CONSUMER PORTFOLIO SERVICES, INC.

Previous wording

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 have also (i) originated vehicle purchase money loans by lending directly to consumers, (ii) acquired installment purchase contracts in four merger and acquisition transactions, and (iii) 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.”

Current wording

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, to a lesser extent, originate loans directly to consumers for the refinancing of an existing loan from other lenders secured by an automobile and have also (i) originated vehicle purchase money loans by lending directly to consumers, (ii) acquired installment purchase contracts in four merger and acquisition transactions, and (iii) 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."

Previous wording

We were incorporated and began our operations in March 1991. From inception through March 31, 2026, we have originated a total of approximately $25.2 billion of automobile contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. Our recent history of contract purchase volumes and managed portfolio levels are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.

Current wording

We were incorporated and began our operations in March 1991. From inception through June 30, 2026, we have originated a total of approximately $26.0 billion of automobile contracts from dealers, and to a lesser degree, by originating loans secured by automobiles directly with consumers. Our recent history of contract purchase volumes and managed portfolio levels are shown in the table below. Managed portfolio comprises both contracts we owned and those we were servicing for third parties.

Previous wording

Since 1994 we have conducted 108 term securitizations of automobile contracts that we originated. As of March 31, 2026, 19 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year.

Current wording

Since 1994 we have conducted 109 term securitizations of automobile contracts that we originated. As of June 30, 2026, 19 of those securitizations are active and all are structured as secured financings. We generally conduct our securitizations on a quarterly basis, near the beginning of each calendar quarter, resulting in four securitizations per calendar year.

Previous wording

Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. We currently have short-term funding capacity of $702.5 million over three credit facilities. The first credit facility was established in May 2012. This facility was most recently renewed in July 2024, extending the revolving period to July 2026, with an optional amortization period through July 2027. In addition, the capacity was increased from $200 million to $335 million in December 2024.

Current wording

Generally, prior to a securitization transaction we fund our automobile contract purchases primarily with proceeds from warehouse credit facilities. As of June 30, 2026 our short-term funding capacity was $725.0 million over two credit facilities. The first credit facility was established in May 2012.

Previous wording

In October 2025, we entered into a new $167.5 million facility. This facility has a two year revolving period to October 2027, with an optional amortization period through April 2029.

Current wording

In October 2025, we entered into a new $167.5 million facility. On April 3, 2026, it amended its two-year revolving credit agreement with Capital One, N.A. to increase the capacity of the facility. The amendment applies to both Capital One, N.A. and the subordinate lender, and increases the capacity of the facility from $167.5 million to $390 million. This facility has a two-year revolving period to October 2027, with an optional amortization period through April 2029.

Previous wording

In addition, from time to time, we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored. On March 4, 2026, we completed a $50 million securitization of residual interests from previously issued securitizations. In the transaction, qualified institutional buyers purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in four CPS securitizations issued from January 2025 through October 2025. The sold notes (“2026-1 Notes”), issued by CPS Auto Securitization Trust 2026-1, consist of a single class with a coupon of 8.75%.

Current wording

In addition, from time to time, we have also completed financings of our residual interests in other securitizations that we and our affiliates previously sponsored. Most recently, in March 2026, we completed a $50 million securitization of residual interests from previously issued securitizations. In the transaction, qualified institutional buyers purchased $50.0 million of asset-backed notes secured by an 80% interest in a CPS affiliate that owns the residual interests in four CPS securitizations issued from January 2025 through October 2025. The sold notes (“2026-1 Notes”), issued by CPS Auto Securitization Trust 2026-1, consist of a single class with a coupon of 8.75%.

Previous wording

Revenues. During the three months ended March 31, 2026, our revenues were $112.3 million, an increase of $5.5 million, or 5.1% from the prior year revenue of 106.9 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended March 31, 2026, did not include a mark to the recorded value of the finance receivables measured at fair value. Marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in no marks to finance receivables measured at fair value. There was a $3.5 million mark up to the fair value portfolio in the prior year period.

Current wording

Revenues. During the three months ended June 30, 2026, our revenues were $121.4 million, an increase of $11.6 million, or 10.6% from the prior year revenue of 109.8 million. The primary reason for the increase in revenues is the increase in interest income resulting from the increase in the average outstanding balance of finance receivables measured at fair value. Revenues for the three months ended June 30, 2026, did not include a mark to the recorded value of the finance receivables measured at fair value. Marks are estimates based on our evaluation of the appropriate fair value and future earnings rate of existing receivables compared to recently acquired receivables and increases or decreases in our estimates of future net losses. In the current period, our re-evaluation of the fair values of these receivables resulted in no marks to finance receivables measured at fair value. There was a $3.0 million mark up to the fair value portfolio in the prior year period.

