Consumer Portfolio Services, Inc. Reports 2006 Fourth Quarter and Full-Year Earnings

Consumer Portfolio Services, Inc. (Nasdaq:CPSS) today announced earnings for its fourth quarter and year ended December 31, 2006. Pretax income for the fourth quarter of 2006 increased to $4.5 million, compared to pretax income of $1.7 million for the comparable quarter ended December 31, 2005. Net income for the quarter ended December 31, 2006 was $30.9 million, or $1.30 per diluted share, compared to net income of $1.7 million, or $0.07 per diluted share, for the quarter ended December 31, 2005. Net income for the 2006 period included a net tax benefit of $26.4 million, or $1.11 per diluted share, related to the reversal of most of the valuation allowance against the deferred tax asset on the Company’s books. Without the tax gain, net income for the quarter would have been $4.5 million, or $0.19 per diluted share, up from $1.7 million, or $0.07 per diluted share, in the fourth quarter of 2005. For the three months ended December 31, 2006 total revenues increased approximately $25.2 million, or 46.0%, to $79.9 million, compared to $54.7 million for the three months ended December 31, 2005. Total expenses for the three months ended December 31, 2006 were $75.4 million, an increase of $22.3 million, or 42.1%, as compared to $53.0 million for the three months ended December 31, 2005. Pretax income for the full-year 2006 increased to $13.2 million, compared to pretax income of $3.4 million for 2005. Net income for the year ended December 31, 2006 was $39.6 million, or $1.64 per diluted share, compared to net income of $3.4 million, or $0.14 per diluted share, for the year ended December 31, 2005. As discussed above, net income for 2006 included a net tax benefit of $26.4 million, or $1.09 per diluted share. Without the tax gain, net income for 2006 would have been $13.2 million, or $0.55 per diluted share, up from $3.4 million, or $0.14 per diluted share, for the full year 2005. Revenues for the year ended December 31, 2006 totaled $278.9 million, an increase of $85.2 million, or 44.0%, compared to $193.7 million for 2005. Total expenses for the year ended December 31, 2006 were $265.7 million, an increase of $75.3 million, or 39.6%, as compared to $190.3 million for the year ended December 31, 2005. During the fourth quarter of 2006, Consumer Portfolio Services purchased $241.4 million of contracts from dealers as compared to $254.4 million during the third quarter of 2006 and $188.1 million during the fourth quarter of 2005. For 2006, new contract purchases increased approximately 47.5% vs. 2005, increasing from $691.3 million in 2005 to $1,019.0 million in 2006. The Company's managed receivables totaled $1,565.9 million at the end of 2006, an increase of $444.2 million from $1,121.7 million at the end of 2005, as follows ($ in millions): Dec. 31, 2006 Dec. 31, 2005 Owned by Consolidated Subsidiaries* $1,527.3  $1,000.6  Owned by Non-Consolidated Subsidiaries 34.8  103.1  As Third Party Servicer for SeaWest Financial 3.8  18.0  Total $1,565.9  $1,121.7    * Before $125.9 million and $87.0 million of allowance for credit losses, deferred acquisition fees and repossessed vehicles for 2006 and 2005, respectively. The Company continued its regular quarterly securitization program with the December sale of $195.8 million of AAA/Aaa rated asset backed notes. In addition, in December the Company entered into a new $35 million revolving residual credit facility. Subsequent to year end, the Company completed a $25 million subordinated warehouse facility that will allow for an advance rate up to 93% of the principal balance of receivables it purchases. Annualized net charge-offs during the December 2006 quarter were 5.9% of the average owned portfolio as compared to 6.0% in the December 2005 quarter. Annualized net charge-offs for the full-year 2006 were 4.5% of the average owned portfolio as compared to 5.3% for the full-year 2005. Delinquencies greater than 30 days (including repossession inventory) were 5.5% of the total owned portfolio as of December 31, 2006 as compared to 5.0% as of December 31, 2005. "As we have discussed over the last several quarters, our financial results continue to improve,” said Charles E. Bradley, Jr., President and Chief Executive Officer of Consumer Portfolio Services. "This is the result of the continued growth of our managed portfolio while maintaining tight control over credit and operating expenses. This quarter our net income benefited from a one-time tax gain that significantly strengthens our equity base and helps de-lever the balance sheet. More importantly, pretax income continues to show solid year-over-year growth. Going forward, we expect to start providing for federal and state income tax expense, which will impact net income and EPS.” "Operationally 2006 was another good year for the Company as we once again achieved significant originations growth. During the fourth quarter, purchases of new receivables remained strong although down slightly from the third quarter but consistent with seasonal patterns. On the servicing side of the business, we have continued to improve our use of behavioral scorecards which allows us to be more effective and efficient. Delinquencies and net charge-offs for the fourth quarter remained well within historical seasonal ranges.” Conference Call Consumer Portfolio Services announced that it will hold a conference call tomorrow, February 15, 2007, at 1:30 p.m. ET to discuss its quarterly and full-year earnings. Those wishing to participate by telephone may dial-in at 973-409-9261 approximately 10 minutes prior to the scheduled time. A replay will be available between February 15, 2007 and February 