OneMain Holdings, Inc. Q2 2026 Earnings Call

Good morning, everyone. Welcome to the OneMain Financial second quarter 2026 earnings conference call and webcast. Hosting the call today from OneMain is Peter Poillon, head of investor relations. Today's call is being recorded. It is my pleasure to turn the floor over to Mr. Peter Poillon. Please go ahead, sir. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to page two of the second quarter 2026 investor presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP measures. The presentation can be found in the investor relations section of the OneMain website. Our discussion today will contain certain forward-looking statements reflecting management's current beliefs about the company's future, financial performance, and business prospects. These forward-looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward-looking statements are set forth in our earnings press release. We caution you not to place undue reliance on forward-looking statements.

If you may be listening to this via replay at some point after today, we remind you that the remarks made herein are as of today, July 29th, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Shulman, our Chairman and Chief Executive Officer, and Jenny Osterhout, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. I'd like to now turn the call over to Doug.

Thanks, Pete. Good morning, everyone. Thank you for joining us today. Let me begin with a few highlights from the quarter and then discuss the progress we're making across the business as we continue to execute our strategy and drive profitable growth. We had strong financial results in the quarter, including very good receivables growth, driven by product innovation and positive delinquency trends, which point to lower losses in the second half of the year. Strong year-over-year originations growth of 10% supported receivables growth this quarter. By focusing on high-quality loan originations, continuously improving customer experience, and enhancing our product offering, we have driven this growth while also maintaining a conservative underwriting posture. Credit performance was good and tracked in line with our expectations, and early delinquency trends continued to improve.

Our 30 to 89 delinquency declined seven basis points year-over-year, accelerating the year-over-year improvement from last quarter's one basis point decline. In the first half of the year, 30 to 89 delinquency declined 28 basis points. That's better than last year and the pre-pandemic average. We're pleased that delinquency performance continues to move in the right direction, which supports our expectation for improvement in losses over the second half of the year and into 2027. C&I net charge-offs were 8.2%, and consumer loan net charge-offs were 7.8%, both in line with our expectations. We continued to have strong recoveries in the quarter. We reached a significant milestone this quarter, surpassing four million customer accounts, an increase of 14% from a year ago. This growth has been driven by the success of auto finance and credit cards, combined with our continued product innovation in our core personal loan business.

In our personal loan business, several recent initiatives are progressing very well. Our enhanced debt consolidation offering makes the loan process easier for our customers and helps most customers improve their credit scores. Also, because the majority of our debt consolidation loans are secured, they have lower losses compared to our overall personal loan portfolio. Our home fixture secured product offering was introduced earlier this year. While it's still early, we are seeing good uptake from customers and strong initial credit results. Like any new offering at OneMain, we started with a small test to prove out results. Given that we like what we've seen, we are now starting to expand it. We also continued to expand our analytics around bank data to deliver more personalized offers and improve customer engagement. Insights from this data strengthen our underwriting, improve credit outcomes, and increase pull-through rates.

Initiatives like these are helping us better serve our customers while strengthening the long-term performance of our personal loan business. Turning to our newer businesses, starting with auto finance. Originations grew 19% during the quarter. Receivables reached $3 billion, an increase of 14% year-over-year. We continue to drive solid growth through the expansion of our dealer network and enhance underwriting capabilities. Importantly, credit performance remains in line with expectations and continues to outperform the broader industry. Turning to our credit card business, we delivered another very strong quarter with positive results across all important metrics. Receivables increased to $161 million in the quarter, and nearly $400 million year-over-year. New BrightWay cards, which include both higher rewards and no reward credit cards, continue to attract new customers and support strong growth.

Customer accounts increased to 1.3 million, up 155,000 from last quarter. More than 400,000 from a year ago. Credit metrics continue to improve, with lower losses and delinquency than a year ago. Just as importantly, as we scale, we're seeing good revenue growth and continuing to improve the long-term profitability of the business. With marginal operating costs per account down about 25% year-over-year. We're encouraged by the continued growth and improvement in the profitability of our credit card portfolio. Looking ahead, we'll continue to invest in customer acquisition, digital capabilities, and collections optimization to strengthen credit performance and support profitable growth for the long term. As I discussed last quarter, we continue to invest in technology, data, and AI capabilities to enhance our business and drive growth and efficiency.

