Core Viewpoint - Consumer Portfolio Services, Inc. has successfully closed its first term securitization in 2026, marking its 58th senior subordinate securitization since 2011 and the 41st consecutive securitization to receive a triple "A" rating from at least two rating agencies for the senior class of notes [1]. Group 1: Transaction Details - The securitization involved the sale of $345.61 million in asset-backed notes, secured by $352.66 million in automobile receivables originated by the company [2]. - The notes were issued by CPS Auto Receivables Trust 2026-A and consist of five classes, with ratings provided by Standard & Poor's and DBRS Morningstar based on transaction structure and historical performance [2]. - The weighted average coupon on the notes is approximately 5.18% [3]. Group 2: Note Class Breakdown - Class A notes amount to $155.520 million with an interest rate of 4.19% and a rating of AAA from both S&P and DBRS [3]. - Class B notes total $47.790 million with an interest rate of 4.43% and a rating of AA from both agencies [3]. - Class C notes are $58.360 million with an interest rate of 4.63% and a rating of A [3]. - Class D notes amount to $38.440 million with an interest rate of 4.98% and a rating of BBB [3]. - Class E notes total $45.500 million with an interest rate of 6.66% and a rating of BB from DBRS [3]. Group 3: Credit Enhancement and Payment Structure - The transaction features initial credit enhancement consisting of a cash deposit equal to 1.00% of the original receivable pool balance and overcollateralization of 2.00% [4]. - Agreements require accelerated principal payments to achieve overcollateralization of the lesser of 7.30% of the original receivable pool balance or 18.00% of the outstanding pool balance [4]. Group 4: Company Overview - Consumer Portfolio Services, Inc. is an independent specialty finance company that provides indirect automobile financing to individuals with past credit problems or limited credit histories [6]. - The company purchases retail installment sales contracts primarily from franchised automobile dealerships, funding these purchases mainly through securitization markets [6].

Core Viewpoint - The conference call is focused on the third quarter operating results for Consumer Portfolio Services in 2025, indicating a review of financial performance and strategic outlook for the company [1]. Group 1 - The call is being recorded and is intended for discussing the operating results of Consumer Portfolio Services [1]. - Management has indicated that the call may contain forward-looking statements, which are subject to risks that could lead to actual results differing from projections [2]. - The company has no obligation to update any forward-looking statements publicly, regardless of new information or events [3].

Core Insights - The current state of auto loan delinquencies indicates significant stress among lower and middle-income households, raising concerns about potential defaults in the sector [1][6][22] Group 1: Auto Loan Market Overview - The U.S. auto loan market has reached a record $1.66 trillion in debt, which has doubled over the past 12 years, with a significant portion sold as asset-backed securities (ABS) [4][23] - Recent collapses of subprime auto lenders, such as Tricolor and First Brands, have triggered warnings about the health of the $3 trillion private credit market [3][22] - The share of subprime auto loans with borrowers missing payments for 60 days or more reached 6.43% in August, the highest level since 1993, indicating a troubling trend in consumer credit [5][6] Group 2: Consumer Financial Strain - The average price of a new car has surged by 35% since 2019, surpassing $50,000, leading to higher monthly payments that consumers are struggling to meet [8] - The number of clients seeking help from American Consumer Credit Counseling (ACCC) has increased significantly, with average debt loads rising by nearly 60% over five years [9][11] - Delinquency rates for credit cards and student loans have also climbed, reflecting broader consumer financial distress [12] Group 3: Risk Factors and Future Outlook - The performance of subprime auto ABS is expected to deteriorate further into 2026, with continued increases in delinquencies and defaults anticipated [22] - Concerns have been raised about the lending practices towards potentially undocumented borrowers, which could exacerbate default risks [20][21] - The overall stress in the auto loan sector may not pose an immediate threat to financial stability but signals significant consumer strain, especially if unemployment rises [24]

Core Insights - Consumer Portfolio Services, Inc. reported earnings of $4.8 million, or $0.20 per diluted share, for Q2 2025, reflecting an increase from $4.7 million, or $0.19 per diluted share, in Q2 2024 [1][2] Financial Performance - Revenues for Q2 2025 were $109.8 million, up $13.9 million, or 14.5%, from $95.9 million in Q2 2024 [2][10] - Total operating expenses for Q2 2025 were $102.8 million, compared to $89.2 million in the same period of 2024 [2][12] - Pretax income for Q2 2025 increased to $7.0 million from $6.7 million in Q2 2024 [2][10] - For the six months ended June 30, 2025, total revenues were $216.6 million, an increase of approximately $29.0 million, or 15.5%, compared to $187.6 million for the same period in 2024 [3] - Net income for the six months ended June 30, 2025, rose to $9.5 million from $9.3 million in the prior year [3][12] Portfolio and Contracts - During Q2 2025, CPS purchased $433.0 million of new contracts, slightly up from $431.9 million in Q2 2024 [4][14] - The company's receivables totaled $3.708 billion as of June 30, 2025, an increase from $3.615 billion as of March 31, 2025, and from $3.173 billion as of June 30, 2024 [4][14] Credit Quality - Annualized net charge-offs for Q2 2025 were 7.45% of the average portfolio, compared to 7.26% for Q2 2024 [5][15] - Delinquencies greater than 30 days were 13.14% of the total portfolio as of June 30, 2025, down from 13.29% as of June 30, 2024 [5][15] Management Commentary - The CEO highlighted improvements in earnings and operating efficiencies, emphasizing a focus on credit quality and loan performance as the portfolio grows [6]