Washington, D.C. 20549
A. Full title of the plan and the address of
the plan, if different
Consumer Portfolio Services, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant
to the plan and the
I. Financial Statements.
Financial statements and schedule prepared in
accordance with the financial reporting requirements of the Employee Retirement Income Security Act of 1974, together with the
report of independent registered public accounting firm thereon, are filed herewith.
All schedules omitted are not applicable
or are not required based on disclosure requirements of the Employee Retirement Income Security Act of 1974 and regulations issued
by the Department of Labor.
Notes to Financial Statements
December 31, 2015 and 2014
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(1)
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Description of the Plan
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The following description of the Consumer
Portfolio Services, Inc. (the “Plan Sponsor” or “CPS, Inc.”) 401(k) Plan (the “Plan”) provides
only general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
The Plan was established as a profit
sharing plan with a cash or deferred arrangement on January 1, 1994. The Plan was restated as of January 1, 1996 to permit
investment in the Plan Sponsor’s common stock without regard to Section 407(a) of the Employee Retirement Income Security
Act of 1974 (“ERISA”). Effective January 1, 2003, the Plan Sponsor adopted the MassMutual Life Insurance Company Flexinvest®
Prototype Non-Standardized 401(k) Profit Sharing Plan. During 2012, the Plan was amended to allow for automatic enrollment with
automatic deferral contributions of 3% of eligible compensation of employees eligible to participate in the Plan, unless otherwise
elected by such employees. During 2015, the Plan was amended to change the minimum participant loan amount to $1,000 and to provide
for a renegotiation of participant loan terms once during the life of a loan.
The Plan is a defined contribution
plan which provides retirement benefits for eligible employees of the Plan Sponsor. It is subject to the provisions of ERISA.
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(b)
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Administration of the Plan
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The Plan is administered by the
Human Resources Department (the “Plan Administrator”) of the Plan Sponsor. The Plan Administrator consults with
the benefits committee and other key management of the Plan Sponsor when managing the operations and the administration of the
Plan.
The Plan is operated under an agreement
which requires that MassMutual Retirement Services (MassMutual), as custodian and record-keeper, hold and distribute the funds
of the Plan in accordance with the text of the Plan and the instructions of the Plan Administrator or its designees.
Employees are eligible to participate
in the Plan after completing 90 days of service. In accordance with the Plan, participants may contribute up to 100% of their annual
compensation, after required deductions, such as those required by the Federal Insurance Contributions Act. Contributions are subject
to certain limitations as defined in the Plan agreement, as well as a maximum of $18,000 and $17,500 for the years ended December 31,
2015 and 2014, respectively, under the Internal Revenue Code (“IRC“) of 1986. Catch-up contributions (within the meaning
of Section 414(v) of the IRC) can also be made by participants who reach age 50 during the plan year. Participants are only permitted
to make catch-up contributions after they have already contributed the maximum amount for the year. The catch-up contribution limit
was $6,000 and $5,500 for 2015 and 2014, respectively. Participants may roll over into the Plan amounts representing distributions
from other qualified plans.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
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(1)
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Description of the Plan (continued)
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(c)
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Contributions (continued)
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The Plan Sponsor may make a discretionary
matching contribution equal to a discretionary amount of each participant’s pretax contributions up to a maximum of $1,500.
As of January 1, 2011, the Plan Sponsor suspended its discretionary match contribution, which was subsequently reinstated as of
June 1, 2014. Discretionary cash matching contributions were $838,155 and $642,744 for the years ended December 31, 2015 and 2014,
respectively.
Each participant’s account
is credited with the participant’s contributions, allocations of the Plan Sponsor’s matching contributions and investment
earnings and charged with an allocation of expenses and investment losses. Allocations are based on participant earnings or account
balances, as defined in the Plan agreement.
Participants are immediately vested
in their contributions plus actual earnings thereon. Vesting in the Plan Sponsor’s matching contributions plus actual earnings
thereon is based on years of continuous service. A participant vests at the rate of 20% after two years of credited service and
20% each year thereafter until 100% is reached after six years of credited service. Participants are also fully vested at death,
retirement and upon termination for disability.