We are currently rolling out a new loan origination system for customers and team members that streamlines our process and should help support profitable growth. We've built an internal AI tool that gives our more than 9,000 team members information they need, like policies or procedures, at their fingertips in an intuitive conversational manner, driving efficiency and speeding up customer service. Our engineering and product teams use AI tools to drive efficiency across the product development life cycle. We are also learning and piloting AI in a very controlled manner in a number of areas where we see high potential returns and value for our customers. Let me briefly touch on the consumer. Although the current economic environment continues to have some uncertainty, our customers remain resilient and metrics across the industry point to a strong consumer.

Unemployment remains low, providing ongoing support for credit performance. As always, we are closely monitoring trends across the consumer and our portfolio. Credit is performing well, showing that our customer has been able to make it work. Our early-stage consumer loan and credit card delinquency trends give us confidence that we are in a strong position. Turning to capital allocation, our priorities remain unchanged. We will continue to extend credit to every customer that meets our risk-return framework, and we will continue to invest in the business to meet customer needs, drive efficiency, and create long-term shareholder value. Our regular dividend, currently $4.20 per share on an annualized basis, represents a 7% yield at today's share price.

In the second quarter, we repurchased 576,000 shares for $32 million, bringing our total repurchases year to date to $137 million, which is $100 million more than we repurchased in the first half of 2025. Looking ahead, our approach to share repurchases will continue to be guided by several factors, including the capital requirements of the business, market dynamics, and economic conditions. We continue to feel good about our business as we're capitalizing on the core competitive advantages of OneMain, including best-in-class data science and underwriting, an experienced and proven team with unparalleled expertise in serving the non-prime consumer, and a strong, diversified balance sheet with a long liquidity runway. We remain confident in our competitive position and see many opportunities to drive capital generation growth well into the future as we execute on our strategic priorities. With that, let me turn the call over to Jenny.

Thanks, Doug, and good morning, everyone. As Doug said, we delivered strong second quarter results across key financial metrics, including profitable growth, good credit results as our customers remain resilient, disciplined expense management, coupled with investments for the future, and continued strong balance sheet management. This reinforces our confidence in the strength of the business and our outlook for the future. Delinquency metrics, the best indicator of future loss performance, are improving relative to last quarter, and we're seeing originations growth accelerate across our business. Consumer loan originations grew 10% year-on-year. While both card origination units and purchase volume increased significantly. This strong performance supported our 7% growth in managed receivables, up from 6% in the first quarter.

Importantly, we were able to deliver this growth while maintaining our conservative credit posture across all our products as we continue to focus our underwriting on higher quality customers, positioning us well to continue to generate attractive returns and create meaningful shareholder value in the quarters ahead. During the quarter, we raised $1.1 billion in the secured market, further strengthening our funding profile and adding flexibility for future issuances. On the capital return front, we repurchased 2.5 million shares in the first half of the year, more than three times the amount repurchased during the same period last year. Second quarter GAAP net income of $152 million, or $1.32 per diluted share, compared to $1.40 per diluted share in the second quarter of 2025. C&I adjusted net income per diluted share of $1.31 compared to $1.45 in the second quarter of 2025.

As higher total revenue in the current quarter was offset by higher loss provisions, driven largely by a higher reserve build in the quarter due to the larger growth in receivables we saw this quarter compared to the prior year. Importantly, capital generation, the metric against which we manage and measure the business, totaled $229 million, up 3% from $222 million in the second quarter of 2025. Managed receivables ended the quarter at $26.9 billion, up $1.6 billion or 7% from a year ago. Managed receivables at the end of June included $1.7 billion of receivables serviced for third parties. Second quarter originations of $4.3 billion increased 10% compared to the second quarter of last year. This strong growth was achieved while maintaining our conservative underwriting, reflecting the effectiveness of our new products and innovative growth strategies. The personal loan product innovations Doug discussed are gaining traction.

