OneMain Holdings, Inc. Stock

All right. We'll get started. So I'm very pleased to have OneMain Holdings on stage with me. And we have Jenny Osterhout, the Chief Financial Officer. So welcome, Jenny.

Thank you. Thank you for having me.

So let's jump right into it. Maybe just beginning with consumer. There's been renewed concerns around household budgets just given higher gas prices and some signs of inflation pressure. How would you characterize the health of the nonprime consumer today?

It's interesting. You can read the papers, you can look at all the stats out there. But frankly, when we look at our customer base, it doesn't match up with what we're seeing. Let me just talk a little bit about who our customers are. So we don't use FICO to underwrite, but our average customer has about a 630 FICO, just to give you a sense. They have been at their jobs for -- about half of them have been at their jobs for over 5 years. Really, you're seeing 40% homeowners. So a really good -- we call them hard-working Americans, $80,000 a year in annual income. So sort of your average American. And when we look at payment behaviors, we're seeing really good payment behaviors where you can then look at sentiment and you can spend time in the branches and you can feel that folks are trying to make things work. But I think what you're seeing right now is that they're able to sort of move things around and make their family budgets work.

So at the end of the day, right now, we're still seeing everyone work through it. I would say the pieces we'll be watching are obviously the 2 things you watch. You watch for employment, which right now, we're seeing generally very good employment numbers. And then you also watch inflation. And there on inflation, fuel prices. We've seen very modest change on our card that we have. We now have some spend data. And so we're seeing a move that's pretty minor, 7.5% of our average spend was on gas, and that's moved to about 8% of average spend. So you're not seeing major shifts, but we'll watch gas prices. And we'll also watch for other pieces like electricity bills. I think place like insurance -- places where you can see major shifts very quickly are things that we would watch. But right now, really seeing good payment behavior.

Got it. That's helpful. Maybe we just jump right into credit performance. That's been the focus this year. Net charge-offs were 8.3% in the first half. That compares to your guide of 7.4% to 7.9%. What gives you confidence in achieving your guide? And what would bring you to the high or low end?

Right. So that guide of 7.4% to 7.9%, I think we're feeling very good about that guide. We saw really, really good year-on-year improvement. If I look at the second quarter -- first quarter, we were about 1 basis point year-over-year in our 30 to 89 delinquency improvement. And then if you look at that second quarter, we were 7 basis points in terms of that improvement. So we like that sort of that movement. And if we look at to be at the low end of our guide, we talked a little bit about roll rates, but we've seen a little bit higher roll rates. If those were to continue, you would see us at the high end of our guide. You'd have to see the economy stay rather like it has been. To be at the low end, you'd have to see improvements in those roll rates. We're really at that point of the year when that's going to be what affects our losses and maybe some improvement in the economy. But overall, I think we're feeling very good about the guide, very good about the long-term trajectory of losses.

Got it. And if I just take the midpoint of your guide, that implies net charge-offs are flat year-over-year. Just over the next few years, how confident are you in migrating back to your target 6% to 7% net charge-off range? And if we think about how card and auto kind of impact that, maybe just any color around that.

Yes. So if I look in 2019, we were a personal loans company. That's what we did. It was a different economy, but -- and we were in the 6% to 7% guide. And I think that relates to why you asked the question about the different products. If you look at us today, I would think you look at our consumer loan book, that's personal loans and auto, and I would compare that back to that 2019 number. And then we'll talk about cards in a minute, but cards obviously comes with a different loss rate. Last year, we saw this massive improvement. We went from 8.2% losses to 7.65% losses. We really -- it was outsized improvement. This year, you mentioned it's been rather flat. I think as we look forward, you're not always going to see an exactly linear path, but we feel pretty confident in that consumer loan loss level coming in below 7% over time. So I think you're going to see that get there.

And then cards, which is included in our overall C&I, so it's consumer loans plus cards, depending on the growth of cards and its percentage of the book, you're going to then see that impact our overall C&I loss number.

Got it. Okay. That's helpful. Maybe we'll just talk about the recovery side of the net charge-off equation a little bit. Recovery rates in the last 2 quarters have been materially better, up by about 30 basis points year-over-year on average. What's the driver of that? And can you touch upon the sustainability of that going forward?

I was saying this earlier today to someone, but recoveries are such a core piece of what we do regularly and just in the normal course of business. We, a little while back, invested more in our internal recovery capabilities. And to talk about what some of those things are, I mean, that can be looking at the tools that you use and the models that you use to determine who you're going to contact, how you're going to contact them? And let me -- just to give you some examples. I mean, it used to be you call the next person on your queue at the time that worked for you. Think about in today's day and age, you've got to think about, well, what -- how can we predict what's the best time to call a customer? How can we predict what's the best method to reach them? Should we call them? Should we chat with them? Should we text with them? Should we send them a notification in the app? Should we e-mail them so they can see it later.

So you have so many more channels to determine what's the best way to reach them. And then you can also determine who on your -- what's the right? Should we put this in the -- where -- who should contact them? So I think there's so much that we did around investing in those analytics, and it also comes with making sure you have the right data sources to figure out some of those pieces. And I think that's an ongoing effort. I mean the world is changing. We're moving into folks who are much more digitally native. So that's going to change the way that you're doing recoveries.

And we also have had since the sort of '21, '22 inflation, if you want to call this an inflation cycle, more inventory. And so as we've looked, you have more opportunity to go and look at externally what you -- the value of that inventory and what somebody else can do with it. So I think it's just given us a little boost there as well in terms of recoveries. But if I look at the second half of the year, I think you'll see an average of what we've seen over the past few quarters. And it's obviously been great to see the improvements that we've seen there.

Got it. That's helpful. Maybe just a follow-up on the inventory piece, any sense on when that excess inventory normalizes?

I think you've seen some others talk about it, too. I think it's sort of a phenomenon that's not just a OneMain phenomenon. I think over time, if you see the trajectory of losses improve, you're going to start to see less inventory. But I think through the end of the year, you still have a little bit more inventory, and then we'll look at it again next year.

Okay. Got it. That's helpful. Maybe just to switch gears a little bit. So OneMain has one of the largest branch networks in the nation. Can you just talk about how that fits with OneMain's strategy? And are the branches primarily customer acquisition advantage, the servicing advantage or something else?

Capital A advantage. I really -- I love talking about our branches. I think they're -- I just talked about changing customer behaviors and how folks' behaviors are changing, but I also still think there's so much value in talking to a person face-to-face. We have 1,300 branches across 44 states. We have the seventh -- if we were a bank, we have the seventh largest branch network in the United States. It's core to our model, and I think it will be core to our model for a long time. And let me explain why. I mean, it builds trust. I think when you know that there is a OneMain branch, you've seen it on your way to work or you've seen it to drop off your kid at soccer, it gives you this sense of comfort and trust. I think trust is so important in the industry.

You also have this -- in this moment, and I would just say we always talk about this, but it's a pretty stressful moment. I mean if you live in Texas and your HVAC goes out and you need a new air conditioning system and you don't know where you're going to get $10,000. When you go in, you are stressed when you have that conversation. It is helpful to have somebody who has seen many of these conversations sit and have -- and talk to you about your options. So it's a consultative process where we also guide you. And our branch managers, on average, have over 14 years of experience. So they've sat with many customers who have been in a position just like you. And I really think there's so much value in that.

And you're also, at the same time, always looking to help put the customer into a loan that you think they're going to be able to pay back. And remember, you have this dual model where you're both at the upfront in the initial acquisition process, but you also have your branch team members there if -- for the minority of our customers who do need help in figuring out how to make a payment, just having had that conversation at the beginning, you may not even be talking to the exact same person, but to know that they know Sally or that they sit in a branch with Sally, and it's the same person that you talk to. It really builds trust, and we think it drives better outcomes.

I have to say that a lot of what we're doing and investing in, in terms of the digital capabilities that we have are also to help make those team members more productive. How can I take the branch manager and make it so that we really have the -- make the most value out of their time, out of their workday. And so this isn't just about, okay, you've got this branch network and you're doing -- we're doing things the way we've always done them. I'd say this is really about how can you look and make sure you're making the most of the human connection, making the most of the experience that, that person has while simultaneously leveraging your central sites, so where you have your central sites and capabilities and self-service. Maybe for certain activities, we'd rather just allow the customer to do it themselves.

So it's really figuring all of this out is a major effort of what we're doing at the company, and it's exciting. I mean it's really exciting. You can sort of feel that it's pretty powerful.

Got it. And OneMain applied for a bank charter last year. Any updates that you can share on the status of the application? And then maybe also just to take a step back, just remind us why OneMain applied for a bank charter.

Great. I wish I had more of an update. I don't. Obviously, we think it's a really strong application. We think we've been doing this for over 100 years, and we're a great -- we would be a great applicant for an FDIC charter.

Just as a reminder of why we did this because I do think it is helpful for our strategy. I would say, if we don't get it, we have a great strategy and we would be fine. I think of it as the word we've been using is an amplifier. It allows us to reach more customers in more states. I think that's the first and foremost piece of this. It also reduces some of the complexity. Just to give you an example, in North Carolina, if you lend to a customer, if you lend them $4,000, you have a certain rate. If you lend them $4,000 to $8,000, you have a different rate. If you lend them $8,000 to $12,000, you have a different rate. So all of that drives complexity and then you compare that in each state, you have different complexity. It could be complexity on the collection side, it can be complexity on the underwriting side.

So all of that -- there's a simplification of what's happening in the back and sort of the bowels of OneMain. We also today use a credit card bank for our credit card. We would be able to do that ourselves. And then there is some funding flexibility that it would allow us over time, and I think that could be a long-term benefit for us. So it's exciting if it happens, but we'll see.

Okay. It sounds like you guys have a pretty strong case to get approved for one. But maybe just switching gears again. You've indicated your reserve ratio should trend higher over time as credit card becomes a larger portion of the portfolio. How should investors think about the reserve ratio as the mix evolves? And what could the reserve ratio look like in a more normalized credit environment?

CECL is my favorite topic. So I think you've seen 11.6% was our reserve rate this past quarter. That was sort of a modest increase this past quarter, that really was from the growth in our card book. And cards has a higher loss rate. So we've stated our long-term loss rate in cards is 15% to 17%. It also comes with a great revenue yield. We've got over 33% revenue yield. So overall, it's a great product. We're happy to put it on our books. The goal here is to put profitable book -- profitable growth on our books. And it's still such a small portion of our overall, about $1 billion on our $27 billion portfolio. But even minor increments in the percentage of -- or the portion of cards receivables on our book are going to make changes to CECL, and that's because our CECL reserve for cards is about 2x that of our reserve for consumer loans. And so while it's really good and profitable growth, it's going to inch us up. I'd say 11.7% or 11.8% are visible in the near term. I think towards the end of the year, we could trend in that direction as you see some of that growth in cards.

Got it. Just shifting to loan growth. OneMain has continued to maintain a conservative underwriting box. Most of your current originations today are from your higher credit tiers. What returns are you currently underwriting to today? And what would you need to see before reopening the credit box?

So we underwrite to a 20% minimum ROE hurdle. It's actually -- it's pretty simple. So I start with just if you think about our -- you take your APR and your fees and you take your cost, so your funding costs and then you take your operating costs and then you take your losses. And on the losses, we've had this 30% overlay. So that means if we thought you're a 6% loss rate, you're actually going to be a 7.8% loss rate, really simple, 1.3. You multiply that by 1.3. And then you get to your 20% return hurdle. You've got a hurdle over that for us to underwrite. I'd really say, for us, we're pretty conservative in how we -- like we really think about this as a focus on returns. So we're focused on long-term capital generation. To loosen that, you'd need to see on-us outperformance, I'd say, over time in terms of pockets where you'd see that ROE hurdle perform better than you'd expect.

And then we also run something called a weather vane test. And that's basically you take a small slice of customers who are going to perform below your 20% ROE hurdle, and we put just enough on that would allow us to read that group. And if you start to see that population moving upwards and performing above that 20% ROE hurdle, that's when you start to look at, is it time for us to make moves. But unfortunately, it's not going to be something that you see externally in the environment where you're going to say, okay, we now think the future is going to be better. It's going to be something that we're likely to see on-us.

But overall, we've seen pretty good growth. So I would also say I don't think there is the need or the pressure to think about credit right now because I think we found so many other ways for us to think about growth.

Got it. Where do you see the greatest opportunities to accelerate growth without taking any incremental risk?

So we have that 6% to 9% managed receivables guide. I think we feel pretty good about that growth. Again, for us, growth is an outcome. Our consumer loan originations this past quarter was at 10% year-over-year. So I think quite good. Accounts was 44%. So really, you're seeing that impact from the credit card from a smaller line having more accounts. And you're also seeing the acceleration of those newer products. In auto, you're seeing just -- we can get very good growth with just new geographies, new dealers, new partnerships. It's very much a -- for those of you who follow other auto, it's very much a grind-it-out business. You're looking -- but there's so much opportunity. I think we're coming off of a smaller base.

In cards, it's really about the product mix that you're changing, some of what we're doing in terms of growing with our best customers. It's how we attract and find new customers. I think, again, we're growing off of such a small base that there's just so much more that we have in the pipeline to do to grow. And then in loans, I really think what you're seeing now are the fruits of our labor that we put in back a year ago or 1.5 years ago to do tests. And the 3 things I'd call out are we have this new home fixture-secured product that we're still rolling out. That allows folks who have a home to get the advantage of a secured product. Then you have debt consolidation, which is a product we've had for a long time, but we've really reenvisioned how we market it and how we connect it and how we interact with the folks that we're paying off. So that's become much more digital, and we've seen a lot of success there.

And then we're also seeing bank data, which I think folks have been talking about for many years, but we're really seeing it and it allows you to think about the offer that you're making to your customers and to really look at them in a different way. So I think we're feeling very, very good about growth. And it's a good reminder that you always have to invest and I think of it almost like an R&D arm of what we have in the background to make sure that we feel good about the future.

Got it. That's helpful. So with your portfolio, cards have grown meaningfully, and they've become -- that segment has become profitable this year. Auto continues to grow as well. How have these product lines developed compared to your initial expectations, particularly around credit and also return profiles? And then longer term, what are your expectations for each of those?

Let me start with card. In card, we started in -- it was August 2021, and we did this initial test, and we said, "Oh, we want to be very mindful that we get a good read on the customer." And I think we're very, very glad that we did. And we're very glad we did it in that moment in time because I think it was actually quite lucky because we were able to see that there was something happening in the card market, and we were able to adjust before we really opened up and put a lot of these accounts on our books. So I think that was both deliberate and a little bit of luck.

But obviously, if you look at what's happened, we were able to set up this card in a moment when the economy has been okay. I would not say it's been great, great. And so now we're finally at this place where I think we're feeling very good about our card product. You've got 17.7% losses in the second quarter. You've got line of sight to getting within your 15% to 17% range. I talked about our 33% revenue yield. As you scale a card, you start to get cost improvements, really feeling quite good about that team, 1.4 million customers on a $1 billion portfolio. So it's really all coming in line. We sometimes call it a teenager. I think we may be moving into our early 20s here. It just feels like it's all coming together, and I think we're feeling very good about the card. It may have been taken a little bit more of a moment to get there, but I'm sure happy we stuck with it to get through that.

Auto, we started in 2020. We started auto on-us with independent dealers. So think of when you look at a dealership and you see multiple types of cars on their lot, we are going into those dealers into those independent dealers and doing direct lending with them. We started there. And then in April of 2024, we bought an auto company called Foursight based out of Utah. Today, we've got this $3 billion portfolio. It's performing very well. It's performing better than the industry. I think we're feeling very good about it. Now it's really focused on what I talked about before, which is geographic expansion, new dealers, making sure you're really looking at how your sales team is performing, looking at our analytics, how can we improve based on what we already know about this customer set.

So auto is a really interesting business. It's a little less volatile. It also comes with slightly lower returns. I think we like the balance that these 2 new products give us and for the long term and really think it just opens a whole new world. I think before OneMain had about a $1.3 billion total addressable market. And now we are looking at an over $1 trillion total addressable market. So it sort of changed the whole game in terms of where we're playing.

Got it. And maybe just stepping back, are you seeing any evidence that card and auto are just becoming more valuable to the franchise either through higher retention, lower acquisition costs or even greater product cross-sell?

Having 4 million customers across all 3 businesses, there was a while there, we were sort of at a steady state of about 2.5 million customers. So it does start to feel like you have this new opportunity. We really do run each of these products individually to make sure they are individually profitable, and then over time, explore the value of the customer base across products. I think the most valuable cross-buy opportunity for us will be having a customer start with a transactional card product, getting to know them. Usually, you start with a lower FICO, smaller line, you get to know them. Then when they have the sort of -- a loan product is much more episodic. When they have that need, then you can find them in the app because they're going into the app regularly. And that allows you to basically acquire a personal loan customer at about 1/4 of the cost of what it would take to acquire them on the open market.

So there's real value in that. I think it's something that we're exploring over time. But again, each of these -- you got to grow the card business first before you can work on the cross-buy. So I think it's really this something that we focus on a lot, which is how do you drive value in the near term while also thinking about the long term, and it's something we'll be focused on.

Got it. And I guess, like speaking of long term, do you have a target product mix over time? And also any new products that you may be interested in launching?

Target product mix. Really, I'd say we focus on returns and the product mix comes after, similar to how we've talked about growth. That said, I can tell you, today, we're about 85% in terms of personal loans as a percentage of the portfolio. If I look forward in the medium term, let's say, 3 to 5 years, maybe that 85% becomes 75%, but this company is still going to be driven by personal loans. I think cards and auto will become a greater piece of the pie, but I still think personal loans will be pretty dominant.

Never say never. I think we'll always look at products, and we're always thinking about our customers and looking at what they're doing and what their needs are. But at its core, OneMain is a pretty focused company. We really try to make decisions very quickly and really prioritize where we're going to put our effort, our time and our energy. And so I would say, never say never, we'll look at potential other products. But for now, I think you guys have a pretty good sense of our strategy.

Okay. That makes sense. So I want to touch on competition today. How would you characterize the competitive environment? Are competitors behaving rationally from a pricing and underwriting perspective? And how has demand for credit evolved relative to, let's say, 6 months ago?

Yes, it's an interesting one because I think we've seen demand for nonprime has been pretty steady. There was a period in 2021, 2022 when you started to see folks really give outsized offers, really reach for customers and you saw some irrational behavior. We are not seeing that right now. From what we're seeing, and it's something we monitor very closely, we're seeing pretty rational behavior. We're seeing no sense of major, major competition. Again, I think we've been putting so much effort into how can we attract customers in new and different ways. That's really been what's driving our growth. We're quite happy with where growth is, but I don't think we see any sort of irrational competition right now.

Got it. And maybe just double-clicking a little bit, like how are the fintechs behaving versus the traditional balance sheet lenders? Any differences in competitive intensity?

It's always good to be mindful that you're on the same playing board, but you're playing different games, right? And I'd say what we've learned is we really focus on returns, and we really stick to our knitting. And other folks may be focused on growth because that's what they're valued on or focused on building a long-term cross-buy opportunity. I think you've got to remember they can play their game, you got to play yours. But I haven't seen any major shifts in either of these 2 bases right now in what we're seeing.

Okay. That's helpful. Just to switch gears, do you have any updates that you can share on the state AG lawsuit? And then anything else related to regulation you're paying attention to?

I'm always paying attention to regulation. I don't have an update on the state AG lawsuit. There is a statement posted on our website. We obviously think that the claims are without merit, and we think it is -- there are issues that they're looking at that were already reviewed by the CFPB when they came in, in 2023. So really nothing to comment on there. But always really mindful of state and local regulation and watching what's happening, but nothing of note.

Got it. Okay. So maybe just touching on capital returns. They remain -- it's remained pretty strong with $137 million of repurchases and over $200 million of dividends year-to-date. Looking ahead, how should investors think about balancing loan growth, dividends, share repurchases and any future investment strategic initiatives?

We've talked a lot about profitable growth. I think for us, you're going to focus, first and foremost, on when you see opportunities to grow, you're going to put that back into the business. So that's where you'll start. And then there's also investments that we're making for the future. So that can be investments in our technology and analytics, in our new products, so in cards or in auto. So we'll also look at those where we think we need to make investments.

Then our dividend coverage, it's around 7% right now. It's pretty healthy. We'll look at inorganic opportunities. That's always an option for us. But I would say in the absence of what's left over, you should expect would largely go to share repurchase. I think you've started to see a little bit of a shift there. We think it's really attractive right now. So I think that it's pretty much par for the course. You'll continue to see that as we look forward.

Okay. Got it. I want to talk about rate hikes/cuts real quick. I think coming into this year, we were expecting 3 cuts. Now we're potentially expecting 3 hikes. How is the balance sheet positioned? And what's the kind of impact from the new kind of forward curve?

I think we've -- if there's something to be proud of at OneMain, to lend money, we need to borrow money. And I think we do that quite well. We've got these staggered maturities. We really had a long-term staggered maturity strategy where we have both ABS and high yield. And so I think that strategy will really pay off. We've been through a rate hike type environment, where I think we've seen some of that preparation really pay off and insulate us from some of the immediate hikes. I think for us, that's something we'll be mindful of, but we build these relationships for the long term. And we think we've got really good ability to access capital. We have really good access to the capital markets, a great team. And so I think as we look ahead, we're obviously watching this piece, but I think we're sitting in a pretty good spot.

Okay. We have about 5, 6 minutes left. I'll open it up to any questions from the audience. Okay. No questions. So I'll keep going.

Okay.

So you've previously talked about investments in AI and technology and we've already seen some benefits like higher recoveries. So looking ahead, where do you see the biggest opportunities for technology to create value, whether it's through credit outcomes, operating efficiency, growth or customer experience?

I think here, this is one where we're both excited about these opportunities, but we're also mindful of this is an area where you want to drive and lead, but you also want to be very protective of your data and make sure you have very, very good governance. If I look at some of the places where we'll focus, tech and development, it's such an obvious area to focus on, but it's really one where we're embedding AI into our development, looking for improvements in efficiency and also, frankly, effectiveness. How can we be better at what we do? How can we be faster in what we do?

