"Consumer Portfolio Services" Q2 2026 Earnings Call - Originations Surge 40% While Credit Discipline Holds Firm
Summary
Consumer Portfolio Services finally broke through its growth ceiling. Originations jumped 40% quarter over quarter to $758 million, powered by a 60% expansion in the sales force and an 84% surge in active dealers. The numbers look like a textbook scaling event, but the real story is the underwriting discipline. Approval rates stayed anchored at 51%, and delinquencies actually ticked lower to 12.16%. Management refused to loosen standards to chase volume, which means this growth is built on solid paper.
Financially, the leverage is working. Revenue climbed 11% to $121.4 million, while core operating expenses grew at just 3% on a half-year basis. The fair value portfolio now sits at $4.2 billion, yielding 11.3% net of losses, and shareholders’ equity hit a record $319.2 million. Recoveries are finally turning the corner as older vintages flush out, and the securitization market remains wide open for the company’s largest quarterly issuance yet. The only macro variable left to watch is interest rates. Until then, the club is profitable, the pipeline is full, and the credit box stays closed.
Key Takeaways
- Originations surged 40% sequentially to $758 million in Q2, marking a structural inflection point after a year of missed growth targets.
- Underwriting standards held firm: approval rates remained at 51% and debt-to-income ratios stayed flat despite rapid volume expansion.
- Credit quality improved sequentially, with 30-day delinquencies falling to 12.16% and net charge-offs dropping to 7.28% year-over-year.
- Recovery rates climbed to 33.3% as older 2022-2023 vintages flush out, with newer 2024 and 2025 vintages showing 37% and 47% recovery respectively.
- Revenue grew 11% to $121.4 million while pre-tax earnings jumped 29% to $9 million, driven by origination growth outpacing expense increases.
- The fair value portfolio reached $4.2 billion, up 18% year-over-year, maintaining an 11.3% net yield.
- Core operating expenses grew just 3% on a half-year basis, improving operating leverage as core opex as a percentage of managed portfolio fell to 4.6%.
- Sales and distribution scaled aggressively: the sales team expanded 60% and the active dealer base hit a record 11,889, up 84% year-over-year.
- Balance sheet strength hit a new peak with shareholders’ equity at $319.2 million, supported by $180.2 million in cash and over $900 million in warehouse capacity.
- Securitization execution remains a competitive moat, with management completing their largest quarterly issuance and noting zero new industry entrants to disrupt pricing.
- Macro conditions favor the business: unemployment remains low, regulatory pressure has eased, and management views interest rate stabilization as the primary variable to monitor.
Full Transcript
Operator: Good day, everyone, and welcome to the Consumer Portfolio Services 2026 second quarter operating results conference call. Today’s call is being recorded. Before we begin, management has asked me to inform you that this conference call may contain forward-looking statements. Any statements made during this call that are not statements of historical facts may be deemed forward-looking statements. Statements regarding current or historical valuation of receivables, because dependent on estimates of future events, are also our forward-looking statements. All such forward-looking statements are subject to risks and could cause actual results to differ materially from those projected. I refer you to the company’s annual report filed March 16th, 2026, for further clarification. The company assumes no obligation to update publicly any forward-looking statements, whether as a result of new information, further events, or otherwise.
With us here is Mr. Charles Bradley, Chief Executive Officer, Mr. Danny Bharwani, Chief Financial Officer, and Mr. Mike Lavin, President and Chief Operating Officer of Consumer Portfolio Services. I will now turn the call over to Mr. Bradley.
Charles Bradley, Chief Executive Officer, Consumer Portfolio Services: Thank you, welcome everyone to our second quarter earnings call. I think a good way to start things off is, last year, we thought we were going to grow a lot. We really did a lot of things we thought would enable us to do that, we didn’t really see as much growth as we had anticipated. As we rolled into this year, we continued to work on a bunch of different things, investing in technology, looking at new technologies and new ways to do things, along with expanding our marketing so that we can grow. In March of this year, last month of the first quarter, it actually worked, things took off. The second quarter, we might have thought March is always a very good month for originations, we kind of were hesitant to call out a big change.
