8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON DC 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) July 21, 2020

CONSUMER PORTFOLIO SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
CALIFORNIA	1-11416	33-0459135
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(State or Other Jurisdiction<br><br> <br>of Incorporation)	(Commission<br><br> <br>File Number)	(IRS Employer<br><br> <br>Identification No.)
3800 Howard Hughes Pkwy, Suite 1400, Las Vegas, NV 89169
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(Address of Principal Executive Offices) (Zip Code)

Registrant's telephone number, including area code (949) 753-6800

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 Stock Market LLC (Global Market)

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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

Item 2.02 Results of Operationsand Financial Condition.

On July 21, 2020, the registrant distributed a quarterly earnings release for the three-month period ended June 30, 2020. A copy of the earnings release is attached as an exhibit to this report. As noted in the release, the registrant will hold a conference call on Wednesday, July 22, 2020, at 1:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time. The conference identification number is 9486817.

Item 9.01. Financial Statementsand Exhibits.

(d) Exhibits.

One exhibit is included with this report:

99.1	News release re earnings.

SIGNATURES

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

	CONSUMER PORTFOLIO SERVICES, INC.
Dated: July 21, 2020	By:   /s/ JEFFREY P. FRITZ
	Jeffrey P. Fritz<br><br> <br>Executive Vice President and Chief Financial Officer<br><br> <br>Signing on behalf of the registrant

Exhibit 99.1

NEWS RELEASE

CPS ANNOUNCESSECOND QUARTER 2020 EARNINGS

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§	Pretax income of $4.6 million
§	Net income of $3.0 million, or $0.13 per diluted share
§	New contract purchases of $136 million
§	Pretax charges of $12.6 million related to potential losses from the pandemic

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LAS VEGAS, NV, July 21, 2020 (GlobeNewswire)-- Consumer Portfolio Services, Inc. (Nasdaq: CPSS) (“CPS” or the “Company”) today announced earnings of $3.0 million, or $0.13 per diluted share, for its second quarter ended June 30, 2020. This compares to net income of $1.8 million, or $0.08 per diluted share, in the second quarter of 2019.

Revenues for the second quarter of 2020 were $67.3 million, a decrease of $19.0 million, or 22.0%, compared to $86.3 million for the second quarter of 2019. Total operating expenses for the second quarter of 2020 were $62.6 million compared to $83.6 million for the 2019 period for a decrease of $20.9 million, or 25.0%. Pretax income for the second quarter of 2020 was $4.6 million compared to pretax income of $2.8 million in the second quarter of 2019, an increase of 67.6%.

Results for the second quarter include two specific charges related to estimated potential impact on credit performance resulting from the pandemic. The Company recorded a $9.5 million mark down to the carrying value of the portion of the receivables portfolio accounted for at fair value. The mark down is reflected as a reduction in revenue for the quarter. The Company also recorded a $3.1 million charge to the provision for credit losses for the legacy portfolio accounted for under the Current Expected Credit Loss (CECL) model. Without the charges related to the pandemic, revenues, total operating expenses and pretax income for the second quarter of 2020 would have been $76.8 million, $59.5 million and $17.3 million, respectively.

For the six months ended June 30, 2020 total revenues were $138.1 million compared to $174.6 million for the six months ended June 30, 2019, a decrease of approximately $36.5 million, or 20.9%. Total expenses for the six months ended June 30, 2020 were $130.3 million, a decrease of $38.8 million, or 23.0%, compared to $169.1 million for the six months ended June 30, 2019. Pretax income for the six months ended June 30, 2020 was $7.8 million, compared to $5.4 million for the six months ended June 30, 2019. Net income for the six months ended June 30, 2020 was $13.8 million compared to $3.5 million for the six months ended June 30, 2019. Results for the six months ended June 30, 2020 include a net tax benefit of $8.8 million related to the revaluation of the Company’s net operating losses and other tax adjustments. Without this tax benefit, net income and net income per diluted share for the six months ended June 30, 2020 would have been $5.0 million and $0.21 per share, respectively.

During the second quarter of 2020, CPS purchased $135.9 million of new contracts compared to $266.0 million during the first quarter of 2020 and $250.1 million during the second quarter of 2019. The Company's receivables totaled $2.326 billion as of June 30, 2020, a decrease from $2.435 billion as of March 31, 2020 and $2.399 billion as of June 30, 2019.