Then we're also looking at team member productivity. I think we've mentioned this before, but one example of what we have is something called One Advisor. It basically allows our team members access to information where they can find what they need at their fingertips more easily. It used to be you had to go into, whether if it was online, it wasn't a specific folder, you'd have to go ask somebody which folder it was in to find it. And now you can just -- you get this very easy to find pieces of information. We're finding our team members, about half of them are using it regularly, and you're seeing a large number of pings on One Advisor every day.

We're also looking across the company. I mean, you can take finance as an example. We're looking at opportunities where can we leverage AI to help us do work, whether it's faster or better. And I think I'm most excited about the better, how can we make our modeling even better. But we're looking across all our functions and how we can do that. But I'm very mindful. I also want to make sure I get a return for that investment. So there's a lot of ideas out there. You have to make sure that those ideas are really backed by a return and where you think you're going to be able to get that back. And so very mindful of that.

And then the last -- I mean, the investment that you also have to make in making sure that all of this is happening in an environment that's well governed and you feel very comfortable about is really, really important. And so that's another piece that we're quite focused on. But it's pretty exciting. I know everybody is excited about AI. I think we are, too, but I think we're also quite mindful with how we're putting it in place.

Got it. Just about 2 or 3 minutes left. Maybe just in closing, what's the key message that investors should be taking away from this presentation? What do you think the market may be underappreciating about the OneMain story? And what gets you most excited about the story going forward?

I mean I think we've been around for our customers for a very long time. We're very focused on serving this customer base. And I think there's -- I expect for there to be a lot of demand for credit in any macro environment going forward. And I think we're really well positioned. I talked about the branch plus digital plus central for the go forward. I think there's just so much opportunity there, plus we've got these newer products. So I think there's some exciting new pieces. And I also just think we're hyper-focused in terms of how we're doing this. So I think it's a pretty exciting time to be at OneMain or to invest in OneMain. I think we've got a pretty bright future. And so I think we're all just very excited to move forward in any environment.

Okay. Great. I think with that, we'll end it on a positive note. It's been great. Thank you.

Great. Thank you so much, Terry.

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.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 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, and 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 29, 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 7 basis points year-over-year, accelerating the year-over-year improvement from last quarter's 1 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, and we continue to have strong recoveries in the quarter. We reached a significant milestone this quarter, surpassing 4 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. And 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 enhanced 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 $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 and 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. While we are mindful that geopolitical tensions and fluctuations in energy prices create some risk, we have not seen it show up in our data. And unemployment remains low, providing ongoing support for credit performance.

As always, we are closely monitoring trends across the consumer and our portfolio. But credit is performing well, showing that our customer has been able to make it work. And 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 nonprime 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 investment 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 3x 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 remain 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 continue 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 credit, starting on Slide 8. 30 to 89 delinquency on June 30, excluding Foursight, was 2.82%, down 7 basis points compared to a year ago, improving on the trend we saw last quarter. On Slide 9, 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 and 24 basis point improvement in the pre-pandemic period. 90-plus delinquency ex Foursight was 3 basis points above last year, a solid improvement over the 14 basis point year-on-year increase we saw last quarter.

And 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 Foursight was 5.03% down 4 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 9.

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 card 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 delinquency 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 2x 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.

Now let's turn to expenses on Slide 11. Operating expenses were $439 million, up 6% compared to a year ago, driven by continued investments 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.

Now 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 3-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 5.5x, flat to a year ago and within our target range of 4 to 6x. 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, support 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% to 9%, supported by momentum across all 3 of our products, personal loans, auto finance and credit cards. We expect C&I net charge-offs to come in between 7.4% and 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. And 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. So 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 hard-working 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. And 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 2 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.

The first question comes from Moshe Orenbuch with TD Cowen.

Great. And 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% to 7.9% range is fairly wide. And as expected, you kind of were slightly in the range at 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.

Sure. I think, as I said, we maintained our guidance in that range of 7.4% to 7.9%. And 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 to 89 delinquency, excluding Foursight, which was down 7 basis points year-on-year, which is a further decline from the 1 basis point decline that we had in the first quarter and the 30-plus delinquency, excluding Foursight, which was down 4 basis points and better than the 14 basis point increase we had last quarter and the 90-plus delinquency, which was 3 basis points up year-on-year, but actually much better than last quarter's 14 basis point increase.

So all of those delinquency metrics are moving us in the right direction, and they are where we -- we're seeing us land where we expected based on the fourth quarter of last year and last quarter's 90-plus. And so then 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. But 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 kind of to follow up and in a similar vein, the -- 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 kind of 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 growth rate -- the relative growth rate of credit card loans is probably highest in Q2. So I guess I would hope that it would have, particularly given what you had mentioned about improving kind of credit card credit quality that would have potentially less of an impact going forward, but kind of wanted to get your views on how to think about that reserve rate going forward.

Yes. Happy to talk about that. So -- we did talk about that change in reserves, which is really that portfolio mix impact. And that is coming from cards, which, as you mentioned, is performing quite well, and we do like the performance of credit. That card reserve rate is about 2x our consumer loan portfolio reserve rate. So even as it improves -- as the loss performance improves, I think it takes sort of time for it to come into your reserve rate. So -- but as we see -- we did see really strong growth in the second quarter. I do think we expect to continue to see really strong growth. So even though it's only 4% of the portfolio, 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. So I don't think it's a major shift, but I do think it is going to put some pressure on that reserve rate.

The next question comes from Terry Ma with Barclays.

Just wanted to follow up. Can you maybe just talk about the recovery benefit you saw this quarter? It was quite elevated. And 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? And maybe just some color on kind of what's driving that, whether it's just selling more inventory or some improvements in your recovery process?

Yes. So 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.

So internal changes would be things like how we get in touch with customers, how we staff, how we manage our teams. But we are also looking at charged-off sales with our long-standing partners and make those sales when we see attractive economics. We have had more inventory of charged-off loans from the past 2 years. So we do have more assets to potentially sell. And it's -- so 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. But I think we're pretty confident that we like what we're seeing, and it's -- we're going to continue to see good recoveries going forward.

Got it. That's helpful. And then 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. But last quarter, you guys mentioned kind of roll rates worsening in the 90-day bucket. Can you talk about that, whether or not that's kind of normalized a little? And then like 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 kind of worsened over the last 3 to 4 quarters.

Yes. So 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. But 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.

And I do think that's what you're seeing when you look -- you mentioned GCO. And I think when you're seeing that, you're 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. So 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.

The next question comes from Mark DeVries with Deutsche Bank.

Mark, we cannot hear you.

Can you hear me?

We can hear you now.

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

The next question comes from Don Fandetti with Wells Fargo.

Can you talk a little bit about the bank ILC process, where you are and kind of how you're thinking about timing? And then on receivables growth, just given where you're tracking and the new product has been pretty well received. Are you sort of 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, but 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. And so 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 our a conservative credit box. And the way we manage that is we still have really since 2022, had a 30% stress overlay. So we've put assumed more stress in the portfolio than has actually showed up just to be conservative in our underwriting models. And we're seeing really nice growth across all of our business lines, and 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.

The -- 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 very -- we're able now to target and bring on customers that are lower risk, but also more likely to use their full line. So it's just a lot of things. We're not changing our guidance at all, but it's what we're seeing, we're really happy with.

The next question comes from Arren Cyganovich with Truist Securities.

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?

Yes. I mean, look, the first change is in the past, we've always had loan consolidation as part of what we -- it's always been an offering, but it's more been an intake offering. So 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've been -- we developed now an outgoing proposition, which is consolidate your loans with us, bring down your monthly payment, those kinds of things. So 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. And then once it comes in, we now have tools that can quickly -- 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.

And then we've really refined the direct payoff. And so we've kind of 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. So 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. And Jenny, just quickly on the loan yield comments in 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?

Yes. Loan yield has some of our later stage, you get the 90-plus coming through in your loan yield. So you have both your revenue line, and you also have some of the impact from auto coming through. And so usually, we typically see loan yields moderate a little bit in the second half of the year. And so I'd 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 '22. Even while we're growing the auto book, so I do expect -- as we look ahead, that should shift down slightly. We're talking more like the first half in total. So I think you can -- the first half in total was about 22.6%. So I think that's what you can expect going forward.

The next question comes from Mihir Bhatia with Bank of America.

I wanted to follow up on the -- Don's question about just growth and stronger -- potentially stronger growth from here. And maybe one way of thinking about it is you obviously had this overlay, as you mentioned, since 2022. But 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.

Yes. No, I'm happy to talk about it. I mean, 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. And we see growth as an 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 our -- 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.

And so 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've constructed a book that has credit moving in the right directions and has really healthy origination growth. But we're not at the point where we plan to open the box, and we just need to see both weather vane and current book doing better than expected.

Got it. 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?

Yes. Let me start and then maybe Jenny wants to add something. Look, our buyback framework is 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. And going forward, it will depend on all of those factors, where is the other use of capital. But Jenny, I don't know if you want to add.

Yes. The only thing -- I think you touched on this, but 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. And the first quarter is our seasonally lowest growth quarter. So I do think it gave us some opportunity there to do more purchases. But I think we're going to make sure that we're using it as one lever as we look forward.

The next question comes from Rick Shane with JPMorgan.

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 is basically flattish year-over-year. And I recognize that there is a second derivative improvement. So that probably impacts fourth quarter. But 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 on to the right framework. So I do think we're looking at how much we have in 90-plus, looking at those roles 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. So I think you're on to 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. And look, you've had some good questions about recoveries and you've sort of described the different factors that had contributed to that better internal policy or internal recoveries and also attractive sales. Can you help us actually think about what that pie chart looks like? And 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. I do think of this as probably about 20% of our recoveries were from sales. And I think it's a combination of the 2 reasons that you mentioned, where we found good economics, and we also had slightly larger inventory. So that 20% might be a slightly higher portion of the pie than usual, but you're still seeing, I mean, 80% of this is coming from internal recovery.

And 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 this really -- 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 it's you get to a better outcome than if you held those charged-off assets on our own balance sheet and work them out ourselves. So it really varies and sort of depends on where the market is and sort of all the math around that trade.

And by the way, the guidance on the recoveries...

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

The next question comes from David Scharf with JMP Securities.

Maybe one last on credit, but 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 kind of personal loan customization, personalization and so forth. But 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. And so 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 and 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, there's 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 like 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. And so we haven't seen anything significant in our book around energy prices. And that's probably where we have the most specific data about spend. Operator, we are up at the hour, and I want to thank everyone for joining us. As always, our team is here and fully available to answer any follow-up questions, and 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, and have a wonderful day.

Good morning, everyone. Welcome to the OneMain Financial First 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. [Operator Instructions]

It is now my pleasure to turn the floor over to Mr. Peter Poillon. Please go ahead, sir.

Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the first 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, and 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 or as of today, May 1 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, and good morning, everyone. Thank you for joining us today. Let me begin by saying we are quite pleased with the financial results of the quarter, which continued the momentum we built over the last couple of years. Our customers remain resilient, and we are confident in our ability to execute our 2026 financial objectives as we operate from a position of strength.

Let me briefly walk you through a few of the highlights for the quarter, and then I'll discuss progress on some of our important strategic initiatives. Capital generation was $194 million in the quarter. C&I adjusted earnings were $1.95 per share, up 13% year-over-year. Total revenue and receivables each grew 6% year-over-year. We achieved this growth while still maintaining a conservative underwriting posture. Receivables growth was supported by focused initiatives to drive high-quality personal loan originations and important contributions from our newer businesses, auto finance and credit card.

Credit performance was very good and continues to track well against our expectations, both for delinquencies and losses. Our 30 to 89 delinquency declined year-over-year improving on last quarter's slight increase. Quarter-over-quarter improvement in 30 to 89 delinquency was better than last year and better than the pre-pandemic average. C&I net charge-offs were 8.4%, in line with expectations as first quarter losses are seasonally the highest of the year, and we feel good about our full year credit outlook. Consumer loan net charge-offs were 8%, also in line with expectations, and we continue to see strong recoveries across the business.

During the quarter, we continued to make progress on key strategic initiatives, positioning the company well for continued earnings growth in 2026 and beyond. In our personal loans business, we are always enhancing our product offerings to better serve customers and drive profitable growth while maintaining our disciplined underwriting practices. We continue to refine how we deliver debt consolidation loans, making the experience more seamless. This product provides real value to our customers as they consolidate other debt onto a loan with a single monthly payment that amortizes down over time. In the majority of the cases, our customers' credit scores improved and OneMain also benefits from better credit performance.

We've also seen an uptick in the number of customers who choose to share bank data with us. By accessing this more granular data, we can offer better loan terms, improve credit outcomes and continue to enhance our credit models over time. We're also encouraged by the early performance of our new home fixture secured loan product, which provides OneMain homeowners with a differentiated way of accessing credit. We continue to pilot this offering, and it's performing very well, attracting high-quality customers and delivering strong results. These types of innovations are positioning our personal loan business for continued growth. As always, we move quickly but with discipline, testing rigorously, scaling what works and building a pipeline of initiatives that we expect to drive value over time.

Turning to auto finance. Receivables grew 14% year-over-year to $2.8 billion. Credit performance was in line with expectations and continues to outperform the broader industry. During the quarter, we continued to grow our dealer network across the country, including through our partnership with Ally.

We are also innovating across our auto finance business. Earlier this year, we began piloting an agentic AI tool that improves insurance recovery outcomes on damaged customer vehicles by automating negotiations with insurers. Initial results have exceeded expectations with improved outcomes for us and our customers. We've also deployed AI more broadly across the company, where we see clear near-term benefits. This includes using AI across the product development life cycle, leading to faster deployment of technology at a potentially lower cost. We've also developed an AI tool, which gives our team members easy access to a broad array of internal information, increasing their effectiveness, saving them time and speeding up customer service. And we are launching pilots in key customer service areas where the risk is low and the learning potential is high. We are taking a focused strategic approach to AI by implementing where we have high conviction and piloting in other areas to build capability and scale over time.

Turning to our credit card business. We delivered strong results for the quarter, with receivables increasing 45% year-over-year to just under $1 billion, and customer accounts are up 40% year-over-year to nearly 1.2 million. All of the key metrics in the credit card business were very strong as we saw increased yields improvement in loss trends and decreased unit costs. We're driving profitable growth in the card business by combining product innovation with deeper customer engagement. As the business has matured, we've enhanced line management processes for our best customers. We are developing differentiated offerings across rewards and pricing to increase our share of wallet with lower-risk customers. And our data science team has refined marketing and credit models to make better offers to customers more likely to use the card thereby creating more value for the customer and for OneMain. All of this shifts our portfolio mix to our best customers and supports profitable long-term growth.

We're also implementing initiatives to improve delinquency and collections performance while driving cost efficiencies as we scale. Taken together, we expect these efforts to position the business for profitable growth this year and beyond.

We've also seen a steady rise in customer adoption of our financial wellness offering, which has recently been enhanced and rebranded, OneMain MyMoney. Our customers use OneMain MyMoney to monitor credit scores, manage budgets, track expenses and negotiate bills to save money. It's another way we build deep, long-lasting relationship with our customers and help them make progress towards a better financial future. These are just a few examples of strategic business initiatives across our company that are driving both short- and long-term value.

Let me briefly touch on the consumer. While the current economic environment continues to have some uncertainty, our customers remain resilient. A year ago, tariffs were top of mind. Today, geopolitical tensions and their impact on energy prices are the broader risk. However, unemployment remains low, providing ongoing support for credit performance. As always, we are closely monitoring trends across the consumer and our portfolio, and we are maintaining our cautious underwriting posture, but credit is performing well as the actions we have taken over the past several years put us in a strong position.

Turning to capital allocation. Our first priority for capital remains extending credit that meets our risk-adjusted returns while also investing in the business to meet customer needs, drive efficiency and build an enduring franchise. Our regular dividend, which is currently $4.20 per share on an annual basis, represents a 7% yield at today's share price. As I discussed last quarter, all things being equal, we expect incremental capital returns to be weighted more towards share repurchases going forward. In the first quarter, we repurchased 1.9 million shares for $105 million. Over the last two quarters, we've repurchased 3.1 million shares for $176 million. As we look ahead, we will continue to pace share repurchases based on several factors, including the capital needs of our business, market dynamics and economic conditions. I'm feeling very good about our business as we are operating from a position of strength with disciplined underwriting, a proven team that is experienced in serving the non-prime consumer and a resilient diversified balance sheet. We remain confident in our competitive positioning and like the trajectory of our credit performance and we anticipate continued capital generation growth this year and beyond as we execute on our strategic priorities.

With that, let me turn the call over to Jenny.

Thanks, Doug, and good morning, everyone. Let me begin by summarizing our solid first quarter performance, which supports our continued confidence in the trajectory of the business. We delivered revenue growth, credit performance and capital generation in the quarter that was right in line with our expectations. We saw good performance in our personal loan business, coupled with growth in auto and outsized improvement across key financial metrics in the credit card business. Additionally, we executed across all our businesses on several strategic initiatives that we expect to deliver significant value in the quarters ahead. Funding was once again a highlight as we further strengthened our balance sheet and access markets favorably even in a challenging environment, demonstrating the strength of our programs and our access to capital.

We increased our share repurchases in the first quarter to $105 million. While we remain committed to our dividend as the primary means to return capital to our shareholders, we continue to expect to use share repurchases as a means to bolster capital returns in the future. In the first quarter, we generated higher excess capital due to our seasonally lower growth needs and returned that excess capital through our share repurchase program. Looking ahead for the year, we expect to continue generating excess capital though at more moderate levels as we deploy additional capital to support higher seasonal growth in the business. As a result, we expect share repurchase activity to adjust accordingly.

First quarter GAAP net income per diluted share of $1.93 was up 8% from $1.78 in the first quarter of 2025. The C&I adjusted net income per diluted share of $1.95 was up 13% from $1.72 in the first quarter of 2025. Capital generation totaled $194 million comparable to the first quarter of 2025. Managed receivables ended the quarter at $26.1 billion, up $1.5 billion or 6% from a year ago. First quarter originations of $3.1 billion increased 3% compared to the first quarter of last year, and we see opportunities to continue our growth across our products. In our personal loan business, we saw good performance as the initiatives we've discussed continue to gain traction.

Moving to our newer businesses. Auto originations this quarter benefited from the expansion of our dealer network and new partnership activity, which has helped support scale and momentum across our auto business. We like the pace and performance of our auto business and expect it to continue to grow and contribute to our future capital generation. In our card business, we saw growth in both account openings and receivables as our increased customer engagement continues to support the enhanced value proposition of the BrightWay card product. Notably, in April, we crossed $1 billion in card receivables, marking another important milestone in scaling the card business. As we look forward, we expect both of our newer products and personal loan innovation initiatives to help drive receivables growth throughout the year.

Turning to yield. Our first quarter consumer loan yield was 22.5%, up 13 basis points year-over-year. Consumer loan yields are up over 60 basis points since second quarter 2024, resulting from the proactive steps we took to optimize pricing in certain customer segments since the middle of 2023 despite the mix shift headwinds from the growth of our lower loss, lower yielding auto business. We expect consumer loan yields to remain around current levels throughout the rest of the year assuming a steady product mix and competitive environment. While the credit card portfolio remains a relatively small portion of our overall portfolio, we continue to see strong yield momentum with total revenue yield of 33.9%, increasing roughly 300 basis points since last year, supporting our overall revenue growth as the card portfolio scales.

Total revenue was $1.6 billion, up 6% compared to the first quarter of 2025. Interest income of $1.4 billion grew 6% and from the first quarter of last year, driven by receivables growth and yield improvements. Other revenue of $198 million was up 4% from last year, primarily due to higher servicing fees on our growing portfolio of loans serviced for third parties and higher credit card revenue as we grow the card business. Interest expense for the quarter was $322 million, up 4% compared to the first quarter of 2025, driven by an increase in 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 first quarter of 2025 helping our profitability as we grow the book. Going forward, we expect our funding costs to remain at approximately this level throughout 2026. First quarter provision expense was $465 million, comprising net charge-offs of $512 million and a $47 million decrease in our reserves driven by the seasonal sequential decline in receivables during the first quarter. Our loan loss reserve ratio of 11.5% remained flat to prior year and last quarter. Policyholder benefits and claims expense for the quarter was $52 million, up from $49 million in the first quarter last year. Looking forward, we expect quarterly claims expense in the mid- to high $50 million range over the remainder of the year.

Let's turn to credit, starting on Slide 8. 30 to 89-day delinquency on March 31, excluding Foursight, was 2.62%, down 1 basis point compared to a year ago. This year-over-year performance is in line with our expectations and modestly better than the performance we saw a quarter ago. And as seen on Slide 9, the 48 basis point sequential improvement was better than the 43 basis point sequential improvement both last year and in the pre-pandemic benchmark period. Our front book continues to perform in line with expectations, while our back book, which represents only 5% of the portfolio, still accounts for 14% of 30-plus delinquencies. This is more than double the impact we would typically expect from vintages on the book this long so the back book continues to present a headwind for total portfolio credit metrics.

Moving to net charge-offs for the quarter, as shown on Slide 10. The first quarter C&I net charge-offs, which include the results from our small but growing credit card portfolio were 8.4%, up 24 basis points year-over-year, in line with expectations. Consumer loan net charge-offs, which exclude credit cards were 8.0% of average net receivables in the first quarter, up 19 basis points from a year ago and in line with our expectations. Strong recoveries continued to support our results, increasing 18% year-over-year to $104 million in the first quarter.