By now, we can certainly say it’s been an enormous change in terms of our originations volume. Quarter to quarter, it’s up over 40%. It remains very strong. It’s probably the biggest and most important thing that’s happened in the second quarter. If we can keep that rolling along, it means very good things for the future. The credit for all of that paper continues, at least on the early signs, to show to be at least as good as before, if not better. We have not given up anything in terms of credit to achieve that growth objective. Also, without going through renewals and increases and things, we now stand with warehousing of over $900 million, which is kind of what we need to make things happen. Again, all these things are going the right way.
The only thing we could use a little help in, it’d be nice if interest rates would come down or not go up and other things. We’ll talk about that later. For now, I’ll turn it over to Danny to go over the financials.
Danny Bharwani, Chief Financial Officer, Consumer Portfolio Services: Thank you, Brad. Going over the financial results, revenues for the second quarter, $121.4 million, is up 11% from the $109.8 million in the second quarter of last year. For the six months ended June 30, $233.7 million is an 8% increase over $216.6 million in the six months of last year. This increase in revenue is driven by our strong increase in new loan originations, $758 million for the quarter, $1.3 billion for the six months in 2026, compared to $433 million in the second quarter last year and $884 million for the six months of last year. Our fair value portfolio now sits at $4.2 billion, and that is yielding 11.3%. This yield is net of credit losses. Moving down to expenses, $112.4 million for the second quarter is 9% higher than $102.8 million last year.
For the six months, expenses were $216.7 million, which is 7% higher than $202.9 million last year. This increase in interest expense is largely as a result of higher interest expense, which can be expected because the new loan originations effectively increases our securitization debt, as that is our primary means to finance the portfolio. Interest expense for the second quarter was $64 million, which is 9% higher than the $58 million last year. Pre-tax earnings, $9 million for the quarter, is 29% higher than $7 million for the second quarter last year. For the six months, pre-tax earnings were $17.1 million, compared to $13.8 million in 2025, which is a 24% increase. Likewise, similar trends for net income, $6.2 million of net income for the quarter versus $4.8 million. That’s a 30% increase. For the six months, net income is up 24% to $11.8 million.
Diluted earnings per share, $0.27 compared to $0.20 in the second quarter of last year. For the six months, diluted earnings are $0.50 compared to $0.39 in the six months of 2025. Our cash of $180.2 million of restricted and unrestricted cash is 12% higher than $160.2 million in June of last year. Like I said, our fair value portfolio now sits at $4.2 billion, which is 18% higher than the $3.56 billion last year. Moving on to shareholders’ equity, $319.2 million is a record high for the company. That’s up 5% from $303.1 million last year. Looking at other metrics, net interest margin is $53.9 million, which is 15% higher than $46.7 million last year in 2025. For the six months ended June 30, net interest margin was $102.5 million, compared to $93.7 million in the six months of last year.
Core operating expenses, $48.1 million is 9% higher than the $44.1 million last year. For the six months, $92.3 million of core operating expense is 3% higher than the $89.3 million in the six months of last year. What we’re seeing is an increase in revenues that are growing faster than our core operating expenses, which is only growing at 3% rate, which is a good sign. Core operating expense as a percentage of the managed portfolio is 4.6%, compared to 4.8% in the second quarter of last year. For the six months, it’s 4.6% versus 4.9%, comparing 2026 versus 2025. Lastly, the return on managed assets, 0.9% for the second quarter, compares to 0.8% in the second quarter of last year. For the six-month period, $0.8 million annualizes the same as $0.8 million in the six months of 2025. I will turn the call over to Mike.
Mike Lavin, President and Chief Operating Officer, Consumer Portfolio Services: Thanks, Danny. Just a few follow-up comments to Brad and Danny. When looking at our second quarter originations of $757 million, that actually compares to $433 million that we did in the second quarter of 2025. Looking at it from a seasonality standpoint, we increased the originations by 75%. How have we accomplished the growth? Well, we’ve accomplished the growth by expanding our sales force, which is driving up our dealer base and applications received. At the end of 2025, we had 93 total sales representatives, and at the end of the second quarter of this year, we had a total of 149 sales representatives. That’s an increase of 60% since the beginning of the year. At the end of the second quarter of 2025, we had, well, that’s an increase of 96% from what we had at the end of the second quarter of 2025.
