivables March 31, December 31,
2021 2020
(In thousands)
Delinquency Status
Current $ 360,369 $ 406,693
31 - 60 days 35,533 56,572
61 - 90 days 11,683 22,660
91 + days 3,038 5,382
$ 410,623 $ 491,307

Finance receivables totaling $~~6.9~~3.0 million and $~~31.4~~5.4 million at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, including all receivables greater than 90 days delinquent, have been placed on non-accrual status as a result of their delinquency status.

Allowance for Credit Losses – Finance Receivables

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of finance receivables to present the net amount expected to be collected. Charge offs are deducted from the allowance when management believes that collectability is unlikely.
14
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

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

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.

15
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~
~~The following table presents~~Effective January 1, 2020, the ~~amortized cost basis of our~~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 by annual vintage~~receivables) are measured. ASC 326 introduced a new credit reserving model known as ~~of September 30, 2020 and December 31, 2019.~~

Schedule of amortized cost basis of finance receivables
September 30, December 31,
2020 2019
Annual Vintage Pool (In thousands)
2012 and prior $ 851 $ 2,432
2013 6,212 15,489
2014 29,878 61,290
2015 95,522 162,242
2016 190,788 292,360
2017 252,976 361,753
$ 576,227 $ 895,566
At 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 of ~~$127.0~~$127.0 million. ~~In accordance with the rules for adopting CECL, the~~The offset to the addition to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method.

~~In consideration~~
15
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the amortized cost basis of ~~the uncertainty associated with the pandemic, the Company made additional provision for credit losses on~~our finance receivables ~~for the for the three-month~~by annual vintage as of March 31, 2021 and ~~nine-month periods ended September 30, 2020, in the amounts of $7.4 million and $14.1 million, respectively.~~December 31, 2020.
Schedule of amortized cost basis of finance receivables March 31, December 31,
2021 2020
(In thousands)
Annual Vintage Pool
2012 and prior $ 427 $ 608
2013 3,102 4,483
2014 17,169 23,115
2015 62,428 78,457
2016 136,699 163,677
2017 190,798 220,967
$ 410,623 $ 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, 2020~~March 31, 2021 and ~~2019:~~2020:

Schedule of allowance for finance credit losses
Three Months Ended

Schedule of allowance for finance credit losses
Three Months Ended Nine Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
(In thousands) (In thousands) (In thousands)
Balance at beginning of period $ 98,602 $ 32,664 $ 11,640 $ 67,376 $ 80,790 $ 11,640
Early adoption of CECL 0 n/a 127,000 n/a 0 127,000
Provision for credit losses on finance receivables 7,400 19,874 14,113 64,319 0 3,613
Charge-offs (15,574 ) (46,118 ) (73,096 ) (149,038 ) (12,122 ) (34,214 )
Recoveries 3,790 6,320 14,561 30,083 4,829 6,034
Balance at end of period $ 94,218 $ 12,740 $ 94,218 $ 12,740 $ 73,497 $ 114,073

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

Schedule of allowance for losses on repossessed inventory
September 30, December 31,
2020 2019
(In thousands)
Gross balance of repossessions in inventory $ 17,005 $ 28,933
Allowance for losses on repossessed inventory (12,896 ) (21,389 )
Net repossessed inventory included in other assets $ 4,109 $ 7,544
Schedule of allowance for losses on repossessed inventory March 31, December 31,
2021 2020
(In thousands)
Gross balance of repossessions in inventory $ 10,340 $ 15,589
Allowance for losses on repossessed inventory (6,816 ) (11,790 )
Net repossessed inventory included in other assets $ 3,524 $ 3,799

16

CONSUMER PORTFOLIO SERVICES, INC.
AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

(3) Securitization Trust Debt

We have completed many securitization transactions that are structured as secured borrowings for financial accounting purposes. The debt issued in these transactions is shown on our Unaudited Condensed Consolidated Balance Sheets as “Securitization trust debt,” and the components of such debt are summarized in the following table:

Schedule of securitization trust debt
Weighted
Average
Final Receivables Outstanding Outstanding Contractual
Scheduled Pledged at Principal at Principal at Interest Rate at
Payment September 30, Initial September 30, December 31, September 30,
Series Date (1) 2020 (2) Principal 2020 2019 2020 Final Scheduled Payment Date (1) Receivables Pledged at
March 31,
2021 (2) Initial Principal Outstanding Principal at
March 31,
2021 Outstanding Principal at
December 31,
2020 Weighted Average Contractual Interest Rate at
March 31,
2021
(Dollars in thousands) (Dollars in thousands)
CPS 2014-C December 2021 $ 0 $ 273,000 $ 0 $ 19,758 0
CPS 2014-D March 2022 0 267,500 0 23,755 0.00 %
CPS 2015-A June 2022 14,892 245,000 13,337 26,713 5.95 %
CPS 2015-B September 2022 22,065 250,000 21,661 36,338 5.71 % September 2022 $ 0 $ 250,000 $ 0 $ 17,984 0
CPS 2015-C December 2022 33,602 300,000 33,634 53,579 6.44 % December 2022 21,749 300,000 23,929 28,529 6.87%
CPS 2016-A March 2023 41,934 329,460 44,498 71,599 6.87 % March 2023 28,459 329,460 30,958 37,158 7.65%
CPS 2016-B June 2023 53,268 332,690 53,973 82,667 7.30 % June 2023 37,418 332,690 38,724 46,079 7.58%
CPS 2016-C September 2023 54,865 318,500 54,750 83,696 7.31 % September 2023 39,455 318,500 40,046 47,325 7.82%
CPS 2016-D April 2024 44,381 206,325 42,622 65,021 5.63 % April 2024 32,599 206,325 30,753 36,455 6.05%
CPS 2017-A April 2024 49,404 206,320 47,265 71,450 5.58 % April 2024 36,408 206,320 34,412 40,619 6.04%
CPS 2017-B December 2023 61,113 225,170 47,090 76,201 4.82 % December 2023 46,080 225,170 31,951 39,016 5.23%
CPS 2017-C September 2024 63,388 224,825 54,006 80,315 4.68 % September 2024 48,489 224,825 41,953 47,553 4.95%
CPS 2017-D June 2024 65,532 196,300 55,937 83,801 4.16 % June 2024 50,010 196,300 43,273 49,297 4.48%
CPS 2018-A March 2025 70,923 190,000 60,777 91,258 3.98 % March 2025 54,744 190,000 47,230 53,549 4.25%
CPS 2018-B December  2024 84,265 201,823 76,306 111,188 4.39 % December 2024 65,851 201,823 58,112 66,955 4.65%
CPS 2018-C September 2025 98,583 230,275 87,227 130,064 4.51 % September 2025 76,364 230,275 68,625 77,345 4.74%
CPS 2018-D June 2025 116,839 233,730 101,011 149,470 4.45 % June 2025 91,484 233,730 78,446 88,228 4.68%
CPS 2019-A March 2026 147,942 254,400 130,663 186,900 4.28 % March 2026 115,227 254,400 99,017 114,373 4.50%
CPS 2019-B June 2026 143,956 228,275 134,066 184,308 3.84 % June 2026 113,420 228,275 105,045 118,982 4.06%
CPS 2019-C September 2026 167,813 243,513 158,699 216,650 3.18 % September 2026 133,374 243,513 125,430 142,080 3.35%
CPS 2019-D December  2026 212,273 274,313 202,755 265,035 2.73 % December 2026 168,358 274,313 160,999 181,485 2.88%
CPS 2020-A March 2027 210,936 260,000 207,905 0 2.72 % March 2027 165,519 260,000 163,649 184,944 2.89%
CPS 2020-B June 2027 203,947 202,343 179,851 0 2.92 % June 2027 168,416 202,343 147,587 164,403 3.31%
CPS 2020-C (3) November 2027 193,242 252,200 252,200 0 1.58 %
CPS 2020-C November 2027 223,358 252,200 214,018 231,961 1.75%
CPS 2021-A March 2028 232,317 230,545 218,218 0 0.77%
$ 2,155,163 $ 5,945,962 $ 2,060,233 $ 2,109,766 $ 1,949,099 $ 5,391,007 $ 1,802,375 $ 1,814,320
_________________
(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 $~~225.1~~ ~~million in 2020, $717.6~~642.9 million in 2021, $~~510.7~~498.5 million in 2022, $~~396.7~~411.9 million in 2023, $~~92.0~~100.4 million in 2024, $~~86.8~~102.2 million in 2025, ~~and~~ $~~18.7~~33.7 million in ~~2026.~~2026, and $2.0 million in 2027.
(2) Includes repossessed assets that are included in Other assets on our Unaudited Condensed Consolidated Balance Sheet.
~~(3)~~ ~~An additional $63.7 million of receivables were pledged to CPS 2020-C in October 2020.~~

17

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

Debt issuance costs of $~~12.1~~10.8 million and $~~12.0~~10.6 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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.

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, 2020,~~March 31, 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, 2020,~~March 31, 2021, restricted cash under the various agreements totaled approximately $~~200.91~~159.4 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.

On ~~September 15, 2020~~April 28, 2021 we completed our ~~third~~second securitization transaction of ~~2020.~~2021. In the transaction, qualified institutional buyers purchased ~~$252.2~~$240.0 million of asset-backed notes secured by ~~$260~~$240.0 million in automobile receivables ~~purchased~~originated by ~~us.~~CPS. The sold notes, issued by CPS Auto Receivables Trust ~~2020-C,~~2021-B, consist of ~~six~~five classes. Ratings of the notes were provided by Moody’s and DBRS Morningstar, and were based on the structure of the transaction, the historical performance of similar receivables and CPS’s experience as a servicer. The weighted average yield on the notes is approximately ~~2.39%~~1.65%.

18

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

(4) Debt
The terms and amounts of our other debt outstanding at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 are summarized below:

Schedule of debt outstanding
Amount Outstanding at Amount Outstanding at
September December 31, March December 31,
2020 2019 2021 2020
(In thousands) (In thousands)
Description Interest Rate Maturity Interest Rate Maturity

Warehouse lines of credit 5.50% over one month Libor (Minimum 6.50%) February 2021 $ 11,539 $ 40,558 5.50% over one month Libor (Minimum 6.50%) N/A $ 0 $ 42,558

3.00% over one month Libor (Minimum 3.75%) November 2020 20,559 96,225 3.00% over one month Libor (Minimum 3.75%) December 2022 44,956 45,689

4.00% over a commercial paper rate (Minimum 5.00%) December 2021 0 0 4.00% over a commercial paper rate (Minimum 5.00%) December 2021 27,300 32,265

Residual interest financing 8.60% January 2026 32,243 40,000 8.60% January 2026 20,597 25,576

Subordinated renewable notes Weighted average rate of 10.24% and 9.75% at September 30, 2020 and December 31, 2019 , respectively Weighted average maturity of December 2022 and April 2022 at September 30, 2020 and December 31, 2019, respectively 20,242 17,534 Weighted average rate of 9.92% and 10.09% at March 31, 2021 and December 31, 2020, respectively Weighted average maturity of March 2023 and January 2023 at March 31, 2021 and December 31, 2020, respectively 23,740 21,323
$ 84,583 $ 194,317 $ 116,593 $ 167,411
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 March 31, 2021, our short-term funding capacity is $200 million, comprising two credit facilities.

Unamortized debt issuance costs of $~~243,000~~57,000 and $~~522,000~~150,000 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, have been excluded from the amount reported above for residual interest financing. Similarly, unamortized debt issuance costs of $~~897,000~~1.2 million and $~~2.0~~1.5 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~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 debt on our Unaudited Condensed Consolidated Balance Sheets.

