Washington, D.C. 20549
[ ] Transition Report pursuant
to Section 15(d) of the Securities Exchange Act of 1934
A. Full title of the plan and the address of the
plan,
Consumer Portfolio Services, Inc. 401(k) Plan
B. Name of issuer of the securities held pursuant
to the plan
Consumer Portfolio Services, Inc.
I. Financial Statements.
Financial statements and supplemental schedule
prepared in accordance with the financial reporting requirements of the Employee Retirement Income Security Act of 1974, together with
the report of independent registered public accounting firm thereon, are filed herewith.
II. Exhibits:
Consent of Independent Registered Public Accounting
Firm is filed herewith as Exhibit 23.1.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
The Participants and Benefits Committee
Consumer Portfolio Services, Inc. 401(k) Plan
Opinion on the Financial Statements
We have audited the accompanying statements of
net assets available for benefits of the Consumer Portfolio Services, Inc. 401(k) Plan (the “Plan”) as of December 31,
2021 and 2020, the related statements of changes in net assets available for benefits for the years then ended, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all
material respects, the net assets available for benefits of the Plan as of December 31, 2021 and 2020, and the changes in net assets available
for benefits for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We are
a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required
to be independent with respect to the Plan in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Plan is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Plan’s
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Supplemental Information
The supplemental information in the accompanying
schedule, Schedule H, Line 4i – Schedule of Assets (Held at End of Year) as of December 31, 2021, has been subjected to audit procedures
performed in conjunction with the audit of the Plan’s financial statements. The supplemental information is the responsibility of
the Plan’s management. Our audit procedures included determining whether the supplemental information reconciles to the financial
statements or the underlying accounting and other records, as applicable, and performing procedures to test the completeness and accuracy
of the information presented in the supplemental information. In forming our opinion on the supplemental information, we evaluated whether
the supplemental information, including its form and content, is presented in conformity with the Department of Labor’s Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. In our opinion, the supplemental information
is fairly stated, in all material respects, in relation to the financial statements as a whole.
/s/ HASKELL & WHITE
LLP
We have served as the Plan’s auditor since
2005.
Irvine, California
June 29, 2022
Notes to Financial Statements
December 31, 2021 and 2020
| (1) | Description of the Plan |
The following description of the Consumer
Portfolio Services, Inc. (the “Plan Sponsor” or “CPS, Inc.”) 401(k) Plan (the “Plan”) provides only
general information. Participants should refer to the Plan agreement for a more complete description of the Plan’s provisions.
The Plan was established as a profit
sharing plan with cash or deferred arrangement on January 1, 1994. The Plan was restated as of January 1, 1996 to permit investment in
the Plan Sponsor’s common stock without regard to Section 407(a) of the Employee Retirement Income Security Act of 1974 (“ERISA”).
Effective January 1, 2003, the Plan Sponsor adopted the MassMutual Life Insurance Company Flexinvest® Prototype Non-Standardized 401(k)
Profit Sharing Plan. During 2012, the Plan was amended to allow for automatic enrollment with automatic deferral contributions of 3% of
eligible compensation of employees eligible to participate in the Plan, unless otherwise elected by such employees. Effective January
1, 2017, the Plan was amended to automatically increase participant contributions by 1% on the employee’s anniversary date each
year forward, unless the employee opts out. The Plan is a defined contribution plan which provides retirement benefits for eligible employees
of the Plan Sponsor. It is subject to the provisions of ERISA.
On July 20, 2020, the Plan was amended,
effective as of March 27, 2020, to implement certain changes provided for under the Coronavirus Aid, Relief, and Economic Security Act
(“CARES Act”), including allowing certain eligible individuals to a) receive coronavirus-related distributions; b) temporarily
borrow a maximum of $100,000; c) delay certain participant note repayments for up to one year; and d) temporarily suspend required minimum
distributions. The CARES Act provisions were effective through December 31, 2020.
On January 4, 2021, MassMutual Life
Insurance Company, the custodian and record-keeper for the plan, was acquired by Empower Retirement (“Empower”).
| (b) | Administration of the Plan |
The Plan is administered by the Human
Resources Department (the “Plan Administrator”) of the Plan Sponsor. The Plan Administrator consults with the benefits committee
and other key management of the Plan Sponsor when managing the operations and the administration of the Plan. The Plan is operated under
an agreement which requires that Empower hold and distribute the funds of the Plan in accordance with the text of the Plan and the instructions
of the Plan Administrator or its designees.
CONSUMER PORTFOLIO SERVICES, INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
| (1) | Description of the Plan (continued) |
Employees are eligible to
participate in the Plan after completing 90 days of service. In accordance with the Plan, participants may contribute up to 100% of
their annual compensation, after required deductions, such as those required by the Federal Insurance Contributions Act.