Recoveries as a percentage of receivables increased to 1.7% from 1.5% in the first quarter of 2025, largely due to continued enhancements to our internal recovery strategies. And it is worth noting that bulk sales of charged-off loans, which is one of the strategic tools in our overall recovery strategy were slightly less than prior year. As net charge-offs are seasonally highest in the first half of the year, we expect losses in the second half of the year to significantly decline following the improvement in early delinquencies we have seen. This normal seasonal improvement is reflected in our full year C&I net charge-off guidance range provided on our last earnings call, which remains 7.4% to 7.9%. And as a reminder, C&I net charge-offs include losses in our credit card portfolio, which has higher yields and higher loss content and will continue to pressure overall losses as the portfolio grows. With that in mind, we are seeing improvement in our credit card net charge-offs, which declined 176 basis points year-over-year to 18% in the quarter. We also continue to see strong performance in card delinquency as 30-plus delinquency fell 105 basis points year-over-year in the first quarter, a notable improvement from the 83 basis point decline we saw in the fourth quarter. While we like the sustained improvements we are seeing, we remain committed to measured growth and disciplined underwriting. Loan loss reserves ended the quarter at $2.8 billion. Our loan loss reserve ratio remained flat, both sequentially and year-over-year at 11.5%. The continuation of the steady improvement in our card portfolio I just spoke about was also reflected in our reserves this quarter as the reserve rate on the credit card portfolio dropped 80 basis points from last quarter. However, given it's a higher yield, higher loss business, the card portfolio maintains a higher reserve rate than the consumer loan book and will continue to pressure the overall reserve rate of the company. This quarter, the credit card portfolio continued to add approximately 40 basis points to the overall reserve rate, and we expect that to increase slightly over the remainder of the year, consistent with the growth of the portfolio. Looking forward, in addition to the shifting product mix of the overall portfolio, we will continue to be prepared to adjust reserves if and when the macroeconomic environment changes.

Now let's turn to Slide 11. Operating expenses were $437 million, up 9% compared to a year ago, driven by thoughtful investment in growth initiatives in our newer products and solutions as well as data and technology capabilities to better serve our customers, accelerate product innovation and drive operating efficiency in the future. Our OpEx ratio this quarter was 6.8%. As the year progresses, we have a clear line of sight to lower quarterly expense growth, which combined with expected receivables growth will drive the OpEx ratio lower, and we remain confident in the full year OpEx ratio guide of approximately 6.6%.

Now turning to funding and our balance sheet on Slide 12. During the first week of March, even with escalating geopolitical tensions and market uncertainty, we were able to issue an $850 million 3-year revolving ABS. The offering saw very strong demand and was executed at attractive pricing of 4.63%, once again demonstrating our excellent access to markets and strong ability to execute even in difficult market conditions. The proactive measures we took last year to reduce our secured funding mix redeem and repurchased near-term maturities and refinanced the 9% 2029 bonds, reduced our interest expense and gave us significant flexibility on both the mix and timing of issuance in 2026. An important advantage, especially given the increased volatility in markets so far this year. At the end of the first quarter, our bank lines totaled $7.5 billion, unchanged from last quarter. These bank lines add significant liquidity and funding flexibility to our program. Our balance sheet is a core strength, highlighted by staggered long-term maturities, strong market access and experienced execution, a balanced funding mix and significant liquidity. We view this as a durable competitive advantage that supports our business through economic cycles. Our net leverage at the end of the first quarter was 5.4x, in line with last quarter and within our targeted range of 4 to 6x.

Turning to Slide 14. We are reiterating our 2026 guidance that we provided last quarter. We had a good first quarter that was in line with our expectations, and we are pleased with our performance. For full year 2026, we expect to grow managed receivables in the range of 6% to 9% while maintaining our current conservative underwriting posture. We expect C&I net charge-offs in the range of 7.4% to 7.9%. And we expect our full year operating expense ratio to be approximately 6.6%. All of this supports the strong capital generation of the company for 2026 and beyond.

In closing, we are encouraged by our first quarter performance and start to the year. Our credit metrics are in line with expectations, supporting good momentum over the remainder of the year. We see opportunities to grow through innovation and product expansion while improving efficiency, which we expect will deliver outstanding shareholder value in the quarters and years ahead.

So with that, let me turn the call over to Doug.

Thanks, Jenny. In closing, we remain very confident in the strength and trajectory of our business. We are serving more customers with products that meet their diverse needs and strengthen OneMain's position as the lender of choice for hard-working Americans. We remain focused on profitably scaling our auto finance and credit card businesses to provide value in both the short and long term. Credit is performing well and in line with our expectations and our industry-leading balance sheet remains a key competitive advantage, supported by a diversified funding model, consistent market access and a strong liquidity position. All of this points to our expectations of driving increased capital generation this year and beyond.

Let me conclude by thanking our team members for their outstanding execution as well as their commitment to our customers and to each other. With that, let me open it up for questions.

[Operator Instructions] We'll go first this morning to John Hecht with Jefferies.

First, maybe any update on the bank application, if any sense of timing and so forth there?

No updates this quarter. The process continues to move forward. Timing is uncertain, but we remain optimistic because we continue to believe we have a very strong case for approval. We're having constructive dialogues with the FDIC and the Utah Department of Financial Institutions. So we're optimistic and we'll keep folks posted as things evolve.

Okay. And then you talked about a lot of focus on technology and using AI for productivity reasons. Any update on the branch versus digital kind of activities and how they integrate together and any thoughts on like, I guess, the trajectory of the branch system over time?

Yes. Look, we've, over the last 7, 8 years, really focused on being a multiproduct omnichannel lender. And so we've obviously added card and auto, which are not dependent on the branch. But our core personal loan business we have this model where you can do business with us in person, on the phone or digitally. We do think our branches are a competitive differentiator and one of the secret sauces of how we serve the non-prime customer very well, where they can walk into a branch, they can work out issues with us. It gives them confidence that we can advise them on getting them into a loan that they can afford and getting them into the right type of loan. And so over the years, what we've done is, generally, our branch footprint shrank from like the late teens until 5 years ago, shrink from about 2000 to about 1,400. It's remained somewhat steady. It will -- it's gone down about 100 over the last couple of years. But what we've done is really try to take the -- make sure our branch team members are spending time working with customers, either in lending or in servicing and getting as much of the lower value work into either technology and automated into self-service or into our call centers. And so we've made a lot of progress now around automating information the branch used to need to get, having outbound calling when someone applies, but their application isn't complete, just to get the application complete, and then the branch team member can work with them who I've talked before about getting DMV data, so the branch doesn't have to go and look that up and get the VIM, but it's automatically -- it's just in their hands when a customer walks in. So we continue to invest in technology to make our branch team members more productive and free them up to work with customers.

In the AI front, I think AI gives you great opportunities around everything I talked about, whether it's automating things, having chatbots get information either for the branch. I mean one of the great examples is all of our internal information now, which people used to need to go on to our Internet and look up and do certain search terms or would be in different applications is fed into an AI program where someone can just ask, "Hey, what's the policy for a loan size in Tennessee?" Or "Hey, can you tell me the policy about health insurance for my kid?" And so they can just have a chat with folks. Again, it frees up branch team members just to get information at their fingertips.

We'll go next now to Moshe Orenbuch with TD Cowen.

Great. I was hoping to talk a little bit about credit quality. You've definitely kind of called out that you expect credit to improve, I guess, more than seasonal patterns by the second half, and you've got a lower level, probably even at an improved rate of the back book sitting in there, and yet it's been a little bit stubborn in terms of that. Maybe if you could kind of just expand a little bit about what is actually going on with those loans, those customers? And what gives you the confidence that you'll get to that back half levels?

Moshe, it's Jenny. This quarter, we saw that back book represent about 5% of the portfolio, and it contributed 14% to that 30-plus delinquency. Those loans are continuing to go delinquent at about a 2x higher rate than we would have expected so I think what gives us the confidence there is that our loans typically are about 5 years. And that gives you a sense that as those loans get older and we start to see them burn off, we should get closer to our historical range. And then obviously, there's also growth as a piece of that equation.

I was also intrigued to hear you talk about the credit card business turning to profitability. I mean can you talk about the level of investment and what that had represented in the card business to date and how you think about the ultimate profitability when you compare it to your core installment product and what that might mean for overall earnings for OneMain?

Yes. So I'd say this. I mean I think as everybody knows, card businesses are challenging to set up and take some time. And I think what's really been remarkable here is that we were able to, coming out of COVID, actually start this card business and really leverage the overall -- the whole company and our company scale and size and breadth and knowledge, right? So as you're setting up this card business, looking at -- [indiscernible], obviously, we've got lots of corporate functions, and we've got a great funding program, all these pieces. And so I think that's really been quite helpful as we've set that up. We did mention we're now profitable. And I think from here, it's all about making sure that we can continue to scale this business in a way that we like.

Now if I also turn then to the returns because I think that's really one of the more remarkable pieces, personal loans, obviously, has a very good return profile. If I look at credit cards, it's probably one of the few businesses that we could go into for the non prime consumer where you would have a similar or slightly higher return profile. And so you can see our revenue yields in the low 30s. You can able to support over time credit coming in closer to a 15% to 17% range. And then we're very focused on operating expenses and I'd say unit operating expenses. That's where the focus really is for cars. And so I think that team has been very focused on how you can scale and as we scale, you get more benefits. So we're always looking sort of at a longer-term trajectory for that business. But quite pleased with where we've gotten and where we're going to be able to go from here.

We go next now to Arren Cyganovich with Truist.

In terms of the personal loans, they are up -- looks like on balance sheet, only around 2%. I know you're kind of selling a portion of those as well. Maybe you could talk about the balance of, I guess, pursuing personal loans or the demand for personal loans relative to the card and auto that you're starting to increase, if there's any kind of push and pull there in terms of how you're focusing on originations? And then maybe just touch on the overall health of the consumer, given that we have the rising oil prices and how that might be impacting your customers?

Sure. I think there's two questions in there, so let me take them both. One is we run the 3 businesses independently. So we're not trying to balance how much personal loans are we doing versus card versus auto. We're quite disciplined operators. Each loan we make, whether it's issuing a credit card, making an auto loan or making a personal loan needs to meet our 20% ROE threshold. It's all based on credit box, cost of funds, OpEx and losses and the formula over time. And so they're going to move at different paces. Now we have a very big market share in personal loans. And so by definition, kind of -- we're growing from a pretty large base. And so we don't expect as much percentage growth, although it remains the biggest part of our originations in any year. I think auto and credit card, these are huge markets where credit card, we have $1 billion of receivables and a $500 billion market. In auto, we've got $3 billion of receivables or just under -- in a $600 billion market. So I think we would expect those to be growing relatively faster. But each business is running independently with a team focused on each business because they have different characteristics, different needs, different competitive environments.

On the consumer, look, we -- what I would say is what I said before, our consumer remains resilient, I think they're holding up well. We are seeing our credit perform just where we expected our credit perform. And so our [ onus ] data is our best data. If you look at kind of the last year across the board all the external, employment remains low. It ticked up a little bit in the second half of 2025 but it's actually been stable. Recently, wages have been stable, savings have been stable. The thing that's gone down a lot in the last 6 months is sentiment. So I mean, I think everything you hear and see and feel is people don't feel great, but we're not seeing it show up in our numbers. And obviously, we said before, we're paying attention to the geopolitical tension and the cost of oil. We haven't seen that creep into our book at this time. And the other thing I'd say, our other two data sources is we do have unemployment insurance. We've seen no uptick in that. We have a branch survey that we just asked our branch managers, what are they seeing and feeling, and that's been stable over the last couple of quarters as well.

Just a follow-up on the personal loan side. Is there a higher competitive environment today in terms of the fintech lenders that you compete with? I mean you just -- wondering why that product -- or maybe it's just the credit overlays that you still have on there that are kind of keeping that from maybe growing a little faster than what I would expect.

Yes. I mean, one, we have a very conservative credit box given that -- and we've had it now for a few years because we don't think the macro uncertainty is fully cleared. There's no change in -- from what we can tell in competitive environment. I mean, there's always fluctuations here and there. But what I would say is the last 18 months has been quite competitive. There's been plenty of funding available for our competitors to make loans. Different competitors have different views of how they -- what are the return profiles and what kind of premium do they put on growth, we really don't chase growth. We make sure we focus on profitability. Our receivables or our originations, we're still booking 60% of our originations are in our best or lowest risk customers with very attractive pricing, which is an indicator to us that our competitive position remain strong. And as I mentioned before, we've got a pipeline of product innovation. And so I think it will fluctuate quarter-to-quarter. I don't get too fussed about that because as someone told me when I was coming into consumer finance many years ago, like anyone can make a loan, you just have to be good to get paid back. And so we focus on having a great product getting our marketing to the right people and then booking loans that meet our risk-adjusted returns, 6% year-over-year receivable growth we're fine with.

We'll go next now to Mihir Bhatia with Bank of America.

So I wanted to just turn to credit for a minute. There's a few moving pieces this quarter, just -- the gross charge-offs and recovery has both stepped up pretty materially year-over-year. So I guess, what is driving that? And then I'll just ask the second question upfront. You also have early-stage DQs, the 30 to 89 bucket, basically flat with the 90-plus bucket increasing. So is there something going on in roll rates where folks are finding it difficult to cure once they are delinquent, can you just help us frame like what's going on with credit?

Sure. I heard a couple of questions in there. So let me try and get to them. But -- so we focus really on net charge-offs. And like I said earlier, we ended net charge-offs in line with expectations. But Mihir, you're right, there were a couple of things going on when you look at the puts and takes of the way we got to those net charge-offs. And we have seen historically low roll rates from delinquency to loss since the pandemic. And this quarter, we did see some normalization in those roll rates, but we're not expecting that to continue through the rest of the year. And just again, we remain well above -- better than pre-pandemic.

Then secondly, I'd just say the efforts on recoveries, I think, really paid off and we saw very strong recoveries in the quarter that helped offset that GCO. And those recoveries largely came from improvements that we made to our internal capabilities. So that's what really was driving the majority of that improvement. I mentioned earlier, but we had about a little bit less actually year-on-year in terms of the gross sales that we did. So in general, I think we are feeling good about where credit is and where it's going. And I think you're absolutely right. There are some puts and takes in terms of how things are moving, and you can see that with those roles, and that's a little bit of what you're seeing in that 90 plus, but we're not expecting that to go forward and we're feeling quite good.

We go next now to John Pancari with Evercore ISI.

Good morning. Just to go back to the credit point. Regarding the back book, you indicated, Jenny, that the loans are going delinquent 2x faster than expected but you're still confident in the charge-off expectation given the burn off. Is that view predicated on that 2x faster DQ formations slowing or is it predicated on it remaining stable? I know in your -- just the answer that you just gave to me here that you had indicated that you don't expect that to worsen. But what is your assumption around that DQ formation that's been impacting the back book when it comes to your charge-off outlook?

Let me -- so I really think about that back book, and you've seen that its contribution to delinquency has shrunk slightly over time. You can see that in the presentation, right? And it varies a little bit in terms of -- it's not just completely linear based on the size of that book running down. But I think in general, when you look at -- but let's just -- when you look at a personal loan curve, as you get older, you typically see some plateau in where the back book is going. I think really for us, when we look at the second half of the year, we look at the composition of the vintages, and we do also see newer vintages coming on. So I think we're -- when we look forward, and we see both this fact book contribution coming down slightly. I think you can assume it's approximately 2x, maybe slightly more than 2x what we would have expected in pre-pandemic. But it's really also about the -- what you can -- the good and young loans that we're starting to put on the book coming into that portfolio and that playing out in the second half of the year.

Okay. And then separately, I'm not sure there's much you could say here, but if you can maybe give us an update on the status of the state AG lawsuit filed back in March, maybe any developments there? Any progression to the courts? Maybe thoughts on your exposure, fines or remediation, settlements? I know you've indicated that this issue has been, to an extent, addressed by the CFPB in a previous action. So if you can kind of walk us through that.

Sure. Look, first, you should look at our statement on the website, which is our public statement on it. The bottom line is the claims made by the states are untrue, and they have no merit. They're trying to relitigate issues that were already reviewed by the CFPB and resolved, and we are happy to go to court on this and confident that we can win.

Regarding sizing, again, these are matters that have been fully resolved with the CFPB, and it's only a fraction of the states. And so we do not view this as a material matter or one that's going to have any material impact on our business.

We'll go next now to Rick Shane with JPMorgan.

Look, there's an interesting dynamic. You guys have had a tight credit box and I think sort of consistently tightened your credit box since August of 2022. And if we go back and look at commentary from throughout 2022, the real driver was the sensitivity to your lower quality borrowers to inflation, housing prices, gas -- or housing and gas were sort of the two standouts. We're now two months into substantially higher gas prices. I'm curious sort of how you think about the credit box now you guys were tight. That environment is arguably worsened had you anticipated loosening the credit box and you're going to maintain status quo or do you tighten from here?

Look, we think we have a good conservative credit box, and we've kept it conservative just for things like what's happened recently. And so we just -- to be clear, we have a 30% stress overlay in our credit box, which means what our models predict, we're then putting 30% peak loss overlay on it in order -- and you have to -- even with that 30% peak loss, meet our 20% marginal return on tangible equity return. So that's the credit box we have.

I wouldn't say things have gotten worse from 2022. I mean what I would say is we're now like 3 years plus into a world where you could keep looking to say, "Gosh, I wish the uncertainty would clear and everything was great." Things have actually been pretty good despite the uncertainty, but we haven't declared coast is clear for the economy, and there's no risk going forward. And we've been able to construct a book of business with better quality customers, which has allowed us to drive losses down during that time and drive up profitability. So I don't think -- we don't look at oil prices and all of a sudden, oil prices are going up, and therefore, we're tightening our credit box. Like we look at the whole picture of [ onus ] credit, external factors, early defaults. We run these weather vein tests, which we're always booking a little bit. A small de minimis amount under our 20% threshold to see if they pop up above our 20% return on equity thresholds. And so there's nothing in there that says let's put more overlay on now, but we're also not at the point where we want to take the overlay off.

I would say, though, we're always making tweaks. So we'll see a data source that indicates some weakened credit, some place and will put a difference factor on that data source or we'll see a type of customer with a set of characteristics that's very much outperforming. And on that micro segment, we'll make an adjustment. And so we are making adjustments every month across the board with by customer, by geography, by product type, et cetera. But the overall overlay has remained constant. And as of now, we'll change it when we see fit. But as of now, we're keeping it constant.

Got it. Doug, I appreciate the answer. And I do want to clarify, I'm not suggesting things are worse than they were before. That's not fair to you guys. And if I suggested that, that's not my intention.

I did want to ask a follow-up, though, which is that, again, thinking back to the sensitivity that you guys pointed to in '22, and there are reasons to see analogs today. Incumbent in your guidance is a pretty significant improvement in credit in the second half of this year. Does that change in environment over the last couple of months reduce your confidence in your ability to achieve that? I know you reiterated guidance, but I'm curious if you -- how you think about that.

Yes. I -- the answer is no. I mean, like what we've seen right now doesn't change anything. We always put the caveat. I mean, if the economy tanks, our business changes, but as of now, we're assuming things to be relatively steady. And we feel confident in all of the things we've said about maintaining our guidance, et cetera.

Thank you for taking all my questions. I know they were long today.

No, no. Thank you. And we are now up on the hour. So I want to thank everyone for joining us. As always, our team is available for follow-ups and hope everybody has a great day.

Thank you, Mr. Shulman. Thank you, Ms. Osterhout. Again, ladies and gentlemen, this does conclude today's OneMain Financial First Quarter 2026 Earnings Conference Call. Please disconnect your lines at this time, and have a wonderful day.

Thank you for joining us this afternoon. For those who don't know, I'm Mihir Bhatia. I cover consumer finance and specialty payments companies here at Bank of America.

Next on stage, we have OneMain. I'm delighted to welcome Doug Shulman, who is the CEO of OneMain. And for those who don't know, OneMain is a consumer finance lender, provides personal loans, auto loans, also credit cards with a real focus on the subprime consumer. So firstly, Doug, thank you for being at the conference for doing this event.

Thank you.

I think it's the second or third year that we've had you, and we really appreciate the support.

So why don't we just dig right in. Compared to a lot of companies at this conference, I think OneMain's focus on the nonprime consumer historically is a little bit different. So maybe give us a view on the health of the customer. We've heard a lot about high inflation, but inflation has come back to a good place. Wage growth has been happening. How is that nonprime customer, the core OneMain customer doing?

Yes. No, thanks. Look, I would say our customers and which represent a section of the nonprime consumer are quite resilient is the word we use. And I think you have to compare like I like to give the disclaimer that we underwrite and lend to people who can pay us back. And so that's not everyone. And our customers, we've got a bunch of tools that we can use to make sure we can extend credit to customers in a responsible way. So whether it's the product because we have a secured product, the size of the loan, the risk grade that they are, the state that they're in and the rate.

So there's a number of things. And so my disclaimer is our underwriting is quite granular, and there's no like one broad set of consumer. It's can this person pay us back? Can they afford the loan that they want. With that said, there is -- we see a lot of applications from the consumer, so we've got a decent sense. I'd say I've talked about it before. Income has definitely caught up with -- cumulative incomes have caught up with inflation a couple of years ago. I think the customer is doing -- the nonprime consumer is doing fine. I think they've been steady and resilient. They haven't improved dramatically in the last year or so. And I think there's a whole bunch of cross currents.

Employment is an interesting one, which is unemployment still historically is quite low, which means most people who want a job can get a job. With that said, it ticked up a little bit last year. So there's some crosscurrents there. Inflation, I think, is at a controllable level. And as you said, is the rate of growth has come down. But cumulatively, it's still more expensive at a grocery store than it was 5 years ago. And so I think that our consumers are doing great as evidenced by our credit trajectory. I think in general, the nonprime consumer is doing fine.

So maybe just like digging in a little bit, would it be fair to say there hasn't been like any big change in approval rates in the loan applications that you're seeing in, like would you say the nonprime consumers doing generally fine. Is that a fair interpretation of that, that doesn't mean any big changes for you all in terms of what you see coming in the door?

Yes. I don't no. I mean, I guess I wouldn't interpret it that, which is we spend a lot of time on the people we approve. And so our approval rates, I don't even think about it as approval rates. I think of do you meet our underwriting criteria? And if you do, then we'll have a conversation with you about what's the best way to serve you.

Okay. So then maybe just turning to the portfolio a little bit. One question that we get a lot from investors is how resilient is this portfolio, right? Like you mentioned unemployment is still historically low, but like compared to maybe some prior cycles, how resilient is the portfolio from your perspective from a employment shock or income shock? Like what are some of the lessons that you have learned over the last few years that inform the risk posture today?

Yes. Look, I think our current portfolio is quite resilient. And I'll just give you the way we've underwritten the vast majority of that portfolio is in 2022, we and everyone else saw an uptick in delinquencies that then became an uptick in losses. And we cut our credit box quite aggressively. And the way we manage our credit box is we have a minimum threshold of 20% return on equity of any loan we make. And we usually put about $15 for every $100 of equity into a loan and the rest we borrow. And so for that $15, we need a 20% ROE. And the way we calculate the ROE is our model of what's going to be -- what's that loan going to produce over the lifetime of the loan. It's customer lifetime value model.