The Plan offers various investment
options which are managed by several outside investment managers. Upon enrollment in the Plan, participants may direct their contributions
in any of the investment options offered at the time. Participants may change their investment options daily. Participants should
refer to the investment literature provided by the Plan Sponsor for a complete description of the investment options and for the
detailed composition of each investment fund.
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(g)
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Notes Receivable from Participants
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Participants may borrow from their
fund accounts. Such borrowings and repayments are treated as transfers from and to, respectively, the participant’s investment
funds. Borrowings are secured by the participant’s vested account balance and bear interest at a rate commensurate with local
prevailing rates as determined by the Plan Administrator. Loans are limited to the lesser of $50,000, reduced by the highest outstanding
loan balance during the preceding 12 months, or 50% of the participant’s vested account balance. A loan shall be repaid
within five years, unless it is used for the purchase of a primary residence.
Notes receivable from participants
are payable through payroll deductions in installments of principal plus interest at rates between 4.25% and 6.00%, with final
payments due between January 2016 and July 2029.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
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(1)
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Description of the Plan (continued)
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Upon termination of service, a participant
may elect to receive either a single lump sum payment in cash equal to the value of the vested interest in his or her account,
or a series of substantially equal annual or more frequent installments over a period not to exceed the participant’s life
expectancy. Benefits are recorded when paid.
In accordance with the Plan agreement,
forfeitures attributable to matching contributions must be applied first to reduce expenses related to the administration of the
Plan and then to reduce any employer contributions. As of December 31, 2015 and 2014, forfeited accounts totaled $22,228 and
$38,892 respectively.
Although it has not expressed any
intent to do so, the Plan Sponsor has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the
event of the Plan’s termination, participants will become 100% vested in their accounts.
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(2)
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Significant Accounting Policies
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The financial statements of the
Plan have been prepared on the accrual basis of accounting.
The Plan Administrator evaluated
subsequent events through June 28, 2016 the date the financial statements were available to be issued.
Publicly traded securities are carried
at fair value based on published market quotations. Shares of pooled separate accounts and registered investment companies are
valued at the net fair value of the underlying assets at year-end. Purchases and sales of investments are recorded on a trade-date
basis. Dividends are recorded on the ex-dividend date. Interest income is recorded on the accrual basis.
Realized gains and losses on investments
are based on the market value of the asset at the beginning of the year or at the time of purchase for assets purchased during
the year and the related fair value on the date investments are sold during the year.
In accordance with Generally Accepted
Accounting Principles (“GAAP”), investment contracts held by a defined contribution plan are required to be reported
at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits
of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount
participants would receive if they were to initiate permitted transactions under the terms of the Plan. In the event that the underlying
agreements in the Plan’s
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
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(2)
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Significant Accounting Policies (continued)
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(c)
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Investments (continued)
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investments in fully benefit-responsive
investment contracts are fully or partially terminated,
participants will receive the liquidation value instead of the contract value. The Plan Administrator does not anticipate the full
or partial termination of such agreements in the foreseeable future. As required by GAAP, the statements of net assets available
for benefits presents the fair value of the investment contracts, as well as the adjustment of the fully benefit-responsive investment
contracts from a fair value to contract value. The statements of changes in net assets available for benefits are prepared on a
contract value basis.
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(d)
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Notes Receivable from Participants
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Notes receivable from participants
are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded
as distributions based on the terms of the Plan agreement.
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(e)
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Administrative Expenses
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The Plan and the Plan Sponsor share
plan expenses. Certain direct investment expenses, such as record keeping fees, brokerage fees, loan, withdrawal or distribution
processing fees are deducted from participants’ accounts. During the years ended December 31, 2015 and 2014, $112,981 and
$37,040, respectively, in Plan investment and administrative expenses were paid through the use of forfeitures.
