Consumer Portfolio Services, Inc. Stock

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 also are 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 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. Denesh 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.

Thank you, and welcome, everyone, to our second quarter earnings call. I think a good way to sort of 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. And we didn't really see as much growth as we had anticipated. As we roll into this year, we continue 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, the last month of the first quarter, it actually worked and things took off. The second quarter, we might have thought March is always a very good month for originations. So we kind of were hesitant to call out a big change. But 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. So it's probably the biggest and most important thing that's happened in the second quarter. And if we can keep that rolling along, it means very good things for the future. We also -- the credit for all of that paper continues, at least on the early signs, to show it to be at least as good as before, if not better. So we have not given up anything in terms of credit to achieve that growth objective.

Also, we now -- 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. It would be nice if interest rates would come down or not go up and other things. But we'll talk about that later.

For now, I'll turn it over to Danny to go over the financials.

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 6 months ended June 30, $233.7 million is an 8% increase over $216.6 million in the 6 months of last year. This increase in revenue is driven by a strong increase in new loan originations, $758 million for the quarter, $1.3 billion for the 6 months in 2026 compared to $433 million in the second quarter last year and $884 million for the 6 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 6 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. Pretax earnings, $9 million for the quarter, is 29% higher than $7 million for the second quarter last year. For the 6 months, pretax 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 6 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 6 months, diluted earnings are $0.50 compared to $0.39 in the 6 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 6 months ended June 30, net interest margin was $102.5 million compared to $93.7 million in the 6 months of last year. Core operating expenses, $48.1 million, is 9% higher than the $44.1 million last year. For the 6 months, $92.3 million of core operating expense is 3% higher than the $89.3 million in the 6 months of last year. So 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 6 months, it's 4.6% versus 4.9% comparing '26 versus '25.

And 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 6-month period, $0.8 million (sic) [ 0.8% ] annualizes the same as $0.8 million (sic) [ 0.8% ] in the 6 months of 2025.

I will turn the call over to Mike.

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. So looking at it from a seasonality standpoint, we increased the originations by 75%. In the -- 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. And 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.

So 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, 2/3 of our lending comes from franchise dealerships and 1/3 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%. So 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. So 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% in 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 2022 vintage had a recovery rate of 22%. The '23 vintage had a recovery rate of 25%. The 2024 vintage then drove up to 37.5% and the '25 vintage was at 47.1%. So as the '22 and '23 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 the players are in the -- 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.

And with that, I'll hand the call back to Brad.

Thank you. And 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 $1 billion-plus portfolio, of which ours is now $4.5 or you're much smaller. There really aren't a lot of people that really can compete. There's really maybe 5 or 6 entrants in the industry that do kind of what we do. So it's good club to be in, and it's good that 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 is good in the industry standards.

Looking at the macro, and this comes back to the securitizations, it kind of nice if Iran war ended and securitization rates could come down a bit or interest rates. But in terms of what we care about, as we said a million times, we care about unemployment, number one, unemployment looks great. So as long as unemployment is doing fine, the rest of it is good. We care about a good economy. Economy seems to be good. You get rid of the war in Iran, you probably get much easing on inflation and it looks even better. Regulation, the CFPB has done little or nothing now. So really, a lot of the big picture items that we would be focused on are all kind of going in our favor. So that's another strong part about where we sit.

Like I said, we have no new entrants in the industry and we get to grow and 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.

And with that, we just thank you all for being on the call and look forward to speaking to you next quarter.

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.

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.

Thank you, and welcome, everyone, to our first quarter earnings call. And looking back at the quarter, I think sort of going through the basic things. We -- our securitization program continues to run really well. We did another securitization, $345 million, well received. No problems at all. So it's very good that, that program remains consistent. 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. So 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.

And 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. And so being how we're here in May, it's safe to say all of that hard work we've done over the last year or 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.

So we really caught a lot of that in March next quarter, the second quarter should be very interesting in that regard. But all in all, very good in terms of what we're doing. So across the board, things look very good. I'll get back to that after Danny and Mike go through their pieces.

So I'll turn it over to Danny to do the financials.

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. And 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. And obviously, that increase is largely due to the higher debt balance from the higher originations -- higher loan originations in the quarter. Pretax earnings of $8 million is 18% higher than $6.8 million in the first quarter of 2025.

And 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 pretax 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, 2025.