19

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

(5) Interest Income and Interest Expense

The following table presents the components of interest income:

Schedule of interest income

Three Months Ended Nine Months Ended Three Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
(In thousands) (In thousands) (In thousands)
Interest on finance receivables $ 29,753 $ 49,912 $ 101,333 $ 167,862 $ 22,099 $ 37,807
Interest on finance receivables at fair value 42,808 32,903 125,273 83,696 43,988 40,806
Mark to finance receivables measured at fair value (3,152 ) 0 (23,051 ) 0 (4,417 ) (10,350 )
Other interest income 21 713 665 2,264 6 523
Interest income $ 69,430 $ 83,528 $ 204,220 $ 253,822 $ 61,676 $ 68,786

The following table presents the components of interest expense:

Schedule of interest expense

Three Months Ended Nine Months Ended Three Months Ended
September 30, September 30, March 31,
2020 2019 2020 2019 2021 2020
(In thousands) (In thousands) (In thousands)
Securitization trust debt $ 21,605 $ 24,208 $ 67,770 $ 72,662 $ 18,453 $ 23,798
Warehouse lines of credit 1,856 2,407 6,294 6,387 1,314 1,763
Residual interest financing 876 956 2,734 2,867 566 938
Subordinated renewable notes 564 369 1,579 1,017 613 492
Interest expense $ 24,901 $ 27,940 $ 78,377 $ 82,933 $ 20,946 $ 26,991
20
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,~~March 31, 2021 and 2020 ~~and 2019~~ 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, 2020~~March 31, 2021 and ~~2019:~~2020:

Computation of earnings per share

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(In thousands) (In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share 22,666 22,526 22,630 22,378
Incremental common shares attributable to exercise of outstanding options and warrants 1,242 1,540 1,195 1,724
Weighted average number of common shares used to compute diluted earnings per share 23,908 24,066 23,825 24,102
20
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~
Computation of earnings per share
Three Months Ended
March 31,
2021 2020
(In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share 22,741 22,539

Incremental common shares attributable to exercise of outstanding options and warrants 2,226 1,340

Weighted average number of common shares used to compute diluted earnings per share 24,967 23,879

If the anti-dilutive effects of common stock equivalents were considered, shares included in the diluted earnings per share calculation for the ~~three-month~~three-months ended March 31, 2021 and ~~nine-month periods ended September 30,~~ 2020 would have included an additional ~~14.2~~7.5 million and ~~13.5~~12.9 million shares, respectively, attributable to the exercise of outstanding options and warrants. ~~For the three-month and nine-month periods ended September 30, 2019, an additional~~ ~~10.6~~ ~~million and~~ ~~10.6~~ ~~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~~$8.8 million, which is reflected in income taxes for the ~~nine-month~~three-month period ending ~~September 30,~~March 31, 2020.

As of ~~September 30, 2020,~~March 31, 2021, and December 31, ~~2019,~~2020, we had 0 unrecognized tax benefits for uncertain tax positions. We do not anticipate that total unrecognized tax benefits will significantly change due to any settlements of audits or expirations of statutes of limitations over the next 12 months.

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

21
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not. A valuation allowance is recognized for a deferred tax asset if, based on the weight of the available evidence, it is more likely than not that some portion of the deferred tax asset will not be realized. In making such judgments, significant weight is given to evidence that can be objectively verified. Although realization is not assured, we believe that the realization of the recognized net deferred tax asset of ~~$31.0~~$27.5 million as of ~~September 30, 2020~~March 31, 2021 is more likely than not based on forecasted future net earnings. Our net deferred tax asset of $~~31.0~~27.5 million consists of approximately $~~20.3~~16.2 million of net U.S. federal deferred tax assets and $~~10.7~~ 11.3million of net state deferred tax assets.

Income tax expense was ~~$2.1~~$2.8 million~~2,121~~ for the three months ended ~~September 30, 2020.~~March 31, 2021, representing an effective income tax rate of 35%. Income tax benefit was ~~$3.9~~$7.7 million~~(3,888)~~ for the ~~nine~~three months ended ~~September 30,~~March 31, 2020, which includes net tax benefits of $8.8 million. Excluding the tax benefit, income tax expense would have been ~~$8.7~~$1.1 million, ~~for the nine months ended September 30, 2020,~~ representing an effective income tax rate of 36%. ~~For the prior year period, income tax expense was $991,000~~ ~~and $2.9 million~~ ~~2,898~~ ~~for the three months and nine months ended September 30, 2019 and represents an effective income tax rate of~~ 35%.
21
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~

(8) Legal Proceedings

Consumer ~~Litigation~~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.

Wage and Hour Claim.On September 24, 2018, a former employee filed a lawsuit against us in the Superior Court of Orange County, California, alleging that we incorrectly classified our sales representatives as outside salespersons exempt from overtime wages, mandatory break periods and certain other employee protective provisions of California and federal law. The complaint seeks injunctive relief, an award of unpaid wages, liquidated damages, and attorney fees and interest. The plaintiff purports to act on behalf of a class of similarly situated employees and ex-employees. As of the date of this report, no motion for class certification has been filed or granted.

We believe that our compensation practices with respect to our sales representatives are compliant with applicable law. Accordingly, we have defended and intend to continue to defend this lawsuit. We have not recorded a liability with respect to this claim on the accompanying consolidated financial ~~statements~~.statements.

In General.There can be no assurance as to the outcomes of the matters described or referenced above. We record at each measurement date, most recently as of ~~September 30,~~December 31, 2020, our best estimate of probable incurred losses for legal contingencies, including the matters 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, 2020~~March 31, 2021 is immaterial, and that the range of reasonably possible losses for the legal proceedings and contingencies we face, including those described or identified above, as of ~~September 30, 2020~~March 31, 2021 does not exceed $3 million.

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

22
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(9) Fair Value Measurements

ASC 820, "Fair Value Measurements" clarifies the principle that fair value should be based on the assumptions market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Under the standard, fair value measurements would be separately disclosed by level within the fair value hierarchy.
22
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~

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

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

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

Our level 3, unobservable inputs reflect our own assumptions about the factors that market participants use in pricing similar receivables and are based on the best information available in the circumstances. They include such inputs as estimates for the magnitude and timing of net charge-offs and the rate of amortization of the portfolio of finance receivable. Significant changes in any of those inputs in isolation would have a significant effect on our fair value measurement.
For the period ended ~~September 30, 2020,~~March 31, 2021, the Company ~~considered the effect~~evaluated of the ~~pandemic~~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 recorded a mark down to that portfolio of ~~$23.1~~$4.4 million.

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,
2020 2019 2020 2019
(In thousands) (In thousands)
Balance at beginning of period $ 1,537,649 $ 1,158,365 $ 1,444,038 $ 821,066
Finance receivables at fair value acquired during period 173,209 261,929 572,938 756,555
Payments received on finance receivables at fair value (132,847 ) (83,384 ) (354,910 ) (200,889 )
Net interest income accretion on fair value receivables (33,904 ) (24,309 ) (98,060 ) (64,131 )
Mark to fair value (3,152 ) 604 (23,051 ) 604
Balance at end of period $ 1,540,955 $ 1,313,205 $ 1,540,955 $ 1,313,205
Schedule of reconciliation of the finance receivables measured at fair value on a recurring basis
Three Months Ended
March 31,
2021 2020
(In thousands)
Balance at beginning of period $ 1,523,726 $ 1,444,038
Finance receivables at fair value acquired during period 205,459 265,282
Payments received on finance receivables at fair value (156,020 ) (109,558 )
Net interest income accretion on fair value receivables (35,025 ) (29,715 )
Mark to fair value (4,417 ) (10,350 )
Balance at end of period $ 1,533,723 $ 1,559,697

23

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~(In thousands)~~

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, 2020 December 31, 2019
Contractual Fair Contractual Fair March 31, 2021 December 31, 2020
Balance Value Balance Value Contractual Fair Contractual Fair
(In thousands) Balance Value Balance Value
(In thousands)
Finance receivables measured at fair value $ 1,658,662 $ 1,540,955 $ 1,492,803 $ 1,444,038 $ 1,698,110 $ 1,533,723 $ 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,
2020 2019 Unobservable Inputs 2020 2019
(In thousands)
Assets:
Finance receivables measured at fair value $ 1,540,955 $ 1,444,038 Discount rate 10.5% - 11.1% 8.9% - 11.1%
Cumulative net losses 16.4% - 18.4% 15.0% - 16.1%
Schedule of level 3 fair value measurements
Financial Instrument Fair Values as of Inputs as of
March 31, December 31, March 31, December 31,
2021 2020 Unobservable Inputs 2021 2020
(In thousands)
Assets:
Finance receivables measured at fair value $ 1,533,723 $ 1,523,726 Discount rate 11.0% - 11.3% 10.4% - 11.1%
Cumulative net losses 15.4% - 18.4% 15.3% - 18.4%

The following table summarizes the delinquency status of these finance receivables measured at fair value as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

Schedule of delinquency status of finance receivables measured at fair value
September 30, December 31,
2020 2019
(In thousands)
Delinquency Status
Current $ 1,530,301 $ 1,344,883
31 - 60 days 76,208 81,262
61 - 90 days 27,616 34,280
91 + days 9,159 15,167
Repo 15,378 17,211
$ 1,658,662 $ 1,492,803
Schedule of delinquency status of finance receivables measured at fair value March 31, December 31,
2021 2020
(In thousands)
Delinquency Status
Current $ 1,594,070 $ 1,505,486
31 - 60 days 58,534 96,296
61 - 90 days 20,114 36,436
91 + days 5,378 9,607
Repo 20,014 20,251
$ 1,698,110 $ 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, 2020~~March 31, 2021 the finance receivables related to the repossessed vehicles in inventory totaled ~~$17.0~~$10.3 million. We have applied a valuation adjustment, or loss allowance, of ~~$12.9~~$6.8 million, which is based on a recovery rate of approximately ~~24.2%~~34%, resulting in an estimated fair value and carrying amount of ~~$4.1~~$3.5 million. The fair value and carrying amount of the repossessed inventory at December 31, ~~2019~~2020 was ~~$7.5~~$3.8 million after applying a valuation adjustment of ~~$21.4~~$11.8 million.
24
CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

There were no transfers in or out of level 1, level 2 or level 3 assets and liabilities for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019.~~
24
~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~
~~(In thousands)~~
2020.

The estimated fair values of financial assets and liabilities at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, were as follows:

Schedule of estimated fair values of financial assets and liabilities

As of September 30, 2020 As of March 31, 2021
Financial Instrument (In thousands) (In thousands)
Carrying Fair Value Measurements Using: Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 11,253 $ 11,253 $ 0 $ 0 $ 11,253 $ 9,197 $ 9,197 $ 0 $ 0 $ 9,197
Restricted cash and equivalents 200,912 200,912 0 0 200,912 159,404 159,404 0 0 159,404
Finance receivables, net 483,063 0 0 450,325 450,325 337,612 0 0 348,892 348,892
Accrued interest receivable 6,291 0 0 6,291 6,291 3,744 0 0 3,744 3,744
Liabilities:
Warehouse lines of credit $ 31,201 $ 0 $ 0 $ 31,201 $ 31,201 $ 71,097 $ 0 $ 0 $ 71,097 $ 71,097
Accrued interest payable 4,937 0 0 4,937 4,937 4,740 0 0 4,740 4,740
Residual interest financing 32,000 0 0 32,000 32,000
Securitization trust debt 2,048,089 0 0 2,137,877 2,137,877 1,791,583 0 0 1,813,370 1,813,370
Subordinated renewable notes 20,242 0 0 20,242 20,242 23,740 0 0 23,740 23,740

As of December 31, 2019 As of December 31, 2020
Financial Instrument (In thousands) (In thousands)
Carrying Fair Value Measurements Using: Carrying Fair Value Measurements Using:
Value Level 1 Level 2 Level 3 Total Value Level 1 Level 2 Level 3 Total
Assets:
Cash and cash equivalents $ 5,295 $ 5,295 $ 0 $ 0 $ 5,295 $ 13,466 $ 13,466 $ 0 $ 0 $ 13,466
Restricted cash and equivalents 135,537 135,537 0 0 135,537 130,686 130,686 0 0 130,686
Finance receivables, net 885,890 0 0 841,160 841,160 411,343 0 0 429,972 429,972
Accrued interest receivable 11,645 0 0 11,645 11,645 5,017 0 0 5,017 5,017
Liabilities:
Warehouse lines of credit $ 134,791 $ 0 $ 0 $ 134,791 $ 134,791 $ 118,999 $ 0 $ 0 $ 118,999 $ 118,999
Accrued interest payable 5,254 0 0 5,254 5,254 4,919 0 0 4,919 4,919
Residual interest financing 39,478 0 0 39,478 39,478
Securitization trust debt 2,097,728 0 0 2,116,520 2,116,520 1,803,673 0 0 1,862,630 1,862,630
Subordinated renewable notes 17,534 0 $ 0 17,534 17,534

21,323 0 0 21,323 21,323

25

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

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

We were incorporated and began our operations in March 1991. From inception through ~~September 30, 2020,~~March 31, 2021, we have originated a total of approximately ~~$16.8~~$17.2 billion of automobile contracts, primarily by purchasing retail installment sales contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. In addition, we acquired a total of approximately $822.3 million of automobile contracts in mergers and acquisitions in 2002, 2003, 2004 and 2011. Recent contract purchase volumes and managed portfolio levels are shown in the table below:

$ 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
Nine months ended September 30, 2020 575,876 2,250,395
$ 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
Three months ended March 31, 2021 205,482 2,119,073

Since April 2020, due to the onset of the pandemic, we have seen a decrease in the monthly volumes of our contract purchases when compared to the ~~prior year period and also compared to our~~ first quarter of 2020.

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.

