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) August 17, 2016
| CONSUMER PORTFOLIO SERVICES, INC. |
| (Exact Name of Registrant as Specified in Charter) |
| CALIFORNIA | 1-14116 | 33-0459135 | ||
|
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
| 3800 Howard Hughes Parkway, Suite 1400, Las Vegas, NV 89169 |
| (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):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
ITEM 7.01 REGULATION FD DISCLOSURE
We are today making available one presentation consisting of 22 slides. A copy is attached as an exhibit. Although the exhibit is an update of similar presentations made available from time to time as an exhibit to a report on Form 8-K, we are not undertaking to update further any of the information that is contained in the attached presentation. The same presentation furnished as an exhibit to this report will be made available on our website, at this address:
http://ir.consumerportfolio.com/presentations.cfm
We routinely post important information, including news releases and reports to the U.S. Securities and Exchange Commission, on our website.
The information furnished in this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
Neither financial statements nor pro forma financial information are filed with this report.
One exhibit is attached:
| Exhibit Number | Description |
| 99.1 | Company Summary as of June 30, 2016 |
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: August 17, 2016 | By: /s/ Jeffrey P. Fritz |
|
Jeffrey P. Fritz Executive Vice President |
Exhibit 99.1
Investor Presentation As of June 30, 2016
2 » Consumer finance company focused on sub - prime auto market » Established in 1991. IPO in 1992 » Through June 30, 2016, over $13.0 billion in contracts purchased from automobile dealers » From 2002 – 2011, four mergers and acquisitions aggregating $822.3 million » Irvine, California operating headquarters; Branches in Nevada, Illinois, Virginia and Florida » Approximately 957 employees » $1,060.5 million contract purchases in 2015; $631.4 million in six months ended June 30, 2016 » $2.3 billion outstanding managed portfolio at June 30, 2016
3 $1,000 $1,200 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 Total Managed Portfolio ($ in mm) $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 Pretax Income ($ in mm ) $50 $100 $150 $200 $250 $300 $350 New Contract Purchases ($ in mm) (1) Equal to annualized pretax income as a percentage of the average managed portfolio. 0.0% 1.0% 2.0% 3.0% Return on Managed Assets (1)
4 CPS Systems Proprietary Applications Credit Decisioning AOA / DOA Underwriting Servicing and Collections System Auto Dialer –Workflow Management Receivables Accounting System Credit Application Servicing Activities –Five Branch Locations Decline or Approval / Pricing Credit Bureaus Underwriting Package Originations System Automobile Dealership Auto Consumers Shop -- Negotiate -- Apply for Credit
5 » Improvements in operating leverage offsetting lower contract APRs resulting in steady returns on managed portfolio. (1) As a percentage of the average managed portfolio. Percentages may not add due to rounding. June 30, 2016 June 30, 2015 December 31, 2015 December 31, 2014 Interest Income 18.4% 19.0% 18.9% 20.2% Servicing and Other Income 0.6% 0.8% 0.7% 1.0% Interest Expense (3.6%) (3.1%) (3.1%) (3.5%) Net Interest Margin 15.4% 16.7% 16.6% 17.6% Provision for Credit Losses (8.0%) (8.0%) (7.7%) (7.6%) Core Operating Expenses (5.1%) (5.3%) (5.5%) (6.3%) Pretax Return on Assets 2.2% 3.4% 3.3% 3.7% Quarter Ended Twelve Months Ended
U.S. Auto Finance Market $1.1 trillion in auto loans outstanding as of Q2 2016 (2) Approximately 44% of 2016 new auto loans are below “prime” (credit score less than 660) (1) Approximately $140 billion in new subprime auto loans in 2015 (2) Historically fragmented market – top 20 players represent 49% of outstandings (1) Few dominant long - term players Significant barriers to entry Other National Industry Players Santander Consumer USA GM Financial/AmeriCredit Capital One Chase Custom Wells Fargo Westlake Financial Credit Acceptance Corp. Exeter Finance Corp. 6 (1) According to Experian Automotive. (2) According to Equifax
» Purchasing contracts from dealers in 48 states across the U.S. » As of June 30, 2016 had 94 employee marketing representatives » Primarily factory franchised dealers 7 (1) Under the CPS programs for contracts purchased during first six months of 2016. 75% 25% Contract Purchases (1) Factory Franchised Independents
$284 $1,019 $1,283 $297 $9 $113 $552 $764 $945 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 ($ in millions) $631 First Half 2016 8 » Since inception through June 30, 2016 the Company has purchased over $13.0 billion in contracts » New contract purchases have ramped up significantly since financial crisis $1,061
$0 $500 $1,000 $1,500 $2,000 $2,500 ($ in millions) $2,254 $2,156 $1,664 $1,195 $756 $795 $898 $1,231 $1,644 $2,031 9 » Decline through 2010 was the result of the financial crisis
0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% Model Year 10 • 24% New • 76% Pre - owned • 40% Domestic • 60% Imports Primarily late model, pre - owned vehicles (1) Under the CPS programs for contracts purchased during first six months of 2016.