Previous wording

Interest income for the three months ended March 31, 2026, increased $6.8 million, or 6.7% to $108.7 million from $101.9 million in the prior year. The primary reason for the increase in interest income is the 7.9% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreased to 11.3% from 11.4% in the prior year period. 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 balance and interest yield of our loan portfolio for the three months ended March 31, 2026 and 2025:

Current wording

Interest income for the three months ended June 30, 2026, increased $12.8 million, or 12.1% to $118.1 million from $105.4 million in the prior year. The primary reason for the increase in interest income is the 13.7% increase in the average balance of our loan portfolio over the prior year period. The interest yield on our total loan portfolio decreased to 11.3% from 11.4% in the prior year period. 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 balance and interest yield of our loan portfolio for the three months ended June 30, 2026 and 2025:

Previous wording

Other income was $3.6 million forthe three months ended March 31, 2026, compared to $1.4 million for the comparable period in 2025. This $2.2 million increase was primarily driven by the dealer recoveries collected for the three months ending March 31, 2026. These dealer recoveries were $2.3 million for the quarter ended March 31, 2026. There were no dealer recoveries in the prior year period. The Company engaged a third party that identifies discrepancies in the values of the vehicles that have been repossessed and sold at auction. The third party attempts to collect the amount of the discrepancy from the dealers and remits the amounts collected to the Company net of fees charged.

Current wording

Other income was $3.3 million forthe three months ended June 30, 2026, compared to $1.4 million for the comparable period in 2025. This $1.9 million increase was primarily driven by the dealer recoveries collected for the three months ending June 30, 2026. These dealer recoveries were $1.8 million for the quarter ended June 30, 2026. There were no dealer recoveries in the prior year period. The Company engaged a third party that identifies discrepancies in the values of the vehicles that have been repossessed and sold at auction. The third party attempts to collect the amount of the discrepancy from the dealers and remits the amounts collected to the Company net of fees charged.

Previous wording

Total operating expenses were $104.3 million for the three months ended March 31, 2026, compared to $100.1 million for the prior period, an increase of $4.2 million, or 4.2%. The increase is primarily due to increases in interest expense.

Current wording

Total operating expenses were $112.4 million for the three months ended June 30, 2026, compared to $102.8 million for the prior period, an increase of $9.5 million, or 9.3%. The increase is primarily due to increases in interest expense.

Previous wording

Employee costs were $23.0 million during the three months ended March 31, 2026, compared to $25.0 million for the same quarter in the prior year, a decrease of $2.0 million, or 7.9%. 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, March 31, 2026, and 2025.

Current wording

Employee costs were $23.4 million during the three months ended June 30, 2026, compared to $24.4 million for the same quarter in the prior year, a decrease of $944,000, or 3.9%. 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, June 30, 2026, and 2025.

Previous wording

Increases in headcount among our Sales staff during the three-month period ended, March 31, 2026, and the decrease from the prior year period in the average cost of our Servicing staff, were the largest contributing factors to the increase in headcount and decrease to employee costs for the three-month period ended, March 31, 2026 compared to the prior year period.

Current wording

The increase in headcount within our Sales staff throughout the three-month periods ended, June 30, 2026, and the decrease in the average employee cost of our Servicing staff from June 30, 2025, were the largest contributing factors to the increase in headcount and decrease to employee costs from the three-month period ended, June 30, 2025 to June 30, 2026.

Previous wording

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 $12.9 million, a decrease of $345,000 from $12.6 million in the prior year period.

Current wording

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 $14.7 million, an increase of $2.3 million from $12.4 million in the prior year period.

Previous wording

Interest expense for the three months ended March 31, 2026, was $60.1 million and represented 57.6% of total operating expenses, compared to $54.9 million in the previous year, when it was 54.9% of total operating expenses.

Current wording

Interest expense for the three months ended June 30, 2026, was $64.3 million and represented 57.2% of total operating expenses, compared to $58.7 million in the previous year, when it was 57.1% of total operating expenses. The $5.5 million increase in interest expense compared to the prior year period was largely due to increases in the average balance of our securitization trust debt, warehouse credit line debt and residual interest financing debt.