26

Securitization and Warehouse Credit Facilities

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

When structured to be treated as a secured financing for accounting purposes, the subsidiary is consolidated with us. Accordingly, the sold automobile contracts and the related debt appear as assets and liabilities, respectively, on our consolidated balance sheet. We then periodically (i) recognize interest and fee income on the contracts, and (ii) recognize interest expense on the securities issued in the transaction. For automobile contracts acquired after 2017 we take account of estimated credit losses in our computation of a level yield used to determine recognition of interest on the contracts. For contracts acquired before 2018, we adopted CECL on January 1, 2020 and we may, as circumstances warrant, record as expense provisions for credit losses, as we did during the ~~three-month and nine-month periods~~year ended ~~September 30,~~December 31, 2020 ~~as a result~~because of the uncertainty related to the pandemic.

Since 1994 we have conducted 8788 term securitizations of automobile contracts that we originated. As of ~~September 30, 2020, 22~~March 31, 2021, 21 of those securitizations are active and all are structured as secured financings. Since September 2010 we have utilized senior subordinated structures without any financial guarantees. We have generally conducted our securitizations on a quarterly basis, near the end of each calendar quarter, resulting in four securitizations per calendar year. However, in 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 is summarized in the table below:

~~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
Nine months ended September 30, 2020 3 741,867
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
Three months ended March 31, 2021 1 245,000

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 ~~September 2018,~~December 2020, extending the revolving period to ~~September 2020,~~December 2022, with an optional amortization period through September 2021. The revolving period for this facility was extended to November 2020. In April 2015, we entered into a second $100 million facility. This facility was renewed in April 2017 and again in February 2019, extending the revolving period to February 2021, followed by an amortization period to FebruaryDecember 2023. In November 2015, we entered into ~~a third~~another $100 million facility. This facility was renewed in November 2017 and again in December 2019, extending the revolving period to December 2021, followed by an amortization period to December 2023.
In April 2015, we entered into a $100 million facility that was renewed in April 2017 and again in February 2019. We repaid the outstanding balance for this facility at its maturity date in February 2021 and elected not to renew it. We currently have short-term funding capacity of $200 million.

27

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.

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.

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, 2020,~~March 31, 2021, we were in compliance with all such covenants.

Results of Operations
Comparison of Operating Results for the three months ended ~~September 30, 2020~~March 31, 2021 with the three months ended ~~September 30, 2019~~March 31, 2020

Revenues.  During the three months ended ~~September 30, 2020,~~March 31, 2021, our revenues were ~~$70.7~~$63.1 million, a decrease of ~~$14.9~~$7.7 million, or ~~17.4%~~10.8%, from the prior year revenue of ~~$85.5~~$70.8 million. The primary reason for the decrease in revenues is a decrease in interest ~~income and a mark down to the recorded value of the portion of the receivables portfolio accounted for at fair value.~~income. Interest income for the three months ended ~~September 30, 2020~~March 31, 2021 decreased ~~$10.9~~$13.0 million, or ~~13.1%~~16.5%, to ~~$72.6~~$66.1 million from ~~$83.5~~$79.1 million in the prior year. The primary reason for the 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 ~~accrued~~decreased by 46.6% from the prior period. The decrease in interest ~~at an average~~from that legacy portion of ~~18.5%, which is~~our portfolio was partially offset ~~only in part~~ 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. The table below shows the average balances and interest yields of the two components of our loan portfolio for the three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended September 30,
2020 2019
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Finance receivables $ 624,532 $ 29,775 19.1% $ 1,105,087 $ 50,625 18.3%
Finance receivables measured at fair value 1,646,022 42,807 10.4% 1,304,012 32,903 10.1%
Total $ 2,270,554 $ 72,582 12.8% $ 2,409,099 $ 83,528 13.9%
Three Months Ended March 31,
2021 2020
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Finance receivables $ 451,425 $ 22,105 19.6% $ 845,727 $ 38,330 18.1%
Finance receivables measured at fair value 1,687,232 43,988 10.4% 1,580,468 40,806 10.3%
Total $ 2,138,657 $ 66,093 12.4% $ 2,426,195 $ 79,136 13.0%

28

Revenues for the ~~third quarter~~three months ended March 31, 2021 and 2020 are net of ~~2020 include a $3.2~~mark downs of $4.4 million ~~mark down~~and $10.4 million, respectively, to the recorded value of the finance receivables measured at fair value. The mark ~~down is an estimate~~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 pandemic.

In the three months ended ~~September 30, 2020,~~March 31, 2021, other income of ~~$1.2~~$1.4 million decreased by ~~$755,000,~~$545,000, or ~~37.9%~~27.5% compared to the prior year. The three-month period ended ~~September 30, 2020~~March 31, 2021 includes a decrease of ~~$361,000~~$204,000 in revenues associated with direct mail and other related products and services that we offer to our dealers and a decrease of ~~$320,000~~$290,000 in payments from third-party providers of convenience fees paid by our customers for web based and other electronic payments.

Expenses.  Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). Interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts. Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received, processed and serviced. Factors that affect margins and net income include changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates and changes in the unemployment level.

Employee costs include base salaries, commissions and bonuses paid to employees, and certain expenses related to the accounting treatment of outstanding stock options and are one of our most significant operating expenses. These costs (other than those relating to stock options) generally fluctuate with the level of applications and automobile contracts purchased and serviced.

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

Total operating expenses were ~~$64.8~~$55.2 million for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~$82.7~~$67.7 million for the prior period, a decrease of ~~$17.9~~$12.5 million, or ~~21.7%~~18.5%. The decrease is primarily due to ~~a decrease~~decreases in ~~provision~~interest expense, provisions for credit ~~losses.~~losses and employee costs.

Employee costs decreased by ~~$1.1~~$1.7 million or ~~5.4%~~7.7%, to ~~$19.2~~$20.2 million during the three months ended ~~September 30, 2020,~~March 31, 2021, representing ~~29.6%~~36.5% of total operating expenses, from ~~$20.3~~$21.8 million for the prior year, or ~~24.5%~~32.3% of total operating expenses. 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, 2020~~March 31, 2021 and ~~2019:~~2020:

September 30, 2020 September 30, 2019 March 31, 2021 March 31, 2020
Amount Amount Amount Amount
($ in millions) ($ in millions)
Contracts purchased (dollars) $ 174.0 $ 262.1 $ 205.5 $ 266.0
Contracts purchased (units) 9,106 14,353 10,736 14,747
Managed portfolio outstanding (dollars) $ 2,250.4 $ 2,412.6 $ 2,119.1 $ 2,435.1
Managed portfolio outstanding (units) 168,071 177,575 158,933 179,253

Number of Originations staff 161 203 160 198
Number of Sales staff 94 118 102 113
Number of Servicing staff 472 622 446 601
Number of other staff 73 75 75 76
Total number of employees 800 1,018 783 988
29

During the second quarter of 2020, we laid off 114 staff members due to the decrease in our business caused by the pandemic. ~~Throughout the third quarter~~Since then, we have experienced further staff reductions due in part to the fact that our contract purchases have not returned to pre-pandemic levels. If our contract purchase volumes remain at current levels, we expect somewhat lower employee costs in future periods.

29
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 ~~$7.8~~$7.7 million, a decrease from ~~$8.2~~$8.7 million in the previous year and represented ~~12.1%~~14.0% of total operating expenses.

Interest expense for the three months ended ~~September 30, 2020~~March 31, 2021 were ~~$24.9~~$20.9 million and represented ~~38.4%~~38.0% of total operating expenses, compared to ~~$27.9~~$27.0 million in the previous year, when it was ~~33.8%~~39.9% of total operating expenses.

Interest on securitization trust debt decreased by ~~$2.6~~$5.3 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the prior period. The average balance of securitization trust debt decreased to ~~$1,979.5~~$1,876.8 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$2,165.9~~$2,186.8 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The blended interest rates on new term securitizations have generally increased in 2017 and 2018 before declining infrom 2019 ~~and 2020.~~to 2021. 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 fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:

Blended Cost of Funds on Recent Asset-Backed
Term Securitizations

Period Blended Cost of Funds
January 2017 3.91%
April 2017 3.45%
July 2017 3.52%
October 2017 3.39%
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%

The annualized average rate on our securitization trust debt was ~~4.4%~~3.9% for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~4.5%~~4.4% in the prior year period. The annualized average rate is influenced by the manner in which the underlying securitization trust bonds are repaid. The rate tends to increase over time on ~~any particular~~each securitization since the structures of our securitization trusts generally provide for sequential repayment of the shorter term, lower interest rate bonds before the longer term, higher interest rate bonds.

Interest expense on subordinated renewable notes increased by $194,000. The average balance of the outstanding subordinated debt increased 30.4% to $19.7 million for the three months ended September 30, 2020 compared to $15.1 million for the three months ended September 30, 2019. The average yield of subordinated notes increased to 11.4% in the three-month period ended September 30, 2020 compared to 9.8% in the prior period.

30
Interest expense on subordinated renewable notes increased by $119,000. The average balance of the outstanding subordinated debt increased 22.9% to $22.2 million for the three months ended March 31, 2021 compared to $18.1 million for the three months ended March 31, 2020. The average yield of subordinated notes increased to 11.0% in the three-month period ended March 31, 2021 compared to 10.9% in the prior period.

Interest expense on warehouse debt decreased by ~~$550,000~~$448,000 to ~~$1.9~~$1.3 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$2.4~~$1.8 million in the prior year period. The average rate on the debt ~~also declined~~increased to ~~8.2%~~10.4% for the ~~third~~first quarter of ~~2020~~2021 compared to ~~9.8%~~9.7% for the same quarter in ~~2019.~~2020.

On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations. Interest expense on this residual interest financing was ~~$876,000~~$566,000 for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$956,000~~$938,000 in the prior year period.

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, 2020~~March 31, 2021 and ~~2019:~~2020:

Three Months Ended March 31,
2021 2020
Three Months Ended September 30, (Dollars in thousands)
2020 2019 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) $ 624,532 $ 29,775 19.1% $ 1,105,087 $ 50,625 18.3% $ 451,425 $ 22,105 19.6% $ 845,727 $ 38,330 18.1%
Finance receivables at fair value 1,646,022 42,807 10.4% 1,304,012 32,903 10.1% 1,687,232 43,988 10.4% 1,580,468 40,806 10.3%
2,270,554 72,582 12.8% 2,409,099 83,528 13.9% 2,138,657 66,093 12.4% 2,426,195 79,136 13.0%
$ $
Interest Bearing Liabilities $ $
Warehouse lines of credit $ 90,697 1,857 8.2% $ 98,520 2,407 9.8% $ 50,322 1,314 10.4% $ 72,684 1,762 9.7%
Residual interest financing 36,407 876 9.6% 40,000 956 9.6% 22,011 566 10.3% 38,895 938 9.6%
Securitization trust debt 1,979,491 21,605 4.4% 2,165,927 24,208 4.5% 1,876,807 18,453 3.9% 2,186,833 23,798 4.4%
Subordinated renewable notes 19,737 563 11.4% 15,133 369 9.8% 22,180 612 11.0% 18,053 493 10.9%
$ 2,126,332 24,901 4.7% $ 2,319,580 27,940 4.8% $ 1,971,320 20,945 4.2% $ 2,316,465 26,991 4.7%
$ $
Net interest income/spread $ $ 47,681 $ 55,588 $ $ 45,148 $ 52,145
Net interest yield (3) $ 8.1% 9.1% $ 8.2% 8.3%

Ratio of average interest earning assets to average interest bearing liabilities $ 107% 104% $ 108% 105%
_____________________

~~(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)~~
     (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.

31

Three Months Ended September 30, 2020
Compared to September 30, 2019
Three Months Ended March 31, 2021
$ Total Change Due Change Due
$ Change to Volume to Rate
Compared to March 31, 2020
Total Change Due Change Due
Change to Volume to Rate
(In thousands) (In thousands)
Interest Earning Assets $ $
Finance receivables gross $ (20,850 ) $ (22,099 ) $ 1,249 $ (16,225 ) $ (17,918 ) $ 1,693
Finance receivables at fair value 9,904 8,669 1,235 3,182 2,760 422
(10,946 ) (13,430 ) 2,484 (13,043 ) (15,158 ) 2,115
Interest Bearing Liabilities $ $
Warehouse lines of credit (550 ) (187 ) (363 ) (448 ) (536 ) 88
Residual interest financing (80 ) (80 ) – (372 ) (411 ) 39
Securitization trust debt (2,603 ) (2,108 ) (495 ) (5,345 ) (2,999 ) (2,346 )
Subordinated renewable notes 194 115 79 119 113 6
(3,039 ) (2,260 ) (779 ) (6,046 ) (3,833 ) (2,213 )

Net interest income/spread $ (7,907 ) $ (11,170 ) $ 3,263 $ (6,997 ) $ (11,325 ) $ 4,328

The reduction in the annualized yield on our finance receivables for the three months ended ~~September 30, 2020~~March 31, 2021 compared to the prior year period is the result of the lower interest yield on the receivables measured at fair value. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The average balance of these receivables was ~~$1,646.0~~$1,687.2 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$1,304.0~~$1,580.5 million in the prior year period.

