Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 752

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 3
Chunk 752
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are included in our estimation of cash to be received with respect to receivables. In accordance with the fair value accounting standards,
credit losses are included in our computation of the appropriate level yield, therefore 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.

Allowance for Finance Credit Losses

In order to estimate an appropriate
allowance for losses likely incurred on finance receivables, we use a loss allowance methodology commonly referred to as “static
pooling,” which stratifies the finance receivable portfolio into separately identified pools based on their period of origination,
then uses historical performance of seasoned pools to estimate future losses on current pools. Historical loss experience is adjusted
as necessary for current economic conditions. We consider our portfolio of finance receivables to be relatively homogenous and consequently
we analyze credit performance primarily in the aggregate rather than stratification by any particular credit quality indicator. Using
analytical and formula driven techniques, we estimate an allowance for finance credit losses, which we believe is adequate for current
expected credit losses that can be reasonably estimated in our portfolio of finance receivable contracts. Net losses incurred on finance
receivables are charged to the allowance. We evaluate the adequacy of the allowance by examining current delinquencies, the characteristics
of the portfolio, the value of the underlying collateral and historical loss trends. As conditions change, our level of provisioning
and/or allowance may change.

     F-10 

CONSUMER PORTFOLIO SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Charge Off Policy

Delinquent contracts for which
the related financed vehicle has been repossessed are generally charged off at the earliest of (1) the month in which the proceeds from
the sale of the financed vehicle are received, (2) the month in which 90 days have passed from the date of