Importantly, early indicators of performance suggest these initiatives are attracting more customers while also delivering solid credit performance consistent with our expectations. In auto finance, originations grew by 19% year-on-year during the quarter, supported by the ongoing expansion of our dealer network, continued improvements in our underwriting, and growth from our partnerships. Additionally, our credit card business also delivered strong growth. Customer accounts increased 44% year-on-year, and purchase volume increased 57% year-on-year, driven by new reward options and enhancements to the BrightWay value proposition that attracted new customers and deepened engagement with existing ones. Key metrics remained strong, including utilization and revolve rates, and credit performance continued to steadily improve. Turning to yield. Our second quarter consumer loan yield was 22.7%, up 16 basis points from last quarter and 11 basis points year-on-year, even as our lower loss, lower yield auto book continued to grow as a percentage of our consumer loan portfolio.

We continue to see strong asset yields as we grow our portfolio, which is a testament to our disciplined pricing approach. Looking ahead, we expect consumer loan yield to remain around recent levels and follow typical seasonal patterns. We also continued to see strong revenue yield improvement in our credit card portfolio, with total card revenue yield increasing 330 basis points year-on-year to 33.6%. Total revenue in the second quarter was $1.6 billion, up 6% compared to last year. Interest income of $1.4 billion grew 6% from the second quarter of last year, driven by net finance receivables growth and the improvement in asset yields that I just mentioned.

Other revenue of $207 million was also up 6% from last year, primarily due to higher credit card revenue as we grow the card business, along with higher servicing fees from our portfolio of loans serviced for third parties. Interest expense for the quarter was $326 million, up 3% compared to the second quarter of 2025, driven by higher average debt to support our receivables growth. Our interest expense as a percentage of average net receivables was 5.3% this quarter, down from 5.4% in the second quarter of 2025, reflecting the actions we took last year to proactively manage our debt profile and take advantage of market windows to best position us for the future. We expect our funding costs to remain at approximately this level throughout the rest of 2026.

Second quarter provision expense was $610 million, comprising net charge-offs of $506 million and a $104 million increase in our reserves, driven primarily by the increase in receivables during the second quarter. Our loan loss reserve ratio of 11.6% is up slightly from 11.5% last quarter, primarily due to the growth of the card business, which carries a higher reserve rate. Policyholder benefits and claims expense for the quarter was $44 million, down from $54 million in the second quarter of last year. The year-on-year decrease was driven by a reserve release in the second quarter. We continue to expect quarterly PB&C expense in the mid-$50 million range going forward. Let's turn to credits, starting on slide eight. 30 to 89 delinquency on June 30th, excluding Foresight, was 2.82%, down seven basis points compared to a year ago, improving on the trend we saw last quarter.

On slide nine, you see the 28 basis point year-to-date improvement and 30 to 89 delinquency was better than the 17 basis point improvement last year, 24 basis point improvement in the pre-pandemic period. 90-plus delinquency ex Foresight was three basis points above last year. A solid improvement over the 14 basis point year-on-year increase we saw last quarter. We expect 90-plus delinquency to follow the improvement we saw in our 30 to 89 delinquency throughout the remainder of the year. Combined, our 30-plus delinquency ex Foresight was 5.03%, down four basis points from the prior year, improved from the 14 basis point year-on-year increase last quarter. It is also worth noting that our back book, which comprises originations prior to August 2022, continues to present a modest headwind to our credit performance, as it remains a disproportionate contributor to delinquency rates, as shown on slide nine.

The back book now represents just 4% of the portfolio but accounts for 12% of 30-plus delinquencies. More than twice the level we would typically expect for vintages at this stage of seasoning. While the front book vintages are performing well, the negative impact of the back book stubbornly remains on our balance sheet. Moving to net charge-offs for the quarter, as shown on slide 10. Second quarter C&I net charge-offs, which include the results from our growing higher-loss, higher-yield credit card portfolio, were 8.2%, down 21 basis points sequentially and up 63 basis points year-on-year. Consumer loan net charge-offs, which exclude credit cards, were 7.8% in the second quarter, down 25 basis points sequentially and up 58 basis points from a year ago. I'll discuss credit cards separately in a moment, but let me first talk about the consumer loan portfolio loss performance.