And the main factors that go into it is what's the interest rate we charge, you subtract operating expenses against that loan, you subtract our cost of funding that loan, especially the debt portion. And then losses is a big number. Since 2022, we've got our model that says whatever losses for this customer will be 5%. We put a 30% stress on that. And so the model will say the loss is going to be 6.5%, right, because there's 30%, even though the loans have been performing at closer to 5% losses in that scenario.

And so since then, that's a pretty hefty stress overlay. That's like an overlay saying you're going to have like a mild recession when it comes to employment. And so we've been underwriting saying, even if unemployment ticks up, then we still will make our 20% ROE. So we think our portfolio from a profitability standpoint is quite conservative. And we've had that since 2022. So it's almost -- this summer, it will be 6 years of running that playbook, and we haven't lightened it up. And so we feel pretty good about it.

I think the lessons you asked about for us. I think the biggest lesson for me is -- which we've known all along is you just need to be disciplined in this business. Like you can't go chase growth. You can't say, maybe things are better, like you need to follow the data. And like we said, our customer has been resilient. Our customers have been performing as we expect, but they haven't been necessarily outperforming. And so have a very conservative balance sheet, so you always have a lot of liquidity in case there's a shock err on the side of being conservative with conservative with your portfolio and then just run a great business. And it's very easy to like say, "Oh, things are looking good. The economy is good. Maybe you should tighten your box." You just got to follow the data and stay disciplined and run your game in the lending business.

Like I guess that does -- like one question that I have is what do you need to see in the data when you -- to maybe loosen a little bit, right? You mentioned putting the 30% stress overlay on. Today, we're at, what, 90% of the front -- 90% of the book is like with this new tighter underwriting that you put in place. So what do you need to actually see in the data to start loosening a bit?

Yes. I think you need to see some period of time where there's consistent better performance than our models had predicted. So we're seeing our models predict really good. Our underwriting is quite good when we pick the customer and manage the customer the way we know how to manage them. And it's performing in line with our expectations, but it's not like the customers' losses are lower than we thought or their delinquencies are lower. They're exactly what we thought. And so one is I think you need to see continued outperformance. Two is we have this thing we call it weather vein testing, where we're always booking a sliver of loans. It doesn't really show up in our portfolio because it's not a material amount that are people who have like a 15% ROE or an 18% ROE just to see if those are performing like just below our cutoff to see if they're performing better.

And we haven't -- there's some variations. Sometimes it ticks up and down. But on a consistent basis, we haven't seen it perform better. And then -- so I think we need to see the weather vein consistently performing better. We need to see our book consistently perform better. Not -- we like the way it's performing. It just would need to outperform, and I would say we can loosen the box some. And then you need to see some of those macro. I mean, there's still some uncertainty in the economy with macro, geopolitical. There's a variety of things. And so I think you need to feel really good. When we open up, though, it's not going to be a big bang. It's going to be secured products in these states for -- we have 20 risk grades for these specific risk grades coming through our branch-based channel, right?

So it's going to be by channel. It's going to be by state, it's going to be by product. And so you're going to have it be a very granular adjustment of the credit box. It's not going to be coast is clear, let's open the box.

Got it. Maybe then like let's switch a little bit to the ILC application. I guess first question on it is just what's the latest on the ILC application? And then we can -- I have a couple of more follow-ups on that one.

Yes. Look, latest, I don't have any updates. Like I tell my Board, when you've applied for a license with the government, you either have it or you don't have it, we don't have it yet. So we're -- I wouldn't predict it.

Okay. But let's just walk through why you apply it? Like what's the strategic vision like how does this ILC license help you both from an operational standpoint, but also like obviously, there's the funding cost, maybe a little more straightforward, but...

Yes. Look, I think it's important before I answer that, that for us, it's a nice to have, not a must-have. We've got a very profitable business. We've got a huge amount of confidence in our ability to continue to drive earnings. We got a lot of levers. So we have a lot of momentum in our business. On the nice to have, you get some diversification of funding. It wouldn't be a huge amount, especially the first 5 or so years because the size of it will be limited as a de novo application. You would -- the big advantage is it would unify the operation.

Right now, we operate in 47 states. Each one has different rates. It has different rules. It has different fees. It has different reportings. The states have different regulations around branches and all these things. And so it could simplify the operations, simplify the technology backbone around that. Every time legislation is passed in a state, you need to code your application, you need to train your people, you need to do this. And we're a button-down shop, super compliant. We comply with all the states. So I think there'd be a simplification. We also have a small credit card that's growing.

And right now, we have a partner bank because you need to have a bank to issue a credit card. We'd be able to issue it through our bank. So that would be an advantage. And so in the meantime, we're playing our game, driving profitability up. We feel good about it. If we get it, it would be great. If we don't get it, we'll -- that's fine, too.

Right. I hear you. If you get it, great. It's nice positive optionality maybe is the way to think about it for investors. But like I think one question we get a lot from investors about this one is like, yes, it simplifies operations. It helps them that, but it also potentially lets you export rate cap and you get to go past like different state rate caps and potentially it's a bigger TAM. Is that something you're thinking about with this? Where you can maybe -- state has a cap of 25%, now you can go up to 36%, so you can approve more. Is there any way for us from the outside to be able to size that opportunity?

Yes. Look, we have not sized that we think about it as providing access to credit potentially for more customers, right? Because riskier customers, you need to have price to absorb the loss, right? And so I think that would have an effect. That's part of simplifying the operation, but we haven't sized it.

Got it. And then publicly -- maybe when you get the license, then you help us size that. But maybe turning to the funding strategy more broadly. Look, you expanded your TPG partnership recently. You have to potentially have the bank charter coming. You have -- you're active in the ABS markets. Just talk to us more generally about -- I think you mentioned you're having resilient funding. What is the funding strategy? How do you go about doing that? Like what are you trying to achieve from funding when we think about it?

Yes. Look, we have a very conservative balance sheet. And if you look at the history of consumer finance companies, liquidity and running out of liquidity is the existential risk. And we wanted to take that off the table. So when I came in, we started pivoting and creating a much more diversified balance sheet with a long liquidity runway with long-tenured securities. And so our goal is just to have that be a 0 issue and to have a fortress balance sheet. And we're willing to pay for that.

And so we have extra interest expense, like if we ran a just-in-time funding like a lot of people do with lots of whole loan sales and only the ABS market, which is cheaper and not having lots of extra bank lines, we kick off more capital generation and more earnings every year. And I'd trade it all day long just to have an enduring franchise. So that's our fundamental precinct. And so the funding strategy is we pretty much split most of the funding between ABS, which is -- and we do a lot of long dated. We'll do a 5-year ABS, even longer.

Unsecured funding, just issuing bonds, and we'll do 10-year bonds that -- and we're a known name with a diversified investor base that can get very good terms. So we don't have covenants on that. This is like here's your money, you have it for all these years. We then have bank lines, and we have over $7 billion of bank lines from 14 different banks, again, and back in the beginning of -- end of February of -- when was the pandemic?

2020. February, March.

A long ago. Yes, yes. We actually tapped all our bank lines when everyone was panicking and the market was going down and everyone thought we were going to have full arm again. And we tapped them all just to test it and say, like were these good if you needed it. And then we have our whole loan program, which we've been very public about. We did it to have the pipes and to create optionality. And sometimes it's a good economic trade for us, but it's not a huge part of our balance sheet. And so highly diversified. We keep about 2 years of liquidity runway.

So capital markets froze up, and we had no access to the capital markets. pay our employees, make every loan we want to make, invest in technology, run our business. In '08, '09, the longest any of the markets froze up was a couple of months that you couldn't tap them at all. Again, right after the pandemic started, we went out and actually did an unsecured deal. It was higher than normal, much lower than everyone else. And so our balance sheet, we view as like a core competitive advantage, and we run it long liquidity runway, diversified and I think it's been a strength, and I think investors trust us because of our attitude towards our balance sheet.

Yes. No, I think we've definitely heard that from investors. Let's turn to the auto business for a second.

Our CFO, Jenny Osterhout is sitting in the back. She runs it all.

So let's turn to the auto business, right? Give us an update on the progress you've made there. You've been leaning in the last few years. Just -- what does the ROE profile of that business look like relative to your personal loans? And what's been going on with the auto business?

Yes. Look, we like the business a lot. I mean our history was for over a decade, we've had secured lending for personal loans, which wasn't I'm buying an auto, but it was somebody says, I want $10,000, and we say, we can give you an $8,000 unsecured loan at this interest rate or we can give you a $15,000 loan secured by your auto. We'll take over -- we'll take the collateral on your auto, we'll pay off the old lender at $5,000, you get $10,000, which you request and it's all at a lower interest rate. So it's a very -- it's been a great product.

About 5 years ago, we had some team members who kind of ran the collateral part and the other thing, and they said, "Hey, we'd like to see if we can get into some independent dealers. We've got -- we know how to do all of this. We know how to value collateral. We know how to secure a lien. We know how to collect on an auto. We have the underwriting machine." And so we actually gave people a little pot of money, and they built a nice like $800 million business with independent dealerships. And then as we looked at it, we said, great, but we built it on our personal loan platform, which isn't exactly fit for purpose for interacting with auto dealers, et cetera.

And so we went out and scoured the market and found a great company called Foresight that we bought. And the -- and Foresight had a great technology, had relationships with some franchise dealers, had a great management team. And so we picked up Foresight as a tuck-in acquisition, put the 2 together. And at that point, I think we had like $1.8 billion of receivables. Since then, we put the businesses together. We've moved over to a proper auto platform. We've refined the models around that, and we've started to expand the dealer relations and sales. And so it's been a nice little growth engine for us.

I view it as like a complementary business. It's one that has lower risk because it's 100% collateralized. And so it's good for like our volatility of risk profile. It generally has a little bit lower ROEs than the personal loan business or the credit card business, which we're also growing. And so I think it fits nicely in our product portfolio and has a huge total addressable market. It's like $500 billion. And so even if we just take a little of it, like we're playing our game. As you saw, we just announced -- we just signed a partnership with Ally, where they'll send us turndowns through their Clearpass program, which should get us some more application volume, which will be a nice little piece of growth. And we're also just expanding our sales team and so that we're penetrating more auto dealers.

Got it. No, that's great. You mentioned credit cards. receivables have actually been growing at a pretty nice clip. I know early on, you announced and then market conditions, you pulled back prudently, I think, in most investors would say, but they've again started growing at a pretty nice clip. Talk about just how the credit card business fits into the overall OneMain strategy.

Yes. Look, we back in 2019, we did a real look and said, we've got a bunch of core assets in our platform of OneMain. And is there more we can do than just personal loans? And we looked across the whole spectrum of all lending that happens. And we made a decision we were going to stay focused on the nonprime consumer, and we're going to focus on lending. We're not going to be a wealth manager. We're not going to be a bank and deposit gatherer as like in traditional sense. And auto and card, when we thought about a future portfolio, were the most attractive for us. And if we had our personal loans as the core center and the biggest part of our business, but we had 2 ballast to like stabilize the ship and add some growth.

Card, which is same or higher ROE than personal loans, and I'll talk about it for a minute. Auto, which is a little lower volatility, a little lower ROE, both places, we thought intellectually, they made the most sense to put together. But then we did a whole exercise like what's our right to play? And I talked about auto. We knew how to do collateral. We had relationships. We had already built a small business. I think card, super complementary for us.

One is we had a whole bunch of infrastructure we could use. Most of our underwriting team had card experience. We had plugged into the credit bureaus already. We had 3 million current customers and 50 million either former customers or applications we have seen. We could build it digital first, so we wouldn't have to use the whole branch infrastructure, and we had a whole tech and digital team who knew how to kind of put that together. And so we thought we had a bunch of head starts. I think they're incredibly complementary products. And so if you think about it, a card is a daily transactional product that serves a different purpose for the consumer. And the main -- the highest use for our cards is what you would think, retail, dining, gas, groceries. You're using it for that.

A personal loan is a large episodic transaction. Either I want to consolidate debt, I want to pay for my grandkids, horseback riding lessons and some other things or I've got my hot water heaters broken and I need to get it fixed or my HVAC. And so large episodic, daily transactional, you put them together, and so they complement each other. Then the card is actually real estate because if you get a personal loan with us and you're a good customer, you put it on AutoPay and there's not a lot of reasons to interact with us. I mean we have customers logged into our app and they change their address or they change their payment date, those kinds of things. But a card, you check in, do I have $100 left on my line this month for the groceries that I'm about to buy from my family.

Most of our cards have rewards. So like you're taking your points and using your points. And then our card proposition is payments sequel progress. And so if you make 6 on-time payments, you either get a line increase or you can get a decrease in your rate. And so we're getting a lot of action on the digital real estate. Our average card customer is in there like 7 times a month checking on the app. For the customers who have been paying on time over time, and we have unique insight into their credit, now it pops up and says, would you like a $10,000. You're prequalified for a $10,000 loan apply here. When we get that customer, acquiring a card customer is about 1/4 of the cost of acquiring a loan customer.

So you acquire them and a year later, you get a new customer at 0 customer acquisition cost. And so it's a very complementary product that we think we've got a right to play, and we bring some special sauce to it.

How different is the underwriting for a personal loan versus a revolving card product?

It's different models because it's different behavior. I mean, a card, you're only extending a $500 line, so you can take a little more risk. Some of our cards have fees, so they absorb some losses. I think -- and -- but we still -- for card, auto and loan, we have our 20% return on equity threshold that I talked about before. And so we have -- each one has its own customer lifetime value model. Each one has to return 20% return on equity on any credit that we extend. I think the big difference is a loan, you get 100% of the amount day 1 and you start earning interest on it. A card, it takes about 9, 10 months to build up.

So you issue the card, you don't get lending on it quite right away. And then the peak losses occur at different times. And so it's a different loss profile. It's a different delinquency profile, and it's different underwriting. So you definitely need -- it's separate models, but the fundamentals of 20% ROE based on customer lifetime value and us running that discipline is the same.

Got it. We just talked about credit card. I'd be remiss if I didn't ask you. I know it's out of the news now, the 10% interest rate cap. People are saying it maybe doesn't happen, but we're probably a tweet away from it being front page news again. So how would OneMain react if we got that?

Yes. I mean, look, to state the obvious, it's uncertain where this will land. Our card, while you said it's growing, is still under $1 billion of our $26 billion portfolio. So it's like less than 4% of our portfolio. And we don't have a big back book to manage. So even if it occurred in the back book. What I'd say is we would see what happened with our card. What I like about our position is we've got a lot of different ways to serve customers.

I mean if somehow this happened, I think your CEO has been public, Bank of America saying it would cut off credit to a lot of people. Our job is providing responsible credit to people who have had some blemish usually on their credit record at some point. And so I think we could serve them with personal loans, we could do other things. And so I think it's quite manageable for our business regardless where it lands.

Got it. So maybe like let's turn to the core personal loan business for a second. But like in an increasingly digital-first world, some of your peers or maybe even like some of the fintech lenders, they've leaned in very heavily on this idea of we're going to get a loan approved in a few minutes, a few pieces of information, click, click, click, you get a loan as little interaction as possible.

OneMain has continued to be very omnichannel with both an in-person branch model. You also have digital tools and model, but like just talk about that, like what does that give you -- why do you want to stay omnichannel, some of the advantages?

Look, I mean, if you look at our credit, FICO for FICO, I think it's better than anybody in the industry by a pretty wide margin. And I do think our ability to serve customers in a variety of different ways and establish a relationship with customers is important for this business. Setting up a loan correctly, getting them into the right product, setting people up on AutoPay, talking to them and getting alternative phone numbers, you can call them at if there's an issue that we need to reach them. There's a lot of -- a high-touch model has a little more cost in it, but has advantages.

Now at this point, only about half of our customers actually walk into a branch to get a personal loan. And so what we've done is we've built relationship tools, and we built the ability that depending on the customer, you can -- we can serve you in a variety of ways. If you think about our branches, our average branch manager has 14 years tenure. They're in the community. I stop by branches all the time. And you see customers and I say, why you come back here? I say, "Oh, why come to OneMain? And he said, this is my third loan in 20 years. People always treat me right. One time I lost my job and you help me through it and you didn't just foreclose on it and didn't hurt my credit record, and I got a job within 2 months, a lot of people would have cut me off."

And so there's real deep relationships in the community, long-tenured branch team members. And you can think of them as little entrepreneurial pods, like 3 to 7 people in a branch. They both make loans and collect. And so they're really set up not to like push loans out the door, but to get people in loans they can afford and they can pay back. And they're paid on delinquency as well as loan production is part of their payments. So we want them to only make loans where they can afford. With that said, we have a whole network of call centers that take overflow application, capacity -- can help balance out capacity, specialized. We've now moved a lot of like setting up the loan application process and scheduling appointment out of the branch and then they just show up in the branch to have the real value add. And then we built all sorts of digital tools that we've talked about.

And so our view is branch is a huge competitive differentiator. Our 1,300 branches, if we were a bank, would be the seventh largest branch network in the country. So most people can drive to a branch in the country. But we also have like a really world-class call center operation. And then we have really good digital tools. And so our philosophy is simple stuff, change payment date, check your account balance, et cetera, try to push everyone as far digitally as you can. Things that are repetitive and aren't relationship-based, get them into the call center and keep the branches for high-touch in-person interactions. And we think it's the right model to serve our customer and to have a long-term and enduring franchise.

And the last thing I would mention just since we're here in case people bought -- I mean, these are not bank branches like in the fanciest real estate on the corner of a town in America. Like our branches are in shopping centers kind of strip mall kinds of things or in a Class B office building on the second floor. And so the real estate cost isn't wildly different between a branch and a call center. And so you can think of them as like 1,300 distributed call centers as well, but they serve their local community.

One thing that you mentioned in your answer, I think that sometimes gets lost is the branch does collections, early-stage collections, the branch managers actually get paid on loan performance, it sounded like, we'll see and they're like entrepreneurs.

Production and delinquency. So it's a balanced scorecard, which tries to incentivize people. Again, our business is extending responsible credit. So we want to give credit. So we want to give people access to credit, but we want them to be able to pay us back. That's good for them. That's good for us.

Yes. Yes. No, I think that does get missed sometimes when people look at it and they're like, 1,300 branches, like inefficient, like to your point. But anyway, let's turn to capital returns. You just upsized your buyback in the third quarter last year, I believe. Just talk about capital priorities over the next year. How do you think about M&A versus buyback at the current price? What's more attractive to you?

Yes. Look, our capital stack and priorities are pretty clear. First, we're going to invest in the business. So we're going to make every loan. We're going to put that 15% equity into every loan, credit card, auto loan that meets our return thresholds because it's -- that's good use of capital. Then we're going to invest in our platform. So whether it's people, technology, digital, underwriting, data so that we have long-term enduring franchise.

After that, we've got a healthy dividend that's about 7% at the current share price, which has been a differentiator, I think, for us with the investor community. It puts kind of a floor on returns that people are going to get. And then excess capital, we look at opportunistically. We've recently decided that -- or we recently leaned -- we've had a buyback program for a while, but the Board just upped it to $1 billion going through 2028. We -- fourth quarter, we bought more than double in the third quarter and more than double of the whole year of 2024. So you can see the trajectory. We don't have like a set plan, but we're pretty much -- we want to stay at our -- in the leverage range we've committed to the rating agencies. We want to invest in the business, have buybacks.

The leftover or the excess capital generation, our bias is to share repurchases now. We think it's a good use of capital. It's a good return of capital to our shareholders. We're always looking at M&A opportunities. I've been here 7 years. We've done 2 tuck-ins. We bought a financial wellness platform, and we bought Foresight. They were both very small. We're quite discerning. Our M&A filter is strategically, does it make sense? And is it going to accelerate our growth and profitability plans.

Financially, does it make sense? The price makes sense? Is it accretive and for shareholders? And execution, like can we execute because a lot of M&A, there's execution. Again, we don't think we need -- we've got a very good organic growth plan. And so that's why you've seen us lean into buybacks because we think it's the best allocation of capital right now. If the right M&A thing came up, we would definitely consider it, but there's nothing imminent.

Got it. We have a couple of minutes left. If anyone has any questions, anyone? Not seeing any hands. So maybe...

I think he's got a...

Yes, Jenny.

She can answer, she can't ask. It's our CFO, Jenny Osterhout.

So maybe we'll just finish off then with, is there anything that you think isn't well understood by the investment community about OneMain? Anything you want to hit on before we finish here?

I think people understand it, especially people who follow our stock. But I would say we talked about balance sheet, and we talked about credit. I think people hear about a wholesale funded nonprime lender, and they think it's a lot riskier than it is. And if you run it in a very disciplined manner, our balance sheet is this fortress balance sheet, like we're not going to have issues with our balance sheet. And so that's how we've put it together to not have issues. And I think the investors have understood that through the 2022 cycle where a lot of people couldn't get funding, and we had plenty of funding and no issues, I think it kind of proved the point.

And then the nonprime consumer, if you underwrite them well and if you set it up well and if you have a relationship with them, the actual volatility of losses is lower than a lot of prime lending. And so we had at our Investor Day a couple of years back, a chart that showed our volatility of losses over an 8-year period was -- the standard deviation was 1.4 or 1.3. I think prime was 1.4 for like lending. And our competitive set who had even a little bit higher FICO than us, their losses were double ours and their volatility of losses were like over 3. And so if you run these businesses correctly, you actually have pretty low volatility of loss and the balance sheet, you can -- you don't need to be a bank to have an incredibly secure balance sheet. If you're just conservative and you pay extra money to have like lines and everything else is just backup liquidity.

And so I think that's a really important point is we built our business through the cycle. I mean you can make a little less money in a recession, you make a little more when you're not, but it's built as an enduring franchise through the cycle.

Got it. No, that all makes sense. With that, we're at time. So thank you.

Thank you, Doug. Thanks for having me.

Good morning, everyone. Welcome to today's OneMain Financial Fourth Quarter 2025 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Poillon, Head of Investor Relations. Today's call is being recorded. [Operator Instructions]

It is now my pleasure to turn the meeting over to Mr. Peter Poillon. Please go ahead, sir.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the fourth quarter 2025 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, and 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, February 5, 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 the question-and-answer section.

