UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant ý
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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CONSUMER
PORTFOLIO SERVICES, INC.
(Name of Registrant as Specified In Its
Charter)
______________________________
(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
ý No fee
required.
o Fee computed
on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
CONSUMER PORTFOLIO SERVICES, INC.
3800 Howard Hughes Parkway, Las Vegas,
Nevada 89169
Phone: 949-753-6800
The annual meeting of the shareholders
of Consumer Portfolio Services, Inc. (the "Company") will be held at 10:00 a.m., local time, on Thursday, October
22, 2020 at the Company's Nevada office at 3800 Howard Hughes Parkway, Las Vegas, Nevada for the following purposes:
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To elect the Company's entire Board of Directors for a one-year term.
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To ratify the appointment of Crowe LLP as the Company's independent auditors for the fiscal year ending December 31, 2020.
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To approve an advisory resolution on executive compensation.
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To transact such other business as may properly come before the meeting.
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Only shareholders of record at the close of business on Friday,
September 18, 2020 are entitled to notice of and to vote at the meeting.
Whether or not you expect to attend the meeting in person, please
complete, date, and sign the enclosed proxy exactly as your name appears thereon and promptly return it in the envelope provided,
which requires no postage if mailed in the United States. Proxies may be revoked at any time and, if you attend the meeting in
person, your executed proxy will be returned to you upon request.
By Order of the Board of Directors
Mark Creatura, Secretary
Dated: September 24, 2020
Important Notice Regarding
the Availability of Proxy Materials for the Annual Meeting of Shareholders to be held on October 22, 2020. The Proxy
Statement and Annual Report to Shareholders for the fiscal year ended December 31, 2019 are available at www.consumerportfolio.com/AnnualMeeting2020.html
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES
YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO VOTE BY COMPLETING, SIGNING, DATING AND RETURNING
THE PROXY CARD IN THE PRE-ADDRESSED RETURN ENVELOPE PROVIDED. IF GIVEN, YOU MAY REVOKE YOUR PROXY BY FOLLOWING THE INSTRUCTIONS
IN THE PROXY STATEMENT AND ATTACHED PROXY CARD.
CONSUMER PORTFOLIO SERVICES, INC.
3800 Howard Hughes Parkway
Las Vegas, Nevada 89169
949-753-6800
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 22, 2020
_________
INTRODUCTION
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Consumer Portfolio Services, Inc. (the "Company" or "CPS") for use
at the annual meeting of the shareholders to be held at 10:00 A.M. local time on
Thursday, October 22, 2020 at the Company's office at 3800 Howard Hughes Parkway, Las Vegas, NV 89169, and at any adjournment thereof
(the "Annual Meeting").
All shares represented by properly executed proxies received
in time will be voted at the Annual Meeting and, where the manner of voting is specified on the proxy, will be voted in accordance
with such specifications. Any shareholder who executes and returns a proxy may revoke it at any time prior to the voting of the
proxy by giving written notice to the Secretary of the Company, by executing a later-dated proxy, or by attending the meeting and
giving oral notice of revocation to the Secretary of the Company.
The Board of Directors of the Company has fixed the close of
business on September 18, 2020, as the record date for determining the holders of outstanding shares of the Company's Common Stock,
without par value ("CPS Common Stock") entitled to notice of, and to vote at the Annual Meeting. On that date, there
were 22,504,868 shares of CPS Common Stock issued and outstanding. Each such share of CPS Common Stock is entitled to
one vote on all matters to be voted upon at the meeting, except that holders of CPS Common Stock have the right to cumulative voting
in the election of directors, as described herein under the heading "Voting of Shares."
The notice of the Annual Meeting, this proxy statement and the
form of proxy are first being mailed to shareholders of the Company on or about September 24, 2020. The Company will
pay the expenses incurred in connection with the solicitation of proxies. The proxies are being solicited principally
by mail. In addition, directors, officers and regular employees of the Company may solicit proxies personally or by telephone,
for which they will receive no payment other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to the beneficial owners of Common Stock of the Company
and will reimburse such persons for their expenses so incurred.
QUESTIONS AND ANSWERS ABOUT THIS PROXY STATEMENT AND ANNUAL
MEETING
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WHAT IS THIS PROXY STATEMENT AND WHY AM I RECEIVING
IT?
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You are receiving this proxy statement in connection
with an annual meeting of shareholders called by our Board of Directors in connection with soliciting shareholder votes for
the purpose of (i) electing the Company's entire Board of Directors for a one-year term; (ii) ratifying the appointment of
Crowe LLP as the Company's independent auditors for the fiscal year ending December 31, 2020; (iii) holding a non-binding
vote on executive compensation; and (iv) transacting such other business as may properly come before the annual meeting; in
each case, as more fully described in this proxy statement. You have been sent this proxy statement and the enclosed proxy
card because our Board of Directors is soliciting your proxy to vote at the annual meeting of shareholders called for the
purpose of voting on the foregoing matters.
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WHAT INFORMATION IS CONTAINED IN THIS PROXY STATEMENT?
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The information included in this proxy statement
relates to the proposals to be voted on at the annual meeting, the voting process, compensation of our directors and most
highly paid executive officers, and certain other required information.
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WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING,
AND WHAT VOTE IS REQUIRED TO APPROVE THE PROPOSALS?
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The Board of Directors of the Company has fixed
the close of business on September 18, 2020, as the record date (“Record Date”) for determining the holders of
outstanding shares of the Company's Common Stock, without par value ("CPS Common Stock") entitled to notice of, and to vote
at the Annual Meeting. On that date, there were 22,504,868 shares of CPS Common Stock issued and outstanding. Each such share
of CPS Common Stock is entitled to one vote on all matters to be voted upon at the meeting, except that holders of CPS Common
Stock have the right to cumulative voting in the election of directors, as described in this proxy statement under the heading
“Voting of Shares.” In order to approve each proposal, a quorum (a majority of outstanding shares of CPS Common
Stock) must be present and (other than with respect to election of directors) a majority of all of the votes cast on the proposal
at the Annual Meeting must be cast in favor of the proposal, which favorable votes cast must exceed 25% of the outstanding
shares. Directors are elected by plurality vote. Abstentions and broker non-votes will not be counted as “votes cast”
and will have no effect on the result of the vote, although they will count toward the presence of a quorum.
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HOW DOES THE BOARD OF DIRECTORS RECOMMEND THAT
I VOTE?
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Our Board of Directors recommends that you vote
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“FOR” each of the seven nominees for
election as directors (Proposal One)
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“FOR” the ratification of the appointment
of Crowe LLP as the Company's independent auditors for the fiscal year ending December 31, 2020 (Proposal Two)
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“FOR” the approval, by non-binding
vote, of executive compensation (Proposal Three)
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HOW MAY I VOTE ON THE PROPOSALS IF I OWN SHARES
IN MY OWN NAME?
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If you own your shares in your own name, you may
vote on the proposals presented in this proxy statement, whether or not you plan to attend the annual meeting, by completing,
signing and dating the accompanying proxy card and returning it in the enclosed postage-prepaid envelope. It is important
that you vote your shares whether or not you attend the meeting in person. Any proxy that is returned using the form of proxy
enclosed and which is not marked as to a particular item will be voted FOR election of the nominees for director named herein;
FOR the ratification of the appointment of Crowe LLP as the Company's independent auditors for the year ending December 31,
2020; FOR the approval, by non-binding vote, of executive compensation; and such proxy will also be deemed to grant discretionary
authority to vote upon any other matters properly coming before the meeting.
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HOW MAY I VOTE ON THE PROPOSALS IF MY SHARES ARE
HELD IN “STREET NAME” BY MY BROKER, BANK OR OTHER NOMINEE?
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If your shares are held in “street name”
through a broker, bank or other nominee, under certain circumstances the nominee may vote your shares. Brokerage firms have
authority to vote shares for which their customers do not provide voting instructions on certain “routine” matters.
The ratification of an accounting firm is an example of a routine matter. If you do not provide voting instructions to your
brokerage firm, the brokerage firm may either: (1) vote your shares on routine matters, or (2) leave your shares
unvoted. We encourage you to provide instructions to your brokerage firm by signing and returning your proxy. This ensures
your shares will be voted at the meeting. When a brokerage firm votes its customers’ unvoted shares on routine matters,
these shares are counted for purposes of establishing a quorum to conduct business at the meeting and determining the outcome
of the vote on routine matters.
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CAN I CHANGE MY MIND AND REVOKE MY PROXY?
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Yes. Any shareholder who executes and returns
a proxy may revoke it at any time prior to the voting of the proxy by giving written notice to the Secretary of the Company,
by executing a later-dated proxy, or by attending the meeting and giving oral notice of revocation to the Secretary of the
Company
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CAN I VOTE MY SHARES IN PERSON?
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Yes. The annual meeting is open to all holders
of CPS Common Stock as of the Record Date. To vote in person, you will need to attend the meeting and bring with you evidence
of your stock ownership. If your shares are registered in your name, you will need to bring valid identification. If your
shares are held in the name of your broker, bank or another nominee or you received your proxy materials electronically, you
will need to obtain and bring with you a “legal proxy” from your broker, bank or nominee, and bring evidence of
your stock ownership, together with valid identification.
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DO I HAVE DISSENTERS’ RIGHTS?
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No. There are no “dissenters’ rights”
applicable to any of the proposals presented in this proxy statement.
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WHO IS PAYING FOR THIS PROXY SOLICITATION?
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Our Board of Directors is making this solicitation,
and we will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition
to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic
communications by our directors, officers and employees, who will not receive any additional compensation for such solicitation
activities. We will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket
expenses for forwarding proxy and solicitation materials to shareholders.
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PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Nominations
The individuals named below have been nominated for election
as directors of the Company at the Annual Meeting, and each has agreed to serve as a director if elected. The entire board of directors
of the Company is elected annually. Directors serve until the next annual meeting of shareholders and until their successors
are duly elected and qualified.
The names of the nominees, their principal occupations, and
certain other information regarding them are set forth below. None of the nominees currently serves on the board of directors of
any other publicly-traded companies
Charles E. Bradley, Jr., 60, has been the President and
a director of the Company since its formation in March 1991, and was elected Chairman of the Board of Directors in July 2001. Mr.
Bradley has been the Company's Chief Executive Officer since January 1992. From April 1989 to November 1990, he served as Chief
Operating Officer of Barnard and Company, a private investment firm. From September 1987 to March 1989, Mr. Bradley, Jr. was an
associate of The Harding Group, a private investment banking firm. Having been with the Company since its inception, Mr. Bradley
brings comprehensive knowledge of the Company’s business, structure, history and culture to the Board and the Chairman position.
Chris A. Adams, 71, has been a director of the Company
since August 2007. Since 1982 he has been the owner and chief executive of Latrobe Pattern Company and K Castings Inc., which are
firms engaged in the business of fabricating metal parts. With his experience as chief executive of manufacturing companies, Mr.
Adams contributes to the Company’s Board significant organizational and operational management skills.
Louis M. Grasso, 74, has been a director of the Company
since October 2019. Mr. Grasso was the founder and majority owner of PFC Corporation until his retirement in November 2011, upon
sale of PFC’s portfolio of assets to Capstone Realty Advisors. Over a period of 35 years, PFC Corporation originated over
$1.8 billion of mortgage loans, and issued $1.8 billion of mortgage-backed securities. He brings to the Board knowledge and experience
bearing in particular on the Company’s strategies for meeting its capital requirements, and broad organizational and management
skills.