The Plan Administrator has made
a number of estimates and assumptions relating to the reporting of assets and liabilities to prepare these financial statements
in conformity with GAAP. Accordingly, actual results may differ from those estimates.
In accordance with GAAP, the Plan
uses a hierarchy for measuring the fair value of all financial assets and liabilities that are being measured and reported at fair
value on a recurring and non-recurring basis. Fair value is measured in levels, which are described in more detail below, and are
determined based on the observability and reliability of the assumptions used to determine fair value.
Level 1: Valuations for assets
and liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions
involving identical assets or liabilities.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
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(3)
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Investments (continued)
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Level 2: Valuations for assets
and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical
or comparable assets or liabilities.
Level 3: Valuations for assets
and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models,
and similar techniques, and not based on market exchange, dealer or broker traded transactions. These valuations incorporate certain
assumptions and projections in determining the fair value assigned to such assets or liabilities.
Investments in the Plan are measured
and reported at fair value on a recurring basis. The following tables show the balances of these assets based on their GAAP designated
levels:
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As of December 31, 2015
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Total
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Level 1
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Level 2
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Level 3
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|
|
|
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Registered investment companies
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$
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15,642,210
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$
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15,642,210
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|
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$
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–
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|
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$
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–
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Guaranteed interest account
|
|
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3,993,112
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|
|
|
–
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|
|
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–
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|
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3,993,112
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CPS, Inc. common stock
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|
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3,026,196
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|
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3,026,196
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|
|
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–
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|
|
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–
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Interest bearing cash
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|
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39,464
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|
|
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39,464
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|
|
|
–
|
|
|
|
–
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Total
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$
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22,700,982
|
|
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$
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18,707,870
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|
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$
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–
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|
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$
|
3,993,112
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|
|
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As of December 31, 2014
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Total
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|
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Level 1
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|
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Level 2
|
|
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Level 3
|
|
|
|
|
|
|
|
|
|
|
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Registered investment companies
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$
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14,443,311
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$
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14,443,311
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|
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$
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–
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$
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–
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Guaranteed interest account
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|
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4,049,421
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|
|
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–
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|
|
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–
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|
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4,049,421
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CPS, Inc. common stock
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4,120,400
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|
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4,120,400
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–
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|
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–
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Interest bearing cash
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111,834
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|
|
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111,834
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|
|
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–
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|
|
|
–
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Total
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$
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22,724,966
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$
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18,675,545
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|
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$
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–
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$
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4,049,421
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Registered
investment companies were valued at their daily closing price.
The fair value of the guaranteed
interest account was determined based on the liquidation value calculated using an actuarial formula as defined under the terms
of the contracts. The aforementioned actuarial formula takes into consideration the following factors: (i) the interest rate being
earned by investments underlying the guaranteed interest account determined without regard to capital gains and losses, (ii) the
assumed interest rate obtainable by MassMutual on new investments, and (iii) the asset flows of an investment with coupons and
maturity characteristics based upon the rates defined under the terms of the contracts.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
|
(3)
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Investments (continued)
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A reconciliation of the guaranteed
interest account for the years ended December 31, 2015 and 2014 is as follows:
Balance, December 31, 2013
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$
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3,902,793
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Purchases
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17,897,295
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Sales
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(18,036,413
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)
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Adjustment from contract value to fair value
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|
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243,721
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Interest
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104,963
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Fees
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(62,938
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)
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Balance, December 31, 2014
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|
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4,049,421
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Purchases
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571,615
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Sales
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(399,335
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)
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Adjustment from contract value to fair value
|
|
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(227,638
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)
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Interest
|
|
|
115,939
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Fees
|
|
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(116,890
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)
|
|
|
|
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Balance, December 31, 2015
|
|
$
|
3,993,112
|
|
Management may also be required,
from time to time, to measure certain other financial assets at fair value on a non-recurring basis in accordance with GAAP. During
the years ended December 31, 2015 and 2014, no other financial assets were measured at fair value on a non-recurring basis.