I'd like to now turn the call over to Doug.

Thanks, Pete. Good morning, everyone. Thank you for joining us today. Let me start with a brief overview of the company's 2025 performance. It was an excellent year with very strong earnings growth and meaningful progress on our strategic initiatives. All of the momentum we have built over the past few years came through in our 2025 results.

Full year C&I earnings per share were $6.66, an increase of 36% year-over-year. capital generation was $913 million, an increase of 33%. This outstanding earnings growth was driven by significant revenue growth, accelerated loss improvement and continued focus on efficiency. And once again, we exhibited our balance sheet strength, raising $5.9 billion in 2025. Our receivables grew 6% to over $26 billion despite maintaining a tight credit posture throughout the year. Receivables growth was supported by focused initiatives to drive more high-quality personal loan originations as well as important contributions from our auto finance and credit card businesses.

Revenue grew 9%, supported by higher yields in a constructive competitive environment. C&I net charge-offs were 7.7%, down 46 basis points from 2024, and consumer loan net charge-offs came down 63 basis points from last year, benefiting from the proactive credit actions we've been taking the last several years.

In 2025, we continued to make significant progress across all three of our businesses, positioning the company for continued earnings growth in 2026 and beyond. Growth in our personal loans was driven by a series of targeted initiatives. Our debt consolidation product continues to grow. This valuable product, which allows customers to consolidate debt into a single, predictable amortizing loan typically reduces the customer's payment by about 25% on the debt they consolidate. We have also used data to reduce friction and serve more customers, including automated income verification and pre-populated auto collateral before a team member talks to a customer about a loan application. And we continue to increase our use of bank data that enables accurate real-time credit decisioning.

We added a streamlined renewal product for our best customers and also created a new product that links a paycheck directly to our payment system further expanding credit and reducing risk. We expanded our channels including offering our best card customers a personal loan through our mobile app, allowing us to acquire new loan customers with 0 acquisition cost. And this month, we are introducing a new secured lending product just for homeowners, securing the loan with home fixtures, which comes with beneficial pricing similar to our auto secured loan. All of these products allow us to drive originations volume without loosening our underwriting standards.

This year, we've also continued to optimize our branch-based operating model to improve customer engagement while driving performance and efficiency. We've expanded the use of central sales and collections to seamlessly serve customers in real time during periods of high volume. In this month, we launched a new AI-powered tool that gives our branch and central team members faster, easier access to internal policies and guidelines. By transforming enterprise knowledge, into a plain language, intuitive experience, this AI capability is designed to boost productivity, accelerate decision-making and allow our teams to spend more time serving customers.

This launch is just one example of our journey to embed AI across the organization to drive both efficiency and revenue. Initiatives like these across our product operating model, data and analytics are impactful in the aggregate as they drive efficiency, improve our offers and attract more customers.

Turning to auto. In 2025, we grew receivables to $2.8 billion. This was a year of significant progress in building a scalable auto finance platform. We finished the migration of OneMain's legacy auto lending operation onto our new technology infrastructure. We also grew our dealer sales force this year and expanded our business into attractive new dealerships and markets.

And I'm excited to share that we recently partnered with Ally Financial to form a pass-through arrangement on their Clearpass program. We've already rolled out to about 1,700 dealers and will be scaling the program further this year. We look forward to a very successful partnership with Ally in 2026 and beyond.

Turning to credit card. We continue to build momentum in 2025. Receivables grew to $936 million and accounts increased to nearly 1.1 million customers at year-end. We continue to refine our product offering this year. We introduced a number of new cards, adjusting reward levels, credit lines and other features. This allows us to tailor our unique product offering of payments equal progress to more customers while also managing credit and risk. As we scale the business, improvements in digital engagement are driving efficiency. For instance, in 2025, our digital efforts led to a reduction in customer calls per account, reducing marginal operating expense per account by 25%. While credit cards remain a small percentage of our overall business, making up just 4% of receivables we're seeing progress in its performance. And as we drive efficiencies and reduce losses, we are seeing an acceleration in capital generation in the card business.

During 2025, we also continued to help our customers manage their financial lives. We had continued adoption of our financial wellness platform on our mobile app. The platform provides customers with three financial wellness tools, such as credit score monitoring, budgeting, expense tracking and bill negotiation. In 2025, we had a 36% increase in customers using the product. Our free financial education program, Credit Worthy by OneMain has now reached more than 600,000 high school students in nearly 5,000 high schools, or 18% of all high schools in the United States. Many of our team members volunteer and engage with students throughout the year, making a difference in the communities where they live and work. We're proud of the impact Credit Worthy is having on students, delivering early practical financial education that helps them build the skills they need to responsibly manage credit and build a brighter financial future.

Additionally, in 2025, we saw continued recognition of the special workplace we have built at OneMain, as we were recognized by the Best Practice Institute as one of America's Most Loved Workplaces for the fourth year in a row. This distinction is based on team member feedback, and reflects the culture we continue to build, one grounded in high-performance, teamwork, respect, personal growth, and a shared commitment to serving our customers. This culture is a real competitive advantage for our franchise, supporting employee engagement, strong execution, deep customer relationships and consistent outperformance over time.

Now let me turn to the great results for the fourth quarter. C&I adjusted earnings were $1.59 per share, up 37% from last year. We grew capital generation by 23% to $225 million. Our receivables grew 6% year-over-year and revenue grew 8%. Our 30-plus delinquency for consumer loans was 5.65%, in line with expectations and better than pre-pandemic seasonal trends. We also continue to see strong recoveries in the business and better roles from delinquency to charge-offs. C&I net charge-offs were 7.9% in the quarter and consumer loan net charge-offs were 7.6%. We saw a significant improvement in net charge-offs in 2025. Our overall portfolio continues to perform in line with our expectations and we remain confident that our careful management of credit will lead to losses continuing to improve in the coming years.

Moving to the auto finance business. Receivables increased to $2.8 billion at year-end. Losses remain in line with expectations, and we are excited about the future prospects of this business. In our credit card business, we added $102 million in receivables and 88,000 customer accounts during the quarter. We're really pleased that the losses in the card business improved measurably in the second half of 2025. This performance underpins our confidence in the business in 2026 and beyond.

Let me now turn to capital allocation. Our first use of capital is originating loans that meet our risk-adjusted returns. We also continue to invest in the business to meet customer needs, drive efficiency and build an enduring franchise. Our regular annual dividend, which is currently $4.20 per share, represents an approximately 7% yield at today's share price. And we are committed to a programmatic share repurchase program. In October, our Board approved a $1 billion share repurchase program through 2028. In the fourth quarter, we repurchased 1.2 million shares for $70 million. That is up from $32 million of repurchases in the third quarter, and is double the $35 million repurchased in all of 2024.

Unless we see other more attractive strategic uses of capital, we would expect incremental capital returns to be weighted more towards share repurchases in 2026 and beyond, while maintaining our commitment to the dividend.

As we enter 2026, the consumer continues to be supported by some positive trends, including low unemployment. With that said, we saw a slightly weaker labor market in 2025 and inflation has been persistent. So we are maintaining our conservative underwriting posture. Importantly, OneMain customers remain resilient, and we feel good about our portfolio which reinforces our outlook for continued capital generation growth in 2026.

With that, let me turn the call over to Jenny.

Thanks, Doug, and good morning, everyone. I share Doug's enthusiasm about the strong financial results achieved in 2025 as well as the notable progress made toward our long-term strategic priorities. I'll begin today by focusing on the quarter and then I'll get into expectations for 2026.

Our fourth quarter results demonstrated continued improvement across our key financial metrics, highlighted by strong revenue growth, steady credit performance and capital generation that grew 23% year-over-year. We continued our active management of the balance sheet this quarter, raising $1 billion in the unsecured market, bringing our total funds raised in 2025 to $5.9 billion. We also accelerated our pace of share repurchase volume in the fourth quarter. Combined with our dividend, total capital return to shareholders increased to $639 million in 2025, up 20% from 2024.

Fourth quarter GAAP net income of $204 million or $1.72 per diluted share was up 64% from $1.05 per diluted share in the fourth quarter of 2024. C&I adjusted net income of $1.59 per diluted share was up 37% from $1.16 per diluted share in the fourth quarter of 2024. Capital generation, the metric we use to manage and measure our business totaled $225 million, up $42 million from $183 million in the fourth quarter of 2024, reflecting strong receivables growth across our products, higher portfolio yields and good credit performance. Managed receivables finished the year at $26.3 billion, up $1.6 billion or 6% from a year ago. Fourth quarter originations were $3.6 billion, up 3% year-over-year, in line with recent seasonal trends. Consumer loan originations for the full year were up 8%.

We are pleased with our growth trajectory. We have laid out before, our underwriting approach remains conservative, designed to generate a minimum 20% return on tangible equity even with a stress overlay on losses. So while we continue to actively manage credit, we have also been growing through enhanced customer experience, personal loan product innovation, and our new products. Combined, this has helped to drive year-over-year annual originations and receivables growth, giving us solid momentum going into 2026.

Turning to yield. Our fourth quarter consumer loan yield was 22.5%, up 26 basis points year-over-year. We continue to benefit from pricing actions taken over the past few years, with a partial offset from the increasing mix of our lower loss, lower yield auto finance receivables. As we look ahead to 2026, we expect consumer loan yields will remain around this level, assuming a steady product mix and competitive environment throughout the year.

We also saw a measurable improvement in our credit card revenue yield in the quarter, which was up over 100 basis points from the fourth quarter of 2024. As we look to 2026, we expect to see this continue supporting overall revenues as the book grows.

Total revenue was $1.6 billion, up 8% compared to the fourth quarter of 2024. Interest income of $1.4 billion increased 8% from fourth quarter last year, driven by receivables growth and the yield improvements I just mentioned. Other revenue of $195 million was up 10% from last year, primarily due to higher gain on sale related to our larger whole loan sale program and higher credit card revenue as the card portfolio continues to grow.

Full year revenue growth was 9% year-over-year. This was a function of the book growing portfolio yields reflecting the pricing actions we started in 2023 and revenue increases as the card portfolio matures. Interest expense for the quarter was $323 million, up 4% compared to the fourth quarter of 2024, driven by an increase in average debt to support our receivables growth, partially offset by a lower average interest rate as our interest expense as a percentage of average net receivables fell to 5.2% this quarter, down from 5.3% in the fourth quarter of 2024. Full year interest expense came in at 5.3%. Strong execution across our multiple financings this year as well as opportunistic liability management, most notably the refinancing of our 9% debt in the third quarter enabled us to reduce our funding costs below our initial 2025 expectations.

Looking to 2026. Over 90% of our expected average debt is on the books already at fixed rates, and we have good line of sight to 2026 funding costs and expect interest expense as a percent of receivables to be similar to 2025 levels.

Fourth quarter provision expense was $542 million, comprising net charge-offs of $492 million and a $50 million increase to our reserves driven by the growth in our receivables during the quarter. Our loan loss reserve ratio of 11.5% was flat compared to both last quarter and last year.

Policyholder benefits and claims expense for the quarter was $48 million, down modestly from $49 million in the fourth quarter last year. As we look forward, we expect quarterly claims expense to increase slightly to the mid- to high $50 million range due to growth in the book.

Let's turn to credit, starting on Slide 10. 30-plus delinquency on December 31, excluding Foresight, was 5.65%, and flat to last year's particularly strong performance. As shown on Slide 11, we continue to see delinquency performance better than pre-pandemic benchmarks and in line with expectations, as 30-plus delinquency increased 24 basis points quarter-over-quarter, below the pre-pandemic sequential increase of 33 basis points.

You'll also note that 2024 outperformed our pre-COVID benchmarks, increasing only 8 basis points sequentially. This strong delinquency performance at the end of 2024 and drove accelerated net charge-off improvement in 2025. While the front book, which we define as consumer loan originations post August 2022 credit tightening continues to perform in line with expectations. The poor performing back book remains a headwind, it is still 17% of our 30-plus delinquency despite comprising just 6% of the portfolio. At this point in time, we would typically expect the back book to make up about half as much in total delinquencies. This higher contribution to delinquency is due to the weaker performance of the back book as well as pace of originations growth due to our conservative underwriting posture over the past several years, given the macroeconomic environment.

Moving to net charge-offs for the quarter, as shown on Slide 12. The Fourth quarter C&I net charge-offs, which include the results from our small but growing credit card portfolio were 7.9%, flat year-over-year. These results were aided by strong recoveries in the quarter, in line with positive trends over the past few years. Recoveries grew 16% year-over-year to $89 million, representing 1.4% of receivables. For the full year, C&I net charge-offs declined by 46 basis points to 7.7% towards the lower end of the guidance range we provided at the beginning of the year.

Fourth quarter consumer loan net charge-offs, which exclude cards came in at 7.6%, down 7 basis points year-over-year. For the full year, consumer loan net charge-offs declined by 63 basis points year-over-year, a steep decline from 2024.

Credit card net charge-offs improved 22 basis points year-over-year to 17.1% in the quarter. So we are getting close to our target range. In the fourth quarter, we saw the credit card portfolios 30-plus delinquency performance improved by 83 basis points versus the prior year. This trend is a positive indicator of future performance that we expect will benefit card net charge-offs as we look into 2026. As a reminder, while we really like our credit card performance, it will pressure C&I losses higher as it becomes a bigger part of our overall portfolio.

Loan loss reserves ended the quarter at $2.9 billion. Our loan loss reserve ratio remained flat, both sequentially and year-over-year at 11.5%. The macroeconomic assumptions in our reserve calculations remain fairly consistent with prior periods and assume what we believe is an appropriate level of reserve considering the continued uncertainty around inflation and unemployment in the quarters ahead.

We will continue to assess reserve levels and expect that we would reduce our coverage level as the uncertainty around the macro subsides and we continue to see improvement in the performance of the portfolio. Given our evolving product mix, we expect our reserve coverage to remain around the current level over the near term.

Now let's turn to Slide 13. Operating expenses were $443 million, up 5% compared to a year ago as we continue to invest to drive future growth. The 6.7% OpEx ratio this quarter compares to 6.8% last year and was in line with expectations. We strategically invest in future growth through technology, data analytics and our new products while also closely managing cost to maximize profitability. We take the dual task of cost management and investment for the future as fundamental to how we operate the business, and we continue to see meaningful opportunities to invest while improving our operating expense ratio. As we look forward, we are confident that the business will continue to provide operating leverage in the years to come.

Now turning to funding and our balance sheet on Slide 14. During the quarter, we continued to optimize our balance sheet. We issued a $1 billion unsecured bond at 6.75%, maturing in September 2033. The offering was well subscribed as we continue to attract both new and returning investors to our program. A portion of the funds were used to redeem the remaining approximately $400 million of our [ 7.125% ] unsecured bonds originally scheduled to mature in March of this year. This was redeemed last month. We now have no scheduled maturities until January of 2027. Giving us added flexibility on funding amount and timing in 2026.

In 2025, in total, we issued $4 billion in unsecured bonds through 5 separate issuances and 2 revolving ABS issuances totaling $1.9 billion with all offerings seeing healthy demand, resulting in attractive pricing. We believe our strong record of issuance across both the secured and unsecured markets reinforces our position as an industry-leading issuer with best-in-class execution. We were able to take advantage of market conditions to reduce our secured funding mix throughout the course of the year to 50%, down from 59% and in late 2024, while simultaneously reducing our interest expense as a percentage of receivables. This balanced secured mix provides us with more flexibility as we look at our funding options for 2026.

Last quarter, we mentioned the expansion and extension of our forward flow program. The $2.4 billion program runs through mid-2028 with approximately half executed in 2026. As we look forward, higher loan sales in 2026 will impact our other revenue line item with slightly higher quarterly gains on sale and higher servicing income over time. We believe this program is indicative of the attractiveness of our differentiated business model and provides us additional diversification in funding, benefiting our overall public markets program.

At the end of 2025, our bank lines totaled $7.5 billion, unchanged from last quarter, and our unencumbered receivables grew to $11.8 billion up about $900 million from last quarter. Our net leverage at the end of the fourth quarter was 5.4x, comfortably within our targeted range of 4 to 6x. Overall, we feel great about the strength of our balance sheet and ability to continue to opportunistically issue when markets are most attractive in the quarters ahead. I'll summarize 2025 by simply saying it was an outstanding year as we met or exceeded our expectations across the board in a period of uncertainty.

Now let me look ahead to 2026. We expect managed receivables to grow in the range of 6% to 9%, supported by continued innovation in our customer experience, personal loan offerings and growth in our newer products. This assumes we continue to maintain our current conservative underwriting posture. We expect C&I net charge-offs in the range of 7.4% to 7.9%. As a reminder, C&I includes consumer loans and the growing credit card portfolio. Our guidance assumes the softness in the current labor market continues throughout 2026, along with persistent inflation. To the extent we see macro improvement, we could come in towards the lower end of our range. We expect losses to follow seasonal patterns above the range in the first half of the year and below the range in the second half.

Finally, we expect the full year OpEx ratio to be modestly better than last year at approximately 6.6% as we continue to manage expenses and invest in our new products and digital capabilities, that aids our customer interactions and benefit our team member productivity and effectiveness.

All of this leads to our expectation for continued capital generation growth in 2026. We see really good momentum looking into 2026 and beyond, and we're confident in our ability to drive shareholder value by continuing to provide value to our customers.

So with that, let me turn the call back to Doug.

Thanks, Jenny. Let me end by saying we continue to feel great about the key drivers of our business. We're serving more customers through continued product innovation and the ongoing scaling of our auto finance and credit card businesses, positioning OneMain as the lender of choice for hard-working Americans. We continue to manage credit carefully through an evolving macroeconomic environment, driving market-leading risk-adjusted returns. We are investing to support growth and core capabilities across products, while maintaining tight expense discipline. And our industry-leading balance sheet that is highly diversified with a long liquidity runway continues to be a key competitive differentiator. I've spoken before about the enduring franchise value we have created at OneMain. We built a lot of momentum over the last several years, and are excited about continuing to drive capital generation growth and build shareholder value in 2026 and beyond.

I'll close by offering my thanks to all of the OneMain team members for their great work that made 2025 such a success and for their ongoing commitment to our customers.

With that, let me open it up for questions.

[Operator Instructions] We'll go first this morning to Moshe Orenbuch of TD Cowen.

Great. I know that both you, Doug and Jenny have talked a little bit about your outlook for credit. Doug, you had said kind of at a high level that credit should continue to improve. Jenny, you had sort of said it will be a little worse than seasonal patterns in the first half of the year, a little better in the second half. I guess, is there a way to kind of tie this all together, I mean, is it really just that 17% of delinquencies moving through? Or are there other things going on kind of as you think about your guide for the full year losses kind of showing stability as opposed to improvement for 2026?

Thanks, Moshe. Let me chime in here. So I think part of this is 2025 was really a remarkable year. I mean you can see that we really saw a major loss benefit. We talked about this, but C&I net charge-offs coming down 46 basis points and consumer loan losses coming down 63 basis points. They're really coming off of the higher losses. And so that's allowed us to generate a lot of capital and increase our cap gen by 33%. So we're coming down from there.

And we really like what we're underwriting. So if I then take that to looking forward, we see the vintages in the front book performing in line with our expectations. I talked a little bit about some of that pressure that we see from the back book. That's the pre-August 2022 back book, and how that's still outsized in terms of its contribution to delinquency and losses.

And then the other piece to keep in mind for C&I is there's some impact on losses from cards. In 2026, it's adding about 10 basis points more than it did in 2025, which was about 35 basis points. So we are seeing some positive trajectory there.

And then I just remind you that our loans target at 20% return on equity threshold. So we do see very good profitability when we look at the risk-adjusted returns.

So that guide that we gave you gives you a range. It also assumes that soft unemployment and persistent inflation, we spoke about earlier. And so to the extent the macro improves, we could see some benefit there.

I also want to go back to -- I think we see it higher in the first path and lower in the second half. I wouldn't expect for it to see worse than sequential just to go back to the beginning in your question.

Okay. All right. On a separate topic, I think it was almost a year ago that you put in the application for the ILC, assuming that is approved, can you talk a little bit about what you're going to be doing? What are the first steps and what that's going to mean for pricing and loan growth?

Yes. Yes, we applied for an ILC license. You've seen a couple have been granted this year, people who actually -- auto companies who had been there quite a bit before us. And as I've said before, we think we have a very strong application. We think we're qualified to be a bank, and we're progressing through the application process.

I think what -- the time line, a, I won't predict any time line, whether we'll get it or not. And if we get it, when it would happen. So the time line would be, it would take about a year to set it up. And so any positive effects are probably a 2027 event, assuming something happened this year. I do think it will be accretive to the strategy. I do think we would be able to serve more customers. I think we'd have a more standardized rate structure, operational structure nationwide. We have our own bank for our card business, and we have access to deposits which would even further diversify our really strong balance sheet.

And so we have a really strong business plan that we feel great about without an ILC, this would be additive and accretive to it, and we're very positive and hopeful it will come to pass.

We go next now to John Hecht of Jefferies.

You talked about rolling out the new take home merchandise backed products, the Ally program are those programs on products? Are there pilot periods of those or because they're different relative to, say, like the credit card that you're going to roll them out pretty quickly? How do we think about that?

Yes. Look, all of our -- two different things. The homeownership product is in our personal loan. Every time we roll something out, whether it's expanded debt consolidation, even pre-populating wins in auto for our customers or our streamlined renewals or a link to paycheck. We always pilot them and are looking to see our -- we have certain models that say, what would do to customer pull-through rate? What will -- how will the credit perform? How is the pricing and relationships to the credit because, as you know, we just -- we manage risk-adjusted returns. And so for the homeowner product, we have launched -- we'll launch it as a pilot like we do for everything else, make sure it's performing well. And if it is performing well, we'll do a full rollout.

I think the Ally partnership is just getting started. That's a partnership where an auto dealer sends -- an auto dealer gets to choose where it sends applications. It sends one to Ally, and we're now in the pass-through, which is basically a turndown program, ally doesn't take it, but we're not one of their partners. And in the pass-through. We started with dealers that we already had relationships with. So we already had a contract, so we could book loans with and then we're going to be rolling it out further. So that's probably -- I think of that as it's not pilot, but it's at the very beginning of a partnership and any partnership, you want to roll out in a paced and responsible fashion.