The year-on-year increase was expected, as it was predominantly driven by the elevated 90-plus delinquency we saw last quarter rolling through to loss this quarter. Importantly, as I just discussed, we are seeing better 90-plus delinquency performance this quarter as compared to last quarter. Combined with the improvements in early-stage delinquency metrics, these give us confidence that our losses will improve significantly in the second half of the year. Recoveries in the quarter were strong at $117 million, or 1.9% of average net receivables. This performance was driven by continued enhancements to our comprehensive loss recovery strategy. As a reminder, C&I net charge-offs include a 43 basis point contribution from our credit card business, which has higher yields and higher losses. We like the overall economics, given the attractive risk-adjusted returns we are generating on the credit card portfolio.

I'd like to briefly discuss our improving credit performance in credit cards. Credit card net charge-offs declined 186 basis points year-on-year to 17.7%. Additionally, 30-plus delinquencies fell 146 basis points year-on-year, giving us line of sight to further improvement in year-on-year loss performance over the remainder of the year. These sustained improvements strengthen our conviction in the credit card business as we look to continue to grow accounts in a disciplined way. Loan loss reserves ended the quarter at $2.9 billion, or 11.6% of ending net receivables. The increase in the loan loss ratio from 11.5% last quarter and last year was driven by the change in mix of our portfolio associated with the strong growth in our credit card business, as card receivables grew more than 50% year-on-year.

While the credit card reserve ratio was largely unchanged from the prior quarter, it is nearly two times higher than our consumer loan portfolio reserve rate. Given this dynamic, the continued growth in the credit card business will modestly raise the overall reserve ratio in the quarters ahead. Let's turn to expenses on slide 11. Operating expenses were $439 million, up 6% compared to a year ago, driven by continued investment in our credit card and auto finance businesses, as well as data science, technology, and digital capabilities. These investments are focused on enhancing the customer experience, improving our team member performance by boosting productivity and effectiveness, enhancing data and analytic capabilities, and other efforts to drive long-term growth and future operating efficiency. Our OPEX ratio this quarter was 6.7%, flat to the prior year and down 10 basis points from last quarter.

The sequential improvement reflects our disciplined expense management and ability to continue to drive operating leverage. As we look ahead, we will thoughtfully manage expenses while investing for the future. Turning to funding and our balance sheet on slide 12. During the quarter, we further strengthened our balance sheet. In June, we issued a $1.1 billion three-year revolving ABS. Strong, broad-based demand from both new and existing investors drove very tight spreads and attractive pricing of about 5.1%, highlighting the strength of our funding platform and excellent access to capital. At the end of the second quarter, our bank lines were unchanged at $7.5 billion, providing substantial liquidity and additional funding flexibility to our program. Our net leverage at the end of the second quarter was 5.5 times, flat to a year ago and within our target range of four to six times.

Our balance sheet remains a key competitive advantage, supported by staggered long-term maturities, diversified funding mix, ample liquidity, and consistent market access. This combination provides flexibility, supports stable execution, and positions us well through economic cycles. Turning to our full year 2026 guidance, as shown on slide 14. We are reiterating all our guidance metrics. We are maintaining our full year managed receivables growth in the range of 6%-9%, supported by momentum across all three of our products: personal loans, auto finance, and credit card. We expect C&I net charge-offs to come in between 7.4%-7.9% as we see improving early and late-stage delinquency trends that support our expectation that losses will continue to improve as we look ahead. We are maintaining our OpEx ratio guide of approximately 6.6% for the year.

In closing, we are pleased with our financial performance this quarter and the ongoing progress we're making on key strategic priorities. Our growth initiatives are gaining traction as we are across our newer products, auto finance and credit card, and innovating in our personal loan business, all while maintaining a conservative underwriting posture. The positive direction of early-stage credit trends reinforces our view that losses will decline significantly in the second half of the year. As we look ahead, we remain focused on disciplined growth while delivering efficiency across the organization, which together with our strong balance sheet and funding platform, position us well for the future and support our ability to drive capital generation growth, excess capital, and attractive returns in 2026 and beyond. With that, let me turn the call back to Doug.

Thanks, Jenny. In closing, we remain very confident in the strength and trajectory of our business. We now serve more customers than ever, with over 4 million accounts across a diverse set of products, positioning us as the lender of choice for hardworking Americans. We remain committed to our conservative underwriting posture while continuing to drive growth in our personal loan business through product innovation and profitably scaling auto finance and credit cards. Credit metrics are trending well, and we expect credit performance to improve in the second half of 2026, with further improvements expected in 2027. Our strong balance sheet with staggered maturities and excess liquidity remains a key competitive advantage. Before I open it up to questions, I'd like to briefly mention two recognitions we recently received.