22, 2007, beginning one hour after conclusion of the call, by dialing 877-519-4471 or 973-341-3080 for international participants, with pin number 8442344. A broadcast of the conference call will also be available live and for 30 days after the call via the Company’s web site at www.consumerportfolio.com and at www.streetevents.com. About Consumer Portfolio Services, Inc. Consumer Portfolio Services, Inc. is a specialty finance company engaged in purchasing and servicing new and used retail automobile contracts originated primarily by franchised automobile dealerships and to a lesser extent by select independent dealers of used automobiles in the United States. We serve as an alternative source of financing for dealers, facilitating sales to sub-prime customers, who have limited credit history, low income or past credit problems and who otherwise might not be able to obtain financing from traditional sources. Forward-looking statements in this news release include the Company's recorded revenue, expense and provision for credit losses, because these items are dependent on the Company’s estimates of future losses, and also include the statement that continued earnings are expected. The accuracy of such estimates may be adversely affected by various factors, which include (in addition to risks relating to the economy generally) the following: possible increased delinquencies; repossessions and losses on retail installment contracts; incorrect prepayment speed and/or discount rate assumptions; possible unavailability of qualified personnel, which could adversely affect the Company’s ability to service its portfolio; possible increases in the rate of consumer bankruptcy filings or the effects of recent changes in bankruptcy law, which could adversely affect the Company’s rights to collect payments from its portfolio; other changes in government regulations affecting consumer credit; possible declines in the market price for used vehicles, which could adversely affect the Company’s realization upon repossessed vehicles; and economic conditions in geographic areas in which the Company's business is concentrated. All of such factors also may affect the Company’s future earnings, as to which there can be no assurance. Any implication that the results of the most recently completed quarter are indicative of future results is disclaimed, and the reader should draw no such inference. Factors such as those identified above in relation to provision for credit losses may affect future performance. Consumer Portfolio Services, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited)   Three months ended Twelve months ended December 31, December 31, 2006  2005  2006  2005  Revenues: Interest income $ 75,376  $ 49,819  $ 263,565  $ 171,834  Servicing fees 458  1,156  2,895  6,647  Other income 4,059  3,739  12,403  15,216  79,893  54,714  278,863  193,697  Expenses: Employee costs 10,133  10,727  38,483  40,384  General and administrative 6,249  6,407  23,197  23,095  Interest 27,700  15,827  93,113  51,669  Provision for credit losses 26,734  15,633  92,056  58,987  Impairment loss on residual asset -  -  -  -  Other expenses 4,559  4,452  18,814  16,190  75,375  53,046  265,663  190,325  Income (loss) before income taxes 4,518  1,668  13,200  3,372  Income taxes (26,355) -  (26,355) -  Net income (loss) $ 30,873  $ 1,668  $ 39,555  $ 3,372    Earnings (loss) per share: Basic $ 1.43  $ 0.08  $ 1.82  $ 0.16  Diluted 1.30  0.07  1.64  0.14    Earnings (loss) per share without tax gain: Basic $ 0.21  $ 0.08  $ 0.61  $ 0.16  Diluted 0.19  0.07  0.55  0.14    Number of shares used in computing earnings (loss) per share: Basic 21,626  21,698  21,759  21,627  Diluted 23,792  23,835  24,052  23,513  Condensed Consolidated Balance Sheets (In thousands) (Unaudited)     December 31, December 31, 2006  2005    Cash $ 14,215  $ 17,789  Restricted cash 193,001  157,662  Total Cash 207,216  175,451  Finance receivables 1,480,794  971,304  Allowance for finance credit losses (79,380) (57,728) Finance receivables, net 1,401,414  913,576  Residual interest in securitizations 13,795  25,220  Other assets 94,605  40,897  $ 1,717,030  $ 1,155,144    Accounts payable and other liabilities $ 17,752  $ 19,779  Warehouse lines of credit 72,950  35,350  Residual interest financing 31,378  43,745  Securitization trust debt 1,442,995  924,026  Senior secured debt 25,000  40,000  Subordinated debt 13,619  18,655  1,603,694  1,081,555    Shareholders' equity 113,336  73,589  $ 1,717,030  $ 1,155,144  Operating and Performance Data ($ in thousands) At and for theThree months endedDecember 31, At and for theTwelve months endedDecember 31, 2006  2005  2006  2005    Contract purchases 241,361  188,108  1,019,018  691,252    Total managed portfolio 1,565,905  1,121,747  1,565,905  1,121,747    Average managed portfolio 1,539,098  1,102,091  1,376,781  997,697    Net interest margin (1) 47,676  33,992  170,452  120,165    Risk adjusted margin (2) 20,942  18,359  78,396  61,178    Core operating expenses (3) 20,941  21,586  80,494  79,669  as % of average managed portfolio 5.44% 7.83% 5.85% 7.99%   Annualized return on managed assets (4) 1.17% 0.61% 0.96% 0.34%   Allowance as % of finance receivables 5.36% 5.94% 5.36% 5.94%   Delinquencies 31+ Days 3.99% 3.78% 3.99% 3.78%   Repossession Inventory 1.54% 1.21% 1.54% 1.21%   Total Delinquencies and Repossession Inventory 5.53% 4.99% 5.53% 4.99%   Annualized net charge-offs as % of average owned portfolio 5.92% 6.02% 4.50% 5.25%   (1) Interest income less interest expense. (2) Net interest margin less provision for credit losses. (3) Total expenses less interest and provision for credit losses. (4) Pretax income divided by average managed portfolio.