A big expansion of our sales team, mostly inside sales reps calling on territories across the country. In the second quarter, we added 1,345 new and reactivated dealers to our active dealer base for a total of 11,889 active dealers. That’s an increase of 13% over the first quarter of 2026 and a large 84% increase over the second quarter of 2025. Our active dealer base is also a record for the company. We look to continue to add new dealers going forward. Currently, two-thirds of our lending comes from franchise dealerships and one-third from independent dealerships. With more sales reps and more dealers, obviously, comes more applications. In the second quarter of 2026, we had 1.1 million applications as compared to the second quarter of 2025, where we only had 777,000, which is an increase of 42%.
I think it’s very, very important to note that despite the second quarter growth, we continue to underwrite with a tight credit box. Our payment to income and debt to income ratios help mark the ability of the consumer to pay, and those ratios have remained flat through the second quarter and facing any economic headwinds of the last couple of years. Further, and equally important, our approval percentage remains roughly at 51% despite our growth, which means we remain picky on the contracts we purchase. We are getting a proportional amount of good applications, and we are growing ultimately without a lot of credit concessions. Turning to credit performance, the total DQ greater than 30 days, including repossession inventory for the second quarter, was 12.16%, a decrease from the second quarter of 2025 total delinquency of 13.14%. It’s trending downward, which is a good sign.
Taking into account the 2026 first quarter DQ was down as compared to the first quarter of 2025 total DQ. Both quarters are trending downward sequentially. The total net charge-offs of the second quarter of 2026 was 7.28% of the average portfolio as compared to 7.45% for the second quarter of 2025. Again, another downward trend. Further, repossessions were down over the first quarter and the second quarter, and that was the same as the first quarter of last year, which means we’re trending down again on repossessions. Extensions as a percentage of the portfolio were slightly up quarter-over-quarter. Turning to recoveries, a critical element of our business. They are on the upswing as the 2022 and 2023 vintages flush out of our portfolio.
At the end of the second quarter of 2026, the recovery rates rose to 33.3%, which is up from 30.4% of the second quarter of 2025. While those are not at the historical levels that we seek, there is real upward momentum for the first time in quite a while. For example, in the second quarter, the 2020 to 2022 vintage had a recovery rate of 22%. The 2023 vintage had a recovery rate of 25%. The 2024 vintage drove up to 37.5%, and the 2025 vintage was at 47.1%. As the 2022 and 2023 vintages flush out, we should see the recoveries trend higher as we get closer to the end of the year. One more comment.
The competition remains relatively flat in that there’s no new entrants into the competition, and the differentiation between the competitors remains kind of the same to get the deals, which include stipulations required, time to funding, fees, and price. With that, I’ll hand the call back to Brad.
Charles Bradley, Chief Executive Officer, Consumer Portfolio Services: Thank you. Kind of taking a quick look at the industry, as Mike just pointed out, there’s still really no competitors, new competitors. Really, it’s either you have to have a billion-dollar-plus portfolio, of which ours is now four and a half, or you’re much smaller. There really aren’t a lot of people that really can compete. There’s really maybe five or six entrants in the industry that do kind of what we do. It’s a good club to be in. It’s good that no new people are coming in. Keeps people from messing things up, et cetera. Securitization market remains strong. They tend to bounce around a little bit, but overall, most important thing is we get them done every quarter, no problem. We did our largest one ever just recently. Generally speaking, everything’s good in the industry standards.
Looking at the macro, This comes back to the securitizations, it’d be kind of nice if the Iran war ended or securitization rates could come down a bit, or interest rates. In terms of what we care about, as we’ve said a million times, we care about unemployment, number 1. Unemployment looks great. As long as unemployment is doing fine, the rest of it’s good. We care about a good economy. Economy seems to be good. If you get rid of the war in Iran, you probably get much easing on inflation, and everything looks even better. Regulation, the CFPB has done little or nothing now. Really, a lot of the big picture items that we would be focused on are all kind of going in our favor. That’s another strong part about where we sit.
Like I said, if you have no new entrants to the industry, We get to grow, Those outside forces look pretty good, generally speaking, we’re in a really good place these days. We finally started to achieve a lot of growth. We want that to continue. It paints a pretty good picture for the rest of 2026. With that, we just thank you all for being on the call and look forward to speaking to you next quarter.
Operator: Thank you. This concludes today’s teleconference. A replay will be available beginning 2 hours from now for 12 months via the company’s website at www.consumerportfolio.com. Please disconnect your lines at this time and have a wonderful day.