First, OneMain was once again named a Most Loved Workplace by the Best Practice Institute, marking our fifth consecutive year receiving this recognition. This distinction is based on direct feedback from our team members and reflects the special culture we've worked hard to build at OneMain. Second, OneMain has been named to Time magazine's inaugural list of America's Best Companies, which evaluates companies across financial performance, employee satisfaction, and transparency. We're proud of these recognitions because they reflect the strength of our business, the dedication of our team members, and our continued focus on creating long-term value for our customers, employees, and shareholders. I'd like to thank all of our team members for their commitment to our customers, their outstanding execution, and the support they provide to one another every day. With that, let me open it up to questions.

Thank you. We will now conduct a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one at this time. One moment while we poll for the first question. The first question comes from Moshe Orenbuch with TD Cowen. Please proceed. Great, thanks. I think both Doug and Jenny, you both talked about improving delinquencies, and kind of improving credit performance in the second half and into 2027.

I'm wondering if we can kind of put a little bit of a finer point on that because obviously the 7.4%-7.9% range is fairly wide. As expected, you kind of were slightly in the range of that high end in the first half. Just talk a little bit about the evolution of the portfolio, given the things that you're seeing into the second half and the early part of 2027, if possible. Thanks. Sure. Hi, Moshe. I think, as I said, we maintained our guidance in that range of 7.4%-7.9%.

The most important metrics that we look for the second half and into next year are those delinquency metrics that you mentioned, which are performing quite well. That would be the 30-89 delinquency excluding Foresight, which was down 7 basis points year-over-year, which is a further decline from the 1 basis point decline that we had in the first quarter. The 30 plus delinquency excluding Foresight, which was down 4 basis points, and better than the 14 basis point increase we had last quarter. The 90 plus delinquency, which was 3 basis points up year-over-year, but actually much better than last quarter's 14 basis point increase.

All of those delinquency metrics are moving us in the right direction, and we're seeing us land where we expected based on the fourth quarter of last year and last quarter's 90 plus. If I look forward, we look at a variety of scenarios and a range of outcomes, and we're watching that delinquency I just mentioned. We'll watch the mix of the book, roll rates, growth, and then of course the macro environment. To get to the midpoint of that range, we would need to see some of that better than normal seasonal delinquency continue, and we're feeling pretty good about that.

Got it. Maybe just to follow up in a similar vein, every aspect of the P&L was a little better than our expectations. Fee revenue, net interest income, expenses, and even net charge-offs were kind of in line, but the reserve rate went up a little bit more. When we think about that going forward, I think you had mentioned on the call that it would be increasing modestly because of the credit card. I guess I would assume that the relative growth rate of credit card loans is probably highest in Q2. I guess I would hope that it would have, particularly given what you had mentioned about improving credit card credit quality, that it would have potentially less of an impact going forward. Wanted to get your views on how to think about that reserve rate going forward.

Yep. Happy to talk about that. We did talk about that change in reserves, which is really that portfolio mix impact. That is coming from cards, which as you mentioned, is performing quite well. We do like the performance of credit. That card reserve rate is about two times our consumer loan portfolio reserve rate. Even as the loss performance improves, I think it takes time for it to come into your reserve rate. We did see really strong growth in the second quarter. I do think we expect to continue to see really strong growth. Even though it's only 4% of the portfolio, it going to 4.5% or 5% will raise our overall reserve rate. I'd expect that reserve rate to move up to around 11.7% in the second half of the year.

I don't think it's a major shift. I do think it is going to put some pressure on that reserve rate.

Thank you. Thank you. The next question comes from Terry Ma at Barclays.

Please proceed. Hey, thank you.

Good morning. Good morning, Terry that.

Can you maybe just talk about the recovery benefit you saw this quarter? It was quite elevated. As we look out to the back half of the year, does the improving credit in the back half also contemplate some sort of elevated recoveries? Maybe just some color on what's driving that, whether it's just selling more inventory or some improvements in your recovery process.

