Consumer Portfolio Services (NASDAQ:CPSS) reported sharply higher second-quarter loan originations and improved profitability, as the subprime auto lender expanded its sales force, added dealers and maintained what management described as disciplined underwriting standards.
Chief Executive Officer Charles Bradley said the company’s efforts to invest in technology, explore new operating tools and broaden marketing began producing a meaningful acceleration in originations in March. The momentum continued through the second quarter, with originations rising more than 40% sequentially, he said.
Originations surge as dealer network expands
Consumer Portfolio Services originated $758 million of new loans during the second quarter, compared with $433 million in the year-earlier period. For the first six months of 2026, originations totaled $1.3 billion, up from $884 million a year earlier.
President and Chief Operating Officer Michael Lavin attributed the increase to an expanded sales organization, a larger dealer base and increased application volume. The company increased its sales-representative count to 149 at the end of the second quarter from 93 at the end of 2025, a 60% increase.
The company added 1,345 new and reactivated dealers during the quarter, bringing its active dealer count to a record 11,889. That represented a 13% increase from the first quarter and an 84% increase from the second quarter of 2025, according to Lavin. About two-thirds of the company’s lending comes through franchise dealerships, while independent dealerships account for the remaining third.
Applications received rose 42% year over year to 1.1 million in the second quarter, from 777,000 in the comparable 2025 period. Despite the additional volume, Lavin said the company’s approval rate remained about 51%, while its payment-to-income and debt-to-income ratios were flat.
- Second-quarter originations: $758 million, versus $433 million a year earlier.
- First-half originations: $1.3 billion, versus $884 million a year earlier.
- Active dealers: 11,889 at quarter-end.
- Second-quarter applications: 1.1 million, up 42% year over year.
Revenue and earnings increase
Chief Financial Officer Danny Bharwani said second-quarter revenue increased 11% to $121.4 million from $109.8 million in the prior-year quarter. Revenue for the first six months rose 8% to $233.7 million.
Second-quarter pretax income rose 29% to $9 million, while net income increased 30% to $6.2 million from $4.8 million a year earlier. Diluted earnings per share were $0.27, compared with $0.20 in the second quarter of 2025.
For the first half of 2026, pretax income was $17.1 million, up 24% from $13.8 million in the prior-year period. Net income also rose 24% to $11.8 million, and diluted earnings per share increased to $0.50 from $0.39.
Expenses increased 9% in the second quarter to $112.4 million, primarily reflecting higher interest expense associated with increased originations and securitization debt, Bharwani said. Interest expense rose 9% to $64 million.
Net interest margin increased 15% to $53.9 million. Core operating expenses rose 9% to $48.1 million, although core operating expenses as a percentage of the managed portfolio declined to 4.6% from 4.8% a year earlier.
Portfolio growth and credit trends
The company’s fair-value portfolio totaled $4.2 billion at the end of the quarter, up 18% from $3.56 billion a year earlier, and was yielding 11.3% net of credit losses. Restricted and unrestricted cash rose 12% to $180.2 million, while shareholders’ equity reached a company record of $319.2 million, up 5% year over year.
Lavin said credit performance showed improvement. Delinquencies more than 30 days past due, including repossession inventory, declined to 12.16% from 13.14% in the second quarter of 2025. Net charge-offs fell to 7.28% of the average portfolio from 7.45%.
Recovery rates rose to 33.3% at the end of the second quarter from 30.4% a year earlier. Lavin said recoveries have gained momentum as older 2022 and 2023 loan vintages move through the portfolio, though they remain below historical levels the company seeks.
Management sees favorable industry conditions
Bradley said the company had more than $900 million of warehouse capacity, which he described as sufficient to support its growth plans. He also said the securitization market remained strong, noting that the company recently completed its largest securitization to date.
Management said competition has remained relatively stable, with no significant new entrants in its market. Bradley cited employment conditions and the broader economy as important factors for the company, while adding that lower interest rates and easing inflation would be beneficial.
“We finally started to achieve a lot of growth,” Bradley said. “We want that to continue.”
About Consumer Portfolio Services (NASDAQ:CPSS)
Consumer Portfolio Services, Inc is a specialty finance company focused on originating and servicing retail installment contracts for the automotive industry. The company primarily serves subprime and near-prime borrowers by partnering with a network of franchised and independent auto dealers across the United States. By providing flexible financing solutions, CPS seeks to expand vehicle ownership opportunities for customers who may not qualify for traditional prime auto loans.
CPS operates through two principal segments: loan origination and servicing.