Moving on to shareholders' equity, $314.4 million, 5% higher than the 2025 quarter. Net interest margin of 48.7% compared to $47 million last year is a 3% increase. And core operating expenses of $44.2 million is actually down 2% from the $45.2 million in 2025. So this is a good -- something we were able to accomplish in the first quarter. We're able to grow the loan portfolio without showing an increase in cost. And 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. And 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.

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. And 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 first 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 first quarter of 2025, which is a 9% increase.

We are meeting these goals by: one, adding new active dealers; two, hiring more sales reps; three, driving up applications; and four, improving our capture rate. In the first 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 fourth 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 '25 to 124 sales reps at the end of the first quarter of '26, 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. So the increase in applications, combined with the significant increase in capture rate drove a significant amount of growth.

And speaking of growth, it's important to note that we did put in our Gen 9 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 portfolio as 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 '26 was down as compared to the first quarter of '25.

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 '22 and '23 vintages. We saw a significantly improved credit performance starting with 2024-B, C and D. And then when you look at the default curve, which is perhaps the best indicator of performance, the '25s are sitting right on top of the '24, so we're continuing to trend well. The good news is that the '24s and '25s are much better than the '22s and '23s and those vintages are running off quickly with the '22s and '23s 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 '25. 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. So 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. And I noted this morning, there was another good jobs report that came out, so trending well there, too.

So with that, I'll pass it back to Brad.

Thank you, Mike. And looking at the industry, this kind of became 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 a handful of large players and not really too much on the -- then it gets really small. So it's kind of like either you have multiple billion in your portfolio, you have less than $500 million to $600 million. And so -- because of that, I think the competition is good. I think the -- there's nobody running off the rails one way or another anymore. So it's really kind of settled into a very productive environment for everyone.

And I think we're seeing some of the benefits of that in terms of our growth and some of the smaller people still fall away in the lower end. Also, I think it would be nice if the Iran war ended because that would help our interest rates, we think. But 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 moving on to sort of the macro -- the rest of the macros, 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 going to be able to take advantage of the market. So for the most part, we want everything to just 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, so far in the first quarter looks real good.

Second quarter looks real good, too. So with that, we look forward to talking to you next quarter, and thank you all for attending our call.

The meeting has now concluded. Thank you all for joining. You may now disconnect.

Good day, everyone, and welcome to the Consumer Portfolio Services 2025 Fourth Quarter and Full Year 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 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 12, 2025, 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.

Thank you, and welcome, everyone, to the fourth quarter and year-end conference call. 2025 was a very good year. We might have actually expected it to be even better, but we didn't quite get the growth we were looking for, but still overall a very strong year. We focused on credit, we focused on keeping our margins. All in all, it was very good.

A couple of highlights. We renewed -- or actually, we signed a new warehouse line with Capital One for $150 million. We also signed a $900 million prime forward flow commitment. Both of those will be very instrumental in how we grow and what we're going to do in 2026, but more highlight on that is the fact that credit is readily available. The company has done well enough to where lots of people, banks and such, not to mention the investors on the securitizations are very eager, either buy or bonds or lend us money.

So we're in a very good spot in terms of moving into '26.

'26 as a quick peak already looks like it could be very, very good. So '25 was really good. Again, we had focused on getting the '22 and '23 paper was not particularly profitable and didn't perform as well as we would have liked. I think at the beginning of '25, that was almost 40% or more of the portfolio. Today, it's 26%, we would expect that number to gradually decrease over the year to where it's de minimis by the end of '26.

So getting that kind of piece of bad credit out of the portfolio is very good. Portfolio is nearly $4 billion. We expect that to grow substantially in the coming year. We've now reached the size where we're really at a good size in terms of our industry standing. Overall, we're in a very good position. Credit remains strong. Interest rates look good. We'll get back to that more.

But for now, I'll turn it over to Danny to go through the financials.

Thank you, Brad. Looking at some of the numbers, revenues for the fourth quarter 109.4% is a 4% increase over the 105.3% in the fourth quarter of 2024. For the full year 2025, revenues were $434 million is a 10% increase over the $393 million in 2024. The interest income on our fair value portfolio is the main driver of that -- of our total revenues, and that is actually up 16% year-over-year.

The fair value portfolio now sits at $3.6 billion and is yielding 11.4%, remembering that, that yield is net of expected losses. Outside of interest income, the other component of our revenues are our fair value marks. These are adjustments to our fair value portfolio that we occasionally record to revenues as needed. We had no marks in the fourth quarter of 2025 compared to $5 million in the fourth quarter the year before. For the full year, we had fair value marks of $6.5 million compared to $21 million in the prior year.