Effective January 1, 2020, the Company adopted Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The 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 on the portion of the Company’s receivable portfolio that was originated prior to January 2018. ~~To comply with CECL, the~~The Company recorded an addition to its allowance for finance credit losses of $127.0 ~~million.~~million at the 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 was a tax affected reduction to retained earnings using the modified retrospective method.

Provision for credit losses was ~~$7.4~~$3.6 million for the three months ended ~~September 30,~~March 31, 2020. The provision represents our estimate of additional forecasted losses that may be incurred on the portfolio of finance receivables resulting from the pandemic. Such losses were not considered in our initial estimate of remaining lifetime losses that we recorded with the adoption of CECL in January 2020. ~~In the prior year period, prior to the adoption of CECL, provision~~There were no additional provisions for credit losses ~~was $19.9 million.~~for the three months ended March 31, 2021.

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.

32

Sales expense consists primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers, such as training programs, internet lead sales, and direct mail products. Sales expense decreased by ~~$1.2 million~~$444,000 to ~~$3.2~~$4.0 million during the three months ended ~~September 30, 2020~~March 31, 2021 and represented ~~4.9%~~7.2% of total operating expenses. We purchased ~~$174.0~~$205.5 million of new contracts during the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$262.1~~$266.0 million 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. ~~In our third quarter~~Since then, our contract purchase volumes increased but have not recovered to pre-pandemic levels.

Occupancy expenses was ~~$1.8~~$1.9 million for the three months ending ~~September 30, 2020 and 2019.~~March 31, 2021 compared to $1.7 million in the prior year period.

Depreciation and amortization expenses increased to ~~$438,000~~$428,000 compared to ~~$276,000~~$419,000 in the previous year and represented ~~0.7%~~0.8% of total operating expenses.

For the three months ended ~~September 30, 2020~~March 31, 2021 we recorded income tax expense of ~~$2.1~~$2.8 million, representing a ~~36%~~35% effective tax rate. InFor the ~~prior year period,~~three months ended March 31, 2020, we ~~our~~recorded a net income tax ~~expense was $991,000, for an effective income tax rate~~benefit of ~~35%.~~
~~Comparison of Operating Results for the nine months ended September 30, 2020 with the nine months ended September 30, 2019~~
~~Revenues~~~~. During the nine months ended September 30, 2020, our revenues were $208.7 million, a decrease of $51.3 million, or 19.7%, from the prior year revenue of $260.1~~$7.7 million. The primary reason for the decrease in revenues is a decrease in interest income and a mark down to the recorded value of the portion of the receivables portfolio accounted for at fair value. Interest income for the nine months ended September 30, 2020 decreased $26.5 million, or 10.5%, to $227.3 million from $253.8 million in the prior year. The primary reason for the decrease in interest income is the continued runoff of our portfolio of finance receivables originated prior to January 2018, which accrued interest at an average of 18.5%, which is offset only in part 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. The table below shows the average balances and interest yields of our loan portfolio for the nine months ended September 30, 2020 and 2019:
Nine Months Ended September 30,
2020 2019
(Dollars in thousands)
Average Interest Average Interest
Balance Interest Yield Balance Interest Yield
Interest Earning Assets
Finance receivables $ 734,195 $ 101,998 18.5% $ 1,268,190 $ 170,126 17.9%
Finance receivables measured at fair value 1,619,399 125,273 10.3% 1,131,888 83,696 9.9%
Total $ 2,353,594 $ 227,271 12.9% $ 2,400,078 $ 253,822 14.1%
Revenues for the nine months ended September 30, 2020 include a $23.1 million mark down to the recorded value of the finance receivables measured at fair value. 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 arising from the pandemic.
33
In the nine months ended September 30, 2020, other income of $4.5 million decreased by $1.7 million, or 27.9% compared to the prior year. The nine-month period ended September 30, 2020 includes a decrease of $1.3 million in revenues associated with direct mail and other related products and services that we offer to our dealers and a decrease of $530,000 in payments from third-party providers of convenience fees paid by our customers for web based and other electronic payments.
~~Expenses~~.  Our operating expenses consist largely of interest expense, provision for credit losses, employee costs, sales and general and administrative expenses. Provision for credit losses is affected by the balance and credit performance of our portfolio of finance receivables (other than our portfolio of finance receivables measured at fair value, as to which expected credit losses have the effect of reducing the internal rate of return or the recorded value applicable to such receivables). Interest expense is significantly affected by the volume of automobile contracts we purchased during the trailing 12-month period and the use of our warehouse facilities and asset-backed securitizations to finance those contracts. Employee costs and general and administrative expenses are incurred as applications and automobile contracts are received, processed and serviced. Factors that affect margins and net income include changes in the automobile and automobile finance market environments, and macroeconomic factors such as interest rates and changes in the unemployment level.
Employee costs include base salaries, commissions and bonuses paid to employees, and certain expenses related to the accounting treatment of outstanding stock options, and are one of our most significant operating expenses. These costs (other than those relating to stock options) generally fluctuate with the level of applications and automobile contracts purchased and serviced.
Other operating expenses consist largely of facilities expenses, telephone and other communication services, credit services, computer services, sales and advertising expenses, and depreciation and amortization.
Total operating expenses were $195.1 million for the nine months ended September 30, 2020, compared to $251.8 million for the prior period, a decrease of $56.7 million, or 22.5%. The decrease is primarily due to a decrease in provision for credit losses.
Employee costs increased by $1.8 million or 3.0%, to $60.8 million during the nine months ended September 30, 2020, representing 31.2% of total operating expenses, from $59.0 million for the prior year, or 23.4% of total operating expenses. The table below summarizes our employees by category as well as contract purchases and units in our managed portfolio as of, and for the nine-month periods ended, September 30, 2020 and 2019:
September 30, 2020 September 30, 2019
Amount Amount
($ in millions)
Contracts purchased (dollars) $ 575.9 $ 755.3
Contracts purchased (units) 31,475 42,534
Managed portfolio outstanding (dollars) $ 2,250.4 $ 2,412.6
Managed portfolio outstanding (units) 168,071 177,575

Number of Originations staff 161 203
Number of Sales staff 94 118
Number of Servicing staff 472 622
Number of other staff 73 75
Total number of employees 800 1,018
In the first Quarter of 2020, prior to the onset of the pandemic, our employee costs were greater than in the first quarter of 2019. Those increases have been partially offset by decreases since the first quarter of 2020, which are the result of staff reductions due in part to the fact that our contract purchases have not returned to pre-pandemic levels. If our contract purchase volumes remain at current levels, we expect somewhat lower employee costs in future periods.
34
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 $24.4 million, a decrease from $25.1 million in the previous year and represented 12.5% of total operating expenses.
~~Interest expense for the nine months ended September 30, 2020 were $78.4 million and represented 40.2% of total operating expenses, compared to $82.9 million in the previous year.~~
Interest on securitization trust debt decreased by $4.9 million for the nine months ended September 30, 2020 compared to the prior period. The average balance of securitization trust debt decreased to $2,058.1 million for the nine months ended September 30, 2020 compared to $2,178.4 million for the nine months ended September 30, 2019. The blended interest rates on new term securitizations have generally increased in 2017 and 2018 before declining in 2019 and 2020. For any particular quarterly securitization transaction, the blended cost of funds is ultimately the result of many factors including the market interest rates for benchmark swaps of various maturities against which our bonds are priced and the margin over those benchmarks that investors are willing to accept, which in turn, is influenced by investor demand for our bonds at the time of the securitization. These and other factors have resulted in fluctuations in our securitization trust debt interest costs. The blended interest rates of our recent securitizations are summarized in the table below:
~~Blended Cost of Funds on Recent Asset-Backed Term Securitizations~~
~~Period~~ ~~Blended Cost of Funds~~
~~January 2017~~ ~~3.91%~~
~~April 2017~~ ~~3.45%~~
~~July 2017~~ ~~3.52%~~
~~October 2017~~ ~~3.39%~~
~~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%~~
The annualized average rate on our securitization trust debt was 4.4% for the nine months ended September 30, 2020 and 2019. The annualized average rate is influenced by the manner in which the underlying securitization trust bonds are repaid. The rate tends to increase over time on any particular securitization since the structures of our securitization trusts generally provide for sequential repayment of the shorter term, lower interest rate bonds before the longer term, higher interest rate bonds.
35
Interest expense on subordinated renewable notes increased by $563,000. The average balance of the outstanding subordinated debt increased 30.0% to $18.8 million for the nine months ended September 30, 2020 compared to $14.5 million for the nine months ended September 30, 2019. The average yield of subordinated notes increased to 11.2% in the nine-month period ended September 30, 2020 compared to 9.3% in the prior period.
Interest expense on warehouse debt decreased by $93,000 for the nine months ended September 30, 2020 compared to the prior period. The average rate on the debt was 7.8% in 2020 compared to 10.0% in the prior year while the average balance of the warehouse debt increased to $107.4 million from $85.3 million.
On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations. Interest expense on this residual interest financing was $2.7 million for the current year period and $2.9 million in the prior year period as the average outstanding balance has decreased.
~~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, 2020 and 2019:~~
Nine Months Ended September 30,
2020 2019
(Dollars in thousands)
Average Balance (1) Interest Annualized Average Yield/Rate Average Balance (1) Interest Annualized Average Yield/Rate
Interest Earning Assets
Finance receivables gross (2) $ 734,195 $ 101,998 18.5% $ 1,233,413 $ 170,125 18.4%
Finance receivables at fair value 1,619,399 125,273 10.3% 1,131,888 83,696 9.9%
2,353,594 227,271 12.9% 2,365,301 253,821 14.3%
$
Interest Bearing Liabilities $
Warehouse lines of credit $ 107,388 6,294 7.8% $ 85,289 6,387 10.0%
Residual interest financing 37,959 2,734 9.6% 40,000 2,867 9.6%
Securitization trust debt 2,058,110 67,770 4.4% 2,178,437 72,662 4.4%
Subordinated renewable notes 18,847 1,580 11.2% 14,513 1,017 9.3%
$ 2,222,304 78,378 4.7% $ 2,318,239 82,933 4.8%
$
Net interest income/spread $ $ 148,893 $ 170,888
Net interest yield (3) $ 8.2% 9.5%
Ratio of average interest earning assets to average interest bearing liabilities $ 106% 102%
~~(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.~~
36

Nine Months Ended September 30, 2020
Compared to September 30, 2019

$ Total Change Due Change Due
$ Change to Volume to Rate
(In thousands)
Interest Earning Assets $
Finance receivables gross $ (68,127 ) $ (69,033 ) $ 906
Finance receivables at fair value 41,577 34,867 6,710
(26,550 ) (34,166 ) 7,616
Interest Bearing Liabilities $
Warehouse lines of credit (93 ) 2,254 (2,347 )
Residual interest financing (133 ) (133 ) –
Securitization trust debt (4,892 ) (4,695 ) (197 )
Subordinated renewable notes 563 209 354
(4,555 ) (2,365 ) (2,190 )

Net interest income/spread $ (21,995 ) $ (31,801 ) $ 9,806
The reduction in the annualized yield on our finance receivables for the nine months ended September 30, 2020 compared to the prior year period is the result of the lower interest yield on the receivables measured at fair value. The interest yield on receivables measured at fair value is reduced to take account of expected losses and is therefore less than the yield on other finance receivables. The average balance of these receivables was $1,619.4 million for the nine months ended September 30, 2020 compared to $1,131.9 million in the prior year period.
~~Effective January 1, 2020, the Company adopted~~ ~~Accounting Standards Update 2016-13 - Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments.~~ The 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 on the portion of the Company’s receivable portfolio that was originated prior to January 2018. To comply with CECL, the Company recorded an addition to its allowance for finance credit losses of $127.0 million. In accordance with the rules for adopting CECL, the offset to the addition to the allowance for finance credit losses was a tax affected reduction to retained earnings using the modified retrospective method.
Provision for credit losses was $14.1 million for the nine months ended September 30, 2020. The provision represents our estimate of additional losses that may be incurred on the portfolio of finance receivables resulting from the pandemic. Such losses were not considered in our initial estimate of remaining lifetime losses that we recorded with the adoption of CECL in January 2020. In the prior year period, prior to the adoption of CECL, provision for credit losses was $64.3 million.
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.
37
Sales expense consists primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commissions based on volume of contract purchases and sales of ancillary products and services that we offer our dealers, such as training programs, internet lead sales, and direct mail products. Sales expense decreased by $3.2 million to $10.7 million during the nine months ended September 30, 2020 and represented 5.5% of total operating expenses. We purchased $575.9 million of new contracts during the nine months ended September 30, 2020 compared to $755.3 million 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. In our third quarter our contract purchase volumes increased but have not recovered to pre-pandemic levels.
~~Occupancy expenses decreased by $383,000 or 6.7%, to $5.4 million compared to $5.7 million in the previous year and represented 2.7% of total operating expenses.~~
~~Depreciation and amortization expenses increased to $1.3 million compared to $789,000 in the previous year and represented 0.7% of total operating expenses.~~
~~Income tax benefit was $3.9 million for the nine months ended September 30, 2020, which includes an $8.8 million tax benefit.~~ 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 would have been ~~$4.9~~$1.1 million, representing an effective income tax rate of 36%. ~~For the prior year period, income tax expense was $2.9 million, which represents an effective income tax rate of 35%.~~

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 will likely have a negative effect on our delinquency and charge off experience in the future, which is not yet reflected in the tables below.

