Consumer Portfolio Services Q1 2026 Earnings Call - Originations Surge and Margin Expansion

Conference Call Moderator, Consumer Portfolio Services: Good day everyone, and welcome to the Consumer Portfolio Services 2026 first 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 the current or historical valuation of receivables because dependent on estimates of future events are also forward-looking statements. All such forward-looking statements are subject to risks that could cause actual results to differ materially from those projected. I refer you to the company’s annual report filed March 16, 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 and welcome everyone to our first quarter earnings call. In looking back at the quarter, I think, our securitization program continues to run really well. We did another securitization, $345 million, well received, no problems at all. It’s very good that that program remains consistent. You know, we’d like to see the interest rates come down a little more, but overall, being able to buy a lot of paper and sell it all to Wall Street is one of the most important things we can do. Secondly, we did another residual financing, and that program also is running really well. Very well-received. Actually, each time we do a new residual financing, it’s probably more well-received each time along.

We’re getting a little better pricing as well. That’s all very good. Probably the big news is finally, after spending all last year thinking we could grow and trying to grow and not really getting where we wanted to go, the program was to expand our geographic footprint as much as we could, add as many dealers into our network as we could, and also add a lot more marketing people to get more boots on the ground and really focus on that sales. Finally, that has started to pay off. As much as January and February were a bit slow or normal, I should say, March took off.

Being how we’re here in May, it’s safe to say, you know, all of that hard work we’ve done over the last year, 18 months, is really beginning to pay off in terms of the growth in our originations platform and our ability to buy paper and penetrate the markets deeper. You know, we really caught a lot of that in March. Next quarter, the second quarter should be, you know, very interesting in that regard. All in all, very good in terms of what we’re doing. Across the board, things look very good. I’ll get back to that after Danny and Mike go through their pieces. I’ll turn it over to Danny to do the financials.

Danny Bharwani, Chief Financial Officer, Consumer Portfolio Services: Thank you, Brad. Going over the financials, revenues for the quarter were $112.3 million, which is up 5% from $106.9 million in the 2025 first quarter, driven by interest income of $108.7 million, which is up 6.7% over the prior year period. That increase is driven by, as Brad alluded to, strong new loan originations in the quarter. We did $533 million, which is 18% better than the first quarter of 2025. Our fair value portfolio now sits at $3.8 billion, yielding 11.3%, which is net of losses.

In terms of revenues, the only other item of note is the prior year period included a fair value mark of $3.5 million, where we did not have a mark in the first quarter of 2026. Expenses of $104.3 million is up 4% from $100.1 million in 2025. Interest income is the largest contributor to that increase. $60 million is up from Q4 of 2025 compared to $55 million a year ago, which is a 9% increase. Obviously, that increase is largely due to the higher debt balance from the higher originations, higher loan originations in the quarter. Pre-tax earnings of $8 million is 18% higher than $6.8 million in the first quarter of 2025.

Net income is also 18% higher, $5.5 million compared to $4.7 million in the March quarter of 2025. Diluted earnings per share is $0.24 compared to $0.19 in the first quarter of last year. That is a 22% increase, and those trends follow along with the higher pre-tax and net income. Moving on to the balance sheet. Our cash and restricted cash of $185.4 million is 1% higher than $183.5 million in March of 2025. Our fair value portfolio, like I said, $3.8 billion now, is 11% higher than $3.45 billion in March 31 of 2025. Moving on to shareholders’ equity, $314.4 million is 5% higher than the 2025 quarter.

Net interest margin of 48.7% compared to $47 million last year is a 3% increase. Core operating expenses of $44.2 million is actually down 2% from the $45.2 million in 2025. This is a good something we were able to accomplish in the first quarter. We were able to grow the loan portfolio without showing an increase in cost. Because of that, the core operating expense as a percentage of the managed portfolio is 4.6%, down from 5.1% in the first quarter of last year. Finally, our return on managed assets, 0.8%, is flat from 0.8% last year. That’s it for the financials. I will turn the call over to Mike.

Mike Lavin, President and Chief Operating Officer, Consumer Portfolio Services: Thanks, Danny. Just a couple of follow-up comments. As Brad alluded, in the first quarter, we originated $533 million in new contracts. This compares to $363 million in the first quarter prior, which is a 47% increase. That compares to $451 million we did in the first quarter of 2025, an 18% increase. Important to note that March alone accounted for $250 million of originations.