Thanks. Yep. We are pretty pleased with our strong recoveries, and saw good trends in the second quarter, and it was a strong driver of our net charge-off performance. We've been making investments, and we've talked about it for the last few quarters in our internal capabilities, and that's driving a lot of the improvements that we're seeing. Internal changes would be things like how we get in touch with customers, how we staff, how we manage our teams. We are also looking at charged-off sales with our longstanding partners and make those sales when we see attractive economics. We have had more inventory of charged-off loans from the past two years. We do have more assets to potentially sell.

I'd say it's really what we've been seeing is a mix of both internal recovery capabilities being better and having more of the inventory and finding partners where we can get good economics on those sales. If I look for the rest of the year, I think we can expect for our recoveries to be pretty good. I'd say around maybe the first half, so something between the first quarter and the second quarter. I think we're pretty confident that we like what we're seeing and we're going to continue to see good recoveries going forward.

Got it. That's helpful. On the delinquency trends, I think both the early stage and the later stage came in better than our expectations, and I do think they're moving the right way. Last quarter you guys mentioned roll rates worsening in the 90-day bucket. Can you talk about that, whether or not that's normalized a little? Can you maybe just give some color on the roll rates from 90-day plus to gross default? If I just look at that, it looks like it's worsened over the last three to four quarters. Thank you. Yep. We talked a little bit about this, but we've seen historically low roll rates at the end of 2024 and going through 2025.

Actually, 2025 were some of our lowest roll rates that we've seen certainly since the pandemic. In the first quarter, we saw some normalization back towards more typical historical levels. What we like that we're seeing is if you look at the 30 to 89 roll to 90 plus, we saw that peak in the first quarter and start to come down this quarter, which we think is a good indication that those rolls through to loss will come back down as we look ahead and help drive our loss performance in the second half of the year.

I do think that's what you're seeing when you look, you mentioned GCO, and I think when you're seeing that, we are seeing some of that roll that I just mentioned from the first quarter go all the way through and roll from 90-plus to loss this quarter and into that GCO bucket. It's a bit of a roll rate story, and we are excited by what we're seeing in the early buckets and feel pretty good about the future on GCO and more importantly, where we see NCO too, going back to your last question on recovery.

Great. Helpful. Thank you. The next question comes from Mark DeVries with Deutsche Bank.

Please proceed. Yeah, thanks. Hey, Mark, we cannot hear you.

Hello? Can you hear me?

We can hear you now.

Oh, great. The impact from portfolio.

Hey, Mark, we can't hear you. Maybe operator, we go to the next person. Mark, if you can call back in from another line.

Okay. The next question comes from Don Fandetti with Wells Fargo.

Please proceed. Mike, morning. Can you talk a little bit about the bank ILC process, where you are and how you're thinking about timing?

On receivables growth, just given where you're tracking and the new product's been pretty well received, are you feeling like you could end up towards the better end of that guide range?

Sure. We really don't have an update on the ILC. I've said before an ILC would be accretive to our strategy, we don't need it to execute our long-term strategy. We feel we have a very strong application, and we continue to have constructive conversations with the relevant agencies. On that, we'll keep people posted when there's any news. On originations, we're pretty happy with what we're seeing with originations. As a reminder, we continue to have a conservative credit box. The way we manage that is we still have, really since 2022, had a 30% stress overlay. We've put assumed more stress on the portfolio than has actually showed up just to be conservative in our underwriting models.

We're seeing really nice growth across all of our business lines, it's really driven by what we talked about earlier, which is in personal loans, a lot of product innovation, whether it's debt consolidation, home fixture secured, streamlining application processes, better information at the fingertips of our customers and our employees to make it just easier to move the loan process forward without compromising quality. In auto, we've been adding new dealers, partnerships, refining our models. In card, we've now created a variety of products with different kinds of rewards. Some fees, some no fees. Refined our models, so we're able now to target and bring on customers that are lower risk, but also more likely to use their full line. It's just a lot of things. We're not changing our guidance at all, but what we're seeing, we're really happy with.

Thank you. Great. The next question comes from Aaron Sagovinch with Truist Securities.

Please proceed. Thanks. Doug, you had mentioned in your remarks about an enhanced loan consolidation product that you have been seeing some Good results from.

Can you elaborate a little bit on some of the changes that were made there and how meaningful that could potentially be?