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

March 31, 2021 December 31, 2020 March 31, 2020
September 30, 2020 September 30, 2019 December 31, 2019 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) 168,071 $ 2,250,395 177,575 $ 2,412,638 177,604 $ 2,416,042 158,933 $ 2,119,073 163,117 $ 2,174,972 179,253 $ 2,435,074
Period of delinquency (2)
31-60 days 9,883 $ 133,671 14,071 $ 195,016 13,737 $ 189,214 7,108 $ 94,067 11,357 $ 152,868 10,465 $ 143,749
61-90 days 3,771 49,376 6,909 94,603 6,695 91,675 2,496 31,797 4,525 59,096 5,077 69,364
91+ days 1,413 16,067 3,059 39,476 3,530 46,516 822 8,416 1,290 14,989 2,929 34,816
Total delinquencies (2) 15,067 199,114 24,039 329,095 23,962 327,405 10,426 134,280 17,172 226,953 18,471 247,929
Amount in repossession (3) 2,733 32,383 4,047 50,779 3,779 46,144 2,448 30,353 2,979 35,839 4,511 54,349
Total delinquencies and amount in repossession (2) 17,800 $ 231,497 28,086 $ 379,874 27,741 $ 373,549 12,874 $ 164,633 20,151 $ 262,792 22,982 $ 302,278

Delinquencies as a percentage of gross servicing portfolio 9.0% 8.8% 13.5% 13.6% 13.5% 13.6% 6.6% 6.3% 10.5% 10.4% 10.3% 10.2%

Total delinquencies and amount in repossession as a percentage of gross servicing portfolio 10.6% 10.3% 15.8% 15.7% 15.6% 15.5% 8.1% 7.8% 12.4% 12.1% 12.8% 12.4%

Extension Experience
Contracts with one extension, accruing 30,912 $ 441,306 25,036 $ 337,383 27,677 $ 385,673 28,384 $ 388,637 # 29,709 $ 417,347 29,683 $ 397,622

Contracts with two or more extensions, accruing 56,204 675,607 54,182 681,939 54,440 673,918 54,882 640,154 # 55,885 665,572 58,254 794,789
87,116 1,116,913 79,218 1,019,322 82,117 1,059,591 83,266 1,028,791 85,594 1,082,919 87,937 1,192,411

Contracts with one extension, non-accrual (4) 761 9,872 1,084 13,636 1,130 14,528 130 1,510 915 12,408 833 9,958
Contracts with two or more extensions, non-accrual (4) 2,505 28,126 4,435 56,347 4,441 55,436 488 5,328 2,502 28,189 2,558 33,133
3,266 37,998 5,519 69,983 5,571 69,964 618 6,838 3,417 40,597 3,391 43,091

Total contracts with extensions 90,382 $ 1,154,911 84,737 $ 1,089,305 87,688 $ 1,129,555 83,884 $ 1,035,629 89,011 $ 1,123,516 91,328 $ 1,235,502
(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) 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

Finance Receivables Portfolio Finance Receivables Portfolio
September 30, September 30, December 31, March 31, December 31, March 31,
2020 2019 2019 2021 2020 2020
(Dollars in thousands) (Dollars in thousands)
Average servicing portfolio outstanding $ 624,532 $ 1,105,087 $ 1,192,484 $ 451,425 $ 684,259 $ 845,727
Annualized net charge-offs as a percentage of average servicing portfolio (2) 14.1% 13.0% 12.2% 12.6% 11.7% 10.3%

Fair Value Receivables Portfolio Fair Value Receivables Portfolio
September 30, September 30, December 31, March 31, December 31, March 31,
2020 2019 2019 2021 2020 2020
(Dollars in thousands) (Dollars in thousands)
Average servicing portfolio outstanding $ 1,646,022 $ 1,304,012 $ 1,212,226 $ 1,687,232 $ 1,631,491 $ 1,580,468
Annualized net charge-offs as a percentage of average servicing portfolio (2) 3.5% 3.9% 3.8% 4.6% 4.3% 5.2%

Total Managed Portfolio Total Managed Portfolio
September 30, September 30, December 31, March 31, December 31, March 31,
2020 2019 2019 2021 2020 2020
(Dollars in thousands) (Dollars in thousands)
Average servicing portfolio outstanding $ 2,270,554 $ 2,409,099 $ 2,404,710 $ 2,138,657 $ 2,315,750 $ 2,426,195
Annualized net charge-offs as a percentage of average servicing portfolio (2) 6.4% 8.1% 8.0% 6.3% 6.5% 7.0%
_________________________
(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,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ percentages represent three months ended ~~September 30,~~March 31, 2021 and March 31, 2020 ~~and September 30, 2019~~ annualized. December 31, ~~2019~~2020 represents 12 months ended December 31, ~~2019.~~2020.

Extensions

In certain circumstances we will grant obligors one-month payment extensions to assist them with temporary cash flow problems. In general, we are bound by our securitization agreements to refrain from agreeing to more than two such extensions in any 12-month period and to more than six over the life of the contract. The only modification of terms is to advance the obligor’s next due date by one month and extend the maturity date of the receivable by one month. In some cases, a two-month extension may be granted. There are no other concessions such as a reduction in interest rate, forgiveness of principal or of accrued interest. Accordingly, we consider such extensions to be insignificant delays in payments rather than troubled debt restructurings. Because financial regulatory authorities have encouraged obligors to expect payment deferrals as a response to the pandemic, we may seek amendments or waivers of our securitization agreements to relax the limits on extensions; however, we have not sought such changes in terms as of the date of this report, and if we do seek such changes, there can be no assurance that the other parties to our securitization agreements will agree to such amendments or waivers, nor as to the effect on credit performance that may result if such amendments or waivers are agreed to.
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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.
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, 2020,~~March 31, 2021, for accounts that received extensions from 2008 through 2019 (2020 extension data are not included at this time due to insufficient passage of time for meaningful evaluation of results):
Period of Extension # Extensions Granted Active or Paid Off at September 30, 2020 % Active or Paid Off at September 30, 2020 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 # Extensions Granted Active or Paid Off at March 31, 2021 % Active or Paid Off at March 31, 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        10,710 30.1%       20,059 56.4%             4,819 13.5% 19 35,588 10,710 30.1% 20,059 56.4% 4,819 13.5% 19

2009       32,226        10,274 31.9%       16,170 50.2%             5,783 17.9% 17 32,226 10,274 31.9% 16,170 50.2% 5,783 17.9% 17

2010       26,167        12,165 46.5%       12,003 45.9%             1,999 7.6% 19 26,167 12,165 46.5% 12,003 45.9% 1,999 7.6% 19

2011       18,786        10,974 58.4%         6,880 36.6%                932 5.0% 19 18,786 10,974 58.4% 6,881 36.6% 932 5.0% 19

2012       18,783        11,322 60.3%         6,665 35.5%                796 4.2% 18 18,783 11,321 60.3% 6,666 35.5% 796 4.2% 18

2013       23,398        11,197 47.9%       11,225 48.0%                976 4.2% 23 23,398 11,176 47.8% 11,246 48.1% 976 4.2% 23

2014       25,773        10,707 41.5%       14,240 55.3%                826 3.2% 24 25,773 10,606 41.2% 14,341 55.6% 826 3.2% 25

2015       53,319        23,602 44.3%       28,635 53.7%             1,082 2.0% 24 53,319 23,037 43.2% 29,200 54.8% 1,082 2.0% 25

2016       80,897        40,998 50.7%       37,966 46.9%             1,933 2.4% 22 80,897 39,135 48.4% 39,829 49.2% 1,933 2.4% 24

2017     133,881        71,590 53.5%       55,331 41.3%             6,926 5.2% 18 133,881 67,456 50.4% 59,465 44.4% 6,926 5.2% 19

2018     121,531        78,883 64.9%       36,641 30.1%             6,007 4.9% 14 121,531 73,767 60.7% 41,757 34.4% 6,007 4.9% 15

2019       71,548        61,493 85.9%         8,113 11.3%             1,942 2.7% 9 71,548 57,433 80.3% 12,173 17.0% 1,942 2.7% 12
______________________
Note: Table excludes extensions on portfolios serviced for third parties
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We view these results as a confirmation of the effectiveness of our extension program. For example, of the accounts granted extensions in ~~2012, 60.3%~~2018, 60.7% were either paid in full or active and performing at ~~September 30, 2020.~~March 31, 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.
For the extension accounts that ultimately charge off, we consider any that charged off more than six months after the extension to be at least partially successful. For example, of the accounts granted extensions in 2012 that subsequently charged off, such charge offs occurred, on average, 18 months after the extension, indicating that even in the cases of an ultimate loss, the obligor serviced the account with additional payments of principal and interest.

Additional information about our extensions is provided in the tables below:
Nine Months Ended September 30, Year Ended December 31,
Three Months Ended
March 31,

Year
Ended
December 31,

Three Months
Ended
March 31,

2020 2019 2019 2021 2020 2020

Average number of extensions granted per month 7,256 5,152 5,962 3,535 6,931 7,118

Average number of outstanding accounts 174,549 177,094 177,256 160,448 172,129 178,570

Average monthly extensions as % of average outstandings 4.2% 2.9% 3.4% 2.2% 4.0% 4.0%
______________________
Note: Table excludes portfolios originated and owned by third parties

March 31, 2021 December 31, 2020 March 31, 2020
September 30, 2020 September 30, 2019 December 31, 2019 Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount
Number of Contracts Amount Number of Contracts Amount Number of Contracts Amount (Dollars in thousands)
(Dollars in thousands)
Contracts with one extension 31,673 $ 451,178 26,120 $ 351,019 28,807 $ 400,202 28,514 $ 390,146 30,624 $ 429,754 30,516 $ 407,580
Contracts with two extensions 19,028 252,189 17,816 228,337 17,895 229,555 18,664 247,272 19,381 259,236 22,794 310,711
Contracts with three extensions 13,228 161,303 14,611 187,088 14,423 181,896 12,720 152,871 13,117 159,447 17,058 235,319
Contracts with four extensions 11,281 130,279 12,372 157,264 12,367 153,170 10,235 111,789 10,868 122,469 11,282 155,514
Contracts with five extensions 8,801 95,481 8,507 104,396 8,742 103,989 7,827 79,510 8,548 90,322 6,332 84,695
Contracts with six extensions 6,371 64,481 5,311 61,201 5,454 60,743 5,924 54,040 6,473 62,288 3,346 41,682
90,382 $ 1,154,911 84,737 $ 1,089,305 87,688 $ 1,129,555 83,884 $ 1,035,628 89,011 $ 1,123,516 91,328 $ 1,235,501

Managed portfolio (excluding originated and owned by 3rd parties) 168,071 $ 2,250,395 177,575 $ 2,412,638 177,604 $ 2,416,042 158,933 $ 2,119,073 163,117 $ 2,174,972 179,253 $ 2,435,074
______________________
Note: Table excludes portfolios originated and owned by third parties

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In recent years, we have experienced an increase in the number of extensions that we grant to our customers. We attribute this to ~~a number of~~several factors. First, in June 2014 we entered into a consent decree with the FTC that required us to make certain procedural changes in our servicing practices, which we believe have contributed to somewhat higher delinquencies and extensions compared 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 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 the customer portal of our website to facilitate the process whereby the customer may request an extension. Since January of 2019, we have attempted to reduce extensions by working with our servicing staff to be more selective in granting extensions including, where appropriate, to exhaust all possibilities of payment by the customer before granting an extension. ~~During our second quarter we granted significantly more extensions than normal due to the onset of the pandemic. During our third quarter, extensions reverted to pre-pandemic levels.~~