Brian J. Rayhill, 57, has been a director of the Company
since August 2006. Mr. Rayhill has been a practicing attorney in New York State since 1988. As an experienced advocate, counselor
and litigator, Mr. Rayhill brings legal knowledge and perspective to the Company’s Board.
William B. Roberts, 82, has been a director of the Company
since its formation in March 1991.Since 1981, he has been the President of Monmouth Capital Corp., an investment firm
that specializes in management buyouts. Having spent decades in the business of finance, Mr. Roberts brings to the Company’s
Board his perspective and judgment regarding means of financing its business.
Gregory S. Washer, 58, has been a director of the Company
since June 2007. He was the president and owner of Clean Fun Promotional Marketing, a promotional marketing company, from its founding
in 1986 through its sale in September 2014. He continued to act as president of Clean Fun through August 2017, and is now retired.
With his experience in promotions and marketing, Mr. Washer contributes to the Board significant organizational and operational
management skills, combined with a wealth of experience in promotion and marketing of services.
Daniel S. Wood, 61, has been a director of the Company
since July 2001. Mr. Wood was president of Carclo Technical Plastics, a manufacturer of custom injection moldings, from September
2000 until his retirement in April 2007. Previously, from 1988 to September 2000, he was the chief operating officer and co-owner
of Carrera Corporation, the predecessor to the business of Carclo Technical Plastics. As president of Carclo, Mr. Wood was responsible
for the overall operation of that company and for the quality and integrity of its financial statements. He brings to the Board
the knowledge and perspective useful in evaluating the Company’s financial statements, and broad organizational and management
skills.
The Board of Directors has established an Audit Committee,
a Compensation Committee, and a Nominating Committee. Each of these three committees operates under a written charter,
adopted by the Board of Directors. The charters are available on the Company’s website, www.consumerportfolio.com/charters.html.
The Board of Directors has concluded that each member of these three committees (every director other than Mr. Bradley, the
Company's chief executive officer), is independent in accordance with the director independence standards prescribed by
Nasdaq, and has determined that none of them have a material relationship with the Company that would impair their
independence from management or otherwise compromise the ability to act as an independent director.
The members of the Audit Committee are Mr. Wood (chairman),
Mr. Rayhill and Mr. Washer.
The Audit Committee is empowered by the Board of Directors to
review the financial books and records of the Company in consultation with the Company's accounting and auditing staff and its
independent auditors and to review with the accounting staff and independent auditors any questions that may arise with respect
to accounting and auditing policy and procedure.
The Board of Directors has further determined that Mr. Wood
has the qualifications and experience necessary to serve as an "audit committee financial expert" as such term is defined
in Item 407 of Regulation S-K promulgated by the SEC. Mr. Wood, as president of Carclo Technical Plastics, was responsible
for the preparation and evaluation of the audited financial statements of that company.
The members of the Compensation Committee are Mr. Adams (chairman),
Mr. Roberts, and Mr. Wood. This Committee makes determinations as to general levels of compensation for all employees of the Company
and the annual salary of each of the executive officers of the Company, and administers the Company's compensation plans. Those
plans include the Company's Executive Management Bonus Plan and the CPS 2006 Long-Term Equity Incentive Plan.
The members of the Nominating Committee are Mr. Rayhill (chairman),
Mr. Adams and Mr. Washer. Nominations for board positions are made on behalf of the Board of Directors by the nominating committee.
Because neither the Board of Directors nor its nominating committee has received recommendations from shareholders as to nominees,
the Board of Directors and the nominating committee believe that it is and remains appropriate to operate without a formal policy
with regard to any director candidates who may in the future be recommended by shareholders. The nominating committee would consider
such recommendations if received.
When considering a potential nominee, the nominating committee
considers the benefits to the Company of such nomination, based on the nominee's skills and experience related to managing a significant
business, the willingness and ability of the nominee to serve, and the nominee's character and reputation. The Company does not
have a policy regarding the consideration of diversity in identifying nominees for director.
Shareholders who wish to suggest individuals for possible future
consideration for board positions, or to otherwise communicate with the Board of Directors, should direct written correspondence
to the corporate secretary at the Company's principal executive offices, indicating whether the shareholder wishes to communicate
with the nominating committee or with the Board of Directors as a whole. The present policy of the Company is to forward all such
correspondence to the designated members of the Board of Directors. There have been no changes in the procedures regarding shareholder
recommendations in the past year.
Section 16(a) Beneficial Ownership Reporting Compliance
Directors, executive officers and holders of in excess of 10%
of the Company's common stock are required to file reports concerning their transactions in and holdings of equity securities of
the Company. Based on a review of reports filed by each such person, and inquiry of each regarding holdings and transactions, the
Company believes that all reports required with respect to the year 2019 were timely filed, except that the initial report of our
newly-elected director, Mr. Grasso, which reported holdings of zero, was filed late.
Meetings of the Board
The Board of Directors held four meetings and acted six times
by written consent during 2019. The Audit Committee met five times during 2019, including at least one meeting
per quarter to review the Company's financial statements, while the Compensation Committee met four times during 2019. The Nominating
Committee met three times during 2019. Each nominee attended at least 75% of the meetings of the Board of Directors and its committees
that such individual was eligible to attend in 2019. The Company does not have a policy of encouraging directors to attend or discouraging
directors from attending its annual meetings of shareholders. The chairman and chief executive officer, and no other directors,
attended last year’s annual meeting of shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE NOMINEES ABOVE.
PROPOSAL NO. 2 – RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors has appointed
the accounting firm of Crowe LLP ("Crowe") to be the Company's independent auditors for the year ending December 31,
2020. Crowe also performed the audit of the Company's financial statements for the years ended December 31, 2008 through 2019.
A proposal to ratify the Audit Committee’s appointment
of Crowe will be presented to shareholders at the Annual Meeting. If the shareholders do not ratify the selection of
Crowe at the Annual Meeting, the Audit Committee will consider selecting another firm of independent public accountants. Representatives
of Crowe are expected to be present at the Annual Meeting. Such representatives will have an opportunity to make a statement if
they desire to do so, and will be available to respond to appropriate questions from shareholders in attendance.
Fees Paid to Auditors
The following table sets forth the fees accrued or paid to the
Company’s independent registered public accounting firms for the years ended December 31, 2018 and 2019. Crowe has served
as the Company’s independent registered public accounting firm since February 2009, and reported on the Company’s financial
statements for the years ended December 31, 2008 through 2019.
Audit and Non-Audit Fees
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2019
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2018
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Audit Fees (1)
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$
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850,000
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$
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850,000
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Audit-Related Fees (2)
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188,550
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184,700
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Tax Fees (3)
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287,635
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345,550
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All Other Fees
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–
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TOTAL
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$
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1,326,185
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$
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1,380,250
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_________________________
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(1)
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Audit fees relate to professional services rendered in connection with the audit of the Company’s annual financial statements and internal control over financial reporting, quarterly review of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings.
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(2)
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Audit-related fees comprise fees for professional services that are reasonably related to the performance of the audit or review of the Company’s financial statements.
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The 2018 and 2019 tax fees represent services rendered in connection with preparation of state and federal tax returns for the Company and its subsidiaries.
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Audit Committee Supervision
of Principal Accountant
The Audit Committee acts pursuant to a written charter adopted
by the Board of Directors. Pursuant to the charter, the Audit Committee pre-approves the audit and permitted non-audit
fees to be paid to the independent auditor, and authorizes on behalf of the Company the payment of such fees, or refuses such authorization.
The Audit Committee has delegated to its chairman and its vice-chairman the authority to approve performance of services on an
interim basis. In the fiscal years ended December 31, 2018 and December 31, 2019, all services for which audit fees or audit related
fees were paid were preapproved by the Audit Committee as a whole, or pursuant to such delegated authority.
In the course of its meetings, the Audit Committee has considered
whether the provision of the non-audit fees outlined above is compatible with maintaining the independence of the respective audit
firms, and has concluded that such independence is not and was not impaired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"FOR" RATIFICATION OF THE APPOINTMENT OF CROWE LLP.
PROPOSAL NO. 3 – NON-BINDING VOTE
ON EXECUTIVE COMPENSATION
General
The Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010 (the “Dodd-Frank Act”) and Section 14A of the Securities Exchange Act enable the shareholders to vote to approve,
on an advisory or non-binding basis, the compensation of the Company’s named executive officers as disclosed in accordance
with the SEC’s rules in the “Executive Compensation” section of this proxy statement beginning on page
9, below. This proposal, commonly known as a “say-on-pay” proposal, gives the shareholders the opportunity to express
their views on the Company’s named executive officers’ compensation as a whole. This vote is not intended to address
any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named
executive officers and the philosophy, policies and practices described in this proxy statement. The Company’s current policy
is to seek such say-on-pay votes annually, at every regular meeting of shareholders.
The say-on-pay vote is advisory, and therefore not binding on
the Company, the Compensation Committee or the Board of Directors. The say-on-pay vote will, however, provide information to the
board and the Compensation Committee regarding investor sentiment about our executive compensation philosophy, policies and practices,
which the Compensation Committee will be able to consider when determining executive compensation for the remainder of the current
fiscal year and beyond. The Board of Directors and its Compensation Committee value the opinions of the shareholders; accordingly,
to the extent there is any significant vote against the named executive officer compensation as disclosed in this proxy statement,
the Compensation Committee will consider the shareholders’ concerns and evaluate whether any actions are necessary to address
those concerns.
Summary of 2019 Executive
Compensation Program
Following is a summary of some of the key points of our 2019
executive compensation program:
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It is simple, comprising base salary, an annual cash bonus pursuant to an incentive plan, and long-term equity incentives in the form of stock options.
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The Compensation Committee of the Board of Directors controls all portions of the compensation payable to executive officers.
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That committee has from time to time exercised its discretion to reduce cash incentives otherwise payable under the bonus plan.
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See the “Executive Compensation” section
beginning on page 9, below, for more information.
We believe that the information provided above and within the
Executive Compensation section of this proxy statement demonstrates that our executive compensation program was designed appropriately
and is working to ensure management’s interests are aligned with our shareholders’ interests to support long-term value
creation. We also believe the compensation paid to our executive officers during 2019 was appropriate in light of our financial
performance.
Accordingly, we ask that our shareholders vote “FOR”
the following resolution, which will be presented at the Annual Meeting:
“RESOLVED, that the Company’s shareholders
approve, on an advisory basis, the compensation of the named executive officers as disclosed in the Company’s Proxy Statement
for the 2020 Annual Meeting of Shareholders pursuant to the compensation disclosure rules of the Securities and Exchange Commission,
including the compensation tables and the other related disclosure.”
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION.
INFORMATION REGARDING THE COMPANY
Management Structure
The board of directors is responsible for overseeing the management
of the Company. Its oversight is aimed at seeing to it that the company’s business is managed to meet our goals, and that
the interests of the shareholders are served.
Charles E. Bradley currently serves as both the chairman of
the board and our chief executive officer, and is the only member of our board who is not independent of the Company. Largely because
of the small number of directors (seven members in total), our board has chosen not to designate any individual formally as the
lead independent director. Each director retains his full oversight responsibility.
Our board structure supports the independence of our non-management
directors. Our audit committee, compensation committee and nominating committee are each composed solely of independent directors.
Our bylaws provide that any two directors have the authority to call meetings of the board of directors, as do specified officers,
including the president and the secretary. To enhance the possible use of that authority by independent directors, the corporate
secretary is under standing instructions to call a meeting at the instance of any one director.