In terms of expenses for the fourth quarter, $102.2 million is a 4% increase over the $98 million in the fourth quarter of '24. For the full year '25, expenses were $406 million, which is 11% higher than the $366 million in 2024.

Biggest component of that increase is interest expense. Interest expense was $59 million in the fourth quarter. It's $53 million in the fourth quarter a year ago, and that's a 13% increase. That increase is largely due to our higher securitization debt balance from our higher loan portfolio. Our loan portfolio, which I'll cover when we look at the balance sheet, but the loan portfolio is -- actually, the securitization debt from that loan portfolio is up 15% year-over-year.

Looking at pretax earnings, $7.2 million for the fourth quarter compared to $7.4 million in 2024. For the full year, pretax earnings is $28 million compared to $27.4 million for the full year 2024. If you look deeper into the numbers and exclude the fair value marks, pretax income would have been $7.2 million in the fourth quarter compared to $2.4 million in the fourth quarter of '24. So there is some significant improvement there if you strip out the marks and focus on interest income.

For the full year, the pretax income would have been $21.5 million in 2025 compared to $6.4 million in 2024. So again, there's significant improvement in 2025 if you exclude the nonrecurring items. Net income for the quarter, $5 million compared to $5.1 million in the fourth quarter of '24 for the full year, net income, $19.3 million compared to $19.2 million in 2024. Similar trends for net income as pretax income.

But again, if you exclude the fair value marks in 2024, which were higher than '25, there is significant improvement there. Diluted earnings per share, $0.21, is flat from the $0.21 in the fourth quarter last year for the full year $0.80 versus $0.79 in 2024.

Moving now to the balance sheet. Our total cash is cash and restricted cash is finished the year at $172.2 million, which is up from $137.4 million at the end of 2024. Our fair value portfolio is up 10% to $3.655 billion compared to $3.3 billion at the end of 2024. Looking at our debt. I guess the biggest jump would be from our securitization debt we talked about earlier, 15% higher to $2.986 billion compared to $2.594 billion in the prior year.

Moving to shareholders' equity. The $309.5 million ending balance for equity at the end of December 2025 is a 6% increase over $292.8 million at the end of 2024. Equity continues to climb and currently sits at an all-time high for us. This translates to a book value and measured on a fully diluted basis to about $13 a share. Looking at other important metrics. Our net interest margin, $50.1 million in the fourth quarter compared to $52.8 million in the fourth quarter of '24. Full year net interest margin $202.5 million, flat from $202.3 million in 2024.

Again, the marks -- less marks in 2025 from the fair value portfolio has an impact on that. If you strip that out, the net interest margin would have been $50.1 million versus $47.8 million and for the full year, $196 million versus $181 million, which is an 8% increase year-over-year. Our core operating expenses, $43.4 million in the fourth quarter compared to $46.2 million is a 6% decrease. For the full year, core operating expenses of $177 million is down 2% from $180 million last year.

So besides growing our auto loan portfolio and increasing our interest income. We've also put a lot of focus on improving operating efficiencies, which you can see in the decline in our core operating expenses as a percentage of the managed portfolio, which is now down to 4.8% from 5.6% a year ago.

I will turn the call over to Mike.

Thanks, Danny. A few operational notes today. In the fourth quarter of 2025, we originated $363 million of new contracts. For the full year of 2025, we purchased $1.638 billion of new contracts compared to $1.682 billion during the same period in 2024. So a pretty good year, as Brad said, but a little flat.

In 2025, ended up being our third best origination year in our 35-year history. This, despite our continued practice of originating with the tight credit box which we did in '25, we heard from the trenches that dealers were reporting lower foot traffic, and we saw at times increased and in some cases, irrational competition for less business. So overall, when you consider all the factors that were against us, $1.62 billion was a pretty good year.

In the fourth quarter of 2025, we grew our portfolio of assets under management from $3.76 billion to $3.779 billion. And for the full year, we grew the portfolio from $3.4 billion to $3.7 billion, which is an increase of 8.24%. Our focus in Q4 and as we turn to the new year is to grow via one, hiring new sales reps and having new territories. I think the second one is adding more active dealers to our funding dealer pool, we've been successful at doing that in the fourth quarter. We added about 1,000 in January -- or I'm sorry, in December alone. Three, we have a goal to drive our applications from 250,000 a month to $325,000 a month. And four, we started doing this in the fourth quarter and into this year so far as mixing some strategic risk initiatives that we've seen be successful so far.