Yeah. Look, the first change is in the past, we've always had loan consolidation as part of. It's always been an offering, but it's more been an intake offering. Somebody wants a loan and we then start talking to people about, "We see you've got a number of credit cards and other loans. Let's look if we could consolidate those, get you a better deal, lower monthly payment," that kind of a thing. We developed now an outgoing proposition, which is consolidate your loans with us, bring down your monthly payment, those kinds of things. There's a set of analytics on the back end where we think we could really provide value to a customer where we do outbound marketing.

Once it comes in, we've built out technology that can quickly pre-populate for our employees the different kind of offer that they can make for consolidation, all of the information about people's loans that's available on the credit bureau to do it. We've really refined the direct payoff. We've built on the back-end payment systems much easier, better, faster for us to actually pay off those other loans, which obviously leads to good credit performance. It's kind of across the board from outbound marketing, just streamlined experience to back-end payment processing to allow the loan consolidation.

Got it. Thank you. Jenny, just quickly on the loan yield comments and consumer loan, you had mentioned expecting that to be around recent levels and following typical seasonal pattern. Can you remind me what the seasonal pattern is on the loan yield?

Yeah. Loan yield has some of our later stage. You get the 90-plus coming through in your loan yield. You have both your revenue line, and you also have some of the impact from auto coming through. Usually we typically see loan yields moderate a little bit in the second half of the year. I just say, I think you can expect it. We were at 22.7% this quarter. That was about 16 basis points up from the first quarter. It's our highest loan yield that we've had since the second quarter of 2022. Even while we're growing the auto book. I do expect, as we look ahead, that should shift down slightly. We're talking more like the first half in total.

The first half in total was about 22.6%, I think that's what you can expect going forward.

Got it. Okay. Thank you.

The next question comes from Mihir Bhatia with Bank of America. Please proceed. Hi. Good morning.

Thank you for taking my call.

Good morning. Wanted to follow up on Don's question about just growth and potentially stronger growth from here.

Maybe one way of thinking about it is you obviously have this overlay, as you mentioned, since 2022. I think you've talked in the past about doing a lot of weather vane testing and maybe talk a little bit about what you're seeing in that. Are those weather vane portfolios showing evidence that you could start selectively reducing some of the stress overlay, whether it's in certain risk categories, geographies, products, however? Just trying to understand what would drive faster growth given the credit improvement you are seeing and expecting.

Yeah. No, I'm happy to talk about it. Look, first, I just want to make sure to frame as a reminder, we view growth as an outcome. We're very clear about the math that you add receivables, you add profit, and so growth is great, but we don't chase growth. We see growth as a outcome of a great product with a clear value proposition to our customers, marketing, analytics, customer experience, streamlining the company. All of those things lead to growth, but we keep very disciplined around our credit box. I think if the broad question is what would it take to open up? It's a number of things. There's the weather vane testing. There's outperformance like that are the things we're booking are performing significantly better. The new customers we're booking performing significantly better than our models, what have told us.

I think there's some question around clarity in the metro, or I'm sorry, in the macro environment. On the weather vane specifically, we're seeing it perform just fine, but it's not crossing. Our weather vane testing isn't crossing our 20% return on equity thresholds, which is what it takes for us to book a loan. I think we're really happy our current book is performing in line with expectations, and we constructed a book that has credit moving in the right directions and has really healthy origination growth. We're not at the point where we plan to open the box. We just need to see both weather vane and current book doing better than expected.

Got it. Thanks. Maybe turning to just capital allocation and buybacks specifically. With, I think, receivables growth generally solid. Jenny mentioned a slight increase in the reserve rate. How should we think about excess capital that's going to be available for buybacks from here, and just how are you thinking about deploying that? Is it how opportunistic versus programmatic would it be from here?

Yeah. Let me start, maybe Jenny wants to add something. Look, our buyback framework's super clear. We're going to invest in the business first. We're going to invest in growth when we see customers coming in that are going to meet our 20% return on equity thresholds. We're going to make sure we pay our dividend, which has a very healthy yield, and what's left over will be used for buybacks and other strategic opportunities. This quarter, we just had really healthy growth, which ate into the amount that we could use for buybacks. Going forward, it'll depend on all of those factors. Where's the other use of capital? Jenny, I don't know if you want to add.

