CPSS

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How CPSS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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New in FY2025

Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2026.
We expect to earn quarterly profits during 2026; however, there can be no assurance as to that expectation.
We identify important factors that could cause actual results to differ, generally in the “Risk Factors” section of this report, and also under the caption “Cautionary Note Regarding Forward-Looking Statements.” One reason for our expectation is that we have had positive net income in each of the fourteen fiscal years ended December 31, 2025, although not in every quarter within that period.
Our current short-term funding capacity is $702.5 million, comprising three credit facilities.
All warehouse credit facilities have a revolving period during which we may receive advances secured by contributed automobile contracts, followed by an amortization period during which no further advances may be made, but prior to which outstanding advances are due and payable.
At December 31, 2025, we had approximately $3,483.4 million of debt outstanding.
Such debt consisted primarily of $2,986.6 million of securitization trust debt, and also included $324.9 million of warehouse lines of credit, $143.0 million of residual interest financing debt and $29.0 million in subordinated renewable notes.
While the specific terms and mechanics vary among transactions, our securitization and warehousing agreements generally provide that we will receive excess spread cash flows only if the amount of overcollateralization and spread account balances have reached specified levels and/or the net losses related to the automobile contracts in the automobile contract pools are below certain predetermined levels.
In the event net losses on automobile contracts exceed these levels, the terms of the securitization or warehouse credit facility: · may require increased credit enhancement, including an increase in the amount required to be on deposit in the spread account to be accumulated for the particular pool; and · in certain circumstances, may permit affected parties to require the transfer of servicing on some or all of the securitized or warehoused contracts from us to an unaffiliated servicer.
A deterioration in economic conditions and certain economic factors, such as reduced business activity, high unemployment, interest rates, housing prices, energy prices (including the price of gasoline), increased consumer indebtedness (including of obligors on the receivables), lack of available credit, the rate of inflation (such as the recent increase in inflation) and consumer perceptions of the economy, as well as other factors, such as terrorist events, civil unrest, cyber-attacks, public health emergencies, extreme weather conditions or significant changes in the geopolitical environment (such as the ongoing military conflict between Ukraine and Russia and the conflicts in the Middle East, and recent U.S. action taken in Venezuela) and/or public policy, including increased state, local or federal taxation, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables we originate.
In 2024 and 2025, the Federal Reserve lowered short term interest rates.
During the years ended December 31, 2025, and 2024, no single dealer accounted for as much as 1.5% of the automobile contracts we purchased.
We specialize in the purchase and servicing of automobile contracts to finance automobile purchases by sub-prime customers, those who have limited credit histories or past credit problems.
Our Use of Artificial Intelligence May Expose Us to Risks That Could Impact our Business, Financial Conditions, and Results of Operations.
We use artificial intelligence (“AI”) in certain aspects of our business operations, and we or our third-party service providers may expand the use of these technologies in the future.
AI may be used to support functions such as customer service, servicing operations, data analysis, compliance monitoring, and other processes related to our auto finance activities.
Implementing and maintaining these technologies may require significant investments in infrastructure, personnel, data management, and training.
There can be no assurance that these investments will deliver the anticipated benefits or that AI technologies can be successfully integrated into our existing systems and processes without disruption.
If we are unable to effectively implement or adapt to evolving technologies, including AI, as quickly or successfully as our competitors, our operational efficiency, relationships with automobile dealers, and ability to compete in the auto finance market could be adversely affected.
In addition, the legal and regulatory environment relating to AI is evolving and uncertain.
New or changing laws, regulations, or supervisory expectations could limit how we use AI technologies, require modifications to our systems or processes, or increase compliance costs.
Failure to comply with applicable requirements could expose us to regulatory scrutiny or enforcement actions.
We may also rely on AI technologies developed or supported by third-party vendors.
As a result, we may be dependent on those vendors’ development practices, training data, and risk controls, over which we may have limited visibility or control.
Although we seek to manage and oversee our third-party vendors through our vendor risk management and oversight processes, we may not be able to fully mitigate risks arising from their technologies, practices, or controls, and certain risks may remain outside of our control.
The limited transparency of certain AI models may make it more difficult to monitor model performance, identify errors or bias, and demonstrate compliance with regulatory requirements.
AI systems may produce inaccurate or unintended results, reflect biases in the data used to train them, or otherwise operate in ways that are inconsistent with our policies, regulatory obligations, or customer expectations.
If we are unable to effectively manage the risks associated with the use of AI, including operational, regulatory, data security, or reputational risks, our business, financial condition, and results of operations could be adversely affected.
If such estimated value were to be materially different from our recorded value, an adjustment to the recorded value of our receivables will be required.
As of December 31, 2025, our directors and executive officers collectively owned 12.2 million shares of our common stock, or approximately 56% of total shares outstanding.