Non-Accrual Receivables

It is not uncommon for our obligors to fall behind in their payments. However, with the diligent efforts of our Servicing staff and systems for managing our collection efforts, we regularly work with our customers to resolve delinquencies. Our staff are trained to employ a counseling approach to assist our customers with their cash flow management skills and help them to prioritize their payment obligations in order to avoid losing their vehicle to repossession. Through our experience, we have learned that once a customer becomes greater than 90 days past due, it is not likely that the delinquency will be resolved and will ultimately result in a charge-off. As a result, we do not recognize any interest income for contracts that are greater than 90 days past due.
If a contract exceeds the 90 days past due threshold at the end of one period, and then makes the necessary payments such that it becomes less than or equal to 90 days delinquent at the end of a subsequent period, it would be restored to full accrual status for our financial reporting purposes. At the time a contract is restored to full accrual in this manner, there can be no assurance that full repayment of interest and principal will ultimately be made. However, we monitor each obligor’s payment performance and are aware of the severity of his delinquency at any time. The fact that the delinquency has been reduced below the 90-day threshold is a positive indicator. Should the contract again exceed the 90-day delinquency level at the end of any reporting period, it would again be reflected as a non-accrual account.
Our policy for placing a contract on non-accrual status is independent of our policy to grant an extension. In practice, it would be an uncommon circumstance where an extension was granted and the account remained in a non-accrual status, since the goal of the extension is to bring the contract current (or nearly current).
Liquidity and Capital Resources

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

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Net cash provided by operating activities for the ~~nine-month~~three-month period ended ~~September 30, 2020~~March 31, 2021 was ~~$190.6~~$65.4 million, an increase of ~~$20.6~~$1.3 million, compared to net cash provided by operating activities for the ~~nine-month~~three-month period ended ~~September 30, 2019~~March 31, 2020 of ~~$170.0~~$64.1 million. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as our provision for credit losses and interest accretion on fair value receivables.

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Net cash provided by investing activities for the ~~nine-month~~three-month period ended ~~September 30, 2020~~March 31, 2021 was ~~$45.4~~$23.9 million compared to net cash used in investing activities of ~~$177.7~~$61.1 million in the prior year period. Cash provided by investing activities primarily results from principal payments and other proceeds received on finance receivables. Cash used in investing activities generally relates to purchases of automobile contracts. Purchases of finance receivables excluding acquisition fees were ~~$572.9~~$205.5 million and ~~$755.3~~$266.0 million during the first ~~nine~~three months of ~~2020~~2021 and ~~2019,~~2020, respectively.

Net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was ~~$164.6~~$64.8 million compared to ~~net cash provided by financing activities of $14.9~~$1.7 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~~three months of ~~2020,~~2021, we issued ~~$714.5~~$230.5 million in new securitization trust debt compared to ~~$726.2~~$260.0 million in the same period of ~~2019.~~2020. We repaid ~~$764.1~~$242.5 million in securitization trust debt in the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to repayments of securitization trust debt of ~~$723.2~~$266.1 million in the prior year period. In the ~~nine~~three months ended ~~September~~March 31, ~~2020,~~2021, we had net repayments on warehouse lines of credit of ~~$104.7~~$48.3 million, compared to net advances of ~~$20.9~~$6.8 million in the prior year’s period.

We purchase automobile contracts from dealers for a cash price approximately equal to their principal amount, adjusted for an acquisition fee which may either increase or decrease the automobile contract purchase price. Those automobile contracts generate cash flow, however, over a period of years. We have been dependent on warehouse credit facilities to purchase automobile contracts and our securitization transactions for long term financing of our contracts. In addition, we have accessed other sources, such as residual financings and subordinated debt in order to finance our continuing operations.

The acquisition of automobile contracts for subsequent financing in securitization transactions, and the need to fund spread accounts and initial overcollateralization, if any, and increase credit enhancement levels when those transactions take place, results in a continuing need for capital. The amount of capital required is most heavily dependent on the rate of our automobile contract purchases, the required level of initial credit enhancement in securitizations, and the extent to which the previously established trusts and their related spread accounts either release cash to us or capture cash from collections on securitized automobile contracts. Of those, the factor most subject to our control is the rate at which we purchase automobile contracts. Since approximately April 1, 2020, due to the onset of the pandemic, we have seen a decrease in the number of purchased 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, 2020,~~March 31, 2021, we had unrestricted cash of ~~$11.3~~$9.2 million and ~~$268.8~~$128.9 million aggregate available borrowings under our ~~three~~two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of ~~September 30, 2020,~~March 31, 2021, we had approximately ~~$37.2~~$61.3 million of such eligible collateral. Our plans to manage our liquidity include maintaining our rate of automobile contract purchases at a level that matches our available capital, and, as appropriate, minimizing our operating costs. During the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, we completed ~~three securitizations~~one securitization aggregating ~~$714.5~~$230.5 million of notes sold. We generally complete one securitization each calendar quarter and have completed four securitizations every year since 2012, except for 2015 in which we completed three. We had planned to complete a securitization in April 2020 but chose to delay it because the market for asset-backed securities had been significantly interrupted in April due to the pandemic. We have since securitized receivables in June and September 2020. The terms available to us in June were inferior to those available in September, both as to the interest rates payable on the issued bonds, and as to the aggregate amount of such bonds that we were able to sell on acceptable terms, measured as a fraction of our cost basis in the underlying receivables. If the securitization markets were to return to an unfavorable state similar to June 2020, that could have a material adverse effect on our liquidity, on our capital requirements, and on our results of operations. There is no assurance that the markets will not return to such an unfavorable state, in which case we may be required to further reduce our automobile contract purchases, win turn would cause our interest income and other portfolio related income to decrease.
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Our liquidity will also be affected by releases of cash from the trusts established with our securitizations. While the specific terms and mechanics of each spread account vary among transactions, our securitization agreements generally provide that we will receive excess cash flows, if any, only if the amount of credit enhancement has reached specified levels and the net losses related to the automobile contracts in the pool are below certain predetermined levels. In the event delinquencies or net losses on the automobile contracts exceed such levels, the terms of the securitization may require increased credit enhancement to be accumulated for the particular pool. There can be no assurance that collections from the related trusts will continue to generate sufficient cash.

Our warehouse credit facilities contain various financial covenants requiring certain minimum financial ratios and results. Such covenants include maintaining minimum levels of liquidity and net worth and not exceeding maximum leverage levels. In addition, certain of our debt agreements other than our term securitizations contain cross-default provisions. Such cross-default provisions would allow the respective creditors to declare a default if an event of default occurred with respect to other indebtedness of ours, but only if such other event of default were to be accompanied by acceleration of such other indebtedness. As of ~~September 30, 2020,~~March 31, 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, 2020,~~March 31, 2021, we had approximately ~~$2,131.5~~$1,907.0 million of debt outstanding. Such debt consisted primarily of ~~$2,048.1~~$1,791.6 million of securitization trust debt and ~~$31.2~~$71.1 million of debt from warehouse lines of credit. Our securitization trust debt has decreased by ~~$49.6~~$12.1 million while our warehouse lines of credit debt has decreased by ~~$103.6~~$47.9 million since December ~~30, 2019~~31, 2020 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had ~~$20.2~~$23.7 million and ~~$17.5~~$21.3 million in subordinated renewable notes outstanding at ~~September 30,~~March 31, 2021 and December 31, 2020, ~~and 2019,~~ respectively. On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations. At ~~September 30, 2020, $32.2~~March 31, 2021, $20.6 million of this residual interest financing debt remains outstanding ($~~32.0~~20.5 million net of deferred financing costs).

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.

45
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.

4640

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 ~~16, 2020.~~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.

The COVID-19 pandemic and public authorities’ responses to the pandemic have materially and adversely affected our business, and the continuation or intensification of the pandemic or of public authorities’ responses may materially affect our financial condition, liquidity and results of operations.
An outbreak of a novel strain of coronavirus (“COVID-19”) has spread throughout the world, including in the United States. The outbreak has been declared a pandemic by the World Health Organization, the president of the United States has declared a national emergency, and governments in a substantial majority of the states of the United States have imposed emergency restrictions, of varying kind and detail, on economic activity. Such restrictions have included outright bans on the conduct of business not deemed essential by the respective governments.
The pandemic itself, if sufficient numbers of people were to be afflicted, could cause obligors under our automobile contracts to be unable to pay their contractual obligations. As the future course of the COVID-19 pandemic is as yet unknown, its direct effect on future obligor payments is likewise uncertain, but we believe it may be material.
The mandatory shutdown of large portions of the United States economy pursuant to emergency restrictions has impaired and will impair the ability of obligors under our automobile contracts to pay their contractual obligations. The extent to which that ability will be impaired, and the extent to which public ameliorative measures such as stimulus payments and enhanced unemployment benefits may restore such ability, cannot be estimated, but we believe it may be material.
~~Obligors’ willingness to pay may be impaired as a result of any combination of the following:~~
· ~~actual losses of income, resulting from emergency shutdowns, or general economic conditions, or both~~
· ~~obligors’ perception of increased risk that they may suffer a loss of income in the future~~
· ~~encouragement on the part of officials and others to expect deferrals and other accommodations from creditors~~
· ~~emergency or permanent limitations on our ability to enforce our automobile contracts.~~
~~The extent to which these or other factors may increase obligors’ refusal to pay in accordance with the terms of our automobile contracts cannot be estimated, but we believe it may be material.~~
Emergency regulations in some states mandate that we refrain from enforcing our automobile contacts by repossession or by legal process. The effective dates of such mandates vary from state to state, and we expect that the effective dates will change in the future. In addition to the emergency regulations in effect as of the date of this report, federal and state governments may impose further restrictions on servicing practices, such as requiring forbearance for affected borrowers or prohibiting repossession. The effect of existing emergency mandates, and the extent and effect of any such further restrictions is uncertain, but may be material.
47
The pandemic itself (if sufficient numbers of people are afflicted) may adversely affect, and actions taken in response to the pandemic on a national and local level by governmental authorities have adversely affected, general and local economic conditions. We expect that such adverse effects on the economy generally will have an adverse effect on payments that we will receive in the future on our automobile contracts. Such adverse effect may be material.
Further, a general decline in economic activity, should it occur, may adversely affect the availability of automobile contracts for our purchase. We have seen a material decrease in the availability of contracts for purchase since April 2020. We are unable to predict the extent to which such a decrease may reverse, intensify or persist, nor whether or when such a decrease may end. A material and continued decrease would cause the size of our portfolio of automobile contracts to be reduced, which in turn would decrease the revenue that we may receive in the future from our portfolio of automobile contracts, in an amount that we cannot estimate at this time, but which may be material.
We measure our portfolio of finance receivables carried at fair value with consideration for unobservable inputs that 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. The pandemic and the adverse effect it may have on the U.S. economy and our obligors may cause us to consider s~~ignificant changes in any of those inputs, which in turn may a significant effect on our fair value measurement.~~
We have substantial indebtedness.
We have and will continue to have a substantial amount of indebtedness. At ~~September 30, 2020,~~March 31, 2021, we had approximately ~~$2,131.5~~$1,907.0 million of debt outstanding. Such debt consisted primarily of ~~$2,048.1~~$1,791.6 million of securitization trust debt and ~~$31.2~~$71.1 million of debt from warehouse lines of credit. Our securitization trust debt has decreased by ~~$49.6~~$12.1 million while our warehouse lines of credit debt has decreased by ~~$103.6~~$47.9 million since December 31, ~~2019~~2020 (each net of deferred financing costs). Since 2005, we have offered renewable subordinated notes to the public on a continuous basis, and such notes have maturities that range from six months to 10 years. We had ~~$20.2~~$23.7 million and ~~$17.5~~$21.3 million in subordinated renewable notes outstanding at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. On May 16, 2018, we completed a $40.0 million securitization of residual interests from previously issued securitizations. At ~~September 30, 2020, $32.2~~March 31, 2021, $20.6 million of this residual interest financing debt remains outstanding ($~~32.0~~20.5 million net of deferred financing costs). 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.

4841

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.~~
·regulatory requirements.