Yeah. The only thing, I think you touched on this, I think you asked the question of how programmatic. I think of it as pretty dynamic. It's going to depend on the factors Doug just mentioned. The first quarter is our seasonally lowest growth quarter, so I do think it gave us some opportunity there to do more purchases. I think we're going to make sure that we're using it as one lever as we look forward.

Yeah. Thank you for taking my question.

The next question comes from Richard Shane with JP Morgan. Please proceed. Hey, guys. Thanks for taking my questions this morning.

I'd just like to Morning, Rick.

Good morning. I'd like to look at the interplay between sort of where we are from a delinquency perspective, what that suggests for gross charge-offs, and tie that to Jenny's comments about the recoveries in the second half. If we look at the non-card portfolio, 90-day delinquencies basically flattish year-over-year. I recognize that there is a second derivative improvement, so that probably impacts fourth quarter. Presumably, that suggests that gross charge-offs in the third quarter will be roughly comparable to where they were year-over-year, and then there is about 40 basis points of improvement year-over-year in terms of recoveries. Is that the right place to sort of start building our third quarter net charge-off numbers? Is that the right framework?

I do think you're onto the right framework. I do think we're looking at how much we have in 90-plus, looking at those rolls to loss getting slightly better from this quarter. Looking at recoveries, which would be, I mentioned earlier, but closer to the average of the first half of the year, maybe something in that range as you look forward. I think you're onto the right path for how to look forward, and I think we do really like what we're seeing in the second half of the year, and I think it is very dependent on those rolls to loss.

Got it. Okay. That's helpful. Look, you've had some good questions about recoveries, and you've sort of described the different factors that have contributed to that better internal recoveries, and also attractive sales. Can you help us actually think about what that pie chart looks like? On the selling side, is the enhanced recovery because you were selling a greater percentage or because actually the bid for charged-off loans is a little bit higher?

I can give you some more info on the pie. Think of this as probably about 20% of our recoveries were from sales. I think it's a combination of the two reasons that you mentioned, where we found good economics, and we also had slightly larger inventory. That 20% might be a slightly higher portion of the pie than usual, but you're still seeing 80% of it is coming from internal recovery.

Last year, would it have been 20% as well? That's what we're trying to dimensionalize here, sort of how much has that moved?

I think it moves around a bit. Again, I think it has to do with both the inventory and how much you have to look at. It has to do with the economics and what you're seeing. We're always making sure that you get to a better outcome than if you held those charged-off assets on our own balance sheet and worked them out ourselves. It really varies and sort of depends on where the market is and sort of all the math around that trade.

Okay. Thank you. By the way, the guidance on the recoveries?

I think I just gave some guide on the recoveries for the second half a couple times.

The next question comes from David Scharf with JMP Securities. Please proceed. Hi. Good morning.

Thanks for taking my questions as well. Maybe one last on credit, a little more higher level. You had mentioned some other part of the call, the use of more bank data. I think it was around personal loan customization, personalization, so forth. I'm wondering, as a lot of us try to get our arms around the resiliency of the consumer in the face of a lot of these macro shocks, is there anything in bank data that informs you about how people are changing their purchasing decisions, what they're spending money on, how higher energy costs might be diverted from other types of purchases? Is there anything that the bank data is telling you about behavior?

We've got bank data on a set of our customers who share it with us. We're not a bank, you probably should hop on a call with one of the big banks who's going to be able to give you a lot more insight into spending patterns than us. I think our bank data gives us access to information which helps refine our models, which allows us to lend to more people. It gives us a real sense of some spending pattern, but also payroll, income levels, deposit levels that they keep, et cetera. If somebody overdraws all of those kinds of things is more what we're looking at. We do now have over 1 million people with credit cards.

We've said before we've seen a slight uptick, just over 1% uptick in use of our credit card for gas purchases as opposed to the other major purchases, which are things like groceries, retail, restaurants. We haven't seen anything significant in our book around energy prices. That's probably where we have the most specific data about spend.

Got it. No, very helpful. Thank you. Operator, we are up at the hour.

Want to thank everyone for joining us. As always, our team is here and fully available to answer any follow-up questions. Hope everybody has a great day.

Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time.