Gone since FY2024

Subsequently we successfully completed securitizations in June and September 2020, and then on a regular quarterly schedule from January 2021 through January 2025.
We expect to earn quarterly profits during 2025; however, there can be no assurance as to that expectation.
We identify important factors that could cause actual results to differ, generally in the “Risk Factors” section of this report, and also under the caption “Cautionary Note Regarding Forward-Looking Statements.” One reason for our expectation is that we have had positive net income in each of the thirteen fiscal years ended December 31, 2024, although not in every quarter within that period.
Our current short-term funding capacity is $535 million, comprising two credit facilities.
Both warehouse credit facilities have a revolving period during which we may receive advances secured by contributed automobile contracts, followed by an amortization period during which no further advances may be made, but prior to which outstanding advances are due and payable.
At December 31, 2024, we had approximately $3,131.0 million of debt outstanding.
Such debt consisted primarily of $2,594.4 million of securitization trust debt, and also included $410.9 million of warehouse lines of credit, $99.2 million of residual interest financing debt and $26.5 million in subordinated renewable notes.
While the specific terms and mechanics vary among transactions, our securitization and warehousing agreements generally provide that we will receive excess spread cash flows only if the amount of overcollateralization and spread account balances have reached specified levels and/or the delinquency, defaults or net losses related to the automobile contracts in the automobile contract pools are below certain predetermined levels.
In the event delinquencies, defaults or net losses on automobile contracts exceed these levels, the terms of the securitization or warehouse credit facility: · may require increased credit enhancement, including an increase in the amount required to be on deposit in the spread account to be accumulated for the particular pool; and · in certain circumstances, may permit affected parties to require the transfer of servicing on some or all of the securitized or warehoused contracts from us to an unaffiliated servicer.
A deterioration in economic conditions and certain economic factors, such as reduced business activity, high unemployment, interest rates, housing prices, energy prices (including the price of gasoline), increased consumer indebtedness (including of obligors on the receivables), lack of available credit, the rate of inflation (such as the recent increase in inflation) and consumer perceptions of the economy, as well as other factors, such as terrorist events, civil unrest, cyber-attacks, public health emergencies, extreme weather conditions or significant changes in the geopolitical environment (such as the ongoing military conflict between Ukraine and Russia and the conflict in Israel) and/or public policy, including increased state, local or federal taxation, could adversely affect the ability and willingness of obligors to meet their payment obligations under the receivables we originate.
In 2024, the Federal Reserve lowered short term interest rates.
During the years ended December 31, 2024 and 2023, no single dealer accounted for as much as 2% of the automobile contracts we purchased.
We specialize in the purchase and servicing of automobile contracts to finance automobile purchases by sub-prime customers, those who have limited credit history, low income, or past credit problems.
For our receivables originated prior to January 2018, we maintain an allowance for credit losses on automobile contracts held on our balance sheet, which reflects our estimates of probable credit losses that can be reasonably estimated.
If the allowance is inadequate, then we would recognize the losses in excess of the allowance as an expense and our results of operations could be adversely affected.
If such estimated value were to be materially different from our recorded value, we might be required to adjust the recorded value of our receivables.
As of December 31, 2024, our directors and executive officers collectively owned 13.0 million shares of our common stock, or approximately 61% of total shares outstanding.

Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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