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

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Actual results may differ from expectations due to many factors beyond our ability to control or predict, including those described herein, and in documents incorporated by reference in this report. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

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

4942

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended ~~September 30, 2020,~~March 31, 2021, we repurchased ~~219,134~~138,004 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 2020 14,128 $ 3.01 14,128 $ 6,030,388
August 2020 – $ – – $ 6,030,388
September 2020 205,006 $ 3.50 205,006 $ 5,312,224
Total 219,134 $ 3.47 219,134
Period(1) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2)
January 2021 3,010 $ 4.18 3,010 $ 5,051,154
February 2021 24,081 $ 4.12 24,081 $ 4,952,308
March 2021 110,913 $ 4.20 110,913 $ 4,486,745
Total 138,004 $ 3.47 138,004
____________________
(1) Each monthly period is the calendar month.
(2) Through ~~September 30, 2020,~~March 31, 2021, our board of directors had authorized the purchase of up to $74.5 million of our outstanding securities, under a program first announced in our annual report for the year 2002, filed on June 26, 2003. All purchases described in the table above were under the program announced in June 2003, which has no fixed expiration date.

Item 6. Exhibits
The Exhibits listed below are filed with this report.

4.14 Instruments defining the rights of holders of long-term debt of certain consolidated subsidiaries of the registrant are omitted pursuant to the exclusion set forth in subdivisions (b)(iv)(iii)(A) and (b)(v) of Item 601 of Regulation S-K (17 CFR 229.601). The registrant agrees to provide copies of such instruments to the United States Securities and Exchange Commission upon request.
31.1 Rule 13a-14(a) Certification of the Chief Executive Officer of the registrant.
31.2 Rule 13a-14(a) Certification of the Chief Financial Officer of the registrant.
32 Section 1350 Certifications.*

* 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.

5043

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

~~CONSUMER PORTFOLIO SERVICES, INC.~~
~~(Registrant)~~
~~Date: November 2, 2020~~
~~By:~~ ~~/s/   CHARLES E. BRADLEY, JR.~~
~~Charles E. Bradley, Jr.~~
CONSUMER PORTFOLIO SERVICES, INC.
(Registrant)
Date: May 11, 2021
By: /s/   CHARLES E. BRADLEY, JR.
Charles E. Bradley, Jr.
President and Chief Executive Officer
(Principal Executive Officer)
Date: ~~November 2, 2020~~
May 11, 2021
By: ~~/s/~~/s/   JEFFREY P. FRITZ
Jeffrey P. Fritz
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
51
44

	March 31,			December 31,
	2021			2020
ASSETS
Cash and cash equivalents	$	9,197		$	13,466
Restricted cash and equivalents		159,404			130,686
Finance receivables measured at fair value		1,533,723			1,523,726

Finance receivables		411,109			492,133
Less: Allowance for finance credit losses		(73,497	)		(80,790	)
Finance receivables, net		337,612			411,343

Furniture and equipment, net		826			828
Deferred tax assets, net		27,503			28,512
Accrued interest receivable		3,744			5,017
Other assets		23,798			32,317
Total Assets	$	2,095,807		$	2,145,895

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses	$	50,370		$	43,112
Warehouse lines of credit		71,097			118,999
Residual interest financing		20,540			25,426
Securitization trust debt		1,791,583			1,803,673
Subordinated renewable notes		23,740			21,323
Total Liabilities		1,957,330			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; NaN issued		0			0
Common stock, no par value; authorized 75,000,000 shares; 22,656,229 and 22,737,342 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		72,877			72,926
Retained earnings		74,171			69,007
Accumulated other comprehensive loss		(8,571	)		(8,571	)
Total stockholders' equity		138,477			133,362

Total liabilities and stockholders' equity	$	2,095,807		$	2,145,895

	September 30,			December 31,
	2020			2019
ASSETS
Cash and cash equivalents	$	11,253		$	5,295
Restricted cash and equivalents		200,912			135,537
Finance receivables measured at fair value		1,540,955			1,444,038

Finance receivables		577,281			897,530
Less: Allowance for finance credit losses		(94,218	)		(11,640	)
Finance receivables, net		483,063			885,890

Furniture and equipment, net		988			1,512
Deferred tax assets, net		31,026			15,480
Accrued interest receivable		6,291			11,645
Other assets		34,744			39,852
Total Assets	$	2,309,232		$	2,539,249

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts payable and accrued expenses	$	49,056		$	47,077
Warehouse lines of credit		31,201			134,791
Residual interest financing		32,000			39,478
Securitization trust debt		2,048,089			2,097,728
Subordinated renewable notes		20,242			17,534
Total Liabilities		2,180,588			2,336,608
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; NaN issued		0			0
Common stock, 0 par value; authorized 75,000,000 shares; 22,508,862 and 22,530,918 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		72,197			71,257
Retained earnings		64,868			139,805
Accumulated other comprehensive loss		(8,421	)		(8,421	)
Total stockholders' equity		128,644			202,641

Total liabilities and stockholders' equity	$	2,309,232		$	2,539,249


	Three Months Ended					Nine Months Ended					Three Months Ended
	September 30,					September 30,					March 31,
	2020			2019		2020			2019		2021			2020
Revenues:
Interest income	$	72,582		$	82,924	$	227,271		$	253,218	$	66,093		$	79,136
Mark to finance receivables measured at fair value		(3,152	)		604		(23,051	)		604		(4,417	)		(10,350	)
Other income		1,239			1,994		4,508			6,255		1,436			1,981
Total revenues		70,669			85,522		208,728			260,077		63,112			70,767

Expenses:
Employee costs		19,155			20,251		60,826			59,030		20,159			21,842
General and administrative		7,846			8,185		24,352			25,109		7,748			8,669
Interest		24,901			27,940		78,377			82,933		20,946			26,991
Provision for credit losses		7,400			19,874		14,113			64,319		0			3,613
Sales		3,202			4,407		10,710			13,877		3,986			4,430
Occupancy		1,838			1,760		5,362			5,745		1,901			1,691
Depreciation and amortization		438			276		1,344			789		428			419
Total operating expenses		64,780			82,693		195,084			251,802		55,168			67,655
Income before income tax expense (benefit)		5,889			2,829		13,644			8,275		7,944			3,112
Income tax expense (benefit)		2,121			991		(3,888	)		2,898		2,780			(7,680	)
Net income	$	3,768		$	1,838	$	17,532		$	5,377	$	5,164		$	10,792

Earnings per share:
Basic	$	0.17		$	0.08	$	0.77		$	0.24	$	0.23		$	0.48
Diluted		0.16			0.08		0.74			0.22		0.21			0.45

Number of shares used in computing earnings per share:
Basic		22,666			22,526		22,630			22,378		22,741			22,539
Diluted		23,908			24,066		23,825			24,102		24,967			23,879

Schedule of other income	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(In thousands)				(In thousands)
Direct mail revenues	$	760	$	1,121	$	2,444	$	3,508
Convenience fee revenue		280		600		1,340		1,870
Recoveries on previously charged-off contracts		4		30		79		132
Sales tax refunds		192		200		601		631
Other		3		43		44		114
Other income for the period	$	1,239	$	1,994	$	4,508	$	6,255

Supplemental balance sheet information related to leases	September,			December 31,
							March 31,			December 31,
							2021			2020
	2020			2019				(In thousands)
	(In thousands)
Operating Leases
Operating lease right-of-use assets	$	23,735		$	23,735		$	23,840		$	23,735
Less: Accumulated amortization right-of-use assets		(11,280	)		(6,600	)		(14,257	)		(12,792	)
Operating lease right-of-use assets, net	$	12,455		$	17,135		$	9,583		$	10,943
								$
Operating lease liabilities	$	(13,698	)	$	(18,527	)	$	(10,643	)	$	(12,096	)
								$
Finance Leases								$
Property and equipment, at cost	$	3,352		$	876		$	3,407		$	3,407
Less: Accumulated depreciation		(945	)		(150	)		(1,507	)		(1,226	)
Property and equipment, net	$	2,407		$	726		$	1,900		$	2,181
								$
Finance lease liabilities	$	(2,457	)	$	(718	)	$	(1,969	)	$	(2,243	)
								$
Weighted Average Discount Rate								$
Operating lease		5.0	%		5.0	%		5.0%			5.0%
Finance lease		6.5	%		6.4	%		6.5%			6.5%

Maturities of leases
(In thousands)	Operating			Finance
Year Ending December 31,	Lease			Lease
2020 (excluding the nine months ended September 30, 2020)	$	1,959		$	305
2021		7,458			1,217
2022		6,066			1,038
2023		1,397			71
2024		419			14
Thereafter		282			0
Total undiscounted lease payments		17,581			2,645
Less amounts representing interest		(4,524	)		(188	)
Lease Liability	$	13,698		$	2,457

Maturities of leases
Maturities of lease liabilities were as follows:		$
(In thousands)		Operating			Finance
Year Ending December 31,		Lease			Lease
2021 (excluding the three months ended March 31, 2021)	$	5,549		$	921
2022		6,089			1,051
2023		1,421			84
2024		443			26
2025		305			9
Thereafter		2			0
Total undiscounted lease payments		13,809			2,091
Less amounts representing interest		(3,166	)		(122	)
Lease Liability	$	10,643		$	1,969

Lease information
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2020		2019		2020		2019			2021		2020
	(In thousands)				(In thousands)					(In thousands)
Operating lease cost	$	1,885	$	1,884	$	5,654	$	5,659	$	1,837	$	1,885
Finance lease cost		299		46		871		90		308		278
Total lease cost	$	2,184	$	1,930	$	6,525	$	5,749	$	2,145	$	2,163

Supplemental cash flow information related to leases
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2020		2019		2020		2019			2021		2020
Cash paid for amounts included in the measurement of lease liabilities:	(In thousands)				(In thousands)					(In thousands)
Operating cash flows from operating leases	$	1,945	$	1,901	$	5,803	$	5,678	$	1,930	$	1,926
Operating cash flows from finance leases		256		37		737		73		274		231

Financing cash flows from finance leases		42		9		133		17		35		46

	Number of Shares			Weighted Average Exercise		Weighted Average Remaining Contractual
	(in thousands)			Price		Term
Options outstanding at the beginning of period		15,977		$	4.46	N/A
Granted		0			–	N/A
Exercised		(98	)		3.05	N/A
Forfeited		(45	)		3.65	N/A
Options outstanding at the end of period		15,834		$	4.47	2.58 years

Options exercisable at the end of period		12,499		$	4.82	1.87 years

Schedule of stock option activity	Number of Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Options outstanding at the beginning of period		15,348		$	4.59	N/A
Granted		1,600			2.47	N/A
Exercised		(269	)		1.75	N/A
Forfeited		(215	)		5.55	N/A
Options outstanding at the end of period		16,464		$	4.41	3.07 years

Options exercisable at the end of period		12,816		$	4.78	2.30 years

Schedule of stock options outstanding and exercisable	Number of shares as of			Number of shares as of
	March 31, 2021			December 31, 2020
		Outstanding	Exercisable		Outstanding	Exercisable
Range of exercise prices:		(In thousands)			(In thousands)
$0.95 - $1.99		1,878	1,878		1,904	1,904
$2.00 - $2.99		1,570	180		1,570	180
$3.00 - $3.99		4,863	3,234		4,973	3,306
$4.00 - $4.99		1,533	1,217		1,540	1,217
$5.00 - $5.99		0	0		0	0
$6.00 - $6.99		4,770	4,770		4,770	4,770
$7.00 - $7.99		1,220	1,220		1,220	1,220
Total shares		15,834	12,499		15,977	12,597

Schedule of purchases of company stock	Nine Months Ended
									Three Months Ended
	September 30, 2020				September 30, 2019				March 31, 2021				March 31, 2020
	Shares		Avg. Price		Shares		Avg. Price			Shares		Avg. Price		Shares		Avg. Price
Open market purchases		44,247	$	2.94		335,546	$	3.95		138,004	$	4.18		0	$	–
Shares redeemed upon net exercise of stock options		46,909		2.86		18,424		3.76		40,727		4.36		0		–
Other purchases		200,000		3.51		24,500		4.20
Total stock purchases		291,156	$	3.32		378,470	$	3.97		178,731	$	4.22		0	$	–

Schedule of finance receivables	September 30,		December 31,		March 31,		December 31,
	2020		2019		2021		2020
Finance receivables					(In thousands)
	(In thousands)
Finance receivables
Automobile finance receivables, net of unearned interest	$	576,227	$	895,566	$	410,623	$	491,307
Unearned acquisition fees and originations costs		1,054		1,964		486		826
Finance receivables	$	577,281	$	897,530	$	411,109	$	492,133

Schedule of amortized cost basis of finance receivables	September 30,		December 31,
	2020		2019
	(In thousands)
Delinquency Status
Current	$	490,096	$	698,870
31 - 60 days		57,463		107,951
61 - 90 days		21,760		57,395
91 + days		6,908		31,350
	$	576,227	$	895,566

Schedule of delinquency status of finance receivables	March 31,		December 31,
	2021		2020
	(In thousands)
Delinquency Status
Current	$	360,369	$	406,693
31 - 60 days		35,533		56,572
61 - 90 days		11,683		22,660
91 + days		3,038		5,382
	$	410,623	$	491,307