In the 1st quarter of 2026, we grew our portfolio of assets under management from $3.779 billion to $3.942 billion, a 4.5% increase, and from $3.61 billion in the 1st quarter of 2025, which is a 9% increase. We are meeting these goals by, 1, adding new active dealers, 2, hiring more sales reps, 3, driving up applications, and 4, improving our capture rate. In the 1st quarter, we added 2,335 new and reactivated dealers to our active dealer base for a total of 10,544 dealers, which is an increase of 28% over the 4th quarter of 2025. Currently, 2/3 of our lending comes from franchise dealerships and 1/3 comes from independent dealerships.

In the first quarter, we increased the number of sales representatives from 96 at the end of the fourth quarter of 2025 to 124 sales reps at the end of the first quarter of 2026, which is an increase of 29%. The average applications per month in the first quarter was 334,000 and an increase of 31% over the fourth quarter of 256,000. Our capture rate improved significantly from 5.98% to 7.65%, which is an increase of 28% quarter-over-quarter. The increase in applications, combined with the significant increase in capture rate, drove a significant amount of the growth.

Speaking of growth, it’s important to note that we did put in our Gen nine credit model in October of 2025, so we continue to originate under a tight credit box. The other note on growth is we are pleased that our originations team did not miss a beat in underwriting in the quarter growth. Our funding time remained under 2 days, and our error rate remained under 8%. Turning to credit performance, the total DQ greater than 30 days for the fourth quarter was 11.58%, a decrease from the first quarter of 2025 of 12.35%.

The total annualized net charge-offs of the first quarter of 2026 was 8.57% of the average portfolios, compared to 7.54% of the first quarter of 2025. Further, repossessions were down over the fourth quarter of last year and down over the first quarter of last year. Extensions as a percent of the portfolio were up slightly quarter-over-quarter, but the first quarter of 2026 was down as compared to the first quarter of 2025. Affordability continues to be at the top of the mind regarding our customers. Our average payment last month was $542, which is below the average used car payment of $562, and actually, lower than the average subprime payment, which is higher.

Looking at the vintage performance, 2024 A started the improvements over the 2022 and 2023 vintages. We saw a significantly improved credit performance starting with 2024 B, C, and D. When you look at the default curve, which is perhaps the best indicator of performance, the 2025s are sitting right on top of the 2024s, so we’re continuing to trend well. The good news is that the 2024s and 2025s are much better than the 2022s and 2023s, and those vintages are running off quickly, with the 2022s and 2023s being a nominal part of the portfolio going forward. Turning to recoveries, they are up slightly in the quarter, settling in around 32%. That is up quarter-over-quarter and up over the first quarter of 2025.

I mentioned last quarter that the 22 and 23 vintages were dragging down the overall recoveries. That trend continued, but the increase in recoveries quarter-over-quarter, we’re now seeing that relates to the 22 and 23 vintages running off. We expect that trend to continue. One final note, one key metric that we monitor closely here that affects our business is the unemployment rate. That remains historically low. At the beginning of the quarter, it was 4.4%. It actually went down just a touch to 4.3%, with a nice jobs report that added 178,000 jobs. As of the end of March, I noted this morning there was another good jobs report that came out, trending well there too. With that, I’ll pass it back to Brad.

Charles Bradley, Chief Executive Officer, Consumer Portfolio Services: Thank you, Mike. In looking at the industry, this has kind of become a little repetitive. It’s sort of like all quiet, which is good. No hiccups, no problems, no new entrants. I think the industry is finally sort of consolidated to a level where you really have, you know, a handful of large players and not really too much in the, you know, then it gets really small. It’s kind of like either you have multiple billion in your portfolio or you have less than, you know, $500 million or $600 million. Because of that, you know, I think the competition is good. I think there’s nobody running off the rails one way or another anymore. It’s really kind of settled into a very productive environment for everyone.

I think we’re seeing some of the benefits of that in terms of our growth, as some of the smaller people still fall away in the lower end. Also I think, you know, it would be nice if the Iran war ended because that would help our interest rates, we think. Again, it’s interesting to see that even with that kind of turbulence in the market, we’re not having any problems with securitizations. The portfolio performance seems fine and, you know, moving on to sort of the macro, the rest of the macros, you know, generally it looks like the economy is okay. If we could get rid of the war aspect of it, I think everything would be rather sound and very good.

What’s good about that is we’re in a very good spot right now in terms of we’re really hitting a good growth streak and I think we’re gonna be able to take advantage of the market. For the most part, we want everything to just come, you know, quiet down. Have the war end, have the economy settle and do well, and have us be able to grow a lot this year, which is what we’ve been trying to do now for a couple of years. So far in the first quarter, looks real good. Second quarter looks real good too. With that, we’ll look forward to talking to you next quarter and thank you all for attending our call.

Conference Call Moderator, Consumer Portfolio Services: The meeting has now concluded. Thank you all for joining. You may now disconnect.