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CONSUMER PORTFOLIO SERVICES, INC.

CPSS
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Business Summary

Consumer Portfolio Services, Inc. operates in the sub-prime automobile finance industry, a segment of the second largest consumer finance market in the United States. The company provides indirect financing to customers of franchised and independent automobile dealers who have limited credit histories or past credit problems, serving as an alternative to traditional sources such as commercial banks, credit unions, and captive finance companies. The sub-prime segment is described as highly fragmented, with no single company holding a dominant position.

The automobile financing business is highly competitive. Competitors named in the filing include national, regional, and local finance companies with operations similar to CPS, as well as commercial banks, savings and loan associations, leasing companies, credit unions, and captive finance companies affiliated with major automobile manufacturers such as Ford Motor Credit Company, LLC and General Motors Financial Company, Inc. Many competitors possess substantially greater financial, sales, technical, personnel, and other resources. CPS believes the principal competitive factors affecting a dealer's decision to offer contracts for sale are the monthly payment amount made available to the customer, the purchase price offered, the timeliness of response, the amount of required documentation, the consistency and timeliness of purchases, and the financial stability of the funding source.

CPS generates revenue primarily by purchasing and servicing retail automobile installment sale contracts from dealers. The company provides indirect financing to sub-prime customers and earns interest income on the contracts it holds. Revenue is also generated from servicing fees on contracts securitized or serviced for third parties, and from other income including fees from third-party portfolios. The business model involves purchasing contracts, financing them on an interim basis through warehouse credit facilities, and then on a long-term basis through securitizations. The company's profitability is largely determined by the spread between the effective interest rate received on automobile contracts and the interest rates payable on its debt.

CPS offers eight different financing programs covering a wide band of the sub-prime credit spectrum: First Time Buyer, Mercury/Delta, Standard, Alpha, Alpha Plus, Super Alpha, Preferred, and Meta. These programs are priced according to relative credit risk, with upper credit tier products (Meta, Preferred, Super Alpha, Alpha Plus, and Alpha) accounting for approximately 90% of new contract acquisitions for the company's own portfolio in 2025 , 89% in 2024 , and 83% in 2023 , measured by aggregate amount financed. The company also has a direct lending and refinance platform, which represented 0.9% of the outstanding managed portfolio as of December 31, 2025 . For the year ended December 31, 2025, approximately 90% of automobile contracts originated consisted of financing for used cars and 10% for new cars .

The company's servicing activities include mailing monthly billing statements, contacting delinquent obligors, accounting for payments, responding to inquiries, maintaining security interests, skip tracing, repossessing and liquidating collateral, and collecting deficiency balances. For securitized contracts, CPS is typically entitled to a base monthly servicing fee equal to 2.5% per annum computed as a percentage of the declining outstanding principal balance. For contracts serviced for third parties, the base monthly servicing fee is 1% and 2.5% , plus certain incentive fees tied to credit performance. The company also has an extension program to assist obligors with temporary cash flow problems, granting one-month payment extensions with no other concessions such as reduction in interest rate or forgiveness of principal.

During the fiscal year ended December 31, 2025, CPS completed four term securitizations aggregating $1,727.8 million in receivables. In October 2025, the company entered into a new $167.5 million warehouse credit facility with Capital One, N.A. and Oaktree Asset-Backed Income Private Placement Fund Inc. On March 20, 2025, CPS completed a $65.0 million residual interest financing of residual interests from previously issued securitizations. The company repurchased 942,550 shares of its common stock at an average price of $9.20 during the year ended December 31, 2025. In July 2025, the board of directors authorized the repurchase of an additional $5 million of common stock.

For the fiscal year ended December 31, 2025, total revenues were $434.5 million , an increase of $41.0 million , or 10.4% , from $393.5 million in the prior year. Net income was $19.3 million compared to $19.2 million in 2024. Diluted earnings per share were $0.80 versus $0.79 in the prior year. The increase in revenues was primarily driven by a 15.1% increase in the average balance of the loan portfolio, with interest income increasing $58.7 million , or 16.1% , to $422.7 million from $364.0 million in the prior year. Total operating expenses were $406.5 million , an increase of $40.4 million , or 11.0% , primarily due to increases in interest expense.

Business Outlook

Management expects to earn quarterly profits during 2026 , though the filing states there can be no assurance as to that expectation. The expectation is based on the company having had positive net income in each of the fourteen fiscal years ended December 31, 2025 , although not in every quarter within that period.