Contributions are subject to certain limitations as defined in the Plan agreement, as well as a maximum of $19,500 for the years
ended December 31, 2021 and 2020, under the Internal Revenue Code (“IRC”) of 1986. Catch-up contributions (within the
meaning of Section 414(v) of the IRC) can also be made by participants who reach age 50 during the plan year. Participants are only
permitted to make catch-up contributions after they have already contributed the maximum amount for the year. The catch-up
contribution limit was $6,500 for both 2021 and 2020. Participants may rollover into the Plan amounts representing distributions
from other qualified plans.
The Plan Sponsor may make a discretionary
matching contribution equal to a discretionary amount of each participant’s pretax contributions up to a maximum of $2,000. Discretionary
cash matching contributions were $1,235,048 and $1,449,626 for the years ended December 31, 2021 and 2020, respectively.
Each participant’s account is
credited with the participant’s contributions, allocations of the Plan Sponsor’s matching contributions and investment earnings
and charged with an allocation of expenses and investment losses. Allocations are based on participant earnings or account balances, as
defined in the Plan agreement.
Participants are immediately vested
in their contributions plus actual earnings thereon. Vesting in the Plan Sponsor’s matching contributions plus actual earnings thereon
is based on years of continuous service. A participant vests at the rate of 20% after two years of credited service and 20% each year
thereafter until 100% is reached after six years of credited service. Participants are also fully vested at death, retirement and upon
termination for disability.
The Plan offers various investment
options which are managed by several outside investment managers. Upon enrollment in the Plan, participants may direct their contributions
in any of the investment options offered at the time. Participants may change their investment options daily. Participants should refer
to the investment literature provided by the Plan Sponsor for a complete description of the investment options and for the detailed composition
of each investment fund.
CONSUMER PORTFOLIO SERVICES,
INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
| (1) | Description of the Plan (continued) |
| (g) | Notes Receivable from Participants |
Participants may borrow from their
accounts. Such borrowings and repayments are treated as transfers from and to, respectively, the participant’s investment funds.
Borrowings are secured by the participant’s vested account balance and bear interest at a rate commensurate with local prevailing
rates as determined by the Plan Administrator. Loans are limited to the lesser of $50,000, reduced by the highest outstanding loan balance
during the preceding 12 months, or 50% of the participant’s vested account balance. A loan shall be repaid within five years unless
it is used for the purchase of a primary residence.
Notes receivable from participants
are payable through payroll deductions in installments of principal plus interest of prime rate plus 1 percentage point with final payments
due between January 2022 and November 2032.
Upon termination of service, a participant
may elect to receive either a single lump sum payment in cash equal to the value of the vested interest in his or her account, or a series
of substantially equal annual or more frequent installments over a period not to exceed the participant’s life expectancy. Benefits
are recorded when paid.
In accordance with the Plan agreement,
forfeitures attributable to matching contributions must be applied first to reduce expenses related to the administration of the Plan
and then to reduce any employer contributions. As of December 31, 2021, and 2020, forfeited accounts totaled $100,603 and $147,027, respectively.
Although it has not expressed any
intent to do so, the Plan Sponsor has the right under the Plan to terminate the Plan subject to the provisions of ERISA. In the event
of the Plan’s termination, participants will become 100% vested in their accounts.
| (2) | Significant Accounting Policies |
The financial statements of the Plan
have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States
of America (“GAAP”).
CONSUMER PORTFOLIO SERVICES,
INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
| (2) | Significant Accounting Policies (continued) |
The Plan Administrator evaluated subsequent
events through June 29, 2022, the date the financial statements were available to be issued.
Publicly traded securities are carried
at fair value based on published market quotations. Shares of registered investment companies are valued at the fair value of the underlying
assets at year-end. Purchases and sales of investments are recorded on a trade-date basis. Dividends are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
Realized gains and losses on investments
are based on the fair value of the asset at the beginning of the year or at the time of purchase for assets purchased during the year
and the related fair value on the date investments are sold during the year.
The Plan invests in a Guaranteed Interest
Contract (“GIC”), which is valued at contract value based on the underlying value of the account’s group annuity contract.
In the event that the underlying agreements in the Plan’s investments in fully benefit-responsive investment contracts are fully
or partially terminated, participants will receive the liquidation value instead of the contract value. The Plan Administrator does not
anticipate the full or partial termination of such agreements in the foreseeable future.
| (d) | Notes Receivable from Participants |
Notes receivable from participants
are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are recorded as distributions
based on the terms of the Plan agreement.
| (e) | Administrative Expenses |
The Plan and the Plan Sponsor share
plan expenses. Certain direct investment expenses, such as record keeping fees, brokerage fees, loan, withdrawal or distribution processing
fees are deducted from participants’ accounts. During the years ended December 31, 2021 and 2020, $169,081 and $187,779, respectively,
in Plan investment and administrative expenses were paid through the use of forfeitures.
The Plan Administrator has made a number
of estimates and assumptions relating to the reporting of assets and liabilities to prepare these financial statements in conformity with
GAAP. Accordingly, actual results may differ from those estimates.