Okay. And then we all know that debt consolidation is one of the primary, I guess, use cases of the product. I'm wondering what are other main use, I guess, drivers of demand? And what do those tell you about, call it, the state of your borrower.

Yes. I mean, look, the demand has been pretty similar. About 1/3 is usually debt consolidation, where people are taking a whole bunch of other credit they have, consolidating it onto a single amortizing loan, getting control of their finances and getting -- as we told you, usually, our average customer has about a 25% decrease in their monthly payment when they did debt consolidation with us. There's always a chunk of customers, and it hasn't changed a lot for emergency needs, whether it's a hot water heater, brakes or they got car repairs or something else like that. And then there's a whole set of customers who are using it for discretionary. We have customers who want to pay for their granddaughter's horseback riding, or they want to take a vacation or they're rolling over a loan from somewhere else.

And so I don't think there's any great -- there hasn't been a lot of changes, John. And so I don't think it's stating anything new about -- I don't think the use of funds is saying anything new about our customer right now.

We'll go next to now to [ Aaron Saganavich of Truist Securities ].

In terms of loan growth, the originations for the quarter year-over-year were 3% and total loan growth of 6%, but the guide for 26 is 6% to 9%. What what's some of the optimism that you're laying in there while you're still layering that 30% kind of credit overlay.

Thanks for the question. So you're right. In terms of the quarter, we saw 3%. Really, if you look at the whole year, we had 8% origination growth in 2025. All of that -- that 8% also had pretty tight underwriting standards. So as we look to next year, we did assume that same macro environment, and we assumed we kept those underwriting standards. It's really some of the efforts that Doug just talked about in terms of the innovation on the personal loan product. But I'd also say it's team member effectiveness. So as we look at ways to improve the productivity of our team members and help them to find things faster and be able to help customers make sure they get the right offer, look at the right offer and how we can digitize some of that.

And then there's also the efforts we've been working on in terms of our new products and their share of the book. If we look at 2025, the new products contributed about 42% of our growth. So we're expecting continued growth in the new products as well as for next year. So when you pull that all together, it's driving our expectations of that guide of 6% to 9% for 2026.

And I'd just say, growth is an outcome for us. We are always looking to meet those return hurdles that I mentioned before, so above the 20% return on tangible equity. And we really see opportunities next year. We work on those -- we always have -- I like to think of it almost like R&D going. And so I think really, what you're seeing is the output of all those behind-the-scenes efforts that we've had going in the background this year.

Got it. And then in terms of capital return, the share repurchases were nicely higher in the quarter and you have the larger program that you authorized recently. Can you talk a little bit about share repurchase pace? Is that going to be up notably in 2026?

Yes. Look, we -- as I mentioned before, we're very committed to our healthy dividend. And -- but we think, unless we see another use of capital, the incremental capital generation and the excess capital or biases towards share repurchase. We never predict exactly what it will be as we mentioned, fourth quarter was double what all of 2024 was. I think you can do the math on how much capital we're generating, which is a lot more than the last couple of years in 2025, we did. And we said we think we're going to generate more this year, take out the dividend, the amount of capital we need for growth and for expense and investing in the business. And so our bias will make decisions on an ongoing basis is to put the majority of the rest of that into share repurchases.

We'll go next now to Mihir Bhatia of Bank of America.

I just want to ask about tax refunds. A lot of people are obviously calling for higher tax refunds this year. How are you thinking about tax refunds. Is that in your guide? And if I can just ask on that topic, can you just talk about the implications if you get higher refunds if we do see higher tax refunds on your customer base, would that be like both on the credit and on the like loan demand side, if there is any, typically?

Yes. So tax season is obviously a huge focus area for us. I mean it's a driver of our credit performance and drives that normal seasonality that you see where refunds typically improved delinquencies in the first quarter and drive losses down into their seasonal low in the third quarter.

We don't have an expectation yet for what's going to come this tax return season. It just began. And really for us, to the extent we see those returns come in better than expected, that would bring you into the low range. So that should give you some sense sort of where it would take us.

And then just on the loan demand, is there any loan demand side impact of...

Yes. That's fair. So we do typically see low demand in the first quarter, and some of that is driven by tax returns. I think, again, we talked about our the growth that we're expecting and a lot of that growth being driven by new -- either new product innovation on the personal loan side or in our newer products in auto and credit cards advancements that we're making there. So I'm not expecting -- if you saw an increase in tax return season, I'm not sure that I would expect for it to really mute growth too much.

Got it. And then if I can ask on NIM on really interest yield because you talked about interest expense already, Jenny. But just given the card product, some of the newer products that are coming on, anything you can give us on just how we should expect interest yields to trend this year?

So consumer loan yield today is at 22.5%, that's up about 26 basis points from last year in the fourth quarter. So -- and if I look at for the year -- for 2025 as a whole, we were up 43 basis points. So you're going to get some benefit from those yields going up. Depending on product mix, it's going to determine what our yields will be going forward. Auto comes with lower yields, but obviously comes also with that better credit performance. We've seen most of the gain that we've had from that increased pricing that I mentioned earlier since mid-2023. And we really like where our yields are. So I think -- and the risk-adjusted returns that we're generating. So I really think that the yields for the go forward, I'd expect something similar to what we have today.

We go next now to Mark DeVries with Deutsche Bank.

I have a related follow-up to the last question. Jenny, if you can just talk about the decision to kind of drop the revenue growth guide from your full year guidance. It sounds like from a yield perspective and an interest expense perspective, you expect that to be flat, so spreads kind of unchanged. Should we generally expect revenue growth to kind of track your managed receivable growth guidance? Or is there something about kind of the ramping up of the pass-through that could create a little bit more lumpiness in revenues relative to just kind of the receivables growth?

Yes. So you're right. I think we gave you all the pieces, but we didn't sort of cook it for you. So we had really strong revenue growth in this year. So that 9.3% revenue growth, and that was driven by both the portfolio growth and those improving yields I just talked about. So then if I just talk about the pieces that we've given you, and I'll tick through them, but it's very similar to what you mentioned. It's that flat yield year-on-year. You're basically going to see revenues rise with the asset growth. So with the 6% to 9% managed receivables.

One thing to consider is, we also have that whole loan sale program that I mentioned, which gives a little bit of benefit to revenues, but it's also growing to about -- it's about half of the $2.4 billion in 2026. So you need to think about that and think about the on-balance sheet growth in terms of the revenue growth, and that should give you a pretty good sense of where it's going.

Okay. Got it. And then I had a separate question about the whole loan sales and how you think about that longer term? I understand that it's like a nice funding diversification strategy. But to your credit, you guys have built very strong liquidity, a lot of funding flexibility. How do you think about just kind of giving up some of those returns versus just keeping them and having confidence in your ability to fund just through the unsecured markets longer term?

We think a lot about it. You're right. I mean, I think we see -- we have great access to capital in the public markets. And I think you can really see that this year. I mean it was a pretty remarkable year with that $5.9 billion that we were able to raise. And -- but we always look at opportunities. We think of the whole loan sale program as a way to provide funding flexibility. And so really, when we look at it, we're looking at the economics and the terms to make sure it makes sense for us. So I think that $2.4 billion program that we have, we think it has attractive pricing and we like that diversification that it gives us for our balance sheet.

And really, it's about those considerations and how it helps us meet our strategic goals and thinking about those economic trade-offs. Obviously, it gives you a little bit of higher gain on sale and then you get the servicing income. So there's a nice diversification and having different revenue streams. But that gives you sort of some of the components for how we think about it.

The only thing I would add also is, it gives us a lot of strategic optionality. We have way more demand. A lot more people would love to buy our loans. We're pretty careful about it. And as Jenny mentioned, it's diversification 5 years or so ago, we got the pipes working, so the whole thing worked. It also allows us to think about it's not what we do now, which is, are there things that are unique platform can do, which is generate now a whole range of different lending products underwrite them attract customers and service them. And are there things we don't want on our balance sheet in the future that others might want on their balance sheet. And so in addition to being a nice valuable accretive piece of our current balance sheet. It also is great for strategic optionality for the franchise.

We'll go next now to Rick Shane with JPMorgan.

When we look at the charge-off rate on the credit card book, it has improved, and you guys have talked about that. And I think there really are probably three reasons why, one is fundamental improvement, the second is seasonality, and the third is denominator effect from the growth. When we think about the card book long term, what is your target loss rate? Because at the moment, yes, the actual reported net charge-off rate has come down, but the lag loss rates flatten out a little bit. I'm curious where you think this is going to go.

Happy to talk about that. You're right. We saw those net charge-offs improve by about 22 basis points from last year to 17.1% in the fourth quarter. We expect for those to continue to improve based on what we've seen in card delinquency performance, which I mentioned is down 83 basis points. So it gives you a little bit of a go-forward guide. And it's a step towards bringing our book into that expected long-term range, which I would say is in the 15% to 17% range. We've really been able to drive those. You mentioned some of it. But through some of that typical portfolio seasoning, but also a lot of actions that we've taken to improve our servicing and recovery capabilities. We ran this new product, almost like a startup. So you don't focus on some of those later pieces right at the very beginning. So we did find still there were areas that we could improve.

And I'd just say, and remember that our revenue yields on cards allows us room to be able to do that and cushions those higher losses. So overall, the credit card portfolio, we think, remains quite strong, and we think we see that as a way to support our continued capital generation in the years ahead.

Got it. That's very helpful. And to follow up on that a little bit and capital generation is exactly what I wanted to talk about. You guys have laid out sort of the plan. And clearly, you are forming more capital than you can redeploy into the business and you were returning it to shareholders in a very deliberate way. I am curious when you think about capital held against your traditional consumer loans versus your growing credit card portfolio, is the capital that you hold against the card portfolio going to be higher given the higher loss expectations?

Well, I mean, I think if you're talking about reserves, we do give -- our reserve levels are higher. So our card reserve levels are around 22%. But if I look overall at our book and how we think about growing the card, I mean, we really manage capital across the business, and we're focused on being able to manage to this 20% return on tangible equity hurdle. And we apply -- we've been talking about how we also apply additional stress, and we do that across all our products as well. So that's sort of how I would think about it.

And I think we feel -- I mean, especially on cards, we feel like it's going to be a great source of profitability for the future.

Folks, we are up against the hour. Let me just end by saying in 2024, we told our investor base that we've positioned our business for significant earnings growth going forward. This played out in 2025, and we're now generating very healthy earnings and capital generation. Our ability to drive losses down by -- over the last 3 years, carefully managing the book and finding great customers has been a major part of it. Despite the fact that there is persistent inflation and there was a slight uptick in unemployment, the customers on our book are performing really well, and we don't anticipate that changing this year. So we feel really good for 2026 and beyond, but especially 2026 to be another year of strong earnings and capital generation.

We thank everybody for spending time with us on the call. And as always, our team is available for follow-up. So thanks, everyone, and have a great day.

Thank you, Mr. Shulman. And thank you, Ms. Osterhout. Again, ladies and gentlemen, this will conclude today's OneMain Financial Fourth Quarter 2025 Earnings Conference Call and webcast. Again, thanks so much for joining us, everyone, and we wish you all a great day. Goodbye.

Welcome to the OneMain Financial Third Quarter 2025 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Poillon, Head of Investor Relations. Today's call is being recorded. [Operator Instructions]

It is now my pleasure to turn the floor over to Peter Poillon. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Let me begin by directing you to Page 2 of the third quarter 2025 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. And 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, October 31, 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 start by saying we're really pleased with our results this quarter. We had very good revenue growth and continue to see very positive credit trends. This led to excellent growth in capital generation, the primary metric against which we manage our business. We also made meaningful progress in our new products and strategic initiatives, all of which sets us up for significant value creation in the near and long term.

Let me talk about a few of the highlights for the quarter. Capital generation was $272 million, up 29% year-over-year. C&I adjusted earnings were $1.90 per share, up 51%. Our total revenue grew 9%, and receivables grew 6% year-over-year. Originations increased 5%, driven by our expanded use of granular data and analytics, combined with continued innovation in our products and customer experience. We continue to see positive trends across our credit metrics. Our 30-plus delinquency was 5.41%, which is down 16 basis points year-over-year as compared to up 2 basis points in the third quarter of 2024.

C&I net charge-offs were 7% in the quarter. down 51 basis points compared to the third quarter of 2024. Consumer loan net charge-offs were 6.7%, down 66 basis points compared to last year. We're really pleased with the improvement in net charge-offs year-over-year, which reflects ongoing careful management of our portfolio and the strong performance of recent vintages.

Despite some continued economic uncertainty, our customers are holding up well. Delinquencies are in line with expectations, losses continue to come down and we really like the credit profile of the customers we are booking today. Last quarter, I provided an update on some recent initiatives that are helping to drive originations in our core personal loan business, even as we maintain our conservative underwriting posture. They include a simplified debt consolidation product, new data sources that automate customer information to reduce friction in the application process, streamlined loan renewal for certain customers and creating a loan origination channel through our credit card business.

We are continually innovating across our company to expand reach, enhance offers and improve customer experience. For example, we've been expanding a strategy to increase customer eligibility by offering smaller initial loan amounts to some customers, then letting them grow with us as they exhibit positive credit behaviors. This has allowed us to expand our customer base without taking on more risk and provide more customers responsible access to credit. We are constantly optimizing and using data and analytics to find additional pockets of growth by fine-tuning pricing, loan amounts and product offerings at a very granular level.

Let me turn to the progress we are making in our Brightway credit cards and OneMain Auto Finance businesses. Across our multiproduct platform, we now provide access to credit to about 3.7 million customers, that's up 10% from a year ago. Much of the growth in our customer base is attributable to credit card and auto finance. In our credit card business, we ended the quarter with $834 million of receivables. And earlier this month, we passed the 1 million mark in credit card customers, a notable milestone for the business.

Since 2021, when we launched our card business, I have said it is strategically valuable and complementary to our traditional personal loan franchise. It adds a daily transactional product to our more episodic personal loan product. And credit cards create meaningful, long-term deep relationships with customers. The average card customer has a credit card for about 10 years. Our customers often start with a $500 or $700 line of credit, which can grow over time. A card customer is more engaged than a typical borrower, checking their balance, making payments and selecting rewards. Our average customer logs into our app every week. And we have the ability to offer customers alone or other products over time with 0 cost of acquisition since they are already on our platform. So with 1 million customers and growing, this business is very valuable to our franchise.

Additionally, I'm really pleased with what we're seeing in some important financial metrics of our card business. Revenue yield continues to increase, now over 32% and our credit card net charge-offs were down nearly 300 basis points from last quarter. While some of the improvement is due to typical seasonal patterns, the strong performance was also a result of continual efforts to refine underwriting, enhance servicing and the overall maturing of the business.

In our Auto Finance business, we ended the quarter with over $2.7 billion of receivables, up about $100 million from the last quarter. Similar to our personal loan and credit card businesses, we have maintained a conservative underwriting posture and feel great about our Auto portfolio, which continues to perform in line with expectations. We believe that our experienced team, underwriting rigor backed by decades of serving the nonprime consumer and our ability to offer loans through both independent and franchise dealerships are all competitive advantages.

As we grow our Credit Card and Auto Finance businesses, we are focused on carefully managing credit, enhancing our product offerings and driving efficiencies to reduce unit costs as we scale.

This quarter once again demonstrated the strength of our balance sheet. We issued 2 unsecured bonds totaling $1.6 billion with tight spreads. We've now raised $4.9 billion in 2025 across 4 unsecured bonds and 2 ABS securities at attractive pricing, and we've also expanded our forward flow programs. Our strong balance sheet and sustained access to diversified capital sources gives us a distinct competitive advantage.

I want to highlight 2 things that exemplify who and what we are as a company. First, I've spoken before about creditworthy by OneMain, our free financial education program. Since its inception, creditworthy has reached almost 5,000 high schools or about 18% of all high schools nationwide. As we deepen our impact across the U.S., recently, we surpassed the mark of teaching 500,000 students, the importance of building and maintaining good credit and how to do just that. With hundreds of employees volunteering as teachers and mentors in the program, we are dedicated to helping teams across America, build a strong financial foundation.

Second, I'm also pleased that OneMain has been named as one of America's Top 100 Most Loved Workplaces for 2025 by the Best Practice Institute. This recognition is based on direct feedback from our team members who create tremendous value for our customers and our shareholders. It gets to the heart of our culture of teamwork, respect, growth, innovation and accountability. I truly believe that if you have team members working together and going the extra mile every day, it will drive outstanding results for the company. The expanded reach of creditworthy and our recognition for the fourth year running as the most loved workplace speak to our differentiated business model with deep ties in the community and a culture that rewards delivering results while providing outstanding service to our customers, both of which are critical to the long-term success and shareholder value of OneMain.

Let me end with capital allocation. As I've said before, our first use of capital is extending credit to customers who meet our risk-return thresholds. We then make strategic investments in the business that drive long-term shareholder value, like product innovation, our people, data science, technology and digital capabilities to name a few. We are committed to our regular dividend and are increasing it by $0.01 quarterly or $0.04 on an annual basis. The annual dividend is now $4.20 per share, which translates to a 7% yield at our current share price.

Excess capital beyond that will largely be used for either share repurchases or strategic purposes. This month, our Board approved a $1 billion share repurchase program from now through 2028. All things being equal, we expect share repurchases to be a bigger part of our capital return strategy going forward as we drive more excess capital generation in future years. This quarter, we repurchased 540,000 shares for $32 million. Year-to-date, we've repurchased over 1.3 million shares already meaningfully exceeding our repurchases in 2024. Our dividend increase and new share repurchase authorization reflect our continued confidence in the strength of our business.

In summary, we feel great about the quarter and the first 9 months of the year. The strong performance is the result of our continued disciplined actions to optimize our credit box, deliver innovation to drive originations and expand our product offerings and distribution channels.

With that, let me turn the call over to Jenny.

Thanks, Doug, and good morning, everyone. Let me begin by saying we had a great third quarter. The results reflect broad-based continued improvement across our key financial metrics, highlighted by continued strong revenue growth, good credit performance and capital generation that grew 29% year-over-year. We also further demonstrated the strength of our funding program by raising $1.6 billion across 2 bonds in the quarter.

Third quarter GAAP net income of $199 million or $1.67 per diluted share was up 27% from $1.31 per diluted share in the third quarter of 2024.

C&I adjusted net income of $1.90 per diluted share was up 51% from $1.26 in the third quarter of 2024.

Capital generation, the metric against which we manage and measure our business, totaled $272 million, up $61 million from $211 million in the third quarter of 2024, reflecting strong receivables growth across our products, higher portfolio yields and continued improvement in our credit performance. Capital generation per share of $2.28 was up 30% from $1.75 in the third quarter of last year.

Managed receivables ended the quarter at $25.9 billion, up $1.6 billion or 6% from a year ago. Third quarter originations of $3.9 billion were up 5% year-over-year, consistent with our expectations.

As discussed last quarter, we are now more than a year into the successful personal loan growth initiatives that we implemented in June of last year. We identified pockets of growth in high credit quality segments that met our capital return framework, while maintaining a tight credit posture, and we've been able to achieve strong growth without relaxing our underwriting standards. We continue to execute new initiatives utilizing deep analytics to optimize pricing in low-risk segments of the business that will drive profitable growth in the quarters ahead. In fact, we expect originations growth to increase to high single digits in the fourth quarter.

Third quarter consumer loan yield was 22.6%, flat from the second quarter, but up 49 basis points year-over-year. The improvement was driven by the sustained impact of our pricing actions taken since the second quarter of 2023. This tailwind was partially offset by an increasing mix of lower yield, lower loss auto finance receivables. We expect we can maintain yield at approximately this level for the near term.

Also, as Doug mentioned, we saw a nice increase in our credit card revenue yield compared to the third quarter of 2024. It was up 151 basis points to 32.4%. The combination of these yield improvements across our businesses is a notable driver of our year-over-year revenue growth.

Total revenue this quarter was $1.6 billion, up 9% compared to the third quarter of 2024. Interest income of $1.4 billion grew 9% from the prior year, driven by receivables growth and the yield improvements I just mentioned. Other revenue of $200 million grew 11% compared to the third quarter of 2024, primarily driven by higher gain on sale associated with our larger whole loan sale program and increased credit card revenue associated with the growing card portfolio.

Interest expense for the quarter was $320 million, up 7% compared to the third quarter of 2024, driven by the increase in average debt to support our receivables growth. Interest expense as a percentage of average net receivables in the quarter was 5.2%, flat to the prior year, but down from 5.4% last quarter, reflecting the actions we took to proactively manage our step stack, most notably the refinancing of our 9% bond due in 2029. The strong execution of the funding we've done so far this year, combined with our liability management, enabled us to reduce our funding costs below our initial 2025 expectations.

Third quarter provision expense was $488 million, comprising net charge-offs of $428 million and a $60 million increase to our reserves, driven by the increase in receivables during the third quarter.

Our loan loss ratio remained flat quarter-over-quarter at 11.5%. I'll discuss credit in more detail momentarily.

Policyholder benefits and claims expense for the quarter was $48 million, up from $43 million in the third quarter last year. As I've previously mentioned, we expect quarterly PBMC expense in the low $50 million range in the quarters ahead.

Let's turn to credit, where our performance continues to be very good. I'll begin by looking at consumer loan delinquency trends on Slide 8. 30-plus delinquency on September 30, excluding Foursight, was 5.41%, down 16 basis points compared to a year ago as the back book continues to run off and the better performing front book grows. 30-plus delinquency increased by 34 basis points sequentially, which is consistent with pre-pandemic seasonal trends.

On Slide 9, you see our front book vintages comprised of consumer loans originated after our August 2022 credit tightening, now make up 92% of total receivables. The performance of the front book remains in line with our expectations and is driving the delinquency and loss improvements we are seeing. While the back book continues to diminish, now making up 8% of the total portfolio, it still represents 19% of our 30-plus delinquency. Though relatively small, the back book continues to disproportionately weigh on credit results. We expect it will contribute less each quarter ahead with our newer vintages increasing in share. And I should note that the pace of performance contribution will depend on the rate of growth of new originations as well as the back book's performance.