Also in the fourth quarter, we implemented our Generation 9 credit scoring model that as with our previous generation models utilizes AI and machine learning and its development, we have done that at least so far, the new model has increased our approvals 11%. So they were running in the low 40 percentile and now they're running in the low 50 percentiles. It's kept our capture flat, which is good news. And doing the math, it's increased our total fundings about 8.4% just by implementing that new model.

Also in the fourth quarter, as Brad alluded to a little more detail on the partnership regarding the prime program. We partnered with a large credit union to source, originate and service prime auto loans. As part of that deal, we get an origination fee and a servicing fee to sell that credit union prime auto loans that we source. Interestingly, the credit union has committed to buying up the $50 million a month, $600 million annually over 18 months, $900 million commitment.

But it's important to note that we think that the growth will be a slow buildup as we kind of have to rebrand ourselves to our dealer base as more of a full-spectrum lender considering we've been a subprime lender for 35 years. We're getting good feedback from the dealers. We're growing month-over-month. But again, it's going to be a slow build. I kind of compare it to when we started our Meta near-prime program years ago. It didn't come out of the gates too strong, but eventually, it's now 5% to 6% of our originations, and we're kind of hoping the prime program gets to be about the same.

Just sort of following up on what Danny said on our OpEx, we were able to decrease it year-over-year from 24% to 25% by 14%. One note is on the employee cost front, we were able to lower our employee cost as a percent of the portfolio from 2.6% in 2024 to 2.4% in 2025. And we did this despite growing the portfolio 8.24%. That's a little more evidence that we've properly scaled the business. We're at the right size and as we continue to grow in 2026, we look for that OpEx to continue to trend downward.

Turning to credit performance. The total DQ greater than 30 days for the full year 2025 was 14.77% as compared to 14.5% for the full year 2024. The total annualized net charge-offs for the full year 2025 was 7.76% as compared to 7.62% for the full year 2024. Further, repossessions were down a little bit year-over-year. Potential DQs, which we call pots were down year-over-year and extensions remain at our historical average as a percent of the portfolio. Our extensions are also about the same as benchmarked against our competitors. in the subprime space.

So taken together, our improved portfolio performance in 2025 was quite an accomplishment considering the macroeconomic headwinds we faced in servicing with affordability, stubborn inflation, increased interest rates, some stagnant wage growth affecting some of our customers' cash flow. We found that using the right collection techniques and processes, along with our customers still prioritizing their car payments sort of fought off those trends. I mean, to lower delinquency year-over-year in this environment is quite a tip of the hat to our servicing department.

Looking more closely at the vintage performance, we continue to see significant positive credit performance, sort of starting with our 2023 D vintage and continuing vintage over vintage through 2025. Now that it has more time to season, we're sort of looking at the 2024 vintage performance as being a positive result. Probably due to our credit timing that we took in early 2023, and we continue to do today. It's early, but a steep peak at our '25 vintages shows even better potential for that performance than the '24s.

As Brad alluded to, the troubled 2022 vintage and 2023 vintages are running off quickly. And as compared to our competitors' credit performance of the Intech's data that our bond investors use to evaluate the space reveals that we remain among the very best credit performers in the subprime space when you compare us apples-to-apples to our competitors.

Finally, turning to recoveries. They remain somewhat relatively light settling into the 28% to 30% range. We typically want them to be in the low 40s, but our analysis suggests that there is a light at the end of the tunnel our data revealed that recoveries for vehicles from the 2022 and 2023 vintages. Those cars are actually dragging down our overall recoveries.

So for example, in Q4 2025, looking at Q4, vehicles from the 2022 vintage were at -- were recovering at about 20.5% and vehicles from the 2023 vintage were recovering 22.9% on the recovery. Compare that to recoveries on the '24 vintages are more palatable at 36.3% and recoveries for the '25 vintage, at least so far, are hitting 43.4%. So we feel once the 2022 and 2023 vintages sort of flesh out, as Brad said, by the end of this year, our recoveries will get back to normal. And as everybody knows, recoveries are a critical part of reducing our losses and increasing our net income.

And with that, I'll throw it back to Brad.