Because management did not
elect the fair value option for any non-financial assets or liabilities, there were no other assets or liabilities that were measured
at fair value during the years ended December 31, 2015 and 2014.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
|
(3)
|
Investments (continued)
|
The following presents the
fair value of investments that represent 5% or more of the Plan’s net assets available for plan benefits as of December 31:
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2015
|
|
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2014
|
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Investment:
|
|
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|
|
|
|
|
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CPS, Inc. Common Stock
|
|
$
|
3,026,196
|
|
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$
|
4,120,400
|
|
Guaranteed Interest Account
|
|
|
3,993,112
|
|
|
|
4,049,421
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|
Vanguard 500 Index Fund
|
|
|
3,277,571
|
|
|
|
3,309,791
|
|
Select Growth Opportunities (Sands/JSP)
|
|
|
1,542,079
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|
|
|
1,425,790
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|
Vanguard Balance Index Fund
|
|
|
1,279,165
|
|
|
|
1,117,291
|
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American Funds Balance Fund
|
|
|
1,540,469
|
|
|
|
*
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Other investments individually less than 5%
|
|
|
8,042,390
|
|
|
|
8,702,273
|
|
|
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$
|
22,700,982
|
|
|
$
|
22,724,966
|
|
* Investment did not constitute five percent or more for the applicable year
The average yield for the guaranteed
interest account was 2.88% and 2.64% for the years ended December 31, 2015 and 2014, respectively.
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(4)
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Risks and Uncertainties
|
The Plan provides for various investment
options in money market funds, pooled separate accounts, guaranteed interest accounts and the common stock of Consumer Portfolio
Services, Inc. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level
of uncertainty related to changes in value of investment securities, it is at least reasonably possible that changes in the various
risk factors could materially affect participants’ account balances and the amounts reported in the financial statements.
The Internal Revenue Service (“IRS”)
has determined and informed the Plan Sponsor by a letter dated February 7, 1996 that the Plan and related trust are designed in
accordance with applicable sections of the IRC and is, therefore, exempt from Federal income taxes. As described in Note 1, the
Plan has been amended since receiving the determination letter, including the adoption of the MassMutual Life Insurance Company
Flexinvest® Prototype Non-Standardized 401(k) Profit Sharing Plan. The IRS has determined and notified MassMutual Life Insurance
Company by a letter dated May 11, 2009 that the form of the prototype plan is acceptable under section 401 of the Code for use
by employers for the benefit of their employees. The Plan Administrator believes that the Plan is designed and is currently being
operated in compliance with the applicable requirements of the IRC. Accordingly, no provision for income taxes is included in the
accompanying financial statements.
CONSUMER PORTFOLIO SERVICES, INC. 401(K)
PLAN
Notes to Financial Statements
December 31, 2015 and 2014
Certain Plan investments are managed
by MassMutual. MassMutual is the custodian of these assets and provides record keeping services to the Plan and; therefore, these
transactions qualify as permitted party-in-interest transactions. The Plan Sponsor offers its common stock as an investment option
and performs administrative functions at no cost. These are also considered permitted party-in-interest transactions.
|
(7)
|
Reconciliation of Financial Statements to Form 5500
|
The information contained in the financial
statements does not agree to the information contained in the Form 5500 as of and for the years ended December 31, 2015 and 2014.
The differences are due to adjustments from fair value to contract value in the financial statements.
The following is a reconciliation
of net assets available for plan benefits per the financial statements to Form 5500:
|
|
As of December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Value of Guaranteed Interest Accounts per the financial statements
|
|
$
|
3,993,112
|
|
|
$
|
4,049,421
|
|
Adjustment from fair value to contract value for fully benefit-responsive investment contracts
|
|
|
(288,411
|
)
|
|
|
(516,049
|
)
|
Value of Guaranteed Investment Accounts per the Form 5500
|
|
$
|
3,704,701
|
|
|
$
|
3,533,372
|
|
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Schedule H, Line 4i – Schedule of Assets (Held at End of Year) – December 31, 2015