A primary growth vector is the continued acquisition of automobile contracts from dealers. The company purchased $1,638.3 million of contracts in 2025, and the managed portfolio at period end was $3,898.4 million . The company plans to adjust its levels of automobile contract purchases and related capital requirements to match anticipated releases of cash from trusts and related spread accounts. The company also initiated a direct-to-consumer refinance platform in December 2025, originating loans for the refinancing of existing loans from other lenders secured by an automobile, with credit, underwriting, purchase, and servicing procedures substantially the same as those purchased from dealers.

The company's net interest margin was 5.2% for the year ended December 31, 2025, compared to 5.4% in the prior year. The interest yield on the total loan portfolio increased to 11.4% from 11.3% in the prior year period. The annualized average rate on securitization trust debt was 6.3% for 2025 compared to 6.2% in 2024. The average interest rate on warehouse lines of credit was 9.5% in 2025 compared to 10.8% in 2024. The average interest rate on subordinated renewable notes was 9.8% in both 2025 and 2024.

The company's operational outlook involves maintaining its servicing infrastructure across five branch locations in California, Nevada, Virginia, Florida, and Illinois, supplemented by a nearshore third-party call center with approximately 80 agents assigned to the portfolio as of December 31, 2025. The company had 928 employees as of December 31, 2025, allocated across servicing (545 ), origination (182 ), sales (118 ), and administrative (68 ) functions. The company continues to invest in technology, including proprietary scoring models and an automated application decisioning system that produced initial decisions within seconds on approximately 99% of applications in 2025.

Capital allocation includes ongoing securitization activity, with the company completing four securitizations in 2025 aggregating $1,665.3 million of notes sold. In January 2026, the company completed another securitization with $345.6 million of notes sold. The company's board of directors has authorized the purchase of up to $128.2 million of outstanding securities under a stock repurchase program first announced in 2003, with approximately $7.1 million of authorization remaining as of December 31, 2025. The company does not intend to declare any dividends on its common stock in the foreseeable future .

The company faces structural headwinds from changes in general economic conditions, including periods of economic slowdown or recession which typically increase delinquencies, defaults, repossessions, and losses. The sub-prime customer base may be more strongly affected by economic weakness than the population as a whole. Additionally, increases in interest rates could impair results of operations, as the interest payable on securitization trust debt is the company's largest expense, and while fixed for issued debt, the terms of future securitizations may vary. The company also faces execution risks related to its ability to secure and maintain adequate credit and warehouse financing on favorable terms, as its current short-term funding capacity is $702.5 million comprising three credit facilities.

Risk Factors

The company requires substantial cash to service its substantial debt, with approximately $3,483.4 million of debt outstanding as of December 31, 2025, including $2,986.6 million of securitization trust debt. The ability to generate sufficient cash depends on many factors, including the performance of automobile contracts and access to capital markets. A significant number of defaults on automobile contracts could materially impair results, as the company specializes in sub-prime customers who entail higher risk of non-performance, higher delinquencies, and higher losses. The company's results of operations depend on its ability to securitize its portfolio of automobile contracts; if market conditions for asset-backed securitizations reverse, a material adverse effect on results would be expected. Changes in general economic conditions, particularly increased unemployment rates and declining used vehicle values, could increase loss frequency and decrease demand for automobiles. The company is subject to numerous federal and state consumer protection laws and regulations, and failure to comply could result in penalties, litigation losses, and suspension or termination of licenses. The company's common stock is thinly-traded, with directors and executive officers collectively owning approximately 56% of total shares outstanding as of December 31, 2025, which contributes to more volatile price fluctuations and limited opportunities for investors to sell shares.

Management Priorities

Management's message emphasizes the company's position as a specialty finance company providing indirect financing to sub-prime customers through automobile contract purchases. The forward-looking statement that management expects to earn quarterly profits during 2026 is a key theme, grounded in the company having had positive net income in each of the fourteen fiscal years ended December 31, 2025 . Strategic priorities emphasized include maintaining the rate of automobile contract purchases at a level that matches available capital, minimizing operating costs as appropriate, and continuing to access the securitization market for long-term financing, as demonstrated by the completion of four securitizations in 2025 and another in January 2026.

