Company: CPSS
Filing Date: 2025-03-12
Form Type: 10-K
Source: 0001683168-25-001548
Chunk: 814

Company: CONSUMER PORTFOLIO SERVICES, INC.
Filing Date: 2025-03-12
Form: 10-K
Item: Item 4
Chunk 814
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 better than expected credit performance for these receivables. The allowance applies only to our finance
receivables originated through December 2017, which we refer to as our legacy portfolio. The legacy portfolio balance decreased
from $27.6 million on December 31, 2023 to $5.4 million on December 31, 2024. 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.

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. Sales expense increased
by $1.5 million to $22.8 million during the year ended December 31, 2024 and represented 6.2% of total operating expenses. We purchased
$1,681.9 million of new contracts during the year ended December 31, 2024 compared to $1,357.8 million in the prior year period.

Occupancy expenses were $5.6
million in 2024 which is down from $6.4 million in 2023.

Depreciation and amortization
expenses increased to $862,000 compared to $847,000 in the prior year.

For the year ended December
31, 2024, we recorded income tax expense of $8.2 million, representing a 30% effective tax rate. In the prior period, our income tax expense
was $15.6 million, also representing a 26% effective tax rate.

 44 

Liquidity and Capital Resources

Liquidity

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