The board believes that combining the chairman and chief executive
officer positions is currently the most effective leadership structure given Mr. Bradley’s in-depth knowledge of our business
and industry and his demonstrated ability to formulate and implement strategic initiatives. Mr. Bradley is continuously involved
in developing and implementing our strategies, working closely with the company’s other senior executives to seek continued
disciplined growth and excellence in operations. His close involvement in management places Mr. Bradley in the best position to
decide which business issues require consideration by the independent directors of the board. In addition, having a combined chairman
and chief executive officer enables us to speak with a unified voice to shareholders, customers and others concerned with our company.
The board believes that combining the chief executive and chairman roles, as part of a governance structure that includes oversight
of management responsibilities by independent directors, provides the preferred system for meeting the requirement that the Company
be managed in the best interest of our shareholders.
Risk Oversight
The board’s overall responsibility for directing the management
of the company includes risk oversight. The risk oversight function is performed at the board level, and by the Audit and Compensation
Committees.
The board of directors as a whole in its regular meetings discusses
and considers the risk inherent in the existing business of the Company and in proposed initiatives. Because the Company’s
business consists of extending consumer credit to individuals believed to be of higher risk than others (sub-prime credit), the
assessment of the risk assumed in such extensions of credit is a primary consideration on the part of the board. Risk oversight
is also a key function of the Audit and Compensation Committees.
The principal risk management function performed by the Audit
Committee is the ongoing assessment of the credit estimates and allowances periodically recorded in the Company’s books.
The committee reviews that assessment regularly. Other risk assessments performed by the Audit Committee include assessments of
contingent liabilities, and of other reserves and allowances.
The principal risk management functions performed by the Compensation
Committee are its setting and evaluation of objectives for the chief executive officer, in connection with its administration of
the executive management bonus plan. The committee recognizes that the company’s business of extending subprime credit inherently
includes a conflict between growing the business and managing the risk of credit losses: one means to increase the company’s
business is to offer credit on terms that are priced too low for the risk assumed. The Compensation Committee manages that risk
by insisting that objectives to grow the business are qualified by a mandate that credit quality be maintained at appropriate levels.
To some extent, such risk management is shared with the Audit Committee, which performs the primary oversight of whether credit
risk assumed is reflected with adequate allowances in the company’s financial statements.
Code of Ethics
The Company has adopted a Code of Ethics for Senior Financial
Officers, which applies to the Company's chief executive officer, chief financial officer, controller and others. A copy of the
Code of Ethics may be obtained at no charge by written request to the Corporate Secretary at the Company's principal executive
offices.
EXECUTIVE COMPENSATION
Compensation Committee
Report
The Compensation Committee has reviewed and discussed with CPS
management the Compensation Discussion and Analysis contained in this report. Based on such review and discussions and
relying thereon, we have recommended to the Company's Board of Directors that the Compensation Discussion and Analysis set forth
below be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019.
THE COMPENSATION COMMITTEE
Chris A. Adams
(chairman) William B. Roberts Daniel
S. Wood
Compensation Discussion
and Analysis
2019 Say-on-Pay Advisory Vote Outcome
The Compensation Committee annually considers the results of
the most recent advisory vote by shareholders to approve executive officer compensation. In the 2019 advisory vote, a majority
of the voted shares (56%) approved the compensation of our named executive officers. The Compensation Committee has noted the substantial
negative vote, but has determined to retain the existing design, purposes and structure of our executive compensation programs.
The Compensation Committee will continue to consider the results from future shareholder advisory votes regarding executive officer
compensation in its future administration of executive compensation.
Compensation Objectives
The Company's objectives with respect to compensation are several.
The significant objectives are to cause compensation (i) to be sufficient in total amount to provide reasonable assurance of retaining
key executives, (ii) to include a significant contingent component, so as to provide strong incentives to meet designated Company
objectives, and (iii) to include a significant component tied to the price of the Common Stock, so as to align management's incentives
with shareholder interests. The compensation committee ("Committee") of the Company's Board of Directors is charged with
administering the Company’s compensation plans to meet those objectives. To the extent that elements of compensation
would not advance such objectives, or would do so less effectively than would other elements, the Committee seeks to avoid paying
compensation in those forms.
Role of the Compensation Committee and the chief executive
officer
Our Board of Directors has authorized the Compensation Committee,
which is composed solely of independent directors, to make all decisions regarding executive compensation, including administration
of our compensation plans. In that regard, the Compensation Committee:
|
·
|
Reviews and discusses with management the factors underlying our compensation policies and decisions, including overall compensation objectives;
|
|
·
|
Reviews and approves all company goals and objectives (both financial and non-financial) relevant to the compensation of the chief executive officer;
|
|
·
|
Evaluates, together with the other independent directors, the performance of the chief executive officer in light of these goals and objectives and that individual’s overall effectiveness;
|
|
·
|
Fixes and approves directors each element of the compensation of the chief executive officer;
|
|
·
|
Reviews the performance evaluations of all other members of executive management (the chief executive officer prepares and presents to the Compensation Committee the performance evaluations of the other executive officers);
|
|
·
|
Reviews and approves each element of compensation, as well as the terms and conditions of employment, of those other executive officers;
|
|
·
|
Grants awards under our equity compensation plans and oversees the administration of those plans; and
|
|
·
|
Reviews the costs and structure of our key employee benefit and fringe-benefit plans and programs.
|
The Compensation Committee is authorized to form subcommittee(s)
and to retain experts and consultants to assist in the discharge of its responsibilities. To date it has not done so.
The chief executive officer, who attends meetings of the Compensation
Committee by invitation of the Committee’s chairman, assists the Committee in determining the compensation of our other executive
officers by, among other things:
|
·
|
Proposing annual merit increases to the base salaries of the other executive officers;
|
|
·
|
Establishing annual individual performance objectives for the other executive officers and evaluating their performance against such objectives (the Committee reviews these performance evaluations); and
|
|
·
|
Making recommendations, from time to time, for special stock option and restricted stock grants (e.g., for motivational or retention purposes) to other executive officers.
|
The other executive officers do not have a role in determining
their own compensation, other than to discuss their annual individual performance objectives and results achieved with the chief
executive officer.
Our Overall Approach
The Committee has put into place a compensation system consisting
of three key components: base salary, an annual cash bonus pursuant to an incentive plan, and long-term equity incentives in the
form of stock options.
The table below provides comparative information regarding the
components of our year 2019 executive compensation program. We are applying the same elements in our executive compensation program
for the year 2020.
Element
|
Form
|
Objectives and Basis
|
Base Salary
|
Cash
|
·
|
Attract and
retain high quality personnel
|
|
|
·
|
Targeted to be superior to compensation offered by our competitors
|
|
|
|
|
Annual Incentive Bonus
|
Cash
|
·
|
Achieve objectives
set annually
|
|
|
·
|
Annual bonus amount is set and computed as a percentage of base salary
|
|
|
·
|
Actual payout determined by Company and individual performance
|
|
|
·
|
Target total cash (base
salary + target bonus) designed to be superior to compensation offered by our competitors
|
|
|
|
|
Long-Term Incentive
|
Stock
|
·
|
Align interests
of executives with those of shareholders;
|
Compensation
|
options
|
·
|
Target long-term incentive award size designed to retain executives through long-term vesting and the potential for wealth
accumulation, contingent on benefit to the shareholders
|
The Committee has from time to time considered providing additional
elements of executive compensation. It has considered elements such as restricted stock awards, restricted stock units, compensation
contingent on a change in control, defined benefit pension plans, deferred cash compensation, and supplemental retirement plans
(supplemental in the sense that they exceed the limits for tax advantaged treatment). To date, the Committee has elected not to
pay compensation in such forms, having determined that the Company's objectives are better met by one or more of the elements of
compensation that it does pay.
Regarding restricted stock and restricted stock units, the Committee
has noted that any form of equity equivalent to or closely tied to common stock does serve to meet the objective of aligning officers'
personal interest with that of the shareholders generally. The Committee believes, however, that the objective is better met by
grants of stock options than by grants of share equivalents, because recipients of the grants will face the same degree of variance
in results at a lesser cost to the Company, when option grants are compared to grants of restricted stock units. Further, unlike
restricted stock, option grants will not provide a reward to the holder absent an improvement over time in the Company’s
stock price. The Committee has elected not to provide material perquisites as compensation, having determined that cash is a better
medium of exchange.
Regarding compensation that would be payable contingent on a
change in control of the Company, the Committee believes that there are certain legitimate objectives to be met by such contingent
compensation. As of the date of this proxy statement, however, no such contingent compensation plans are in place. Regarding defined
benefit pension plans, deferred cash compensation and supplemental retirement plans, the Committee believes that the Company's
retention objective is better met by straight cash payments, whether in the form of base salary or in the form of bonus compensation.
In particular with respect to plans for deferred compensation, the Committee believes those make sense for the Company and for
the recipient only on the basis of assumptions regarding future tax rates payable by each. Having no assurance that such assumptions
would be correct, the Committee has chosen not to put into place any special deferred compensation programs for the company’s
executive officers. Those officers do participate in a company-sponsored tax-deferred savings plan, commonly known as a 401(k)
plan, on the same terms available to company employees generally.
The Committee may in the future revisit its conclusions as to
any of the components discussed above, or may consider other forms of compensation.
The Base Salary Element
With respect to the retention objective, the Committee considers
an executive's base salary to be the most critical component. Acting primarily on the basis of recommendations of the
chief executive officer, the Committee determines whether to adjust other officers' base salaries annually, with typical adjustments
ranging from zero (applicable to most of the Company’s executive officers from 2017 to the present) to as much as a 10% increase
from the prior year's rate. Where exceptional circumstances apply, such as recruitment of a new executive officer, a
promotion to executive officer status or a special need to retain an individual officer, the chief executive officer may recommend,
and the Committee may approve, a larger increase.
The Company's general approach in setting the annual compensation
of its named executive officers is to set those officers’ base compensation by reference to their base rates for the preceding
year. During the year ended December 2019, the Company's chief executive officer, Charles E. Bradley, Jr., received $995,000 in
base salary. In setting that rate in the first quarter of 2019, the Committee considered the base salary rate that the Company
had paid in the prior year ($995,000), the desirability of ensuring retention of the services of the Company's incumbent chief
executive officer, the Company’s financial performance, and the levels of chief executive officer compensation prevailing
among other financial services companies. The Committee considered whether to adjust officers’ base compensation for 2019,
and determined not to increase the base rate for the chief executive officer or the other named executive officers.
The Annual Incentive Bonus (EMB) element
To encourage executive officers and key management personnel
to exercise their best efforts and management skills toward causing the Company to meet its overall objective, and toward achieving
designated specific individual objectives, the Company has implemented an Executive Management Bonus Plan, with annual payouts.
Under the Company's bonus plan as applied to the year ended December 2019, the Company’s two executive vice presidents (each
of whom is among the named executive officers) were eligible to receive a cash bonus of up to 160% of their base salaries, and
the Company’s senior vice presidents (two of whom is among the named executive officers) were eligible to receive a cash
bonus of up to 120% of their base salaries. The chief executive officer was eligible to receive a cash bonus of up to 600% of
his base salary. The implementation of this element for the year 2019 is discussed below.