Let's now turn to charge-offs and reserves as shown on Slide 10. C&I net charge-offs, which include credit cards, were 7.0% of average net receivables in the third quarter, down 51 basis points from a year ago.

Consumer loan net charge-offs, which exclude credit cards, were 6.7% in the quarter, down 66 basis points year-over-year. This follows the trends we have seen in improving delinquencies along with better back-end roll rates and recoveries, and we are really pleased with the trajectory of losses. We continue to see strong performance from our newer vintages. While there will be typical seasonality, we expect to see continuing year-over-year loss improvement over the remainder of 2025 and into 2026.

Let me update you on the credit trends of our $834 million credit card portfolio. Net charge-offs in our card portfolio improved sequentially by 288 basis points to 16.7%. We anticipated a significant improvement in card losses based on prior quarter's delinquency trends, which were better than typical card portfolio seasonality. The strong performance was further aided by enhancements in our servicing and recovery capabilities in our card business. We remain pleased with the overall quality of the credit card portfolio and feel confident that we are building an enduring profitable business for the long term.

Recoveries remained strong this quarter, amounting to $88 million, up 12% year-over-year and 1.5% of receivables as we continue to optimize our recovery strategy.

Loan loss reserves ended the quarter at $2.8 billion. Our loan loss reserve ratio, which remained flat to prior quarter and prior year at 11.5% at quarter end, includes a 40 basis point impact from our higher yield, higher loss credit card portfolio.

Now let's turn to Slide 11. Operating expenses were $427 million, up 8% compared to a year ago. The 6.6% OpEx ratio this quarter is modestly better than last quarter and in line with our full year expectations as we continue to invest in technology, data analytics and new products. We feel great about the inherent operating leverage of our business, which has been consistently demonstrated over the past several years as our OpEx ratio has declined from 7.5% in 2019 to its current level. We remain disciplined in our spending, balancing responsible investments with our focus on driving long-term growth and efficiency to deliver operating leverage for the future.

Now let's turn to funding and our balance sheet on Slide 12. During the quarter, we continued to optimize our balance sheet. We believe our focus on balance sheet strength is a clear competitive advantage and enhances the stability of our business. As a leading issuer over the years, we've consistently invested in our capital markets program. We focused on maintaining best-in-class execution and controls and as a result, have built a loyal and diversified investor base. In August, we issued a $750 million unsecured bond at 6.13%, maturing in May 2030. The proceeds of that issuance were used to redeem the remaining balance of our most expensive security. The 9% coupon bond scheduled to mature in January 2029.

In September, we issued an $800 million bond at 6.5%, maturing in March 2033. Both bonds had strong demand from new and returning investors and were issued at near record tight credit spreads. Including these 2 bond issuances, we now have issued 7 times in the last 6 quarters in the unsecured market, lowering our issuance costs, de-risking our balance sheet and reducing our secured funding mix to 54%. This creates a lot of flexibility for us going forward.

We also recently signed a $2.4 billion whole loan sale forward flow agreement with a long-term partner. The agreement substantially increases and extends a current loan sale commitment that provides further capital and funding optionality for the future. The current agreement that calls for $75 million of loan sale commitments per month will continue through the end of this year and then increase to $100 million per month starting in January. We're very pleased with the terms and the economics of the agreement and believe this further demonstrates the attractiveness of our loans and great confidence in the performance of our portfolio.

Overall, from a balance sheet perspective, given the strong issuance year-to-date and the larger forward flow whole loan sale program, we feel great about our ability to continue to opportunistically issue when markets are most attractive in the quarters ahead.

Additionally, our overall liquidity profile is as strong as ever with bank facilities totaling $7.5 billion, unchanged from last quarter end and unencumbered receivables of $10.9 billion.

Our net leverage at the end of the third quarter was 5.5x, flat to last quarter.

Turning to Slide 14, our full year 2025 guidance. First, we're narrowing our full year managed receivables growth guidance to the higher end of the range. We now expect managed receivables to grow in the range of 6% to 8% and compared to our prior 5% to 8% guidance held previously. And given our growth in receivables, along with our improving asset yields, we now expect full year total revenue growth of approximately 9%. This is above our guidance range of 6% to 8%. We continue to expect C&I net charge-offs to come in between 7.5% and 7.8%, at the lower end of the range we gave at the beginning of the year. And our expected operating expense ratio remains unchanged at approximately 6.6% for the year.

As all our key financial metrics move in the right direction, we expect capital generation in 2025 will significantly exceed 2024, reflecting strong momentum in our business.

We have another excellent quarter in the books, as we approach the end of the year and look ahead to 2026. We see opportunity to continue to deliver outstanding shareholder value in the quarters and years ahead.

And with that, let me turn the call over to Doug.

Thanks, Jenny. Let me close by saying we really like our competitive positioning. We built our business for the long run with best-in-class credit management and a fortress balance sheet. We are driving growth by innovating across products, digital experience and data science. We are deeply committed to the communities where our customers live and work and have a great team delivering for our customers every day. The strong results of this quarter are a reflection of all of this, and we look forward to continuing to drive value for our customers and our shareholders going forward.

With that, let me open it up for questions.

[Operator Instructions] Our first question comes from Terry Ma with Barclays.

So there's been a lot of chatter about the health of the nonprime consumer. Maybe some cracks showing up in auto both of which you have exposure to. So maybe just talk about what you guys are seeing more recently. Maybe help us tie that to your commentary about higher origination growth in the fourth quarter.

Sure. I guess regarding auto, we're not seeing anything negative in our auto credit. All of our auto continues to perform in line with expectations. I think zooming out on the consumer, I think you got to keep in mind that we see plenty of opportunity, and we lend to individual consumers. And the customers we have on our books and the customers we're seeing come through our channels are holding up very well, and we underwrite net disposable income.

So after somebody is paid, pays their taxes, covers all of their other credit, pays all their expenses, how much is left over. We're seeing net disposable income for the consumers who come in, continue to be strong. And as you know, we have a lot of different cuts that we use for our underwriting, whether it'd be risk, the collateral, the type of product, the geography. And so we're seeing lots of opportunity, and we're not seeing issues with the customers that we have on our books.

I think the consumer generally and the nonprime consumer generally has been stable for the last 18 months. I mean if you look at the macro data, while unemployment has ticked up some, it's still at a -- in a good place. Wages cumulatively have increased. They don't seem to be increasing as much anymore. Inflation is much more in check than it was, and savings remained pretty stable for the last 18 months.

We also do a qualitative survey of our branch managers on a regular basis who are out talking to our customers, seeing new customers. And we look at how's the customer doing? Are you seeing signs of stress, et cetera. That is stable. We just did one. The results are very similar this year now as they were a year ago.

We also have unemployment insurance for a subset of our customers, and we've not seen increase in unemployment insurance claims. And so we are always on the lookout, and I do think there still remains very broadly for the U.S. economies and macro uncertainty, whether it's around tariffs or what's going to happen with interest rates, et cetera. But we feel good about the health of the consumer.

Great. That's super helpful. Maybe just a follow-up question on credit for Jenny. Like net charge-offs continue to improve year-over-year. Delinquencies are also improving year-over-year. Just ex Foursight -- but as I look at the magnitude of delinquency improvement ex Foursight, it's kind of moderated. So maybe like just any color on kind of what's going on there and help us think about maybe just the direction of travel kind of going forward for delinquencies.

I'd say, look, most importantly, to your point about the direction of travel, we feel like the direction of travel is good. These delinquencies are in line with our expectations. And we expect the delinquency improvement year-on-year to vary some. So we're really focused on where the book is going and our expected losses. And we mentioned earlier, but we consistently have seen better roll rates and recoveries. And we expect continued year-on-year improvement in our consumer loan net charge-offs, which you saw dropping this quarter by 66 basis points. And so I think as we look at the consumer loan net charge-offs, we expect for them to get back within our historical range of below 7% over time.

We'll go next to Mark DeVries with Deutsche Bank.

Doug, given some of your comments about the macro uncertainty and the kind of the stable consumer, where do you think you sit right now in kind of the spectrum of underwriting between tightening and loosening? And given that some of the factors, what's your kind of bias going forward in terms of which direction you'd be moving?

We really, for the last several years, have had quite a conservative underwriting posture. Specifically, what we've done is our models will tell us and all of our data science will tell us, depending on the customer, what do we think that our losses will be over their lifetime. And we put a 30% stress overlay on top of that for our credit box, which basically translates into -- even if that customer's peak losses during their lifetime, we're 30% more than we think they're going to be, we would still meet our 20% return on equity threshold.

And so across our personal loans, our credit card and our auto, we've chosen not to loosen that up. I think there just remains macro uncertainty. We're not seeing it on our book, and we're getting plenty of customers to book that meet our return threshold. I think to open that up some, we do weather vein testing. So we're always booking a set of loans across product, customer type, geography that are in the 15% to 20% ROE, and we need to see those top above.

Our current vintages are performing in line with our expectations, but they're not outperforming. And so we need to see outperformance. And I think we need to see a little more clarity in the macro. Our basic bent is always to err on the side of having really good customers who can pay us back who meet our risk-adjusted return thresholds. We don't see a lot of advantage in taking extra risk. Our originations year-on-year for the first 3 quarters of the year are up 10%. So we're finding plenty of pockets of growth. And we'd rather innovate around the kinds of things I talked about earlier: product, customer experience, channel, because this is how we built a really strong, stable company that through the cycle is going to have good returns. So our bent is not to reach for growth, but instead to stick with our discipline and keep finding growth by innovating and serving our customers well.

Okay. Makes sense. And just a follow-up for Jenny on funding. I think you mentioned in your prepared comments that funding costs came in lower than you expected for the year. Is this more of a product of term? Or spreads coming in better than you expected. And you also alluded to enhance mature, I mean, flexibility, right? I think you have very low maturities anytime soon and a lot of liquidity. How are you thinking about taking advantage of that of that added flexibility in the funding markets?

Yes. Thanks. Obviously, funding is critical to any lending business. And I think for us, we really see it as a differentiating strength and a competitive advantage. So we're always looking at the opportunities as they come. And I think what we saw this quarter was we were able to go out for that first $750 million unsecured bond at 6.13% due in 2030. And what we were able to do with that was use the proceeds to redeem the remainder of our 9% 2029 unsecured bonds. So that really allowed us to take in sort of that higher pricing that we had and bring that in. So our interest expense went from an expectation of closer to 5.4% to come in to closer to 5.2%, like you saw this quarter. So that was really what drove that.

I mean I'd say then we were also able to go out and do another issuance at 6.5% and go all the way out to 2033. So I think we were very happy with the spreads and with the performance of what we were able to do this quarter. I mean I would also say, I mean, we've gone out now 7x in the past 6 quarters. So I think we've really been able to go out there and I think that's a testament to the team and to what they've built over time.

And the flexibility that I mentioned is really about, if I look forward, our next unsecured maturity is about $425 million in March of '26. And then we don't have anything maturing until January of 2027 when we have about $750 million maturing. So we can continue to look for opportunities of where we can pay down some of our price bonds that are callable in later needs, and we can also look at our needs for growth.

We also obviously are looking at our unsecured and secured mix, and this has allowed us a little bit more flexibility there to determine which market we want to go into. So we really like that flexibility because it just allows us to continue to focus on maintaining a really conservative balance sheet.

Our next question comes from Mihir Bhatia with Bank of America.

To start just staying on the topic of buybacks or capital, I guess, you obviously upsized the buyback this quarter. Should we be -- any markers you can give us on like what kind of sizing we should be thinking about every quarter? Like what are you trying to solve for? Is there a capital -- like what can we look at? Is it just distributing net income? Is it capital? What payout ratio? What is the target internally that we should be thinking about?

Yes. Look, we've had a pretty consistent capital allocation strategy, which includes -- I'll go through it again, that is First, we're going to make every loan that meets our risk-return thresholds, and we put about 15% of any loan is equity we put into it. So some of it will depend what kind of opportunities and what kind of growth we have.

Then we're going to invest in the business for long-term franchise value. Then we're going to have the dividend. And after that, we're either going to allocate it to other strategic purposes or buybacks. As I mentioned, we anticipate more buybacks now that we're going to have more excess capital at the bottom of that waterfall. I think you've seen us ticking up our buyback. I think you can anticipate it ticking up into next year. I think the best I can give you is we've looked at it and we've allocated $1 billion through 2028. I don't think it's necessarily going to be linear. And we don't have specific guidance about what's going to happen quarterly.

Fair enough. Maybe switching a little bit just on gain on sale, you've had a nice step up this year. I think you in your prepared remarks, you talked about further increasing the forward flow. Should we expect another step-up in '26 as that forward flow comes in? And maybe also just take the opportunity to talk about private credit? How does that compare with your traditional channels today? Any desire to expand forward flows further and leverage the demand from private capital? Like give us a peak [indiscernible] in terms of the hold versus distribute equation.

I'm going to start with your second question first, and then I'll come back again on sales. Just in terms of private credit, I mean, I think what I'd just say there is we're always looking to evaluate opportunities. We've got -- I just talked about, we've got great access to capital in the public markets. And so we're really looking at opportunities really to provide either funding flexibility. And then we're also quite focused on the economics and the terms of those deals. So I did mention we increased that and extended that whole loan sale program. It's forward flow with attractive pricing. And I think we're happy with the diversification that gives us and we'll evaluate those opportunities as they come. And I wouldn't -- I think of this as additive to our current strategy. So I just think of this as one more way that we go access funding.

If I go back to gain on sale, gain on sale was about $17 million this quarter. That increased from last year, about $10 million from that whole loan sale program. If I think going forward, I'd say I'd look more at total revenue because this will both benefit, I'd say, a little bit gain on sale, but also think of servicing fee revenue. So I'd focus on the total revenue line, and it should help some.

Our next question comes from Moshe Orenbuch with TD Cowen.

Great. And it's very encouraging to see the increase in your guidance for originations and loan growth. And can you just talk a little bit about the competitive environment, the pricing environment. And if it's not too much to also say that if -- how would those -- how would your efforts be enhanced if your ILC charter is approved?

Sure. Look, it's -- there's plenty of competition out there, but we think it's quite constructive for us. I think our results show that year-to-date originations, as I mentioned, are up 10% from last year, even with our tight credit box. We expect fourth quarter, we'll see some uptick in originations from this quarter. We're really focused on originating to good customers that meet our risk-adjusted returns and meet all of -- have the right credit profile for us.

Over 60% of the customers that we're booking today remain in our top 2 risk rates, which is where it's more competitive and there's more people playing. And so -- and that's remained steady. So we're still getting plenty of pickup in really competitive spaces.

Our pricing has held. We've not needed to bring down pricing as you see with our yield, and that's been -- has ticked up. And as Jenny said, we expect it to be pretty steady going forward. I think there's always opportunity to drop price and pick up more. We're always fine-tuning pricing, loan size, the type of product, the collateral, the data sources that we use to book loans. So I think the key for us is to continue to innovate. But we like the competitive environment. We like our positioning, and I think we're really comfortable. I've said it before, we just don't chase growth. We book really good loans that are going to have good returns that are going to be accretive to the franchise and to our shareholders, and we're seeing plenty of opportunity there.

Look, I think the ILC, I've said before, is if we get it is accretive to our strategy. It's going to allow us to serve more customers. It's going to allow us to have some deposit funding. It'll allow us through the deposit funding potentially to do some more lower end of prime kind of customers that allow us to book our credit card through our own ILC rather than through a partner. And so I think it is good for long-term franchise value. We'll start to compete in the market, but I think it would be a net positive.

And we'll go next to Don Fandetti with Wells Fargo.

Doug, just curious to get your perspective. I mean, there's been a lot of volatility in ABS markets. And I just want to get your thoughts on how you think those markets are going to hold up in terms of access and if you think they'll be tiering for kind of seasoned issuers such as OneMain?

Yes. I mean, look, I'll let Jenny say. What I'd say is through lots of volatility for many years, we've always been able to access the ABS market because people trust us as steady hands who know how to underwrite and the collateral we put into our trust are ones that we understand well. So I think for us, there's going to be plenty of access. I'll let Jenny talk more broadly.

Yes, I'd just say the team is obviously constantly talking to folks in the market, and I feel like we've built a pretty strong reputation and have a pretty developed program that's been out there for a long time. And so I think we're quite confident in our ability to go out into the ABS market. And obviously, we'll see what unfolds there, but I think we're pretty disciplined operators and our partners feel pretty good about the way we run our program. So I think we're feeling pretty good about being able to go back into ABS.

We'll go next to Kyle Joseph with Stephens.

Just wondering if you're seeing any impact from the government shutdown and if this had any impact on the outlook for this year.

We're not. We've been through a number of government shutdowns. It's a very small part of our book, folks who work for the government. So we don't see any material impact and definitely no impact on our outlook.

Got it. And then just one follow-up for me. Yes, given all the volatility in auto, I know you guys highlighted that you're seeing stability in your portfolio. So is that something -- are you seeing kind of a competitive advantage in that? Is that an opportunity? Are you getting more aggressive in terms of deploying capital there? Or is it one of those things where there is a lot of volatility in your shine away or just kind of unchanged overall?

I'd say unchanged. We're still a very small player in auto. We have a lot of room to grow, but we're very disciplined operators. So we're pacing it. We're developing more dealer relationships. We're continuing to mature the business. We're continuing to mature the models. And so we like what we're booking. We like the pace we're doing it at. There's obviously been a lot of noise. Not necessarily around our customer base in auto, but there's been lots of different divergent noise about things with the title auto, but it really hasn't affected. We're going at pace carefully but we're going to continue to grow the business.

We'll go next to John Pancari with Evercore ISI.

On the -- back to the origination front on your high single-digit expectation for the fourth quarter, I know you indicated that you're not necessarily unwinding or loosening standards here and your -- it sounds like you're not yet taken a more active pricing posture or anything. So can you maybe give us a little bit more of a detail around the what changed here in terms of your expectation for originations to leg up a bit in terms of the pace of growth for the fourth quarter as you look at it?

Look, I think the biggest thing is we are always fine-tuning where we're seeing some credit outperformance in a very small pocket opportunities to increase the loan size a little bit, do things on pricing. We're also always adding channels. And then I've given you the list before, we've been really leaning into product origination -- or I'm sorry, product innovation and investing in it for the last 18 months, and I think you're just seeing the results of that. We have an enhanced debt consolidation product. We've reduced friction for certain really good credit customers in the renewal process, which increases book rates.

We have added new data sources, whether it's bank data, DMV data, other kind of data like that. We've allowed people to split their paychecks and pay us directly from their paycheck, which is better credit performance, which has allowed us to book people who choose to do that. And so a lot of it is just grinding away every day, finding pockets, pushing on it, making sure we offer a great product to customers, and we're refining the business all along. So I think that's mostly what you're seeing.

I can just add one piece of context for that. Just on originations, we were at about 5% year-on-year growth, and I mentioned this earlier, but we expect to be in the high single digits for the fourth quarter. So I just want to put some context around it. I mean, I think Doug mentioned, it's through a lot of constant sort of looking and refining, but I just want to give that context.

Yes. Got it. And then separately, just given the very favorable capital generation that you cited in your expectation for buybacks to leg up a bit. How do you -- any change in how you're looking at M&A opportunities, specifically as you look at still growing the card business? And then on the auto side, is there -- or even outside of that, are there opportunities you see out there that could present from an organic point of view?

Anything that is in the market or we might want to be in the market that we think could accelerate our strategy around personal loans, card or auto or underlying things that we continue to develop, whether it'd be data science, digital capabilities, et cetera, we look at. And so we look at lots of opportunities every year. We've looked at well over 100 opportunities in the last years. And we've acted on 2 of them, which were 2 small tuck-in acquisitions. And so what I'd say is, if there's an opportunity that strategically makes sense, accelerates our strategy, financially makes sense, we think we can execute on it.

It is in our kind of risk in profile of the kind of company we want to be in the reputation. We want to be as the responsible lender who actually helps customers move to a better financial future. we'll look at it. It would have to be accretive to shareholders, and it has to be something that we wanted. So we're very selective, as you've seen over time, but we're always looking at opportunities.

We'll go next to Vincent Caintic with BTIG.

First question, just kind of a follow-up on the 2025 net charge-off guidance. You've had really good credit results this year, both delinquencies and losses the 2025 guide being unchanged, it kind of does imply a very wide fourth quarter range. So I'm just wondering if you're seeing anything that maybe gives you uncertainty for fourth quarter? And if you could describe but would get you to the low end and the high end of the range?

Vincent, it's Jenny. Last quarter, we updated our guide from 7.5% to 8% to 7.5% to 7.8%. So I think we really thought that we already brought that in a bit. I think as we look -- we'll be looking at those rules to loss and -- we've mentioned a little bit about the drivers of those, but I mean, we've been very happy with what we've been able to do in terms of using digital tools to both be in contact with more customers who go delinquent and then also recoveries and being able to do more with recovery.

So I think we just -- I think we're happy with having brought down the guide last quarter, and we'll be looking at those at those roles each month as we go forward.

Okay. Great. That makes sense. And then if you could update us on your kind of long-term thoughts on capital generation, it was nice to see the share repurchases, which, to your point, indicates your confidence in OneMain's capital generation. So I just wanted to update is $12.50 a share of capital generation is still a good bogey for 2028? And what are the factors that get you there? And does that $1,250, if that's still the right bogey that rely on the bank charter?

So we feel really good about capital generation. I said before, our goal is to generate more capital each year going forward. our North Star remains $1,250. We haven't put a date on it. We definitely don't need the bank charter to get to $1,250. It would be accretive. I've said before, a bank charter would be something we think we're well qualified for, meet the requirements, would be additive to the business, but not necessary.

But as you said, this is a business that really generates a lot of capital for our shareholders. We're really happy that we have now moving into a place where we have more excess capital, and we can use it for strategic purposes. I think we're at the top of the hour. So I want to thank everyone for joining. As always, feel free to reach out to us with follow-up and we'll look forward to seeing you during the quarter and on the next call.

Thank you. This does conclude today's OneMain Financial Third Quarter 2025 Earnings Conference Call. Please disconnect your line at this time, and have a wonderful day.

All right. Good morning. Thank you for joining, everyone. My name is Terry Ma. I cover consumer finance at Barclays. I'm very pleased to have on stage Douglas Shulman, CEO of OneMain Financial. So welcome, Doug.