Thank you, Mike. Switching over to taking a look at our industry. Normally, there's not a lot going on in the industry. As we've sort of pointed out already that it was a little bit slow. Traffic was down in the dealerships. That seems to have changed in '26 so far. But the interesting notes were GLS, one of our friendly competitors, got purchased I think that's a good -- it was a very good valuation or extremely good valuation. So having that happen was interesting. Also flagship, which kind of had been sinking for a while was purchased also, but again, more at a discount, I think flagship for all intents purposes, had ceased originations when they were sold but that would be some M&A movement in the industry.

And lastly, Prestige, more recently, stopped originating loans as well. And you don't really see a lot in our industry. More importantly, seen almost no new entrants into our industry in like 5 years. So it's gotten to the point where, unless you really have some size which we'll call a minimum of $1 billion portfolio really in a tough competitive standpoint within the industry.

So being at 4 and on our way growing puts us in a very good spot. Having a couple of our competitors go away and maybe try and reinvent themselves is fine. Certainly, Prestige is not -- and then having the sale for GLS puts a valuation on some of -- on the industry players, all good news across that board. I think the industry is very solid without having people blow up. The [ trichlor ] thing was a bump in the road, but really had nothing to do with the real industry. It did affect the market slightly for us in doing securitization. Other than that had no impact whatsoever.

So we're moving into the future, what we care about, as we've mentioned many times, the interest rates and unemployment. We believe the interest rate environment is very positive. If anything, the interest rates may come down as opposed to go up. Down is obviously way better. As long as they're not going up, we're kind of fine with where they are, but it would be nice if they came down a little bit more because those pretty much go straight to the bottom line, those improvements.

Unemployment seems to be relatively steady. Unemployment could bounce around a little bit, and we really wouldn't be affected we really don't want employment to skyrocket. Obviously, that could trigger sort of a recession, which is all bad. But we don't really see any of that. We see unemployment holding steady. We see interest rates steady or coming down. It really sets us up for a very good environment right now generally, other than the Iran war, which hopefully will go away pretty soon. The economy seems very stable and very strong.

Again, we would think 2026 and beyond looks very positive in terms of where we're going with the company. So having said that, I mean, our goal in '26 is to focus on growth. We want those margins to improve through better interest rates. We want the overall portfolio performance to improve by getting rid of that '22 and '23 paper. We believe a good economy is good.

We think we're, as I mentioned earlier, in a great position to raise money. We did a residual deal recently, which was cheaper by a bunch than the last couple we've done. So again, there's a lot of favorable headwinds -- or excuse me, tailwinds as we move into '26. So we're really looking forward to see what we can do this year.

Now a bunch of stuff going the right way. We've raised the money. We have the warehousing. The credit model looks great. We're very positive in terms of where things go from here. With that, thank you all for attending the conference and the conference call, and we'll speak to you in a month or 2. Thank you.

Thank you. This concludes today's teleconference. A replay will be available beginning 2 hours 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.

Good day, everyone, and welcome to the Consumer Portfolio Services 2025 Third 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 depend on estimates of future events also are 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 12 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.

Thank you. Good morning, everyone. Welcome to our third quarter conference call. I think for the most part, it's 3 quarters in the books. The year is proceeding kind of pretty much exactly what we would expect with a small exception that we haven't really grown as much as we wanted. We had pretty high hopes for growth this year. We've had some growth, but very what we call modest growth as opposed to more aggressive growth, which is probably okay.

Generally speaking, if you look back at the last few calls, we've sort of been in not really a holding pattern, but in a wait-and-see pattern in 2 ways. We wanted to see -- get sort of the '22 and '23 portion of the portfolio to shrink and see if we can get that perform as best we could, even though it wasn't particularly great paper. And then on the flip side, we wanted the '24 and '25 vintages to really prove out that we, in fact, have much better credit.

And I think as I mentioned in previous calls, little by little, the '24 and '25 have all proven to be better. From '23 C on, from D to all the '24 deals and the '25 deals, each one has improved better -- performance-wise, better than the previous one. Now it's still early, certainly for the '25 deals, but it's a trend we wanted. It's a trend we've been kind of waiting to see before we try to get overly aggressive.

And again, on the other side, we wanted to keep the '23 and the '22 paper running off because that paper isn't performing great. Compared to others, it did fine. But compared to what we want, it hasn't done as well as we had hoped, and it's now become a much smaller part of the portfolio. It's down below 30%. And certainly, as time goes by, that number goes down, the number -- the percentage of the good paper goes up and the mix will change and probably create a very good forward-looking program as we go.