View Source Annual Report on SEC.gov ↗

References

  1. [1] Item 1, Business — Contract Acquisitions
  2. [2] Item 1, Business — Contract Acquisitions
  3. [3] Item 1, Business — Contract Acquisitions
  4. [4] Item 1, Business — Overview
  5. [5] Item 1, Business — Overview
  6. [6] Item 1, Business — Servicing and Collections
  7. [7] Item 1, Business — Servicing and Collections
  8. [8] Item 7, MD&A — Securitization and Warehouse Credit Facilities
  9. [9] Item 7, MD&A — Securitization and Warehouse Credit Facilities
  10. [10] Item 7, MD&A — Capital Resources
  11. [11] Item 8, Note 7 — Shareholders' Equity
  12. [12] Item 8, Note 7 — Shareholders' Equity
  13. [13] Item 8, Note 7 — Shareholders' Equity
  14. [14] Item 8, Consolidated Statements of Income
  15. [15] Item 7, MD&A — Results of Operations
  16. [16] Item 7, MD&A — Results of Operations
  17. [17] Item 8, Consolidated Statements of Income
  18. [18] Item 8, Consolidated Statements of Income
  19. [19] Item 8, Consolidated Statements of Income
  20. [20] Item 8, Consolidated Statements of Income
  21. [21] Item 8, Consolidated Statements of Income
  22. [22] Item 7, MD&A — Results of Operations
  23. [23] Item 7, MD&A — Results of Operations
  24. [24] Item 7, MD&A — Results of Operations
  25. [25] Item 8, Consolidated Statements of Income
  26. [26] Item 8, Consolidated Statements of Income
  27. [27] Item 8, Consolidated Statements of Income
  28. [28] Item 7, MD&A — Results of Operations
  29. [29] Item 7, MD&A — Results of Operations
  30. [30] Item 1A, Risk Factors — Periods of Significant Losses
  31. [31] Item 1A, Risk Factors — Periods of Significant Losses
  32. [32] Item 7, MD&A — Overview
  33. [33] Item 7, MD&A — Overview
  34. [34] Item 7, MD&A — Results of Operations
  35. [35] Item 7, MD&A — Results of Operations
  36. [36] Item 7, MD&A — Results of Operations
  37. [37] Item 7, MD&A — Results of Operations
  38. [38] Item 7, MD&A — Results of Operations
  39. [39] Item 7, MD&A — Results of Operations
  40. [40] Item 7, MD&A — Results of Operations
  41. [41] Item 7, MD&A — Results of Operations
  42. [42] Item 7, MD&A — Results of Operations
  43. [43] Item 1, Business — Servicing and Collections
  44. [44] Item 1, Business — Human Capital
  45. [45] Item 7, MD&A — Results of Operations
  46. [46] Item 7, MD&A — Results of Operations
  47. [47] Item 7, MD&A — Results of Operations
  48. [48] Item 7, MD&A — Results of Operations
  49. [49] Item 1, Business — Contract Acquisitions
  50. [50] Item 7, MD&A — Liquidity and Capital Resources
  51. [51] Item 8, Note 14 — Subsequent Events
  52. [52] Item 5, Market for Registrant's Common Equity
  53. [53] Item 8, Note 7 — Shareholders' Equity
  54. [54] Item 5, Market for Registrant's Common Equity
  55. [55] Item 7, MD&A — Securitization and Warehouse Credit Facilities
  56. [56] Item 1A, Risk Factors — Our Substantial Indebtedness Could Adversely Affect Our Financial Health
  57. [57] Item 1A, Risk Factors — Our Substantial Indebtedness Could Adversely Affect Our Financial Health
  58. [58] Item 1A, Risk Factors — Our Common Stock Is Thinly-Traded
  59. [59] Item 1A, Risk Factors — Periods of Significant Losses
  60. [60] Item 1A, Risk Factors — Periods of Significant Losses
  61. [61] Item 8, Consolidated Statements of Income
  62. [62] Item 8, Consolidated Statements of Income
  63. [63] Item 8, Consolidated Statements of Income
  64. [64] Item 8, Consolidated Statements of Income
  65. [65] Item 8, Consolidated Statements of Income
  66. [66] Item 8, Consolidated Statements of Income
  67. [67] Item 8, Consolidated Statements of Income
  68. [68] Item 8, Consolidated Statements of Income
  69. [69] Item 8, Consolidated Statements of Income
  70. [70] Item 8, Consolidated Statements of Income
  71. [71] Item 8, Consolidated Statements of Income
  72. [72] Item 8, Consolidated Statements of Income
  73. [73] Item 8, Consolidated Statements of Income
  74. [74] Item 8, Consolidated Statements of Income
  75. [75] Item 8, Consolidated Statements of Cash Flows
  76. [76] Item 8, Consolidated Statements of Cash Flows
  77. [77] Item 7, MD&A — Liquidity and Capital Resources
  78. [78] Item 8, Consolidated Balance Sheets
  79. [79] Item 8, Consolidated Balance Sheets
  80. [80] Item 8, Consolidated Balance Sheets
  81. [81] Item 8, Consolidated Balance Sheets
  82. [82] Item 8, Consolidated Balance Sheets

Analysis on 6/21/2026