Thanks. Thanks for having me here.

Yes. So we'll jump right into it. I wanted to start with the economic environment and the health of the consumer, specifically OneMain's focus on nonprime consumer. How would you characterize the healthier borrower base?

Yes. No. Let me give my standard caveat, which is that we lend to individuals, right? Not to the broad consumer. And we're seeing plenty of individuals who can pay their loan back with us. And we kind of look at income, we look at expenses, we look by geography, we look by employment type. We have over 1,000 variables we look at. And so I'll give some -- I'll give you a sense of my view of the consumer, but the consumers we're booking today are in good shape. I think the consumer in general is fine, meaning the nonprime consumer. Our average customer makes about $70,000 a year. So if you look at people who make, call it, $40,000 to $150,000. Employment is good.

And so even though you see everyone gets excited when they see an employment number tick up, 4.2% is very good employment and most people who want to get jobs can get jobs. Wages continue to move up at least as much as inflation. If you look at the cumulative effect of the big inflation in '21 and '22, it took a while for wages to catch up, but they're now caught up.

And inflation seems under -- [ I was about to say ], you either should stay or go. I'll keep going. And tell me if we need to leave.

No, we're good.

I think -- so inflation, wages are keeping up with inflation. Obviously, everyone has an eye on that. Our internal data, we do a regular branch survey of our 1,400 branches. It's qualitative, but our branch managers and branch team members, it's been -- their report back in the conversations with customers is steady for the last 18 months. The customers are feeling actually a little bit better for the last 9 months. We also offer unemployment insurance, and we have not seen claims tick up. And so there's clearly still some uncertainty, mostly tariff-based uncertainty in the economy, but we're not seeing it show up in our book, and we like our credit results.

And so I think all in all, I'd say the nonprime consumer is fine, not struggling, but it's not like they're doing way better than they were 18 months ago. I think it's been steady.

Okay. Got it. That's helpful color. Is there any additional color you can give on kind of what you're seeing in borrowers with student loans since Fed collection started in May? And how are you kind of managing that risk?

Yes. Look, we've been super focused on this. October 2023 is when the federal government ended deferments broadly, and then there were a bunch of exceptions. And so we've been super focused on this and just watching our book. We've seen no significant difference throughout the course of our underwriting since we've been focused. We didn't see it then. We haven't seen it since May.

Keep in mind, even when student loans got deferred at the beginning of the pandemic, we assumed people had to pay. So the way we underwrite is you make a certain amount of money, you look at everybody's debt, you look at their income and what's left over the net disposable income, that's what we loan against. So can you afford to pay back this loan? Even when people didn't need to pay the student loan, say it was $200 a month, we assume they had to pay it to get to net disposable income. The other thing is we have the credit bureau data of our customers. And a lot of them even through deferments have been paying. So even though they didn't have to pay, they had been paying. So we're seeing no significant impact at this point.

Great. Maybe we'll turn to credit. We're halfway through the year, at least from a reported basis. you've revised your net charge-off guidance to the lower half of the initial guide. Credit metrics continue to trend in the right direction. And now 90% of your portfolio was originated post August 2022, tightening. What can you tell us about the trajectory of credit going forward?

Yes. Look, we're really pleased with the trajectory of our credit. And as you mentioned, we lowered our loss guidance to the lower half of the original range that we put out in February of this year. I'll finish in a second.

I'm sure your conference planners are thrilled with these announcements during the presentation.

That's great. broken water pipe triggering fire alarms.

There we are. Do you have a question about the pipe?

No, I don't.

Okay. So look, we like the trajectory of our credit. We updated our guidance, which -- and have narrowed it to the lower half of the range. All of the metrics for us with credit are moving in the right direction. So 30+ delinquency, which is the early delinquency is down 29 basis points year-on-year. Our overall losses are down 88 basis points year-over-year. And our consumer loan losses, which is the biggest part of our portfolio, is down. The losses last quarter were down 110 basis points year-over-year. And so early-stage delinquencies, later-stage roll rates, recoveries, all those metrics have been moving down nicely. And so, a, we're confident in our full year guidance. And assuming that the macro is stable, it doesn't have to get a lot better as long as it doesn't have a big deterioration, our losses should continue to move down.

That's great. Sounds very encouraging. So if we think about the target underwriting loss range of 6% to 7%, how much confidence do you have in kind of migrating back there over time?

We're quite confident. I will say though, we underwrite to risk-adjusted returns. So losses are only one metric. They're obviously an important metric, and they're a big piece of our P&L. And given the stress in the nonprime consumer in '21 and '22, we understand the focus. But we will book loans that have a 20% ROE. So if we can take price that has higher loss, we'll book those loans. With that said, the focus is on our consumer loan portfolio getting to 6% to 7%. That's what we've talked about as a to long-range target.

The loans that we've been booking recently in the front book are going to run at those numbers. And so they're there. You mentioned only 10% of our book now is loans we booked before the middle of 2022, but they still account for 24% of our delinquencies. So as we move through and that disappears for consumer loan, we're moving and we're confident we'll be in that range.

Got it. Maybe we just touch on underwriting. Over 60% of your originations are in the top 2 risk grades. Any color on how those 2 risk grades have been performing? And then what do you need to see more broadly to maybe unwind some of those credit actions?

Yes. The -- we've -- we know how to construct the book that creates really good capital generation and therefore, really good returns to shareholders. So what we've been doing since 2022 since the nonprime consumer and credit had gotten a little worse is booking better customers that have lower losses.

We've been able to take price. And so we've had a nice upward trajectory in our earnings. Really this year, it's been moving in the right direction. Those -- that better credit is performing in line with our expectations, as I just a minute ago, those are going to be in the 6% to 7% loss range. I think more broadly, what would it take for us to relax our underwriting standards a little bit. Since 2022, we've put a 30% stress buffer on our underwriting. And the way to think about that is we underwrite a loan to 20% return on equity. The way we get to that is what's the price, what's the size of the loan, what's our loss expectation? What's the cost of debt that we have to put against that and what's our operating expense.

We put about 15% equity into every loan we make. And so that's how we're underwriting. We're not underwriting necessarily to losses. But in order to have some cushion because there's been some uncertainty in the environment, we said our models will say, let's say, this certain loan is going to have a 6% loss. We'll assume 30% more than that in our models, and we still have to hit our 20% return threshold. And so we just left that on, given that there's been a lot of just between inflation and Fed actions, tariffs, the last several years have had a lot of just noise. For us to relax that 30%, the main thing we need to see is significant improvement of the customers that are on our book. So they're performing in line with expectations. Our models are working very well, but it hasn't been wildly better than that.

We also run what we call weather vane testing. So we're always running a thin sliver of loans below the 20% ROE. When those all start or for a segment start ticking over, and those have been running 15% to 20%. When they start running 20% to 25% on a consistent basis, we'll say, okay, we can relax that threshold maybe to 20% stress or to 10% stress. What's really important, though, is we don't run -- I mean, we manage a nationwide portfolio of risk but we don't run one credit box. So we'll see secured loans in a certain number of states with a certain risk-grade customer, that weather vane is running 25%, and we'll make an adjustment there. But you should expect when we tighten, we tighten in a very granular way with thousands of variables, and we do it by deciles across a whole number of metrics. When we loosen, we'll do it the same way.

Got it. That's helpful. Maybe we'll switch gears. So your branch network doesn't get a lot of attention. You have the seventh largest branch network in the nation. I don't think many people know that. Can you maybe just talk about how that fits with OneMain's strategy and how much of a competitive advantage that is?

Yes. Look, we think it's a super important competitive advantage. It's our history as branch-based lending. The last several years, we've added really good digital capabilities to that. And we've added some new products that rely less on the branch like auto lending and credit card. But the vast majority of our business that drives the vast majority of our profits is the branch network. As you mentioned, if we were a bank, we'd have the seventh largest branch network in the country. We have just under 1,400 branches. The way to think about our branch is an entrepreneurial cell and a group of people that runs as a small business and also knows -- is in the community and knows people in the community.

So our average branch manager has a 14-year tenure with the company. So they've been there. They've seen cycles. If you walk into one of our branches, they talk about their team and training their team and lifting up their team. And then the branches are incentivized not just on loan production, but they're incentivized on both loan production and their credit performance. And so they're incented to get people in a loan they can afford in the right loan. So if you walk into one of our branches, someone says their hot water heater broke, and they need $8,000. And we'll say, okay, we can give you an unsecured loan for $8,000. And by the way, all the underwriting that branch does not have discretion around the credit box says, can you loan to this customer or can't you loan to this customer? What kind of loan can you give? What's the rate? And so the analytics and the sophisticated data science is feeding what happens in the branch.

But you might walk in and say, okay, I can give you an unsecured loan at 22% or I see you've got an automobile, we can give you a $14,000 loan. We can pay off the $6,000 you own on your auto. We'll take the collateral and we can give it to you for 17.5% and they'll work through, they understand the differences there. And so it's a consultative approach. In the branch, we also do the budget. I see you have this, what other expenses do you have? And then you're making a call and you say, "Hey, if you get in trouble, [ Terence ], give me a buzz, we can help work out a payment plan for a couple of months. When the phone call comes in, it's from your local area code, not from an 888 number. And so our right party contacts are higher when it comes to collection calls. And so we think the branches are really important. We've spent a lot of time working on the culture and the personalized service.

The other thing I'd mention because people are always -- in banks, everyone is focused on shrinking branches efficiency. These are mostly in an office building in the suburb or a strip mall. So they're not wildly expensive. And the real estate isn't a lot more than a call center, and you need people in call centers if you're a digital lender. And so we love our branches, our team members, it's inspiring to see them. The customers love the branches, and we think it's part of why our credit is better than anybody, FICO for FICO, and it's just part of the secret sauce of how we run the business.

Great. We turn to strategic initiatives, OneMain applied for a bank charter earlier this year. Can you talk about the rationale for the bank charter and just give us an update on how that application process is going? And then is there a time line we can expect?

Yes. So we applied with the FDIC and the Utah Department of Financial Institutions for an ILC, an industrial loan company charter. It's a specific charter that allows you to do business nationwide as a bank. It allows you to gather deposits and they're FDIC insured, but it doesn't subject us to becoming a bank holding company, which has all sorts of implications about capital, capital allocation, et cetera. So we could -- if we get this bank, we'll be able to have all the benefits of a bank without changing our core business or our capital allocation strategy.

The benefits are we could have a nationwide rate structure, and we could have a nationwide operation rather than operating in 47 different states with different state regulations, which adds a lot of complexity. For our credit card, we could become our own credit card issuer rather than have a third-party partner. And deposits just allows us to diversify our funding. And so the way I've described this is it would be accretive. It would add to our bottom line. It would long term, be good for us. If you have access to deposits, we could potentially even have a ladder where you lend over time as people become better credit, you could still lend to them because you'd have a different funding cost for those people. We really don't need it like if we don't get it, we're very confident in all the guidance we've put out about the company in driving capital generation up year-over-year.

But if we got it, it would be a benefit. I don't like to speculate on timing of applications into the government. What I would say is I think we are very well qualified. The activities we would do in a bank are activities we've done for decades, which is lending and balance sheet management. We're not doing anything fancy in a bank that we're doing. And so we think we're very well qualified. We're in the midst of having very constructive conversations we'll see where it goes.

Sounds good. Switching gears again. On the second quarter earnings call, you talked about some additional initiatives to drive growth. One of them is an enhanced debt consolidation product. Can you just talk about how that product differs from what you offer already? And what are the early results that you've seen?

Yes. Look, for many years, debt consolidation was a significant portion of the loans we made because an installment loan is a single payment every month that amortizes down, you pay it off, you're out of debt. And so it's been very appealing to customers for a long time who have credit card debt and they felt they couldn't get out of that debt and they were always paying and it was perpetual.

So it's -- the installment loan is actually a very good debt consolidation product. People came in, wanted to do debt consolidation. Our secured lending was -- we always -- branches would talk to them historically about, hey, I can pay off a bunch of your debt, secure your auto, pay off some credit cards, give you a bigger loan at a lower interest rate. And so that's always been part of it. We, a couple of years ago, looked at all the data that people's credit card debt was increasing. And so we put up in our priority queue of tech investments, product investments, marketing to just market this specifically as -- and so one is just marketing. We've changed some marketing that says debt consolidation, you can pay it off, you can get a single amortizing loan, you can get that.

Second is in our tech [ queue ], we did some things that made it easier for our team members and for our customers just to automatically pay off credit cards. It was a clunkier process before, and we just put it up in our customer experience and ease of doing business flows. And lately, we've been doing some pricing around it and those kinds of things. So it's all about like tweaks to the product strategy, which we're on a track now to have a couple of million dollars more of originations. It could increase from there from debt consolidation.

Got it. You also rolled out new automation income verification and collateral checks on the tech side, and you also streamlined some processes around loan renewal. Can you maybe just talk about those efforts?

Yes. I mean, look, in the broad category of product, what I would say is running a great company is about 1,000 little things and continually looking for places to improve the customer experience, improve the product, improve the value proposition. And so let me talk about those and add just a couple just so people get a sense of how we operate. So we always did a big part, almost half of our lending was always secured lending. So we get the car as collateral. Again, we put up in the priority queue and now about 70% of customers who walk in the door, we already have their VIN number automated that if that employee, they can say, "Oh, I see you have a 2001 Tahoe and you have this much paid off -- to pay off on it, would you like to put that into your loan, get a lower rate".

And then if they say, yes, bing, you hit it, it automates, it all goes through. And so that was automation, which helps drive secured lending, which is very profitable. We also now -- as income verification instead of having to get a pay stub, do fraud verification, et cetera, we've linked bank accounts to a big chunk our customers. Again, automated takes friction out of the process. When you're trying to get a loan, a lot of people drop out if they, I don't have my pay stub, I got to get my pay stub. They can't upload it into our system when they go home. We've got that automated. We did a -- for a small segment of our customers took some steps out of the process for renewal who are really good credit. We have access to their credit bureau. They've been paying everyone else. They've been doing business with us for a while and just streamline that. And then something we're quite excited about that I mentioned earlier, it's income-based lending. And so we now have a product where we offer you a loan, you don't qualify.

We go back and say, if you're willing to have a piece of your paycheck, go to pay the loan, think about it as direct deposit from a bank, but instead, it's to the employer, and we've built technology with a partner that allows you to do that, then you'd qualify because we ran a test for several years, and we saw a lot better credit, just like direct deposit for all the banks has better credit on credit cards and those kinds of things. And so we've rolled that out. Again, it drives volume, reduces risk. And so again, like these are all product innovations. And next year, if I come back, we'll have 5 more. And this is continually grinding it, looking at opportunities, talking to our customers and creating opportunities to keep driving volume.

That's great. That's helpful. Maybe we'll just round out the strategic initiative discussion with Card and Auto. Those 2 are growing businesses. Can you just give a progress update and talk about how you see Card and Auto fitting within OneMain?

Yes. So look, how they fit with OneMain, we, in 2019, did a big strategic review and said, we're a dominant player in personal loans. We run a great business. We've got a nice trajectory of growth. But what else could we do with the franchise? And it's not just like what would be cool to do with the franchise and what do other people make money. It's where do we have a right to play where we have competitive advantage, where we could drive value for our shareholders. And coming out of that, auto and card of all the different products were the ones that we thought fit best with us. It's really important that we are not straying far from our expertise in our roots. And so we looked at all sorts of stuff, but we said we are going to stick with lending to the nonprime.

And so our focus and our expertise is nonprime lending. And so the card fits with that, auto fits with that. We're also very disciplined operators. You can have lots of good ideas, but execution is 90% of the time. And so we've been pacing these. So 4 years ago, we started to launch card. We built the infrastructure. We launched it. Auto, about a year later, we started doing it with our team who already knew how to do secured. The rationale of both of these and how they fit in, a loan is a large episodic transaction for a large amount. And it happens every once in a while, you make the loan, they pay you down. A lot of your customers you're not talking to on a regular basis. They put it on direct deposit and they pay. You talk more to the customers who are having an issue with you when you make a loan.

A card is actually a daily transactional product. that fits a different need. We launched our card and first, we launched it, we test marketing, we test line usage and most importantly, we tested credit and then the segments that worked, we moved into it. We're really pleased the usage. The 3 biggest uses are gas, groceries and retail, which are things that you don't use for a loan. The card, our lowest line is $500. So there's a bunch of customers. You can give a $500 line, especially one with a fee that you'll take that you're not going to give a $10,000 loan to. And so it's a pipeline for our customers. It's on the app. It's almost all digital and people are checking their line, checking their rewards, checking their spending. And so you get a lot of digital real estate. We just started the cross-sell, and it pops up for qualified customers. You're eligible for a $10,000 loan. So it's a very low-cost acquisition channel to us.

And the returns are very similar to our loan returns, which are very good for financial services. Auto is a little different. We had a history with auto. We knew how to underwrite a car. We knew how to secure the collateral and file the title with DMVs in 47 states. We've been doing this for many years. We knew how to do collateral management if someone didn't pay picking up a car, selling it at auction. And so we had a bunch of core expertise. And we started with independent dealers directly. So we just plugged in the Dealertrack and RouteOne and some of the systems that dealers use to find loans and qualified buyers, they'd say, "Oh, you can get a OneMain loan". They'd have to get on the phone with us and apply to us in person, which is a little different than your typical car loan, your typical car loan, the dealer gets the terms from the lender, they make the loan and then 2 days later, you buy the paper from them.

That worked really well, very profitable for us. We had built about an $800 million book, and we decided that we should get into the bigger market of indirect lending, which is the typical way it goes. We bought Foursight 18 months ago. It's been a great transaction. It was a tuck-in transaction. So now we can offer both kinds of loans. Auto is lower loss. So it's a little bit -- it gives us some lower volatility and a different lower risk-adjusted returns. The returns are slightly lower, but we like it as a use of capital. Both of them, we've been very measured in pacing it. We're going to stay measured, especially with the uncertainty of the economy. But we built both of those platforms. So if we decide to give them the green light for growth, they're ready.

Okay. Speaking of growth, ultimately, what should we expect in terms of growth from those 2?

Yes. Look, I think some of it, as I just mentioned, is macro dependent. I've said this a lot, but the way we run our business is we don't chase growth. Growth is an output. We have our credit box, our customer experience, our returns that we have to have, and we lend into that. Those are faster growing than our loan book. They're much bigger markets.

We -- our card, we have about $750 million, and it's a $500 billion market. So there's plenty of room for growth. Auto, we have close to $2.5 billion of auto loans now, and it's a $600 billion, the nonprime market. And so we'll see what the pace is, but they definitely will be additive to our growth. What I like about them, and I talk about our company, there's very few financial service companies that have the kinds of profit margins we have and the opportunity for growth that we have.

Got it. We'll switch gears. What are you seeing in the environment with respect to competition? And are competitors acting rationally?

Yes. I mean, look, we -- it's a constructive competitive environment. The stat you gave that we're having nice loan growth and 60% of our loans are in our top 2 risk tiers, which are the more competitive risk tiers where they have a lot more loan offers. So we feel really well positioned.

Right now, there's a lot of competitors. The market -- the kind of credit markets to lend to lenders kind of was very tight in '22, '23. It got better in '24, '25. It was never tight for us. We have a balance sheet that people know our credit history. We have unsecured debt. We have ABS. We have whole loan partners. So we were never tight, but competitors that have much more volatility in their losses, much less history and kind of depth of capital markets access didn't have capital a few years ago. Now there's plenty of capital for them. And so the competitive environment is, I'd say, it's constructive for us as evidenced by the loans we're booking, but there's plenty of competitors, and we're always watching our competitors. What I would say, even though you've seen a lot of originations this year from some of the smaller players, newer players, fintechs, it's still not as frothy as it was in 2022.

And so I think a lot of the debt providers are a little more discerning. We also, from what we can tell, get really good terms and compared to our competitors. So it's -- there's always -- I think the competitive environment is going to come and go. We really like our positioning with loyal customers, world-class underwriting, all the things we've done for customer experience over time, our balance sheet. And so we feel good about the competitive environment.

Okay. So when you put everything together, you guys guided to $12.50 per share caption in the medium term at your Investor Day. Are you still tracking with that target?

Yes. Look, we're going to get to $12.50, and we like the trajectory we're on. This year, we had a significant year-over-year uptick in capital generation. Again, assuming the macro holds, there's a lot of tailwinds for us to keep moving up in capital generation in the years to come. The most significant is the credit that we talked about is we like where the credit is now, and that should keep -- the losses should keep moving down.

If interest rates stabilize or even go down a little bit, it could be a little bit of tailwinds for us. And so we're confident we're moving towards that $12.50. All the pieces are in place for us to win in the market. Credit is looking really good. We've been doing a lot of product innovation. We've now added a couple of complementary products. Our balance sheet is as strong as it's ever been. And so we like where we are, and we stand by headed towards $12.50 a share of capital generation.

Okay. Great. We have 3 to 4 minutes left. I'll open it up to Q&A from the audience, if there is any.

Okay. No questions.

Maybe I'll have one more. Can you maybe just talk about capital allocation? You guys obviously have the dividend. How do you kind of think about that kind of going forward?

Yes. Look, we have -- our capital allocation strategy, and we're quite disciplined in it is, number one, we use our capital to invest back into the business to position us for medium- and long-term strength and competitive outperformance. And so we'll put capital against every loan, whether it's a personal loan, credit card, auto loan that gets us that 20% return because that kicks off more capital that creates more opportunities for that. We'll put in the tech and digital and people and infrastructure and all the things you need to do to make sure we're a great company.

Then we've got a very healthy 7%-ish dividend, that's sacrosanct to us. That gives a nice just kind of guaranteed capital return to our shareholders every year. What remains is we look at it opportunistically. Lately, we've been using it for buybacks. If there's something strategic, we decide, we'll do. What I would say is we didn't have a lot of excess capital when we went into a more stressed nonprime consumer cycle in '22, '23, '24. We've had more capital recently, and we've been using it for buybacks. That will be a part of our strategy going forward. And all our modeling going out, I talked about where we're headed for profitability. We'll have more excess capital available for buybacks and other things.

Okay. Great. There's no more questions. Any more questions from the audience? So I think we'll wrap it up there.

Great. Thank you very much.

Thank you.