The Long-Term Incentive Compensation Element
The Committee also awards incentive and non-qualified stock
options under the Company's stock option plans. Such awards are designed to assist in the retention of key executives and management
personnel and to create an incentive to create shareholder value over a sustained period of time. The Company believes that stock
options are a valuable tool in compensating and retaining employees. During the year ended December 31, 2019, the Committee granted
stock options to the Company's executive officers. All such grants were awarded in August 2019, and all carry exercise prices equal
to the market price for the Company's common stock at the date of grant. The terms of such options are described below, under the
caption "Grants of Plan-Based Awards in Last Fiscal Year." The numbers of shares made subject to each of the option grants
were based on various factors relating to the responsibilities of the individual officers and to the extent of previous grants
to such individuals.
Because the exercise price of all options granted is equal to
or above the fair market value of the Company's common stock on the date of grant, the option holders may realize value only if
the stock price appreciates from the price on the date the options were granted. This design is intended to focus executives on
the enhancement of shareholder value over the long term.
Other Elements
The Company also maintains certain broad-based employee benefit
plans, such as medical and dental insurance, and a qualified defined contribution retirement savings plan (401(k) plan), in which
executive officers are permitted to participate. Such officers participate on the same terms as non-executive personnel who meet
applicable eligibility criteria, and are subject to any legal limitations on the amounts that may be contributed or the benefits
that may be payable under the plans. The Company does not maintain any form of defined benefit pension or retirement plan in which
executive officers may participate, nor does it maintain any form of supplemental retirement savings or supplemental deferred compensation
plan.
Exercise of Discretion
In exercising its discretion as to the level of executive compensation
and its components, the Committee considers a number of factors. Members of the Committee conduct informal surveys of compensation
paid to comparable executives within and without the consumer finance industry. The Committee finds these data useful primarily
in evaluating the overall level of compensation paid or to be paid to the Company's executive officers. The Committee noted that
the Company met and exceeded its budget objectives for the year. Operational factors considered included individual and group management
goals; indicators of the performance and credit quality of the Company's servicing portfolio, including levels of delinquencies
and charge-offs; and indicators of successful management of personnel, including employee stability. All of such factors are assessed
with reference to the judgment of the Committee as to the degree of difficulty of achieving desired outcomes. With respect to payment
of annual bonuses and grants of stock options, the Committee also takes note of factors relating to the degree of the Company's
success over the most recent year.
Specific Objectives and Evaluation
In the first quarter of 2019 the compensation committee designated
specific objectives with respect to the chief executive officer to be accomplished within the year 2019, and fixed weights to be
associated with each such objective. The chief executive officer proposed to the committee specific annual objectives with respect
to each other executive officer of the company, which the committee, after making certain modifications, approved. These objectives
and the Committee’s administration of the annual incentive bonus element of compensation are discussed in detail below, under
the heading “ - Grants of Plan-Based Awards in Last Fiscal Year - Executive Management Bonus Plan.”
Grants of Options
The Committee's award of stock options to the Company's officers
in August 2019 included option grants to the chief executive officer and the other named executive officers. In determining the
appropriate level of such grant, the Committee considered the long-term performance of the chief executive officer and the desirability
of providing significant incentive for future performance, as well as the desirability of ensuring that officer's continued retention
by the Company, and the various factors noted above with respect to option grants generally. These grants and the Committee’s
administration of the long-term incentive element of compensation are discussed in detail below, under the heading “-Grants
of Plan-Based Awards in Last Fiscal Year – Equity Incentives.”
Stock Ownership, Hedging and Pledging.
Our board of directors and compensation committee have considered
whether to establish a minimum stock ownership goal for members of our senior management. We have elected not to do so, considering
that such a policy would either be strict and mandatory, in which case it would undermine the compensatory objectives of our equity
compensation plans, or would be merely hortatory, in which case it could be expected to have little effect. We’ve also noted
that the multiyear vesting terms of the equity incentives granted under our plans have the effect of aligning our executives’
individual personal financial incentives with the future price performance of the Company’s stock.
As part of our comprehensive compliance policy, we remind all
company executive officers of the mandatory legal prohibition on selling short company shares. We also prohibit company executive
officers from entering into transactions that would have the effect of causing those individuals to benefit from a decline in the
price of the company stock, such as the purchase of “put” options. We prohibit such “hedging” transactions
but we do not find it appropriate to prohibit our executive officers from pledging their shares of company stock as security for
a loan. We believe that the beneficial incentives of owning company stock remain substantially the same with or without such a
pledge.
Summary of Compensation
The following table summarizes all compensation earned during
the three fiscal years ended December 31, 2019 by the Company's chief executive officer, its chief financial officer, and the other
three most highly compensated individuals (such five individuals, the "named executive officers") who were serving in
such position or as executive officers at any time in 2019. It lists their names, the principal positions in which they served
in those years, and each component of compensation paid with respect to those years.
Summary
Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
|
|
|
Non-Equity
Incentive
Plan
Compensation
|
|
|
Option
Awards (1
|
|
|
All Other
Compensation (2)
|
|
|
Total
|
|
Charles E. Bradley, Jr.
|
|
2019
|
|
$
|
995,000
|
|
|
$
|
2,600,000
|
|
|
$
|
334,290
|
|
|
$
|
480
|
|
|
|
3,929,770
|
|
President & Chief
|
|
2018
|
|
|
995,000
|
|
|
|
2,700,000
|
|
|
|
327,000
|
|
|
|
600
|
|
|
|
4,022,600
|
|
Executive Officer
|
|
2017
|
|
|
995,000
|
|
|
|
2,850,000
|
|
|
|
402,000
|
|
|
|
600
|
|
|
|
4,247,600
|
|
Jeffrey P Fritz
|
|
2019
|
|
|
411,000
|
|
|
|
233,000
|
|
|
|
100,287
|
|
|
|
480
|
|
|
|
744,767
|
|
Executive Vice President
|
|
2018
|
|
|
411,000
|
|
|
|
452,000
|
|
|
|
98,100
|
|
|
|
600
|
|
|
|
961,700
|
|
& Chief Financial Officer
|
|
2017
|
|
|
411,000
|
|
|
|
417,000
|
|
|
|
120,600
|
|
|
|
600
|
|
|
|
949,200
|
|
Michael T. Lavin
|
|
2019
|
|
|
411,000
|
|
|
|
461,000
|
|
|
|
100,287
|
|
|
|
480
|
|
|
|
972,767
|
|
Executive Vice President
|
|
2018
|
|
|
411,000
|
|
|
|
506,000
|
|
|
|
98,100
|
|
|
|
600
|
|
|
|
1,015,700
|
|
& Chief Operating Officer
|
|
2017
|
|
|
411,000
|
|
|
|
496,000
|
|
|
|
120,600
|
|
|
|
600
|
|
|
|
1,028,200
|
|
Teri L. Robinson
|
|
2019
|
|
|
368,000
|
|
|
|
328,000
|
|
|
|
66,858
|
|
|
|
480
|
|
|
|
763,338
|
|
Senior Vice President
|
|
2018
|
|
|
368,000
|
|
|
|
354,000
|
|
|
|
65,400
|
|
|
|
600
|
|
|
|
788,000
|
|
- Originations
|
|
2017
|
|
|
368,000
|
|
|
|
341,000
|
|
|
|
80,400
|
|
|
|
600
|
|
|
|
790,000
|
|
Laurie A. Straten
|
|
2019
|
|
|
362,000
|
|
|
|
328,000
|
|
|
|
66,858
|
|
|
|
480
|
|
|
|
757,338
|
|
Senior Vice President
|
|
2018
|
|
|
362,000
|
|
|
|
340,000
|
|
|
|
65,400
|
|
|
|
600
|
|
|
|
768,000
|
|
- Servicing
|
|
2017
|
|
|
362,000
|
|
|
|
339,375
|
|
|
|
80,400
|
|
|
|
600
|
|
|
|
782,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents the dollar value of accrued for financial accounting purposes in connection with the grant of such options, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718 and SFAS 123R. Value was estimated using a Black-Scholes model for the year 2019, and using a binomial option pricing model for 2018 and 2017. For the year 2019 the weighted average fair value per option was $1.11, based on assumptions of 4.11 years expected life, expected volatility of 37.13%, and a risk-free rate of 1.53%. For the year 2018 the weighted average fair value per option was $1.09, based on assumptions of 4.11 years expected life, expected volatility of 33.93%, and a risk-free rate of 2.75%. For the year 2017 the weighted average fair value per option was $1.40, based on assumptions of 4.11 years expected life, expected volatility of 51.23%, and a risk-free rate of 1.10%. In all cases, we assumed a dividend yield of 0.0%.
|
|
(2)
|
Amounts in this column represent premiums paid by the Company for group life insurance.
|
Grants of Plan-Based
Awards in Last Fiscal Year
Equity Incentives
In the year ended December 31, 2019, we did not grant any stock
awards or stock appreciation rights to any of our named executive officers. We granted options to substantially all of our management
level employees on August 8, 2019. The option grants noted in the tables above and below were awarded to the named executive officers
as part of those grants. We also granted awards under our Executive Management Bonus Plan, which were evaluated after the end of
the year. The amounts paid are shown in the table above (Summary Compensation Table) as “Non-Equity Incentive Plan Compensation.”
In the August 2019 grant, the chief executive officer received
an option to purchase 300,000 shares of the Company's common stock at the market closing price ($3.53 per share) on the date of
grant, with such right to purchase to become exercisable in increments of 25% on each of the first through fourth anniversaries
of the grant date, and to expire on the seventh anniversary. Each of the other executive officers of the Company received a grant
at that time on the same terms. Mr. Fritz and Mr. Lavin received such a grant with respect to 90,000 shares, and the other executive
officers of the Company each received such a grant with respect to 60,000 shares.
The table below provides information regarding the awards granted
to the named executive officers in 2019.
Grants of Plan-Based Awards
|
|
Estimated
future payouts under non-
equity incentive plan awards
|
|
|
|
Estimated
future payouts under
equity
incentive plan awards
|
|
Name
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
Grant
Date
|
|
|
Number
of
Shares
Underlying Options
|
|
|
Exercise
Price
|
|
|
Grant
Date
Fair Value
|
|
Mr. Bradley
|
|
$
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8/08/2019
|
|
|
|
300,000
|
|
|
$
|
3.53
|
|
|
$
|
334,290
|
|
|
|
|
–
|
|
|
$
|
5,970,000
|
|
|
$
|
5,970,000
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Mr. Fritz
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8/08/2019
|
|
|
|
90,000
|
|
|
|
3.53
|
|
|
|
100,287
|
|
|
|
|
–
|
|
|
|
657,600
|
|
|
|
657,600
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Mr. Lavin
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8/08/2019
|
|
|
|
90,000
|
|
|
|
3.53
|
|
|
|
100,287
|
|
|
|
|
–
|
|
|
|
657,600
|
|
|
|
657,600
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Ms. Robinson
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8/08/2019
|
|
|
|
60,000
|
|
|
|
3.53
|
|
|
|
66,258
|
|
|
|
|
–
|
|
|
|
441,600
|
|
|
|
441,600
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Ms. Straten
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
8/08/2019
|
|
|
|
60,000
|
|
|
|
3.53
|
|
|
|
66,258
|
|
|
|
|
–
|
|
|
|
434,400
|
|
|
|
434,400
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
The “target” and “maximum” figures appearing
in the table above represent the maximum cash payout under the individual executives’ Executive Management Bonus Plan
awards as of the date the incentive was fixed. The actual payout to each individual named in the table above has been determined
and paid prior to the date of this proxy statement. That amount was in each case materially less than the maximum (approximately
44% of the maximum, in the case of the chief executive). The respective actual payments are described below, and appear above in
the Summary Compensation Table under the heading “Non-Equity Plan Compensation.” Because each non-equity incentive
plan award has been settled and paid, the future payout under such awards as of the date of this report is in each case zero. The
“grant date fair value” figures appearing in the table above, which are the computed fair values of stock option awards,
are computed as described in note 1 to the Summary Compensation Table.