11 » CPS’s proprietary scoring models and risk - adjusted pricing result in program offerings covering a wide band of the credit spectrum (1) Under the CPS programs for contracts purchased during the first six months of 2016. (2) Contract APR as adjusted for fees charged (or paid) to dealer. Program (1) Avg. Yield (2) Avg. Amount Financed Avg. Annual Household Income Avg. Time on Job (years) Avg. FICO % of Purchases Preferred 12.9% $20,037 $81,829 8.8 600 3% Super Alpha 15.4% $20,336 $68,733 7.6 578 9% Alpha Plus 18.6% $18,652 $60,929 6.5 568 14% Alpha 20.4% $16,894 $49,448 5.3 564 45% Standard 22.3% $13,930 $42,499 3.6 566 14% Mercury / Delta 22.7% $13,811 $42,699 3.6 554 11% First Time Buyer 22.7% $12,553 $37,902 2.8 566 3% Bravo 23.0% $11,572 $40,467 2.9 541 1% Overall 20.0% $16,384 $50,891 5.1 565 100%
12 » Yields and credit metrics are significantly stronger today than at the end of the last cycle (1) (1) For new contracts purchased during the calendar quarter under the CPS programs. Averages are weighted by principal balance. (2) Contract APR as adjusted for fees charged (or paid) to dealer . (3) Wholesale loan - to - value ratio. Q2 2007 Q2 2008 Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 New Contract Purchases ($ in mm) $337.6 $75.0 $26.7 $60.8 $137.9 $203.8 $211.4 $270.0 $319.1 Avg. Yield (2) 18.7% 20.9% 24.6% 24.1% 22.8% 21.6% 20.6% 19.9% 20.0% Avg. FICO 524 532 577 567 560 560 568 568 565 Avg. Original Term (months) 65 64 62 63 63 63 65 67 68 Avg. LTV (3) 116.3% 113.4% 113.0% 113.0% 112.9% 113.7% 113.1% 115.3% 114.6%
• Average age 41 years • Average time in job 6 years • Average time in residence 6 years • Average credit history 11 years • Average household income $50,891 per year • Percentage of homeowners 22% Borrower : • Average amount financed $16,384 • Weighted average monthly payment $442 • Weighted average term 68 months • Weighted average APR 19.6% • Average LTV 114.7 % Contract: 13 (1) Under the CPS programs for contracts purchased during first half of 2016.
Contract Originations » Centralized contract originations at Irvine HQ » Maximizes control and efficiencies » Certain functions performed at Florida and Nevada offices » Proprietary auto - decisioning system » Makes initial credit decision on over 99% of incoming applications » Uses both criteria and proprietary scorecards in credit and pricing decisions » Pre - funding verification of employment, income and residency » Protects against potential fraud 14 Servicing » Geographically dispersed servicing centers enhance coverage and staffing flexibility and drive portfolio performance » Early contact on past due accounts; commencing as early as first day after due date » Early stage workload supplemented by automated intelligent predictive dialer » Workloads allocated based on specialization and behavioral scorecards, which enhances efficiencies
» $300 million in interim funding capacity through three c redit facilities » $100 million with Fortress; revolves to April 2017, due in April 2019 » $100 million with Citibank; revolves to August 2018, due in August 2019 » $100 million with Ares / Credit - Suisse; revolves to November 2017, due in November 2019 » Regular issuer of asset - backed securities, providing long - term matched funding » $11.2 billion in 71 deals from 1994 through July 2016. » Completed 21 senior subordinated securitizations since the beginning of 2011 » In July 2016 transaction, sold five tranches of rated bonds from triple “A” down to double “B” with a blended coupon of 4.48% » $7.5 million in residual interest financing, maturing in April 2018 » Total corporate debt of $15.3 million in subordinated unsecured retail notes 15
16 » Average of quarterly vintage cumulative net losses as of June 30, 2016 » Recent pool performance in line with business model economics 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 16.00% 18.00% 20.00% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 2006 2007 2010 2011 2012 2013 2014 2015
($ in millions) June 30, 2016 December 31, 2015 December 31, 2014 December 31, 2013 Assets Cash 15.8$ 19.3$ 17.9$ 22.1$ Restricted cash 115.3 106.1 175.4 132.3 Finance receivables, net of allowance 2,128.2 1,909.5 1,534.5 1,115.4 Finance receivables, measured at fair value - - 1.7 14.5 Residual interest in securitizations - - - 0.9 Deferred tax assets, net 40.4 37.6 42.9 59.2 Other assets 55.2 70.4 60.7 52.0 2,354.9$ 2,142.9$ 1,833.1$ 1,396.4$ Liabilities Accounts payable and accrued expenses 38.5$ 29.5$ 21.7$ 24.8$ Warehouse lines of credit 165.1 196.5 56.8 9.5 Debt secured by receivables measured at fair value - - 1.3 13.1 Residual interest financing 7.5 9.0 12.3 19.1 Securitization trust debt 1,956.6 1,731.6 1,598.5 1,177.6 Senior secured debt, related party - - - 38.6 Subordinated renewable notes 15.3 15.1 15.2 19.1 2,183.0 1,981.7 1,705.8 1,301.8 Shareholders' equity 171.9 161.2 127.3 94.6 2,354.9$ 2,142.9$ 1,833.1$ 1,396.4$ 17 (1) Numbers may not add due to rounding.