Annualized net charge-offs for the second quarter of 2020 were 7.39% of the average portfolio as compared to 7.82% for the second quarter of 2019. Delinquencies greater than 30 days (including repossession inventory) were 9.59% of the total portfolio as of June 30, 2020, as compared to 14.83% as of June 30, 2019.

"We began our second quarter of 2020 with many uncertainties related to the pandemic,” reported Charles E. Bradley, Jr., Chairman and Chief Executive Officer. “During the quarter, we sent home, and later returned to the office, more than half of our workforce with no significant interruption to our operations or the services we provide our dealers and customers. We postponed our planned asset-backed securitization, then completed it when the markets recovered. Despite the challenges of the times, we are pleased with the resiliency of our staff, our customers and the subprime auto finance industry.”

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Conference Call

CPS announced that it will hold a conference call on Wednesday, July 22, at 1:00 p.m. ET to discuss its quarterly operating results. Those wishing to participate by telephone may dial-in at 877 312-5502 or 253 237-1131 approximately 10 minutes prior to the scheduled time. The conference identification number is 9486817.

A replay of the conference call will be available between July 22 and July 29, beginning two hours after conclusion of the call, by dialing 855 859-2056 or 404 537-3406 for international participants, with conference identification number 9486817. A broadcast of the conference call will also be available live and for 90 days after the call via the Company’s web site at www.consumerportfolio.com.

About Consumer Portfolio Services,Inc.

Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems, low incomes or limited credit histories. We purchase retail installment sales contracts primarily from franchised automobile dealerships secured by late model used vehicles and, to a lesser extent, new vehicles. We fund these contract purchases on a long-term basis primarily through the securitization markets and service the contracts over their lives.

Forward-looking statements in this newsrelease include the Company's recorded figures representing allowances for remaining expected lifetime credit losses, its pandemic-relatedmarkdown of carrying value for the portion of its portfolio accounted for at fair value, its pandemic-related charge to the provisionfor credit losses for the its legacy portfolio, its estimates of fair value (most significantly for its receivables accounted forat fair value), its provision for credit losses, its 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 the Company’s estimates of lossesto be incurred in the future. The accuracy of such estimates may be adversely affected by various factors, which include (in additionto risks relating to the COVD-19 pandemic and to the economy generally) the following: possible increased delinquencies; repossessionsand losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailabilityof qualified personnel, which could adversely affect the Company’s ability to service its portfolio; possible increases inthe rate of consumer bankruptcy filings, which could adversely affect the Company’s rights to collect payments from its portfolio;other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, whichcould adversely affect the Company’s realization upon repossessed vehicles; and economic conditions in geographic areas inwhich the Company's business is concentrated. The accuracy of such estimates may also be affected by the effects of the COVID-19pandemic 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 the Company’sfuture financial results, as to which there can be no assurance. Any implication that the results of the most recently completedquarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identifiedabove in relation to losses to be incurred in the future may affect future performance.

Investor Relations Contact

Jeffrey P. Fritz, Chief Financial Officer

844 878-2777

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Consumer Portfolio Services, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

	Three months ended					Six months ended
	June 30,					June 30,
	2020			2019		2020			2019
Revenues:
Interest income	$	75,552		$	84,449	$	154,689		$	170,294
Mark to finance receivables measured at fair value		(9,549	)		–		(19,899	)		–
Other income		1,289			1,876		3,269			4,261
		67,292			86,325		138,059			174,555
Expenses:
Employee costs		19,828			19,706		41,671			38,779
General and administrative		7,837			8,750		16,506			16,924
Interest		26,485			27,703		53,476			54,993
Provision for credit losses		3,100			20,489		6,713			44,445
Other expenses		5,399			6,907		11,938			13,968
		62,649			83,555		130,304			169,109
Income before income taxes		4,643			2,770		7,755			5,446
Income tax expense		1,671			970		(6,009	)		1,907
Net income	$	2,972		$	1,800	$	13,764		$	3,539
Earnings per share:
Basic	$	0.13		$	0.08	$	0.61		$	0.16
Diluted	$	0.13		$	0.08	$	0.58		$	0.15
Number of shares used in computing earnings
per share:
Basic		22,685			22,362		22,612			22,302
Diluted		23,687			23,978		23,783			24,119

