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 they are 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, future 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 first quarter earnings call. Looking back at the quarter, going through the basic things: our securitization program continues to run really well. We did another securitization of $345 million, which was well received. No problems at all. It is very good that the program remains consistent. We'd like to see interest rates come down a little more, but overall being able to buy a lot of paper and sell it to Wall Street is one of the most important things we can do. Secondly, we did another residual financing, and that program is also running very well and was very well received. Each time we do a new residual financing, it seems to be better received each time, and we're getting a little better pricing as well. So that's all very good. Probably the big news is that after spending all last year trying to grow and expand our geographic footprint, add as many dealers into our network as we could, and add a lot more marketing people to get more boots on the ground and focus on sales, that work has started to pay off. January and February were a bit slow or normal; March took off. Being here in May, it's safe to say that all of the hard work we've done over the last year to 18 months is really beginning to pay off in terms of growth in our originations platform and our ability to buy paper and penetrate the markets deeper. We saw a lot of that in March; the next quarter, the second quarter, should be very interesting in that regard. All in all, things look very good across the board. I'll get back to that after Denesh and Mike go through their pieces. So I'll turn it over to Denesh to cover 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, as Brad alluded, by strong new loan originations in the quarter. We did $533 million in originations, 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, whereas we did not have a mark in the first quarter of 2026. Expenses of $104.3 million are up 4% from $100.1 million in 2025. Interest expense is the largest contributor to that increase: $60 million, up from $55 million a year ago, which is a 9% increase. That increase is largely due to the higher debt balance from the higher loan originations in the quarter. Pretax earnings of $8 million are 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 were $0.24 compared to $0.19 in the first quarter of last year, a 22% increase, which follows 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 as of March 31, 2025. Our fair value portfolio, as I said, is $3.8 billion now, which is 11% higher than $3.45 billion on March 31, 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% last year is a 3% increase. Core operating expenses of $44.2 million are actually down 2% from $45.2 million in 2025. This is 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, 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.
Thanks, Denesh. 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. It also 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 representatives; 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, two-thirds of our lending comes from franchise dealerships and one-third 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, an increase of 31% over the fourth quarter's 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 implemented 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 during the quarter of growth. Our funding time remained under 2 days and our error rate remained under 8%. Turning to credit performance, the total delinquency greater than 30 days for the quarter was 11.58%, a decrease from the first quarter of 2025, when it was 12.35%. The total annualized net charge-offs for the first quarter of 2026 were 8.57% of the average portfolio as compared to 7.54% in 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 top of 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. Looking at the vintage performance, 2024-A started the improvements over the 2022 and 2023 vintages. We saw 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 2025 vintages are sitting right on top of the 2024 vintages, 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 older vintages are running off quickly, with the 2022 and 2023 vintages becoming 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 2022 and 2023 vintages were dragging down overall recoveries. That trend continued, but the increase in recoveries quarter-over-quarter relates to the 2022 and 2023 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. I noted this morning there was another good jobs report that came out, so it's trending well there too. With that, I'll pass it back to Brad.
Thank you, Mike. Looking at the industry, things have become a bit repetitive in that it's generally quiet, which is good: no hiccups, no problems, no new entrants. I think the industry has finally consolidated to a level where you really have a handful of large players and then much smaller participants. It tends to be that you either have multiple billions in your portfolio or less than $500 million to $600 million. Because of that, competition is constructive. I think there's nobody running off the rails anymore, so it has settled into a productive environment for everyone. I think we're seeing some of the benefits of that in terms of our growth, and some of the smaller players are falling away in the lower end. Also, I think it would be helpful if the Iran war ended because that would help interest rates, in our view. But even with that kind of turbulence in the market, we're not having any problems with securitizations. The portfolio performance seems fine. Moving to the macro picture, generally it looks like the economy is okay. If the war could end, 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: we're really hitting a good growth streak, and I think we'll be able to take advantage of the market. For the most part, we want everything to 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 for a couple of years. So far the first quarter looks real good. The second quarter looks real good too. 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.