Previous wording

Interest on securitization trust debt increased by $3.7 million for the three months ended March 31, 2026, compared to the prior period. The average balance of securitization trust debt increased to $3,127.4 million for the three months ended March 31, 2026, compared to $2,861.9 million for the three months ended March 31, 2025. The annualized average rate on our securitization trust debt was 6.2% for the three months ended March 31, 2026, compared to 6.3% in the prior year period. For 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:

Current wording

Interest on securitization trust debt increased by $4.5 million for the three months ended June 30, 2026, compared to the prior period. The average balance of securitization trust debt increased to $3,272.1 million for the three months ended June 30, 2026, compared to $2,811.9 million for the three months ended June 30, 2025. The annualized average rate on our securitization trust debt was 6.1% for the three months ended June 30, 2026, compared to 6.5% in the prior year period. For 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:

Previous wording

Interest expense on subordinated renewable notes was $685,000 for the three months ended March 31, 2026. The average balance of the outstanding subordinated debt was $28.7 million for the three months March 31, 2026, compared to $26.9 million for the prior year period. The average yield of subordinated notes is 9.6% for both current and the prior period.

Current wording

Interest expense on subordinated renewable notes was $668,000 for the three months ended June 30, 2026. The average balance of the outstanding subordinated debt was $28.1 million for the three months June 30, 2026, compared to $28.0 million for the prior year period. The average yield of subordinated notes is 9.5% for the three months ended June 30, 2025, compared to 9.7% in the prior year period.

Previous wording

In June 2021, March 2024, March 20, 2025, and again on March 4, 2026 we completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, $65 million, and $50 million, respectively. Interest expense for these residual interest financings was $4.2 million for the three months ended March 31, 2026, compared to $2.7 million for the same period in 2025.

Current wording

In June 2021, March 2024, March 2025, and again in March 2026 we completed a securitization of residual interests from other previously issued securitizations in the amount of $50 million, $50 million, $65 million, and $50 million, respectively. Interest expense for these residual interest financings was $4.7 million for the three months ended June 30, 2026, compared to $4.2 million for the same period in 2025.

Previous wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commission based on volume of contract purchases. Sales expense increased by $641,000 to $6.6 million during the three months ended March 31, 2026, from $5.9 million for the same quarter in 2025. We purchased $533.2 million of new contracts during the three months ended March 31, 2026, compared to $451.2 million in the prior year period.

Current wording

Sales expenses consist primarily of commission-based compensation paid to our employee sales representatives. Our sales representatives earn a salary plus commission based on volume of contract purchases. Sales expense increased by $2.6 to $8.3 million during the three months ended June 30, 2026, from $5.7 million for the same quarter in 2025. We purchased $757.7 million of new contracts during the three months ended June 30, 2026, compared to $433.0 million in the prior year period.

Previous wording

Occupancy expenses were $1.5 million for the three months ending March 31, 2026, which is up from $1.4 million in the first quarter of 2025.

Current wording

Occupancy expenses were $1.5 million for the three months ending June 30, 2026, which is up from $1.4 million in the second quarter of 2025.

Previous wording

For the three months ended March 31, 2026, we recorded income tax expense of $2.5 million, representing a 31% effective tax rate. In the prior period, our income tax expense was $2.1 million, representing a 31% effective tax rate.

Current wording

For the three months ended June 30, 2026, we recorded income tax expense of $2.8 million, representing a 31% effective tax rate. In the prior period, our income tax expense was $2.2 million, representing a 31% effective tax rate.

Previous wording

Interest expense on warehouse credit line debt was $6.5 million for the three months ended March 31, 2026, and in the same period prior year period. The average balance of our warehouse debt was $276.0 million during the three months ended March 31, 2026, compared to $275.8 million for the same period in 2025. The annualized average rate on our credit line debt was 9.4% for the three months ended March 31, 2026, consistent with the same period in the prior year.

Current wording

Interest expense on warehouse credit line debt increased by $569,000 to $15.3 million for the six months ended June 30, 2026, compared to $14.7 million in the prior year period. The average balance of our warehouse debt was $361.3 million during the six months ended June 30, 2026, compared to $314.7 million for the same period in 2025. The annualized average rate on our credit line debt was 8.5% for the six months ended June 30, 2026, compared to 9.4% in the prior year period.

Previous wording

Depreciation and amortization expenses decreased to $225,000 compared to $249,000 in the previous year.

Current wording

Depreciation and amortization expenses decreased to $474,000 compared to $498,000 in the previous year.