Executive Management Bonus Plan
The Executive Management Bonus Plan award granted to the chief
executive officer, Mr. Bradley, called for him to meet as many as possible of seven separate operational and financial objectives
within the year 2019. The Compensation Committee assigned to each of those objectives a value as a percentage of base salary. The
objectives and their weightings were as follows: to meet the Company’s quarterly budgeted earnings (25% each quarter, total
of 100%), to raise $70 million or more of new capital (50%), to renew or replace each of two designated existing warehouse credit
facilities on terms equal to or better than those pre-renewal (50%), to acquire a material new servicing portfolio (100%), to execute
three rated securitization transactions after the first quarter of 2019 (40% each, 120% total), to achieve annual originations
of receivables exceeding each of five targets (100% in the aggregate, creditable in increments of 20% for reaching aggregate amounts
of $800 million, $850 million, $900 million, $950 million, and $1.0 billion), and to cause the Company’s common stock to
trade in excess of each of four targets (80% in the aggregate, creditable in increments of 20% for reaching prices of $5.00, $5.50,
$6.00 and $6.50 per share).
The total of the seven weightings is 600%; accordingly, the
target and maximum possible value to that officer of the award was 600% of his base salary for 2019.
In a series of meetings, the committee evaluated the chief executive’s
performance in comparison to the goals. The Compensation Committee determined that the budget objective was met in one of the four
quarters of 2019, and credited the chief executive with one increment, or 25%. The Company was not successful in raising new capital
during the year, and no credit was given
The Committee noted the successful renewal of both of the two
designated warehouse lines, in February and December, and determined that each renewal was on terms that met the stated objective.
The Committee therefore credited the chief executive with the full 50% possible. No new portfolio was acquired in 2019, and the
Committee found no credit was earned in that respect
The Committee noted that the Company had executed four rated
securitizations during the year, three of them after the objective was set, representing creditable performance of 120%. It determined
that our originations volume exceeded $1.0 billion for the year while maintaining credit quality, representing creditable performance
in the amount of 100%. None of the stock price objectives were fulfilled.
The aggregate valuation of all creditable performance for the
chief executive officer was thus 295%, which would imply a bonus payment under our Executive Management Bonus Plan of $2,935,000.
The committee elected to pay a bonus of somewhat less than the maximum creditable percentage, in the amount of $2,600,000, representing
261% of our chief executive’s base salary.
The Executive Management Bonus Plan awards granted to the named
executive officers other than the chief executive officer are evaluated on a more subjective basis, and were set by the Compensation
Committee in consultation with and on the recommendation of the chief executive officer. Factors used in determining the amount
of bonus for the two named executive officers who are executive vice presidents of the Company are these: (I) an evaluation of
the executive’s skills and performance, 26.7%, (II) whether the executive has met three individual objectives approved by
the compensation committee, 32% in aggregate, (III) whether the Company as a whole has met or exceeded budget targets, 13.3%, (IV)
a subjective evaluation of the officer's performance, 53.3%, and (V) a discretionary allocation recommended by the chief executive
officer and approved by the compensation committee, 34.7%.
Numerical scores are assigned to each of these factors, up to
the maximum percentages stated above, and can result in a maximum bonus of 160% of base compensation.
Similar factors are applied in determining the amount of annual
bonus for executive officers who are senior vice presidents of the Company: (I) skills and performance, 20%, (II) three individual
objectives, 24%, (III) Company budget, 10%, (IV) subjective evaluation of that executive’s department, 40%, and (V) discretionary
allocation, 26%, resulting in a maximum bonus of 120% of base compensation.
Following the end of the year 2019, our compensation committee
evaluated each named executive officer’s performance in relation to these standards and goals. In two quarters out of four,
the Company met its overall budget target, and each officer accordingly received 50% credit with respect to that target.
With respect to the individual factors, the compensation committee,
acting in part on the advice of our chief executive officer, determined that creditable performance for 2019 for each named executive
officer other than the chief executive officer was as set forth below:
|
|
Maximum
percentage
|
|
|
Creditable
percentage
|
|
|
Base Salary
|
|
|
Result (rounded to
nearest $1000)
|
|
Mr. Fritz
|
|
|
160
|
%
|
|
|
56.6
|
%
|
|
$
|
411,000
|
|
|
$
|
233,000
|
|
Mr. Lavin
|
|
|
160
|
|
|
|
112.1
|
|
|
|
411,000
|
|
|
|
461,000
|
|
Ms. Robinson
|
|
|
120
|
|
|
|
86.1
|
|
|
|
368,000
|
|
|
|
328,000
|
|
Ms. Straten
|
|
|
120
|
|
|
|
90.8
|
|
|
|
362,000
|
|
|
|
328,000
|
|
On that basis, the Compensation Committee approved payments
to these named executive officers in the amounts shown in the rightmost column.
Outstanding Equity Awards at Fiscal Year-end
The following table sets forth as of December 31, 2019 the number
of unexercised options held by each of the named executive officers, the number of shares subject to then exercisable and unexercisable
options held by such persons and the exercise price and expiration date of each such option. Each option referred to in the table
was granted at an option price per share no less than the fair market value per share on the date of grant. None of such individuals
holds a stock award; accordingly, only information concerning option awards is presented.
Name
|
|
Number of
securities underlying
unexercised options
(exercisable)
|
|
|
Number of
securities underlying
unexercised options
(unexercisable)
|
|
|
|
Option
exercise price
|
|
|
Option
expiration date
|
Charles E. Bradley, Jr.
|
|
|
50,000
|
|
|
|
–
|
|
|
|
$
|
1.81
|
|
|
4/27/2020
|
|
|
|
200,000
|
|
|
|
–
|
|
|
|
$
|
1.19
|
|
|
12/31/2020
|
|
|
|
100,000
|
|
|
|
–
|
|
|
|
$
|
1.03
|
|
|
6/3/2021
|
|
|
|
250,000
|
|
|
|
–
|
|
|
|
$
|
1.75
|
|
|
11/23/2021
|
|
|
|
83,333
|
|
|
|
–
|
|
|
|
$
|
1.75
|
|
|
11/23/2021
|
|
|
|
166,666
|
|
|
|
–
|
|
|
|
$
|
1.50
|
|
|
11/23/2021
|
|
|
|
100,000
|
|
|
|
–
|
|
|
|
$
|
0.95
|
|
|
11/23/2021
|
|
|
|
140,000
|
|
|
|
–
|
|
|
|
$
|
1.20
|
|
|
4/3/2022
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
1.94
|
|
|
7/16/2022
|
|
|
|
100,000
|
|
|
|
–
|
|
|
|
$
|
3.72
|
|
|
11/8/2022
|
|
|
|
250,000
|
|
|
|
–
|
|
|
|
$
|
6.86
|
|
|
2/1/2023
|
|
|
|
250,000
|
|
|
|
–
|
|
|
|
$
|
7.97
|
|
|
5/7/2023
|
|
|
|
300,000
|
|
|
|
–
|
|
|
|
$
|
6.59
|
|
|
7/28/2021
|
|
|
|
300,000
|
|
|
|
–
|
|
|
|
$
|
6.11
|
|
|
5/19/2022
|
|
|
|
225,000
|
|
|
|
75,000
|
|
(1)
|
|
$
|
3.48
|
|
|
5/12/2023
|
|
|
|
150,000
|
|
|
|
150,000
|
|
(2)
|
|
$
|
4.35
|
|
|
5/17/2024
|
|
|
|
75,000
|
|
|
|
225,000
|
|
(3)
|
|
$
|
3.48
|
|
|
5/9/2025
|
|
|
|
–
|
|
|
|
300,000
|
|
(4)
|
|
$
|
3.53
|
|
|
8/8/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey P. Fritz
|
|
|
25,000
|
|
|
|
–
|
|
|
|
$
|
1.81
|
|
|
4/27/2020
|
|
|
|
50,000
|
|
|
|
–
|
|
|
|
$
|
1.03
|
|
|
6/3/2021
|
|
|
|
36,000
|
|
|
|
–
|
|
|
|
$
|
1.20
|
|
|
4/3/2022
|
|
|
|
14,000
|
|
|
|
–
|
|
|
|
$
|
1.94
|
|
|
7/16/2022
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.86
|
|
|
2/1/2023
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
7.97
|
|
|
5/7/2023
|
|
|
|
180,000
|
|
|
|
–
|
|
|
|
$
|
6.59
|
|
|
7/28/2021
|
|
|
|
90,000
|
|
|
|
–
|
|
|
|
$
|
6.11
|
|
|
5/19/2022
|
|
|
|
67,500
|
|
|
|
22,500
|
|
(1)
|
|
$
|
3.48
|
|
|
5/12/2023
|
|
|
|
45,000
|
|
|
|
45,000
|
|
(2)
|
|
$
|
4.35
|
|
|
5/17/2024
|
|
|
|
22,500
|
|
|
|
67,500
|
|
(3)
|
|
$
|
3.48
|
|
|
5/9/2025
|
|
|
|
–
|
|
|
|
90,000
|
|
(4)
|
|
$
|
3.53
|
|
|
8/8/2026
|
Michael T. Lavin
|
|
|
5,000
|
|
|
|
–
|
|
|
|
$
|
1.81
|
|
|
4/27/2020
|
|
|
|
20,000
|
|
|
|
–
|
|
|
|
$
|
1.03
|
|
|
6/3/2021
|
|
|
|
30,000
|
|
|
|
–
|
|
|
|
$
|
0.95
|
|
|
11/23/2021
|
|
|
|
21,600
|
|
|
|
–
|
|
|
|
$
|
1.20
|
|
|
4/3/2022
|
|
|
|
8,400
|
|
|
|
–
|
|
|
|
$
|
1.94
|
|
|
7/16/2022
|
|
|
|
75,000
|
|
|
|
–
|
|
|
|
$
|
6.86
|
|
|
2/1/2023
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
7.97
|
|
|
5/7/2023
|
|
|
|
130,000
|
|
|
|
–
|
|
|
|
$
|
6.59
|
|
|
7/28/2021
|
|
|
|
90,000
|
|
|
|
–
|
|
|
|
$
|
6.11
|
|
|
5/19/2022
|
|
|
|
67,500
|
|
|
|
22,500
|
|
(1)
|
|
$
|
3.48
|
|
|
5/12/2023
|
|
|
|
45,000
|
|
|
|
45,000
|
|
(2)
|
|
$
|
4.35
|
|
|
5/17/2024
|
|
|
|
22,500
|
|
|
|
67,500
|
|
(3)
|
|
$
|
3.48
|
|
|
5/9/2025
|
|
|
|
–
|
|
|
|
90,000
|
|
(4)
|
|
$
|
3.53
|
|
|
8/8/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Teri L. Robinson
|
|
|
25,000
|
|
|
|
–
|
|
|
|
$
|
1.81
|
|
|
4/27/2020
|
|
|
|
50,000
|
|
|
|
–
|
|
|
|
$
|
1.03
|
|
|
6/3/2021
|
|
|
|
5,000
|
|
|
|
–
|
|
|
|
$
|
1.75
|
|
|
11/23/2021
|
|
|
|
10,000
|
|
|
|
–
|
|
|
|
$
|
1.50
|
|
|
11/23/2021
|
|
|
|
36,000
|
|
|
|
–
|
|
|
|
$
|
1.20
|
|
|
4/3/2022
|
|
|
|
14,000
|
|
|
|
–
|
|
|
|
$
|
1.94
|
|
|
7/16/2022
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.86
|
|
|
2/1/2023
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
7.97
|
|
|
5/7/2023
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.59
|
|
|
7/28/2021
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.11
|
|
|
5/19/2022
|
|
|
|
45,000
|
|
|
|
15,000
|
|
(1)
|
|
$
|
3.48
|
|
|
5/12/2023
|
|
|
|
30,000
|
|
|
|
30,000
|
|
(2)
|
|
$
|
4.35
|
|
|
5/17/2024
|
|
|
|
15,000
|
|
|
|
45,000
|
|
(3)
|
|
$
|
3.48
|
|
|
5/9/2025
|
|
|
|
–
|
|
|
|
60,000
|
|
(4)
|
|
$
|
3.53
|
|
|
8/8/2026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Laurie A. Straten
|
|
|
12,000
|
|
|
|
–
|
|
|
|
$
|
1.81
|
|
|
4/27/2020
|
|
|
|
25,000
|
|
|
|
–
|
|
|
|
$
|
1.03
|
|
|
6/3/2021
|
|
|
|
9,000
|
|
|
|
–
|
|
|
|
$
|
1.95
|
|
|
11/23/2021
|
|
|
|
1,250
|
|
|
|
–
|
|
|
|
$
|
1.75
|
|
|
11/23/2021
|
|
|
|
2,500
|
|
|
|
–
|
|
|
|
$
|
1.50
|
|
|
11/23/2021
|
|
|
|
18,000
|
|
|
|
–
|
|
|
|
$
|
1.20
|
|
|
4/3/2022
|
|
|
|
7,000
|
|
|
|
–
|
|
|
|
$
|
1.94
|
|
|
7/16/2022
|
|
|
|
25,000
|
|
|
|
–
|
|
|
|
$
|
6.86
|
|
|
2/1/2023
|
|
|
|
90,000
|
|
|
|
–
|
|
|
|
$
|
7.97
|
|
|
5/7/2023
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.59
|
|
|
7/28/2021
|
|
|
|
60,000
|
|
|
|
–
|
|
|
|
$
|
6.11
|
|
|
5/19/2022
|
|
|
|
45,000
|
|
|
|
15,000
|
|
(1)
|
|
$
|
3.48
|
|
|
5/12/2023
|
|
|
|
30,000
|
|
|
|
30,000
|
|
(2)
|
|
$
|
4.35
|
|
|
5/17/2024
|
|
|
|
15,000
|
|
|
|
45,000
|
|
(3)
|
|
$
|
3.48
|
|
|
5/9/2025
|
|
|
|
–
|
|
|
|
60,000
|
|
(4)
|
|
$
|
3.53
|
|
|
8/8/2026
|
(1)
|
Became exercisable as to the unexercisable portion on May 12, 2020.
