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 being 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. A good way to start is to reflect on last year, when we expected to grow significantly. We did a lot of things we believed would enable that growth, but we didn't see as much growth as anticipated. As we rolled into this year, we continued to work on several initiatives: investing in technology, evaluating new technologies and new ways of doing things, and expanding our marketing to drive growth. In March of this year, the last month of the first quarter, those efforts produced results and things took off. Initially, we thought March is always a very good month for originations, so we were hesitant to call out a major change. But now we can certainly say it's been an enormous change in terms of originations volume quarter-to-quarter — it's up over 40%. It remains very strong, and that's probably the biggest and most important development in the second quarter. If we can keep that momentum going, it bodes very well for the future. The credit quality of the paper, at least on early signs, continues to be at least as good as before, if not better. We have not sacrificed credit to achieve this growth. Additionally, we now have warehousing of over $900 million, which is the level we need to make things happen. Overall, these trends are positive. The only external factor that could help further would be if interest rates declined or stabilized. But we'll discuss that later. For now, I'll turn it over to Denesh to go over the financials.
Thank you, Brad. Going over the financial results: revenues for the second quarter were $121.4 million, up 11% from $109.8 million in the second quarter of last year. For the six months ended June 30, revenues were $233.7 million, an 8% increase over $216.6 million in the six months of last year. This increase in revenue is driven by a strong increase in new loan originations — $758 million for the quarter and $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, yielding 11.3%. This yield is net of credit losses. Moving down to expenses: $112.4 million for the second quarter, which is 9% higher than $102.8 million last year. For the six months, expenses were $216.7 million, 7% higher than $202.9 million last year. The increase in interest expense is largely a result of higher securitization debt, which is our primary means to finance the portfolio, given the increase in new loan originations. Interest expense for the second quarter was $64 million, 9% higher than $58 million last year. Pretax earnings were $9 million for the quarter, 29% higher than $7 million for the second quarter last year. For the six months, pretax earnings were $17.1 million compared to $13.8 million in 2025, a 24% increase. Net income was $6.2 million for the quarter versus $4.8 million, a 30% increase. For the six months, net income is up 24% to $11.8 million. Diluted earnings per share were $0.27 compared to $0.20 in the second quarter of last year. For the six months, diluted earnings were $0.50 compared to $0.39 in the six months of 2025. Our cash position of restricted and unrestricted cash is $180.2 million, 12% higher than $160.2 million in June of last year. As I mentioned, our fair value portfolio now sits at $4.2 billion, which is 18% higher than $3.56 billion last year. Moving on to shareholders' equity: $319.2 million is a record high for the company, up 5% from $303.1 million last year. Looking at other metrics: net interest margin was $53.9 million, 15% higher than $46.7 million last year. 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 were $48.1 million, 9% higher than $44.1 million last year. For the six months, core operating expense was $92.3 million, 3% higher than $89.3 million in the six months of last year. We are seeing revenues grow faster than core operating expenses, which is only growing at a 3% rate, and that is a positive sign. Core operating expense as a percentage of the managed portfolio was 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, return on managed assets was 0.9% for the second quarter, compared to 0.8% in the second quarter of last year. For the six-month period, return on managed assets annualized to 0.8%, the same as the six months of 2025. I will turn the call over to Mike.
Thanks, Denesh. Just a few follow-up comments to Brad and Denesh. Looking at our second quarter originations of $757 million, that compares to $433 million in the second quarter of 2025. From a seasonality standpoint, we increased originations by 75%. How did we accomplish this growth? We expanded our sales force, which has driven up our dealer base and applications received. At the end of 2025, we had 93 total sales representatives. At the end of the second quarter of this year, we had a total of 149 sales representatives — an increase of 60% since the beginning of the year. Compared to the end of the second quarter of 2025, that's an increase of 96%. This is a substantial expansion of our sales team, primarily inside sales reps covering 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 an 84% increase over the second quarter of 2025. Our active dealer base is a record for the company, and we expect to continue adding 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 comes more applications. In the second quarter of 2026, we had 1.1 million applications compared to 777,000 in the second quarter of 2025, an increase of 42%. Importantly, despite this growth, we continue to underwrite with a tight credit box. Our payment-to-income and debt-to-income ratios, which help measure consumers' ability to pay, have remained flat through the second quarter despite economic headwinds over the last couple of years. Equally important, our approval percentage remains roughly 51% despite our growth, which means we remain selective in the contracts we purchase. We are receiving a proportional amount of higher-quality applications and growing without significant credit concessions. Turning to credit performance: total delinquency 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. The first quarter of 2026 total delinquency was also down compared to the first quarter of 2025, so both quarters are trending down sequentially. Total net charge-offs for the second quarter of 2026 were 7.28% of the average portfolio versus 7.45% for the second quarter of 2025, another downward trend. Repossessions were down versus the first quarter, and repossessions were the same as the first quarter of last year, indicating another downward trend. Extensions as a percentage of the portfolio were slightly up quarter-over-quarter. Turning to recoveries, a critical element of our business: recoveries are improving as the 2022 and 2023 vintages flush out of our portfolio. At the end of the second quarter of 2026, recovery rates rose to 33.3%, up from 30.4% in the second quarter of 2025. While these rates are not yet at historical levels we seek, there is clear 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 2023 vintage had a recovery rate of 25%, the 2024 vintage rose to 37.5%, and the 2025 vintage was at 47.1%. As the 2022 and 2023 vintages flush out, we should see recoveries trend higher as we approach the end of the year. One more comment: competition remains relatively flat. There are no new entrants into the competitive landscape, and differentiation among competitors remains tied to stipulations required, time to funding, fees and price. With that, I'll hand the call back to Brad.
Thank you. Looking at the industry, as Mike pointed out, there really are no significant new competitors. Either you have to have a $1 billion-plus portfolio — ours is now $4.5 billion — or you're much smaller. There aren't many firms that can truly compete with that scale; maybe five or six participants do what we do in the market. It's a good club to be in, and it's positive that new people entering the market helps maintain standards. The securitization market remains strong; it can fluctuate, but most importantly, we get deals done every quarter without issue. We recently completed our largest securitization ever. Overall, industry fundamentals are sound. On the macro side, which affects securitizations, it would be helpful if geopolitical tensions, such as the war in Iran, ended so securitization rates and interest rates could ease. But in terms of what we care about — unemployment and the overall economy — things look good. Unemployment looks strong, and as long as it remains favorable, other indicators tend to follow. Regulation, specifically actions from the CFPB, has been minimal, which also helps. So many of the big-picture items we monitor are moving in our favor. We have few new entrants in the industry and are positioned to grow, and external conditions look supportive. Generally, we're in a very good place these days. We have finally begun to achieve significant growth, and we want that to continue. It paints a positive picture for the rest of 2026. With that, we thank you all for being on the call and look forward to speaking with you next quarter.
Thank you. This concludes today's teleconference. A replay will be available beginning two 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.