Previous wording

We view these results as a confirmation of the effectiveness of our extension program. We consider accounts that have had extensions and were active or paid off as of March 31, 2026, to be successful. Successful extensions result in continued payments of interest and principal (including payment in full in many cases). Without the extension, however, the account may have defaulted, and we would have likely incurred a substantial loss and no additional interest revenue.

Current wording

We view these results as a confirmation of the effectiveness of our extension program. We consider accounts that have had extensions and were active or paid off as of June 30, 2026, to be successful. Successful extensions result in continued payments of interest and principal (including payment in full in many cases). Without extension, however, the account may have defaulted, and we would have likely incurred a substantial loss and no additional interest revenue.

Previous wording

Net cash provided by operating activities for the three-month period ended March 31, 2026 was $83.8 million, an increase of $9.9 million, compared to net cash provided by operating activities for the three-month period ended March 31, 2026 of $73.9 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 marks to finance receivables measured at fair value.

Current wording

Net cash provided by operating activities for the six-month period ended June 30, 2026 was $189.9 million, an increase of $61.6 million, compared to net cash provided by operating activities for the six-month period ended June 30, 2025 of $128.3 million. Net cash from operating activities is generally provided by net income from operations adjusted for significant non-cash items such as marks to finance receivables measured at fair value.

Previous wording

Net cash used in investing activities was $250.7 million for the three months ended March 31, 2026 compared to $194.1 million in the prior year period. Net cash used in investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were $524.9 million and $449.6 million during the first three months of 2026 and 2025, respectively.

Current wording

Net cash used in investing activities was $697.0 million for the six months ended June 30, 2026 compared to $360.8 million in the prior year period. Net cash used in investing activities generally relates to new purchases of automobile contracts net of principal payments and other proceeds received during the period. Purchases of finance receivables excluding acquisition fees were $1,266.6 million and $882.9 million during the first six months of 2026 and 2025, respectively.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2026 was $180.1 million compared to $166.3 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 three months of 2026, we issued $345.6 million in new securitization trust debt compared to $442.4 million for the same period in 2025. We repaid $340.2 million in securitization trust debt in the three months ended March 31, 2026 compared to repayments of securitization trust debt of $293.0 million in the prior year period. In the three months ended March 31, 2026, we had net advances on warehouse lines of credit of $141.5 million, compared to net repayments from warehouse lines of credit of $45.8 million in the prior year’s period.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2026 was $515.1 million compared to $255.3 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 six months of 2026, we issued $859.7 million in new securitization trust debt compared to $862.4 million for the same period in 2025. We repaid $715.1 million in securitization trust debt in the six months ended June 30, 2026 compared to repayments of securitization trust debt of $642.7 million in the prior year period. In the six months ended June 30, 2026, we had net advances on warehouse lines of credit of $354.4 million, compared to net repayments from warehouse lines of credit of $16.6 million in the prior year’s period.

Previous wording

We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital. As of March 31, 2026, we had unrestricted cash of $6.9 million and $178.5 million aggregate available borrowings under our three warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of March 31, 2026, we had approximately $5.3 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 three-month period ended March 31, 2026, we completed one securitizations aggregating $345.6 million of notes sold.

Current wording

We are and may in the future be limited in our ability to purchase automobile contracts due to limits on our capital. As of June 30, 2026, we had unrestricted cash of $7.5 million and $43.4 million aggregate available borrowings under our two warehouse credit facilities (assuming the availability of sufficient eligible collateral). As of June 30, 2026, we had approximately $20.9 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 six-month period ended June 30, 2026, we completed two securitizations aggregating $859.7 million of notes sold.

Previous wording

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.

Current wording

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 flow, 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.

Previous wording

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 March 31, 2026, we were in compliance with all such financial covenants.

Current wording

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 events of default were to be accompanied by acceleration of such other indebtedness. As of June 30, 2026, we were in compliance with all such financial covenants.

Previous wording

We currently have and will continue to have a substantial amount of outstanding indebtedness. At March 31, 2026, we had approximately $3,668.2 million of debt outstanding. Such debt consisted primarily of $2,992.2 million of securitization trust debt, and also included $467.1 million of warehouse lines of credit, $181.4 million of residual interest financing debt and $27.5 million in subordinated renewable notes.

Current wording

We currently have and will continue to have a substantial amount of outstanding indebtedness. At June 30, 2026, we had approximately $4,008.3 million of debt outstanding. Such debt consisted primarily of $3,131.1 million of securitization trust debt, and also included $679.9 million of warehouse lines of credit, $168.8 million of residual interest financing debt and $28.5 million in subordinated renewable notes.