|
(2)
|
Becomes or became exercisable as to additional cumulative increments of one-half of the unexercisable portion on May 17, 2020 and 2021.
|
(3)
|
Becomes or became exercisable as to cumulative increments of one third of the unexercisable portion on May 9, 2020, 2021 and 2022.
|
(4)
|
Becomes or became exercisable as to cumulative increments of 25% of the unexercisable portion on August 8, 2020. 2021, 2022 and 2023.
|
Option Exercises in Last Fiscal Year
Four of the five named executive officers exercised stock options
during 2019. The table below shows the realized value and the number of options exercised for those four individuals. None of our
officers hold stock awards; accordingly, no stock awards vested during 2019.
Option Exercises and Stock Vested
Value realized on exercise (1)
|
|
Number of
shares acquired
on exercise
|
|
Mr. Bradley
|
|
|
338,400
|
|
|
|
120,000
|
|
Mr. Fritz
|
|
|
171,600
|
|
|
|
60,000
|
|
Mr. Lavin
|
|
|
–
|
|
|
|
–
|
|
Ms. Robinson
|
|
|
167,400
|
|
|
|
60,000
|
|
Ms. Straten
|
|
|
96,000
|
|
|
|
30,000
|
|
|
(1)
|
The value realized is the difference between the fair market value of the Company’s
common stock on the date of exercise (the closing price reported by Nasdaq) and the exercise price of the option.
|
Executive Management Bonus Plan (Non-equity Incentive
Plan)
The salary and cash bonus of the named executive officers are
determined by the Compensation Committee. The compensation appearing in the Summary Compensation Table above under the caption
"Non-Equity Incentive Plan Compensation" is paid pursuant to an executive management bonus plan (the “EMB Plan”).
The EMB Plan is administered by the Compensation Committee. Among other things, the Compensation Committee selects participants
in the EMB Plan from among the Company’s executive officers and determines the performance goals, target amounts and other
terms and conditions of awards under the EMB Plan. With respect to officers other than the chief executive officer, determinations
of base salary and of criteria relating to the EMB Plan are based in part on evaluations of such officers prepared by the chief
executive officer, which are furnished to and discussed with the Compensation Committee.
Director Compensation
Throughout 2019, we paid our non-employee directors a retainer
of $5,167 per month, with an additional fee of $500 per month for service on a board committee ($1,000 for a committee chairman).
Non-employee directors also received per diem fees of $1,000 for attendance in person at meetings of the board of directors,
or $500 for attendance by telephone. No per diem fees are paid for attendance at committee meetings. The Board in August
2019 approved issuance to each non-employee director of options to purchase an aggregate of 30,000 shares. The exercise prices
of all such options are the closing price of the Company’s common stock on the date of grant, which was $3.53 per share. The
following table summarizes compensation received by our directors for the year 2019:
Name of Director
|
|
Fees Earned
or Paid in
Cash
(1)
|
|
|
Option
Awards
(2)
|
|
|
Total
|
|
Chris A. Adams
|
|
$
|
82,004
|
|
|
$
|
30,813
|
|
|
$
|
112,817
|
|
Charles E. Bradley, Jr. (3)
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
Louis M. Grasso (4)
|
|
|
10,334
|
|
|
|
–
|
|
|
|
10,334
|
|
Brian J. Rayhill
|
|
|
90,004
|
|
|
|
30,813
|
|
|
|
120,817
|
|
William B. Roberts
|
|
|
71,004
|
|
|
|
30,813
|
|
|
|
101,817
|
|
Gregory S. Washer
|
|
|
90,004
|
|
|
|
30,813
|
|
|
|
108,817
|
|
Daniel S. Wood
|
|
|
90,000
|
|
|
|
30,813
|
|
|
|
120,817
|
|
(1) This
column reports cash compensation earned in 2019 for Board and committee service.
(2) This
column represents the dollar amount recognized for financial statement reporting purposes with respect to the 2019 fiscal year
for the fair value of stock options granted to the directors in 2019. The fair value was estimated using a binomial option-pricing
model in accordance with SFAS 123R. The fair value per option was $1.03, based on assumptions of 3.24 years expected life, expected
volatility of 38.77%, expected dividend yield of 0.0%, and a risk-free rate of 1.53%. In addition to the stock option awards granted
in 2019, our directors other than Mr. Grasso held at December 31, 2019 option awards granted in previous years. The total options
held at December 31, 2019 represent the right to purchase shares as follows: Mr. Bradley, 3,549,999 shares; Mr. Adams, 300,000
shares; Mr. Rayhill, 417,000 shares; Mr. Roberts, 150,000 shares; Mr. Washer, 300,000 shares; and Mr. Wood, 315,000 shares.
(3) Mr. Bradley's
compensation as chief executive officer of the Company is described elsewhere in this report. He received no additional compensation
for service on the Company's Board of Directors.
(4) Mr. Grasso
joined our Board in October 2019.
Pension Plans
The Company's officers do not participate in any pension or
retirement plan, other than a tax-qualified defined contribution plan (commonly known as a 401(k) plan).
Potential Payments Upon Termination or Change of Control
This section provides information regarding payments and benefits
to the named executive officers that would be triggered by termination of the officer’s employment (including resignation,
or voluntary termination; severance, or involuntary termination; and retirement) or a change of control of the Company.
Each of the named executive officers is an at-will employee
and, as such, does not have an employment contract. In addition, if the officer’s employment terminates for any reason other
than a change of control of the Company, any unvested stock options are terminated, and vested options become subject to accelerated
expiration: ordinarily three months following separation from service, or twelve months in the case of disability, retirement or
death. Accordingly, there are no payments or benefits that are triggered by any termination event (including resignation and severance)
other than in connection with a change of control of the Company.
Benefits Triggered by Change of Control or Termination
after Change of Control
Our stock option plans provide that each employee of ours who
holds outstanding unexpired options under our stock option may have the right to exercise such options following a change of control
of the Company, without regard to the date such option would first be exercisable. Each of the named executive officers holds such
options. The “acceleration” of options is mandatory following certain changes of control, and subject to the discretion
of the Compensation Committee following certain others. Acceleration is mandatory in the event of (i) the sale, or other disposition
of substantially all of the Company’s assets, or (ii) a merger or similar transaction in which shareholders of the Company
hold less than 50% of the shares of the surviving entity; provided, however, that acceleration following a merger or similar transaction
is mandatory only if the holder suffers a Qualifying Termination (defined below) within one year following the transaction, or
if the surviving entity does not provide the holder with an equivalent award. Acceleration is also mandatory if a holder suffers
a Qualifying Termination within one year following (iii) a change within a three-year period in the membership of a majority of
the board of directors (excluding changes recommended by the board), or (iv) a person’s acquisition of outstanding voting
securities of the Company, other than directly from the Company and without approval of the board, resulting in that person’s
having beneficial ownership of greater than 25% of the Company.
Under our stock option plans, the Compensation Committee may
exercise its discretion to provide for acceleration under other circumstances than those described above with respect to any particular
stock option or class of stock options. The committee would expect to exercise its discretion with the intention of preserving
the value of the stock option award. To date, such discretion has not been exercised. A “Qualifying Termination” is
a termination of the holder’s employment by the Company other than for cause, disability or death, or by the holder for “good
reason” (principally relating to a material diminution in the holder’s authority, compensation or responsibilities,
or a relocation of greater than 50 miles). The preceding description applies to options held by officers and employees. Options
issued to non-employee directors accelerate without the exercise of discretion upon any of the four categories of change of control
described above
As of December 31, 2019, no named executive officers would realize
a benefit if unvested stock options were to become immediately exercisable upon a change in control, based on the value of the
shares underlying such options at the closing market price on December 31, 2019, which was $3.37 per share).
SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth the number and percentage of shares
of the our Common Stock (our only class of voting securities) owned beneficially as of September 18, 2020 (the record date) by
(i) each person known to us to own beneficially more than 5% of the outstanding Common Stock, (ii) each director nominee and each
named executive officer, and (iii) all of our director nominees and executive officers, as a group. Except as otherwise indicated,
and subject to applicable community property and similar laws, each of the persons named has sole voting and investment power with
respect to the shares shown as beneficially owned by such persons. Percent of class is calculated by reference to 22,504,868
shares outstanding on the record date. Except as otherwise noted, each person named in the table has a mailing address at 3800
Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169.