In terms of the quarter, we did add a new credit line just after the quarter. So that was a big plus. So we now have tons of funding. Also, we did a securitization in what could be termed somewhat more difficult -- more difficult market due to the Tricolor problems. Good news in that front is we've never -- we've always had a third-party custodian. We've never had control of our collateral. We have none of the issues that caused their problems. And as much as we can tell everybody that, it still put a little bit of a cloud in the industry while we're trying to get a securitization done. And it's important that even so, we were pretty easily able to get the securitization done slightly more expensive than we had hoped.

But nonetheless, as I've said numerous times, getting securitization done, getting them done is the most important thing we have to do. You have to be able to securitize the paper. Otherwise, we have serious problems. But overall, the quarter has worked fine. I'll get back to some more specifics on that after we go through the rest of the material.

I'm going to turn it over to Danny to go through the financials.

Thank you, Brad. Going over the financials. Revenues for the quarter, $108.4 million is up 8% from the third quarter of last year, which was $100.6. For the 9 months ending September 2025, revenues were $325.1 million, which is a 13% increase over the $288 million in the 9 months ending September 2024. Two things of note driving revenue. Our fair value portfolio is now up to $3.6 billion. That is yielding 11.4% net of losses. And the other thing of note for top line revenue is that we did not have a fair value mark this quarter. We did have a $5.5 million mark in the third quarter of last year.

Moving to expenses, $101.4 million in the third quarter this year is also up 8% over the $93.7 million in the third quarter of 2024. For the 9 months ending September '25, $304.3 million of expenses is up 14% from the $268.1 million last year. Interest expense is the main driver of the increase in expenses, and it's largely due to our increasing securitization debt as the volume has picked up over the last year.

Pretax earnings is $7 million compared to $6.9 million last year. For the 9 months, $21 million of pretax earnings is up 4% from $20.1 million in 2024. Likewise, net income of $4.9 million is also 2% higher than the third quarter of last year. The 9 months ending September 25, net income was $14.3 million is up 1% from $14.1 million last year. And finally, diluted earnings per share, $0.20 per share is flat from last year. For the 9 months, $0.59 compared to $0.58 last year.

Moving to the balance sheet. Cash and restricted cash is $151.9 million for the third quarter of this year. Finance receivables, which is mostly now our fair value portfolio, that is up 16%. So the fair value portfolio is $3.62 billion as of this quarter compared to $3.13 billion (sic) [ $3.31 billion ] last year. So that is up 16%, largely due to origination volumes, as Brad alluded to earlier, our origination volumes of $391.1 million for the third quarter and $1.275 billion for the 9 months ending September 25 is driving that increase in our fair value portfolio.

Moving down the balance sheet. Our total debt, which is the sum of our warehouse line credit debt, our residual interest financing, securitization debt and long-term debt is $3.4 billion this quarter compared to $3.1 billion last year. That is an 11% increase. So what's happening is we've got a 16% increase on the asset side in our fair value portfolio and only 11% increase in the debt. So that's showing that we're able to manage with less leverage and is improving our balance sheet. That can be seen in our shareholders' equity number, $307.6 million this quarter is up 8% from the $285.1 million last year.

Looking at other metrics, the net interest margin of $49.3 million this quarter compared to $50.5 million last year. for the 9 months, $152.3 million of net interest margin this year compared to 149.5 million last year. Our core operating expenses of $43 million is down 4% from the $44.6 million in the third quarter of last year. And for the 9 months, it's flat $134 million this year and last year. However, measured as a percentage of the managed portfolio, the core operating expense is down 4.6% this quarter compared to 5.4% in the third quarter of last year. So we're starting to see some improving efficiencies as we're able to manage the cost side of the business to allow the portfolio to grow without really seeing increases in cost. And lastly, the return on managed assets is flat 0.8% this quarter compared to 0.8% in the third quarter of last year.

I will turn the call over to Mike.

Thanks, Danny. In terms of operations, again, in the third quarter of 2025, we originated $391 million of new contracts for the first 9 months of the year. We purchased $1.275 billion of new contracts compared to $1.224 billion during the first 9 months of 2024, which is a 4% increase year-over-year. Our year-to-date originations are in line with our 2024 originations. And while not the rocket growth that we had hoped, things go right, 2025 will end up being our second best year in our 34-year history. Growth remains somewhat difficult as our focus has been on providing an affordable product for subprime consumers who are facing macroeconomic headwinds like high interest rates and things like that.