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Condensed Consolidated Balance Sheets

(In thousands)

(Unaudited)

	June 30,			December 31,
	2020			2019
Assets:
Cash and cash equivalents	$	7,475		$	5,295
Restricted cash and equivalents		139,191			135,537
Finance receivables measured at fair value		1,537,649			1,444,038
Finance receivables		669,772			897,530
Allowance for finance credit losses		(98,602	)		(11,640	)
Finance receivables, net		571,170			885,890
Deferred tax assets, net		33,442			15,480
Other assets		48,533			53,009
	$	2,337,460		$	2,539,249
Liabilities and Shareholders' Equity:
Accounts payable and accrued expenses	$	47,415		$	47,077
Warehouse lines of credit		56,668			134,791
Residual interest financing		37,544			39,478
Securitization trust debt		2,051,172			2,097,728
Subordinated renewable notes		19,580			17,534
		2,212,379			2,336,608
Shareholders' equity		125,081			202,641
	$	2,337,460		$	2,539,249

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Operating and Performance Data ($ in millions)

	At and for the				At and for the
	Three months ended				Six months ended
	June 30,				June 30,
	2020		2019		2020		2019
Contracts purchased	$	135.85	$	250.14	$	401.86	$	493.17
Contracts securitized		221.87		230.00		481.87		495.00
Total portfolio balance	$	2,326.44	$	2,399.22	$	2,326.44	$	2,399.22
Average portfolio balance		2,364.03		2,398.92		2,395.11		2,395.57
Allowance for finance credit losses as % of fin. receivables		14.72%		2.77%
Aggregate allowance as % of fin. receivables (1)		17.45%		4.66%
Delinquencies
31+ Days		7.75%		13.15%
Repossession Inventory		1.84%		1.68%
Total Delinquencies and Repo. Inventory		9.59%		14.83%
Annualized Net Charge-offs as % of Average Portfolio
Legacy portfolio		12.84%		12.24%		11.45%		11.87%
Fair Value portfolio		4.95%		2.90%		5.09%		2.77%
Total portfolio		7.39%		7.82%		7.19%		7.90%
Recovery rates (2)		34.0%		34.1%		35.1%		33.9%

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| --- | | | For the | | | | | | | | For the | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Three months ended | | | | | | | | Six months ended | | | | | | | | | | June 30, | | | | | | | | June 30, | | | | | | | | | | 2020 | | | | 2019 | | | | 2020 | | | | 2019 | | | | | | (3) | | %(4) | | (3) | | %(4) | | (3) | | %(4) | | (3) | | %(4) | | | Interest income | | | | 12.8% | | | | 14.1% | | | | 12.9% | | | | 14.2% | | Mark to finance receivables measured at fair value | | ) | | -1.6% | | | | 0.0% | | ) | | -1.7% | | | | 0.0% | | Servicing fees and other income | | | | 0.2% | | | | 0.3% | | | | 0.3% | | | | 0.4% | | Interest expense | | ) | | -4.5% | | ) | | -4.6% | | ) | | -4.5% | | ) | | -4.6% | | Net interest margin | | | | 6.9% | | | | 9.8% | | | | 7.1% | | | | 10.0% | | Provision for credit losses | | ) | | -0.5% | | ) | | -3.4% | | ) | | -0.6% | | ) | | -3.7% | | Risk adjusted margin | | | | 6.4% | | | | 6.4% | | | | 6.5% | | | | 6.3% | | Core operating expenses | | ) | | -5.6% | | ) | | -5.9% | | ) | | -5.9% | | ) | | -5.8% | | Pre-tax income | | | | 0.8% | | | | 0.5% | | | | 0.6% | | | | 0.5% |

All values are in US Dollars.

(1)	Includes allowance for finance credit losses and allowance for repossession inventory.
(2)	Wholesale auction liquidation amounts (net of expenses) as a percentage of the account balance at the time of sale.
(3)	Numbers may not add due to rounding.
(4)	Annualized percentage of the average portfolio balance.  Percentages may not add due to rounding.

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