Name and Address of Beneficial Owner
|
|
Amount and Nature
of Beneficial
Ownership (1)
|
|
|
Percent of
Class
|
|
Charles E. Bradley, Jr.
|
|
|
5,511,410
|
|
|
|
21.6%
|
|
Chris A. Adams
|
|
|
412,213
|
|
|
|
1.8%
|
|
Louis M. Grasso
|
|
|
3,900
|
|
|
|
*
|
|
Brian J. Rayhill
|
|
|
432,168
|
|
|
|
1.9%
|
|
William B. Roberts
|
|
|
900,978
|
|
|
|
4.0%
|
|
Gregory S. Washer
|
|
|
654,201
|
|
|
|
2.9%
|
|
Daniel S. Wood
|
|
|
481,165
|
|
|
|
2.1%
|
|
Jeffrey P. Fritz
|
|
|
995,000
|
|
|
|
4.3%
|
|
Michael T. Lavin
|
|
|
949,223
|
|
|
|
4.1%
|
|
Teri L. Robinson
|
|
|
806,800
|
|
|
|
3.5%
|
|
Laurie A. Straten
|
|
|
583,568
|
|
|
|
2.5%
|
|
All directors and executive officers combined (16 persons)
|
|
|
15,098,403
|
(2)
|
|
|
47.8%
|
|
Black Diamond Capital Management, L.L.C., One Sound Shore Drive, Suite 200, Greenwich CT 06830
|
|
|
3,456,363
|
(3)
|
|
|
15.4%
|
|
Citigroup Inc., 388 Greenwich Street, New York, New York 10013
|
|
|
1,999,995
|
(4)
|
|
|
8.9%
|
|
Dimensional Fund Advisors LP, Building One, 6300 Bee Cave Road, Austin, Texas, 78746
|
|
|
1,810,635
|
(5)
|
|
|
8.0%
|
|
__________
*
|
Less than 1%.
|
(1)
|
Includes certain shares that may be acquired within 60 days after September 18, 2020 from the Company upon exercise of options, as follows: Mr. Bradley, 3,049,999 shares; Mr. Adams, 300,000 shares; Mr. Rayhill, 405,000 shares; Mr. Roberts, 150,000 shares; Mr. Washer, 300,000 shares; Mr. Wood, 315,000 shares; Mr. Fritz, 715,000 shares; Mr. Lavin, 660,000 shares; Ms. Robinson, 505,000 shares; and Ms. Straten, 447,750 shares. Of Mr. Bradley’s shares, 2,199,906 are pledged to secure loan(s) to him. The calculation of beneficial ownership also includes, in the case of the executive officers, an approximate number of shares each executive officer could be deemed to hold through contributions made to the Company's Employee 401(k) Plan (the "401(k) Plan"). The 401(k) Plan provides an option for all participating employees to purchase stock in the Company indirectly by buying units in a mutual fund. Each "unit" in the mutual fund represents an interest in Company stock, cash and cash equivalents.
|
(2)
|
Includes 9,066,399 shares that are not outstanding as of the date of this report, but which may be acquired within 60 days after September 18, 2020 upon exercise of options.
|
(3)
|
Based on a report on Schedule 13G/A filed by the named person and an individual on February 14, 2020.
|
(4)
|
Based on a report on Schedule 13G/A filed by the named person and certain subsidiaries on February 8, 2019.
|
(5)
|
Based on a report on Schedule 13G filed by the named person on February 12, 2020.
|
Equity Compensation
Plan Information
The table below presents information regarding securities
authorized for issuance under equity compensation plans, including the CPS 2006 Long-Term Equity Incentive Plan, as of December
31, 2019.
Plan Category
|
|
Outstanding
Options
|
|
Weighted average
exercise price
of Outstanding
Options
|
|
Number of
securities
remaining
available for
future issuance
under equity
compensation
plans
|
Plans approved by shareholders
|
|
15,347,949
|
|
$4.59
|
|
1,457,581
|
Plans not approved by shareholders
|
|
None
|
|
N/A
|
|
N/A
|
Total
|
|
15,347,949
|
|
$4.59
|
|
1,457,581
|
CEO Pay Ratio
The Dodd-Frank Reform and Consumer Protection Act includes a
mandate that public companies disclose the ratio of the compensation of their CEO to their median employee. Our CEO-median employee
pay ratio calculation for 2019 is 77:1. We determined the pay ratio by dividing the total 2019 compensation of the CEO as disclosed
in the Summary Compensation Table by the total 2019 compensation of the median employee, using the same components of compensation
as used in the Summary Compensation Table for the CEO.
There have been no changes to our employee population or compensation
arrangements that we believe would result in a significant change in the pay ratio. Accordingly, we have computed the ratio by
reference to the same employee who we identified as our median employee for the year 2017, who was determined using the compensation
of employees who were actively employed on December 31, 2017. The total compensation of our median employee in 2019, using the
same methodology we use for Mr. Bradley’s Summary Compensation Table compensation, was $51,116. The total compensation of
the CEO Charles Bradley in 2019 was $3,929,770.
CERTAIN TRANSACTIONS
Citigroup. On July 10, 2008, CPS and its wholly owned
subsidiary Folio Funding II, LLC, as borrower, agreed with Citigroup Financial Products Inc. (“CGFP”), an affiliate
of Citigroup Inc. (“Citigroup”), to amend and restate the agreements governing a pre-existing revolving residual credit
facility. CGFP was the note purchaser in and administrative agent of that credit facility. The amendments included the issuance
to an affiliate of CGFP of a ten-year warrant to purchase (for nominal consideration) 2,500,000 shares of Company common stock,
which warrant was subsequently transferred to CGFP. Upon issuance of such warrant, CGFP became a person with beneficial ownership
of greater than 5% of the Company’s common stock. On March 10, 2010, the Company repurchased a portion of the warrant, representing
500,000 of the 2,500,000 shares available for purchase upon exercise of such warrant. On July 10, 2018, CGFP exercised the remaining
warrant, receiving 1,999,995 shares after surrender of shares equal in value to the nominal exercise price.
In September 2011, and approximately quarterly thereafter, CGMI
acted as a placement agent of asset-backed notes issued by securitization trusts sponsored by CPS. The issuances of investment-grade
and below investment-grade notes, and the placement compensation to CGMI, from January 1, 2017 to the present, are set forth in
the table below. In each case, one or more other placement agents also received compensation for placing such notes, as well as
CGMI.
|
|
|
Investment-grade
notes issued
|
|
|
Below investment-
grade notes issued
|
|
|
Fees paid to
CGMI
|
|
January 2017
|
|
|
$
|
186,270,000
|
|
|
$
|
20,050,000
|
|
|
$
|
869,283
|
|
April 2017
|
|
|
|
202,515,000
|
|
|
|
22,655,000
|
|
|
|
386,098
|
|
July 2017
|
|
|
|
199,525,000
|
|
|
|
25,300,000
|
|
|
|
663,608
|
|
October 2017
|
|
|
|
175,600,000
|
|
|
|
20,700,000
|
|
|
|
336,210
|
|
January 2018
|
|
|
|
169,964,000
|
|
|
|
20,036,000
|
|
|
|
557,922
|
|
April 2018
|
|
|
|
179,478,000
|
|
|
|
22,345,000
|
|
|
|
347,397
|
|
July 2018
|
|
|
|
207,967,000
|
|
|
|
22,308,000
|
|
|
|
667,150
|
|
October 2018
|
|
|
|
207,515,000
|
|
|
|
26,215,000
|
|
|
|
400,709
|
|
January 2019
|
|
|
|
228,695,000
|
|
|
|
25,705,000
|
|
|
|
739,269
|
|
April 2019
|
|
|
|
196,650,000
|
|
|
|
31,625,000
|
|
|
|
384,106
|
|
July 2019
|
|
|
|
213,242,000
|
|
|
|
30,271,000
|
|
|
|
697,912
|
|
October 2019
|
|
|
|
240,075,000
|
|
|
|
34,238,000
|
|
|
|
457,261
|
|
January 2020
|
|
|
|
227,240,000
|
|
|
|
32,760,000
|
|
|
|
787,117
|
|
June 2020
|
|
|
|
179,935,000
|
|
|
|
22,408,000
|
|
|
|
328,280
|
|
September 2020
|
|
|
|
221,000,000
|
|
|
|
31,200,000
|
|
|
|
784,245
|
|
On May 11, 2012, the Company entered into a one-year revolving
credit agreement (the "Citi Warehouse Agreement") and related agreements with affiliates of Citigroup and others, under
which the lenders have agreed to lend up to a maximum of $100 million, to be secured by automobile receivables. In connection with
the Citi Warehouse Agreement, the Company paid a closing fee of $1,000,000. The Company first incurred indebtedness under the Citi
Warehouse Agreement in the amount of $9.1 million on May 14, 2012. The Company used the proceeds of that draw for working capital.
Following earlier extensions in 2013, 2014 and 2016, the Company
and the lenders agreed on September 21, 2018 to extend the revolving term of the Citi Warehouse Agreement to September 21, 2020
(extended in September 2020 to October 21, 2020). At the conclusion of the revolving period, at the election of either the borrower
or the lender, the loans are to amortize for an additional one year, and then become due in full. Loans under the Citi Warehouse
Agreement bear interest during the revolving period at a floating rate equal to one-month LIBOR plus 3.00%, but in all events no
less than 3.75% per year, and during the amortization period (if any) at a floating rate equal to one-month LIBOR plus 4.00%, but
in all events no less than 4.75% per year. The loans are subject to acceleration upon the occurrence of certain defined events
of default. In connection with the 2018 renewal of the Citi Warehouse Agreement, we paid a closing fee of $730,000.
The maximum principal amount of indebtedness under the Citi
Warehouse Agreement during 2019 was $100 million. During 2019, the Company paid $502.6 million of principal and $2.5 million of
interest on such debt. As of September 18, 2020, the principal amount owed was $1.1 million. The Company intends to incur
additional indebtedness under the Citi Warehouse Agreement from time to time as it purchases motor vehicle receivables from dealers.
CPS Leasing. The Company holds 80% of the outstanding
shares of the capital stock of CPS Leasing, Inc. ("CPSL"). The remaining 20% of CPSL is held by Charles E. Bradley, Jr.,
who is the chief executive officer and chairman of the board of directors of the Company. CPSL engaged in the equipment leasing
business, and is currently in the process of liquidation as its leases come to term. The Company financed the operations of CPSL
by making operating advances and by advancing to CPSL the fraction of the purchase prices of its leased equipment that CPSL did
not borrow under its lines of credit. The aggregate amounts of the advances made by the Company and outstanding to CPSL as of December
31, 2017, 2018 and 2019, were approximately $186,000, $153,000, and $122,000, respectively.
Subordinated Notes. Director William Roberts on December
3, 2007 purchased $4,000,000 of unsecured subordinated three-year notes directly from the Company. The interest rate was determined
by negotiation, and Mr. Roberts and the Company have agreed to a series of successive extensions of such indebtedness, with interest
paid at 10% per annum throughout the years 2016 through 2018. The Company in the years 2017 and 2018 paid interest of $400,000
per year on such notes, and in 2019 paid interest of $33,333, in accordance with those terms. The Company repaid the notes in full
on February 1, 2019.
Policy on Related Party Transactions and Director Independence.
The agreements and transactions described above, other than those described under the caption “Citigroup,” were
entered into by the Company with parties who personally benefited from such transactions and who had a control or fiduciary relationship
with the Company. It is the Company's policy that any such transactions with persons having a control or fiduciary relationship
with the Company may take place only if approved by the Audit Committee or by the members of the Company's Board of Directors who
are disinterested with respect to the transaction, and independent in accordance with the standards for director independence prescribed
by Nasdaq. Such policy is maintained in writing in the charter of the Audit Committee. The agreements and transactions above were
reviewed and approved by the members of the Company's Board of Directors who were disinterested with respect to the transaction,
except that the subordinated notes transaction was reviewed and approved by the Audit Committee.