With this in mind, we have continued to tighten our credit box in 2025. That, combined with dealers reporting lower foot traffic and increased competition for [ lost ] business, that's made our growth prospects kind of tough in the first 9 months of the year. But again, like I just said, 2025 should be the second best year in our history. So keeping things in perspective, it's going to be a really good year.

One thing to note, we continue to originate loans at the upper level of the subprime spectrum with 90% of our originations coming from franchise dealers and only 10% coming from the riskier independent dealers. Our tight credit box has allowed us to originate better paper within our upper tier programs. And this is important while still holding a 20% APR. That bodes well for our NIM, which Danny just covered, and almost equally important, our credit performance, which Brad mentioned.

We have had to pivot to organic growth, given our tight credit to do that. We are adding new dealers to our dealer list to increase applications. And we have improved our capture rate this year from the high 4s to now over 6%. So it's more applications and higher capture rate that's led to more organic originations.

We have also put a specific focus on large dealer groups, which we define as having a dealer that has 10 or more dealerships under their umbrella. We started this initiative with a special internal unit focusing on large dealer groups about 2 or 3 years ago. And at the time, large dealer group originations only apprised or comprised 17% of our overall originations. And as of the end of the third quarter of this year, it now comprises 31% of our originations. So we've done a good job building our large dealer groups.

We also continue to rely on our personal relationships with dealers to feed our originations. The retail auto industry is still surprisingly based on personal relationships, even though the technology has grown. And we currently have 100 reps that are personally visiting and calling on our dealer clients daily. One thing that we have been able to do at the end of the third quarter is -- we've cut our funding time down to 1 day. We've cut it about 1 day year-over-year. Dealers appreciate our personal service and certainly our fast funding. It seems like the little things matter when competing for business when we have such a tight credit box.

On an operational front as well, as Danny noted, we've been able to lower our OpEx substantially year-over-year. About 18 months ago, it was sitting at 6% of the managed portfolio. And as of the end of the third quarter, we're down to 4.5%. One of the areas of improvement for us has been to lower our employee costs, which besides interest expense account for a large portion of our expenses. We've actually been able to shrink our headcount 3% from the beginning of this year to the end of the third quarter, all the while growing our portfolio to an all-time high and really heading towards our second best year in our history. The percentage of employees of the portfolio balance has dropped from 28% to 24% year-over-year.

Turning to credit performance. The total DQ greater than 30 days for the third quarter, which also includes repo inventory was 13.96% of the total portfolio as compared to 14.04% as of the third quarter of 2024. That's a slight improvement year-over-year and follows a trend that we have seen sequentially month-over-month. The total annualized net charge-offs for the third quarter were 8.01% of the average portfolio as compared to 7.32% for the third quarter of 2024.

Looking at the vintage performance, we continue to see significant credit performance, as Brad alluded to, with 2023-C and continuing vintage over vintage through 2024. We believe that the '24 vintages and our early look at the '25 is a result of our ongoing credit tightening, which we started at the end of 2022 and ratcheted it up quite a bit in '23 and '24. Of note is that the troubled '22 and '23 vintages now are below 30% of our portfolio and running off quite quickly. That and the performance of the '24s and our initial look at the '25s is showing us a light at the end of the credit performance tunnel.

The other thing we do internally to analyze credit performance is we study the default curves, which depending on who you ask, may be a more accurate metric to judge performance as those curves don't account for recoveries and other loss mitigation tools. And those curves reveal that there is a significant difference between the early '23s and the better performing '24s and '25s. Comparing us to our competitors' credit performance, the Intex data shows that we remain among the very best credit performers in the subprime space when looking at apples-to-apples comparisons.

Finally, turning to recoveries. They do remain relatively light, settling in the low 30s. We have seen a little bit of an uptick in the third quarter. but we typically want to be in the low to mid-40s. Our analysis suggests that improvement is definitely on the way. Our data revealed that the recoveries from the '22 and '23 vintages are dragging down the overall recoveries. In the third quarter, vehicles from the '22 vintages were getting 19% recovery and vehicles from the '23 vintages were at a 23% recovery.

However, on a positive note, recoveries from the '24 vintage were at a more palatable 36% and recoveries from the '25 vintage so far were at the historical average of 42%. So once the '22 and '23 is flushed out of the system, we see the recoveries increasing back to historical norms.