CONSUMER PORTFOLIO SERVICES,
INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
In accordance with GAAP, the Plan
uses a hierarchy for measuring the fair value of all financial assets and liabilities that are being measured and reported at fair value
on a recurring and non-recurring basis. Fair value is measured in levels, which are described in more detail below, and are determined
based on the observability and reliability of the assumptions used to determine fair value.
Level 1: Valuations for assets and
liabilities traded in active exchange markets. Valuations are obtained from readily available pricing sources for market transactions
involving identical assets or liabilities.
Level 2: Valuations for assets and
liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or
comparable assets or liabilities.
Level 3: Valuations for assets and
liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models, and similar
techniques, and not based on market exchange, dealer or broker traded transactions. These valuations incorporate certain assumptions and
projections in determining the fair value assigned to such assets or liabilities.
Certain investments in the Plan are measured
and reported at fair value on a recurring basis. The following tables show the balances of these investments based on their GAAP designated
levels:
| |
As of December 31, 2021 | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| |
| | |
| | |
| | |
| |
Registered investment companies | |
$ | 42,639,854 | | |
$ | 42,639,854 | | |
$ | – | | |
$ | – | |
CPS, Inc. common stock | |
| 7,866,172 | | |
| 7,866,172 | | |
| – | | |
| – | |
Interest bearing cash | |
| 187,520 | | |
| 187,520 | | |
| – | | |
| – | |
Total | |
$ | 50,693,546 | | |
$ | 50,693,546 | | |
$ | – | | |
$ | – | |
| |
As of December 31, 2020 | |
| |
Total | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
| |
| | |
| | |
| | |
| |
Registered investment companies | |
$ | 34,368,831 | | |
$ | 34,368,831 | | |
$ | – | | |
$ | – | |
CPS, Inc. common stock | |
| 2,899,585 | | |
| 2,899,585 | | |
| – | | |
| – | |
Interest bearing cash | |
| 36,300 | | |
| 36,300 | | |
| – | | |
| – | |
Total | |
$ | 37,304,716 | | |
$ | 37,304,716 | | |
$ | – | | |
$ | – | |
Registered investment companies were
valued at their daily closing price.
CONSUMER PORTFOLIO SERVICES,
INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
| (3) | Investments (continued) |
The Plan is a party to a fully
benefit-responsive guaranteed interest contract with Empower. The account is credited with earnings on the underlying investments and
charged for participant withdrawals and administrative expenses. The guaranteed interest contract issuer is contractually obligated to
repay the principal and a specified interest rate that is guaranteed to the Plan. Because the guaranteed investment contract is fully
benefit-responsive, contract value is the relevant measurement for that portion of the net assets available for plan benefits attributable
to the guaranteed investment contract. The guaranteed interest contract is presented on the face of the statements of net assets available
for benefits at contract value. Contract value, as reported to the Plan by Empower, represents contributions made under the contract,
plus earnings, less participant withdrawals and administrative expenses. Participants may ordinarily direct the withdrawal or transfer
of all or a portion of their investment at contract value.
| (4) | Risks and Uncertainties |
The Plan provides for various investment
options in money market funds, registered investment companies, guaranteed interest contracts and the common stock of Consumer Portfolio
Services, Inc. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of
uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the various risk
factors could materially affect participants’ account balances and the amounts reported in the financial statements.
The Internal Revenue Service (“IRS”)
has determined and informed the Plan Sponsor by a letter dated February 7, 1996 that the Plan and related trust are designed in accordance
with applicable sections of the IRC and is, therefore, exempt from Federal income taxes. As described in Note 1, the Plan has been amended
since receiving the determination letter, including the adoption of the Empower Retirement Company Flexinvest® Prototype Non-Standardized
401(k) Profit Sharing Plan. The IRS has determined and notified Empower Retirement Company by a letter dated February 20, 2015 that the
form of the prototype plan is acceptable under section 401 of the Code for use by employers for the benefit of their employees. The Plan
Administrator believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the
IRC. Accordingly, no provision for income taxes is included in the accompanying financial statements.
GAAP requires Plan management to evaluate
uncertain tax positions taken by the Plan. The financial statement effects of a tax position are recognized when the position is more
likely than not, based on the technical merits, to be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax
positions taken by the Plan and has concluded that as of December 31, 2021, there are no uncertain positions taken or expected to be taken.
The Plan has recognized no interest or penalties related to uncertain tax positions.
CONSUMER PORTFOLIO SERVICES,
INC. 401(K) PLAN
Notes to Financial Statements
December 31, 2021 and 2020
Certain Plan investments are managed
by Empower. Empower is the custodian of these assets and provides record keeping services to the Plan and; therefore, these transactions
qualify as permitted party-in-interest transactions. The Plan Sponsor offers its common stock as an investment option and performs administrative
functions to the plan at no cost. These are also considered permitted party-in-interest transactions. Notes receivable from participants
held by the Plan also reflect party-in-interest transactions.
* Denotes investment with party-in-interest.