18 ($ in millions) June 30, 2016 ,June 30, 2015 December 31, 2015 December 31, 2014 December 31, 2013 Revenues . . . Interest income 101.7$ 84.9$ 350.0$ 286.7$ 231.3$ Servicing fees - 0.1 0.3 1.4 3.1 Other income 3.2 3.4 13.4 12.1 10.4 Gain on cancellation of debt - - - 11.0 104.9 88.4 363.7 300.2 255.8 Expenses Employee costs 15.7 13.1 59.6 50.1 43.0 General and administrative 12.8 10.7 42.4 39.3 32.7 Interest 19.7 13.7 57.7 50.4 58.2 Provision for credit losses 44.4 35.7 142.6 108.2 76.9 Provision for contingent liabilities - - - - 7.8 92.6 73.2 302.3 248.0 218.6 Pretax income 12.3 15.2 61.4 52.2 37.2 Income tax expense 5.0 6.7 26.7 22.7 16.2 Net income 7.3$ 8.5$ 34.7$ 29.5$ 21.0$ EPS (fully diluted) 0.25$ 0.27$ 1.10$ 0.92$ 0.67$ Years EndedThree Months Ended (1) Numbers may not add due to rounding.
19 (1) Revenues less interest expense and provision for credit losses. (2) Total expenses less provision for credit losses and interest expense. (3) Equal to annualized pretax income as a percentage of the average managed portfolio. ($ in millions) June 30, 2016 June 30, 2015 December 31, 2015 December 31, 2014 December 31, 2013 Auto contract purchases 319.1$ 269.9$ 1,060.5$ 944.9$ 764.1$ Total managed portfolio 2,253.7$ 1,822.2$ 2,031.1$ 1,643.9$ 1,231.4$ Risk-adjusted margin (1) 40.8$ 39.0$ 163.3$ 141.6$ 109.8$ Core operating expenses (2) $ amount 28.5$ 23.8$ 101.9$ 89.4$ 75.7$ % of avg. managed portfolio 5.1% 5.3% 5.5% 6.3% 7.0% Pretax return on managed assets (3) 2.2% 3.4% 3.3% 3.7% 3.4% Total delinquencies and repo inventory (30+ days past due) As a % of total owned portfolio 8.6% 7.5% 9.5% 7.2% 6.9% Annualized net charge-offs As a % of total owned portfolio 6.9% 6.6% 6.4% 5.8% 4.7% Three Months Ended Years Ended
» CPS has weathered two industry cycles to remain one of the few independent public auto finance companies » Nineteen consecutive quarters of profitability » Attractive industry fundamentals with fewer large competitors than last cycle » Consistent credit performance 20 » Growing portfolio enhances operating leverage through economies of scale » Opportunistic, successful acquisitions » Stable senior management team averaging 19 years of experience owns significant equity » CPSS currently trading at a discount to book value
Any person considering an investment in securities issued by CPS is urged to review the materials filed by CPS with the U . S . Securities and Exchange Commission ("Commission") . Such materials may be found by inquiring of the Commission‘s EDGAR search page (http : //www . sec . gov/edgar/searchedgar/companysearch . html) using CPS's ticker symbol, which is "CPSS . " Risk factors that should be considered are described in Item 1 A, “Risk Factors," of CPS's annual report on Form 10 - K, which report is on file with the Commission and available for review at the Commission's website . Such description of risk factors is incorporated herein by reference . 21
Information included in the preceding slides is believed to be accurate, but is not necessarily complete . Such information should be reviewed in its appropriate context . The implication that historical trends will continue in the future, or that past performance is indicative of future results, is disclaimed . To the extent that one reading the preceding material nevertheless makes such an inference, such inference would be a forward - looking statement, and would be subject to risks and uncertainties that could cause actual results to vary . Such risks include variable economic conditions, adverse portfolio performance (resulting, for example, from increased defaults by the underlying obligors), volatile wholesale values of collateral underlying CPS assets, reliance on warehouse financing and on the capital markets, fluctuating interest rates, increased competition, regulatory changes, the risk of obligor default inherent in sub - prime financing, and exposure to litigation . 22