One more last bit. One of the key economic factors that we think about with the business is the unemployment rate. Right now, it stands -- well, it stands at 4.3% as of the end of August of '25. Various governmental agencies expect the unemployment rate to rise to only about 4.5% in 2026. This compares to the long-run national average unemployment rate of 5.5% and a rate over 6% being considered elevated in a recession risk. So we're still in a good spot with unemployment risk.

And with that, I'll send it back to Brad.

Thanks, Mike. In terms of looking at the industry, the big news in the industry is basically the Tricolor collapse. As I mentioned earlier, that was really -- God knows what they were doing, but they shouldn't have been doing it. And it really comes down to they did not -- they were custodian for their own contracts and double pledged them, all sorts of stupid stuff. We don't have -- we were never in that position. We and many of the companies like us in our industry have custodians who take care of all the contracts but not having a custodian in place was a mistake for Tricolor and that should have been taken care of.

But anyway, we don't have those issues. It did have an effect on the industry, scared a bunch of people, particularly a bunch of investors and certainly those involved with Tricolor. Good news is, even with those kind of problems, we were able to get our securitization done. The market remains stable. I think this will pass. I think it's good that people check on a bunch of stuff, make sure everyone else has custodians and these kind of things can't happen in the future.

Beyond that, it is kind of slow across the industry. It's a little interesting that we're sort of a little disappointed in our growth and yet we're probably -- as everybody has mentioned previously, the second strongest year we've had in our history. But we want more, we want better.

We've also noticed the banks moving a little bit. Capital One is making a little more of a presence. Santander is being a little more aggressive and the credit unions are back a little bit. So all those things probably put a slight amount of pressure in terms of growth.

And as I've mentioned, we're really -- and I think everyone in the call has repeated, we're still trying to get -- we want the '22 and '23 paper gone. We want the '24 and '25 paper to show us how good the credit is. As Mike pointed out, if you look at the defaults, the paper is even better than it looks. All those things are very, very positive in terms of where we're going to go going forward. I think lower interest rates, I mean, there's really a bunch of things going our way. And all we need -- Tricolor will go by the wayside soon enough. Interest rates coming down twice already. We -- rumor is, they'll keep coming down. Those go straight to the bottom line for the most part.

We're going to try and maintain our APRs and put most of that into the margin, improved margin. We continue to cut expenses every possible corner. So we're doing all the things we're supposed to be doing. As Mike mentioned, unemployment, I tell people that our company is -- we see the tip of the spear in terms of recession. Our customers are literally right out in front. And when we hear from them, it's not so much, gee, I can't pay. We kind of expect that occasionally from some customers. It's when they say, I don't have a job, I can't pay, come pick up the car, that you have a problem. We are not hearing any of that.

Same old things, times are tough. The economy is kind of loose right now. So some of our customers are having difficulty, but none of them are saying, hey, I'm out, come get the car, that's when you know there's problems. Unemployment going up is the real killer for us. It's not -- we're not overly worried about it going up a little bit. So we think that's a very strong indicator.

So if you take the interest rates, you take the unemployment position, you take interest rates should spur the economy a little bit. You take the fact that we're moving the nonperforming or nonearnings paying part of the portfolio off the balance sheet and putting on more and more good paper, it really kind of sets us up in a real good spot in terms of going forward.

Not only that, but in '22, '23, we had to post a lot of cash in our securitizations, and that cash will start rolling back out of those securitization as they run off mostly towards beginning to mid next year. So not only should we have sort of an earnings boost from lower interest rates, hopefully get some more growth, better credit performance overall in the portfolio as the old stuff runs off, but we actually should beginning to improve our cash position as well.

So of course, it all sets up for what could be a very good year next year, and we'll see. We need the economy to hang in and start improving. We need all the things I just said to come true. And then I think we're in a very good position to really start growing with our better credit, knowing the credits performed in '24 and '25 and again, '23 -- '22, '23 going away.

So a very -- as positive an outlook as we probably could have going into the fourth quarter. Fourth quarters tend to be a little bit slow, but then you bounce into the first 2 quarters, and those are always good. Anyway, we appreciate everyone's attention in the call, and we'll look forward to speaking again in February. Thank you.

And thank you. This concludes today's teleconference. A replay will be available beginning 2 hours from now from 12 months via the company's website at www.consumerportfolio.com. Please disconnect your lines at this time, and have a wonderful day.