Schedule of allowance for finance credit losses
													Three Months Ended
Schedule of allowance for finance credit losses	Three Months Ended						Nine Months Ended
	September 30,						September 30,						March 31,
	2020			2019			2020			2019				2021			2020
	(In thousands)						(In thousands)							(In thousands)
Balance at beginning of period	$	98,602		$	32,664		$	11,640		$	67,376		$	80,790		$	11,640
Early adoption of CECL		0			n/a			127,000			n/a			0			127,000
Provision for credit losses on finance receivables		7,400			19,874			14,113			64,319			0			3,613
Charge-offs		(15,574	)		(46,118	)		(73,096	)		(149,038	)		(12,122	)		(34,214	)
Recoveries		3,790			6,320			14,561			30,083			4,829			6,034
Balance at end of period	$	94,218		$	12,740		$	94,218		$	12,740		$	73,497		$	114,073

Schedule of allowance for losses on repossessed inventory	September 30,			December 31,
	2020			2019
	(In thousands)
Gross balance of repossessions in inventory	$	17,005		$	28,933
Allowance for losses on repossessed inventory		(12,896	)		(21,389	)
Net repossessed inventory included in other assets	$	4,109		$	7,544

Schedule of securitization trust debt											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)		2020 (2)		Principal		2020		2019		2020			Final Scheduled Payment Date (1)	Receivables Pledged at March 31, 2021 (2)		Initial Principal		Outstanding Principal at March 31, 2021		Outstanding Principal at December 31, 2020		Weighted Average Contractual Interest Rate at March 31, 2021
	(Dollars in thousands)													(Dollars in thousands)
CPS 2014-C		December 2021	$	0	$	273,000	$	0	$	19,758		0
CPS 2014-D		March 2022		0		267,500		0		23,755		0.00	%
CPS 2015-A		June 2022		14,892		245,000		13,337		26,713		5.95	%
CPS 2015-B		September 2022		22,065		250,000		21,661		36,338		5.71	%	September 2022	$	0	$	250,000	$	0	$	17,984		0
CPS 2015-C		December 2022		33,602		300,000		33,634		53,579		6.44	%	December 2022		21,749		300,000		23,929		28,529		6.87%
CPS 2016-A		March 2023		41,934		329,460		44,498		71,599		6.87	%	March 2023		28,459		329,460		30,958		37,158		7.65%
CPS 2016-B		June 2023		53,268		332,690		53,973		82,667		7.30	%	June 2023		37,418		332,690		38,724		46,079		7.58%
CPS 2016-C		September 2023		54,865		318,500		54,750		83,696		7.31	%	September 2023		39,455		318,500		40,046		47,325		7.82%
CPS 2016-D		April 2024		44,381		206,325		42,622		65,021		5.63	%	April 2024		32,599		206,325		30,753		36,455		6.05%
CPS 2017-A		April 2024		49,404		206,320		47,265		71,450		5.58	%	April 2024		36,408		206,320		34,412		40,619		6.04%
CPS 2017-B		December 2023		61,113		225,170		47,090		76,201		4.82	%	December 2023		46,080		225,170		31,951		39,016		5.23%
CPS 2017-C		September 2024		63,388		224,825		54,006		80,315		4.68	%	September 2024		48,489		224,825		41,953		47,553		4.95%
CPS 2017-D		June 2024		65,532		196,300		55,937		83,801		4.16	%	June 2024		50,010		196,300		43,273		49,297		4.48%
CPS 2018-A		March 2025		70,923		190,000		60,777		91,258		3.98	%	March 2025		54,744		190,000		47,230		53,549		4.25%
CPS 2018-B		December 2024		84,265		201,823		76,306		111,188		4.39	%	December 2024		65,851		201,823		58,112		66,955		4.65%
CPS 2018-C		September 2025		98,583		230,275		87,227		130,064		4.51	%	September 2025		76,364		230,275		68,625		77,345		4.74%
CPS 2018-D		June 2025		116,839		233,730		101,011		149,470		4.45	%	June 2025		91,484		233,730		78,446		88,228		4.68%
CPS 2019-A		March 2026		147,942		254,400		130,663		186,900		4.28	%	March 2026		115,227		254,400		99,017		114,373		4.50%
CPS 2019-B		June 2026		143,956		228,275		134,066		184,308		3.84	%	June 2026		113,420		228,275		105,045		118,982		4.06%
CPS 2019-C		September 2026		167,813		243,513		158,699		216,650		3.18	%	September 2026		133,374		243,513		125,430		142,080		3.35%
CPS 2019-D		December 2026		212,273		274,313		202,755		265,035		2.73	%	December 2026		168,358		274,313		160,999		181,485		2.88%
CPS 2020-A		March 2027		210,936		260,000		207,905		0		2.72	%	March 2027		165,519		260,000		163,649		184,944		2.89%
CPS 2020-B		June 2027		203,947		202,343		179,851		0		2.92	%	June 2027		168,416		202,343		147,587		164,403		3.31%
CPS 2020-C (3)		November 2027		193,242		252,200		252,200		0		1.58	%
CPS 2020-C														November 2027		223,358		252,200		214,018		231,961		1.75%
CPS 2021-A														March 2028		232,317		230,545		218,218		0		0.77%
			$	2,155,163	$	5,945,962	$	2,060,233	$	2,109,766					$	1,949,099	$	5,391,007	$	1,802,375	$	1,814,320


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

~~(3)~~	~~An additional $63.7 million of receivables were pledged to CPS 2020-C in October 2020.~~

Schedule of debt outstanding				Amount Outstanding at						Amount Outstanding at
				September		December 31,				March		December 31,
				2020		2019				2021		2020
				(In thousands)						(In thousands)
Description	Interest Rate	Maturity						Interest Rate	Maturity

Warehouse lines of credit	5.50% over one month Libor (Minimum 6.50%)		February 2021	$	11,539	$	40,558	5.50% over one month Libor (Minimum 6.50%)	N/A	$	0	$	42,558

	3.00% over one month Libor (Minimum 3.75%)		November 2020		20,559		96,225	3.00% over one month Libor (Minimum 3.75%)	December 2022		44,956		45,689

	4.00% over a commercial paper rate (Minimum 5.00%)		December 2021		0		0	4.00% over a commercial paper rate (Minimum 5.00%)	December 2021		27,300		32,265

Residual interest financing	8.60%		January 2026		32,243		40,000	8.60%	January 2026		20,597		25,576

Subordinated renewable notes	Weighted average rate of 10.24% and 9.75% at September 30, 2020 and December 31, 2019 , respectively		Weighted average maturity of December 2022 and April 2022 at September 30, 2020 and December 31, 2019, respectively		20,242		17,534	Weighted average rate of 9.92% and 10.09% at March 31, 2021 and December 31, 2020, respectively	Weighted average maturity of March 2023 and January 2023 at March 31, 2021 and December 31, 2020, respectively		23,740		21,323
				$	84,583	$	194,317			$	116,593	$	167,411

Schedule of interest income
	Three Months Ended					Nine Months Ended					Three Months Ended
	September 30,					September 30,					March 31,
	2020			2019		2020			2019			2021			2020
	(In thousands)					(In thousands)						(In thousands)
Interest on finance receivables	$	29,753		$	49,912	$	101,333		$	167,862	$	22,099		$	37,807
Interest on finance receivables at fair value		42,808			32,903		125,273			83,696		43,988			40,806
Mark to finance receivables measured at fair value		(3,152	)		0		(23,051	)		0		(4,417	)		(10,350	)
Other interest income		21			713		665			2,264		6			523
Interest income	$	69,430		$	83,528	$	204,220		$	253,822	$	61,676		$	68,786

Schedule of interest expense
	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2020		2019		2020		2019			2021		2020
	(In thousands)				(In thousands)					(In thousands)
Securitization trust debt	$	21,605	$	24,208	$	67,770	$	72,662	$	18,453	$	23,798
Warehouse lines of credit		1,856		2,407		6,294		6,387		1,314		1,763
Residual interest financing		876		956		2,734		2,867		566		938
Subordinated renewable notes		564		369		1,579		1,017		613		492
Interest expense	$	24,901	$	27,940	$	78,377	$	82,933	$	20,946	$	26,991

Computation of earnings per share
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
	(In thousands)				(In thousands)
Weighted average number of common shares outstanding during the period used to compute basic earnings per share		22,666		22,526		22,630		22,378
Incremental common shares attributable to exercise of outstanding options and warrants		1,242		1,540		1,195		1,724
Weighted average number of common shares used to compute diluted earnings per share		23,908		24,066		23,825		24,102

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,
	2020			2019			2020			2019
	(In thousands)						(In thousands)
Balance at beginning of period	$	1,537,649		$	1,158,365		$	1,444,038		$	821,066
Finance receivables at fair value acquired during period		173,209			261,929			572,938			756,555
Payments received on finance receivables at fair value		(132,847	)		(83,384	)		(354,910	)		(200,889	)
Net interest income accretion on fair value receivables		(33,904	)		(24,309	)		(98,060	)		(64,131	)
Mark to fair value		(3,152	)		604			(23,051	)		604
Balance at end of period	$	1,540,955		$	1,313,205		$	1,540,955		$	1,313,205

Schedule of finance receivables to their contractual balances	September 30, 2020				December 31, 2019
	Contractual		Fair		Contractual		Fair		March 31, 2021				December 31, 2020
	Balance		Value		Balance		Value		Contractual		Fair		Contractual		Fair
	(In thousands)								Balance		Value		Balance		Value
									(In thousands)
Finance receivables measured at fair value	$	1,658,662	$	1,540,955	$	1,492,803	$	1,444,038	$	1,698,110	$	1,533,723	$	1,668,076	$	1,523,726

Schedule of level 3 fair value measurements
Financial Instrument	Fair Values as of					Inputs as of
	September 30,		December 31,			September 30,		December 31,
	2020		2019		Unobservable Inputs	2020		2019
	(In thousands)
Assets:
Finance receivables measured at fair value	$	1,540,955	$	1,444,038	Discount rate		10.5% - 11.1%		8.9% - 11.1%
					Cumulative net losses		16.4% - 18.4%		15.0% - 16.1%

Schedule of estimated fair values of financial assets and liabilities
	As of September 30, 2020										As of March 31, 2021
Financial Instrument	(In thousands)										(In thousands)
	Carrying		Fair Value Measurements Using:								Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	11,253	$	11,253	$	0	$	0	$	11,253	$	9,197	$	9,197	$	0	$	0	$	9,197
Restricted cash and equivalents		200,912		200,912		0		0		200,912		159,404		159,404		0		0		159,404
Finance receivables, net		483,063		0		0		450,325		450,325		337,612		0		0		348,892		348,892
Accrued interest receivable		6,291		0		0		6,291		6,291		3,744		0		0		3,744		3,744
Liabilities:
Warehouse lines of credit	$	31,201	$	0	$	0	$	31,201	$	31,201	$	71,097	$	0	$	0	$	71,097	$	71,097
Accrued interest payable		4,937		0		0		4,937		4,937		4,740		0		0		4,740		4,740
Residual interest financing		32,000		0		0		32,000		32,000
Securitization trust debt		2,048,089		0		0		2,137,877		2,137,877		1,791,583		0		0		1,813,370		1,813,370
Subordinated renewable notes		20,242		0		0		20,242		20,242		23,740		0		0		23,740		23,740


	As of December 31, 2019										As of December 31, 2020
Financial Instrument	(In thousands)										(In thousands)
	Carrying		Fair Value Measurements Using:								Carrying		Fair Value Measurements Using:
	Value		Level 1		Level 2		Level 3		Total		Value		Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents	$	5,295	$	5,295	$	0	$	0	$	5,295	$	13,466	$	13,466	$	0	$	0	$	13,466
Restricted cash and equivalents		135,537		135,537		0		0		135,537		130,686		130,686		0		0		130,686
Finance receivables, net		885,890		0		0		841,160		841,160		411,343		0		0		429,972		429,972
Accrued interest receivable		11,645		0		0		11,645		11,645		5,017		0		0		5,017		5,017
Liabilities:
Warehouse lines of credit	$	134,791	$	0	$	0	$	134,791	$	134,791	$	118,999	$	0	$	0	$	118,999	$	118,999
Accrued interest payable		5,254		0		0		5,254		5,254		4,919		0		0		4,919		4,919
Residual interest financing		39,478		0		0		39,478		39,478
Securitization trust debt		2,097,728		0		0		2,116,520		2,116,520		1,803,673		0		0		1,862,630		1,862,630
Subordinated renewable notes		17,534		0	$	0		17,534		17,534		21,323		0		0		21,323		21,323

	$ 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
Nine months ended September 30, 2020		575,876		2,250,395