The seven directors of the Company are Charles E. Bradley, Jr.,
Chris A. Adams, Louis M. Grasso, Brian J. Rayhill, William B. Roberts, Gregory S. Washer, and Daniel S. Wood, of whom Messrs. Wood,
Rayhill and Washer compose the Audit Committee. The Board of Directors has concluded that other than Mr. Bradley (who is the Company's
chief executive officer), each of the other six directors is independent in accordance with the director independence standards
prescribed by Nasdaq, and has determined that none of them has a material relationship with the Company that would impair his independence
from management or otherwise compromise his ability to act as an independent director.
FURTHER INFORMATION RELATING TO THE ANNUAL
MEETING
Voting of Shares
The Board of Directors recommends that an affirmative vote be
cast in favor of each of the nominees and proposals listed on the proxy card. The Board of Directors knows of no other matters
that may be brought before the meeting which require submission to a vote of the shareholders. If any other matters are properly
brought before the meeting, however, the persons named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
Votes cast in person or by proxy at the Annual Meeting will
be tabulated by the Inspector of Elections with the assistance of the Company's transfer agent. The Inspector of Elections will
also determine whether or not a quorum is present. In general, California law provides that a quorum consists of a majority of
the shares entitled to vote, represented either in person or by proxy, that is, a minimum of 11,252,435 shares of the 22,504,868
shares outstanding at the record date.
You are entitled to one vote per share on each matter other
than election of directors. As to election of directors, you may cumulate votes and give any nominee an aggregate number of votes
equal to the number of directors to be elected (seven) times the number of your shares, or distribute that number of votes among
as many nominees as you see fit. However, no one will be entitled to cumulate votes for any nominee unless the nominee's
name has been placed in nomination prior to the voting and the shareholder wishing to cumulate votes has given notice at the Annual
Meeting prior to the voting of his intention to cumulate votes. If anyone has given such notice, all shareholders may cumulate
their votes for nominees. We are seeking discretionary authority to cumulate votes of shares represented by proxies. The seven
persons properly placed in nomination at the meeting and receiving the most affirmative votes will be elected as directors.
Approval of each of the other proposals requires the affirmative
vote of a majority of those shares voting on the proposal, provided that such affirmative votes are at least a majority of the
required quorum, that is, the affirmative votes must be greater than the negative votes, and must be no less than 5,626,218. Provided
that at least the minimum number of affirmative votes are cast in favor of such proposals, an abstention will have no effect on
the outcome; however, if less than 5,626,218 affirmative votes are cast in favor of such proposals, then each abstention will have
an effect equivalent to that of a negative vote.
The Inspector of Elections will treat abstentions as shares
that are present and entitled to vote for purposes of determining the presence of a quorum, but as not voting for purposes of determining
the approval of any matter submitted to the shareholders for a vote. Any proxy that is returned using the form of proxy enclosed
and that is not marked as to a particular item will be voted FOR the director nominees named in this proxy statement, FOR
ratification of Crowe LLP as the Company’s auditors for the year 2020, FOR the approval, by non-binding vote, of executive
compensation; and will be deemed to grant discretionary authority to vote upon any other matters properly coming before the Meeting,
including procedural matters such as a recess or adjournment. We believe that brokers holding shares for their customers in
general will not be permitted to vote without instruction from their customers on any proposal other than ratification of the selection
of independent auditors. If a broker indicates on the enclosed proxy or its substitute that it does not have discretionary authority
as to certain shares to vote on a particular matter (“broker non-votes”), those shares will be considered as abstentions
with respect to that matter, and will have the effect of abstentions as described above. While there is no definitive specific
statutory or case law authority in California concerning the proper treatment of abstentions and broker non-votes, the Company
believes that the tabulation procedures to be followed by the Inspector of Elections are consistent with the general statutory
requirements in California concerning voting of shares and determination of a quorum.
Shareholder Proposals
We plan to hold our year 2021 Annual Meeting of Shareholders
on May 12, 2020. In order to be considered for inclusion in our proxy statement and form of proxy for the 2021 Annual
Meeting, any proposals by shareholders intended to be presented at such meeting must be received by the Secretary of the Company
at 3800 Howard Hughes Parkway, Las Vegas, Nevada 89169 no later than a reasonable time before we print our proxy materials for
the 2021 Annual Meeting. In addition, any such proposals will need to comply with Rule 14a-8 adopted under the Securities Exchange
Act of 1934, which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Notice
of any director nomination or other proposal that you intend to present at the 2021 annual meeting of shareholders, but do not
intend to have included in the proxy statement and form of proxy relating to the 2021 annual meeting of shareholders, must be delivered
to the Company’s Secretary by mail at the address given above, a reasonable time before we send our proxy materials for that
meeting. The proxy we solicit for the 2021 annual meeting of shareholders will confer discretionary authority on the Company’s
proxies to vote on any proposal presented by a shareholder at that meeting for which we have not been provided with such notice.
Availability of Annual
Report on Form 10-K
We have provided a copy of our 2019 Annual Report with this
proxy statement. Shareholders may obtain, without charge, a copy of the Company’s annual report on Form 10-K,
upon written request. Any such request should be directed to "Corporate Secretary, Consumer Portfolio Services, Inc., 3800
Howard Hughes Parkway, Suite 1400, Las Vegas, Nevada 89169." The annual report on Form 10-K is also available on our website,
at the following address:
http://www.consumerportfolio.com/2019Form10K.html
CONSUMER PORTFOLIO SERVICES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 22, 2020
The undersigned shareholder of CONSUMER PORTFOLIO SERVICES,
INC., a California corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and Proxy Statement
with respect to the Annual Meeting of Shareholders of Consumer Portfolio Services, Inc. to be held at the offices of said corporation
at 3800 Howard Hughes Parkway, Las Vegas, NV 89169 on October 22, 2020, at 10:00 a.m., and hereby appoints Charles E. Bradley,
Jr. and Jeffrey P. Fritz, and each of them, proxies and attorneys-in-fact, each with power of substitution and revocation, and
each with all powers that the undersigned would possess if personally present, to vote the Consumer Portfolio Services, Inc.
Common Stock of the undersigned at such meeting and any postponements or adjournments of such meeting, as set forth below, and
in their discretion upon any other business that may properly come before the meeting (and any such postponements or adjournments).
(Continued and to be signed on the reverse
side.)
ANNUAL MEETING OF SHAREHOLDERS OF
CONSUMER PORTFOLIO SERVICES, INC.
October 22, 2020
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NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at www.consumerportfolio.com/AnnualMeeting2020.html
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Please date, sign and mail your proxy card in the envelope
provided as soon as possible.
Please detach along perforated line and
mail in the envelope provided.
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THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS, AND
“FOR”
PROPOSALS 2 AND 3.
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
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FOR
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AGAINST
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ABSTAIN
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1. Election of Directors:
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2.
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To ratify the appointment of Crowe LLP as independent auditors of the
Company for the year ending December 31, 2020.
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o
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FOR ALL NOMINEES
o
WITHHOLD AUTHORITY
FOR ALL NOMINEES
o
FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To
withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle
next to each nominee you wish to withhold, as shown here: l
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NOMINEES:
m Charles
E. Bradley, Jr.
m Chris
A. Adams
m Louis
M. Grasso
m Brian
J. Rayhill
m William
B. Roberts
m Gregory
S. Washer
m Daniel
S. Wood
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3.
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To approve an advisory resolution on executive compensation.
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o
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o
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4.
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To transact such other business as may properly come before the meeting or any
adjournment(s) thereof.
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THIS PROXY WILL BE
VOTED AS SPECIFIED OR, IF NO CHOICE IS SPECIFIED, FOR THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2 AND 3, AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS
THEREOF.
PLEASE VOTE, SIGN,
DATE AND PROMPTLY RETURN THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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☐
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Signature
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Date
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Signature
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Date
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of Shareholder
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of Shareholder
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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ANNUAL MEETING OF SHAREHOLDERS OF
CONSUMER PORTFOLIO SERVICES, INC.
OCTOBER 22, 2020
PROXY VOTING INSTRUCTIONS
INTERNET - Access “www.voteproxy.com”
and follow the on-screen
Instructions or scan the QR code with your smartphone.. Have
your proxy card available when you access the web page.
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TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
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COMPANY NUMBER
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Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL – Sign, date and mail your proxy card in the
envelope provided as soon as possible.
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ACCOUNT NUMBER
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IN PERSON - You may vote your shares in person by attending
the Annual Meeting.
GO GREEN - e-Consent makes it easy to go paperless. With
e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter
and paper waste. Enroll today via www.astfinancial.com to enjoy
online access.
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NOTICE OF INTERNET AVAILABILITY OF
PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at www.consumerportfolio.com/AnnualMeeting2020.html
Please detach along perforated line and
mail in the envelope provided IF you are not voting via telephone or the Internet.
ANNUAL MEETING OF SHAREHOLDERS OF
CONSUMER PORTFOLIO SERVICES, INC.
OCTOBER 22, 2020
PROXY VOTING INSTRUCTIONS
INTERNET - Access “www.voteproxy.com”
and follow the on-screen
Instructions or scan the QR code with your smartphone.. Have
your proxy card available when you access the web page.
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TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call.
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COMPANY NUMBER
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Vote online/phone until 11:59 PM EST the day before the meeting.
MAIL – Sign, date and mail your proxy card in the
envelope provided as soon as possible.
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ACCOUNT NUMBER
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IN PERSON - You may vote your shares in person by attending
the Annual Meeting.
GO GREEN - e-Consent makes it easy to go paperless. With
e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter
and paper waste. Enroll today via www.astfinancial.com to enjoy
online access.
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NOTICE OF INTERNET AVAILABILITY OF
PROXY MATERIAL: The Notice of Meeting, proxy statement and proxy card are available at www.consumerportfolio.com/AnnualMeeting2020.html
Please detach along perforated line and
mail in the envelope provided IF you are not voting via telephone or the Internet.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE ELECTION OF DIRECTORS,
AND “FOR” PROPOSALS 2 AND
3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
x
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FOR
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AGAINST
|
ABSTAIN
|
1. Election of Directors:
|
|
|
2.
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To ratify the appointment of Crowe LLP as independent auditors of the Company for the year ending December 31, 2020.
|
o
|
o
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o
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o FOR ALL
NOMINEES
o WITHHOLD AUTHORITY
FOR ALL NOMINEES
o FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual
nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown
here: l
|
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NOMINEES:
m
Charles E. Bradley, Jr.
m
Chris A. Adams
m Louis M. Grasso
m Brian J. Rayhill
m William B. Roberts
m Gregory S. Washer
m Daniel S. Wood
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3.
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To approve an advisory resolution on executive compensation.
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o
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o
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o
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4.
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To transact such other business as may properly come before the meeting or any adjournment(s) thereof.
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THIS PROXY WILL BE VOTED AS SPECIFIED OR, IF NO CHOICE IS
SPECIFIED, FOR THE ELECTION OF THE NOMINEES, FOR PROPOSALS 2 AND 3, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE MEETING AND ANY POSTPONEMENTS OR ADJOURNMENTS THEREOF.
PLEASE VOTE, SIGN, DATE AND PROMPTLY RETURN THIS CARD.
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method.
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Signature
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Date
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Signature
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Date
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of Shareholder
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of Shareholder
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Note:
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Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person.
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