OneMain Holdings, Inc. Aktie

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.

Welcome to the OneMain Financial Second 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 second 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, July 25, 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'll 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 start by saying we had a very strong second quarter, which demonstrated our expertise in credit management and best-in-class ability to serve the non-prime consumer. We continue to see growth in high-quality loan originations, good pricing and positive credit trends across the board, all leading to strong growth in capital generation. As you know, we've been very disciplined in the last 3 years in managing credit, optimizing pricing and executing strategic initiatives to drive growth without opening our credit box. All of this sets us up very well for the future.

Let me provide a few of the highlights for the quarter. Capital generation was $222 million, up 63% year-over-year. C&I adjusted earnings were $1.45 per share, up 42%. Our total revenue grew 10% and receivables grew 7% year-over-year, crossing the $25 billion mark for the first time in the company's history. Originations grew 9%, driven by our expanded use of granular data and analytics as well as product and customer experience innovations to opportunistically drive growth through higher quality loans.

Turning to credit. We continue to see positive trends. Our 30-plus delinquency was 5.07% which is down 29 basis points year-over-year as compared to up 27 basis points last year. C&I net charge-offs were 7.6% in the quarter. down 60 basis points from last quarter and down 88 basis points compared to the second quarter of last year. Consumer loan net charge-offs were 7.2% down 64 basis points from last quarter and down 110 basis points year-over-year.

Due to the strength of the first 2 quarters of the year, we have updated our view on 2025 net charge-offs to be at the lower half of the range we provided you at the beginning of the year. Jenny will discuss the specifics in a few minutes, but we are quite pleased with the improvement in credit that we have seen during the first half of 2025.

Let me touch on some of the recent initiatives that are helping to drive originations in our core personal loan business. One initiative is loan consolidation. As many Americans have seen growth in credit card debt, we enhanced our debt consolidation offering. This product allows customers to refinance their debt with a OneMain loan with a single predictable payment and faster pay down. This year, we increased awareness of the product and made changes to the customer experience to make it easier to consolidate debt with OneMain.

Let me give you a few other examples. We have added new data sources to further automate income verification and collateral details. We also have a new streamlined and faster process to renew a loan for select customers who have demonstrated excellent credit performance. We're also growing a new loan origination channel as we enable credit card customers to cross-buy personal loans through our credit card app. While this is a small test, early results are showing excellent credit performance and low acquisition costs, laying the groundwork to expand this channel in the future.

I've said before that to run a great business, it is 1,000 little things that add up to meaningful value creation. Initiatives like these are impactful in the aggregate as they expand our reach, improve our offers and increase application pull-through rate. This is a small sample of the many initiatives we are working on every day, enabling us to drive growth and efficiency across our loan business.

Let me move on to the progress we are making on our strategic initiatives. Today, we provide access to responsible credit to more than 3.5 million customers, up 11% from a year ago. Much of the growth is attributable to the BrightWoay credit card and OneMain Auto Finance business as we're engaging more customers across our expanded multiproduct platform. In our credit card business, we ended the quarter with $752 million of receivables, 61% from a year ago.

We now have more than 920,000 credit card customers. The revenue yield has improved 140 basis points year-over-year and portfolio credit performance remains in line with our expectations and will move down over time as the portfolio matures. The credit card portfolio represents only about 3% of our total receivables today as we remain measured in our credit card growth. As a reminder, our goal is to grow this product conservatively with a focus on building the product for the long term.

We are confident that as we scale this business to a mature steady state, its capital generation return on receivables will be similar to our personal loans business, albeit with higher revenue yield that absorbs higher losses. In the meantime, we're very focused on continuously improving the user experience, growing with our best customers and reducing marginal cost per account to ensure a profitable business for the long run.

In our auto finance business, we ended the quarter with over $2.6 billion of receivables, up $119 million from the last quarter. It has now been a little over a year since we closed the acquisition of Foresight and we are pleased with the evolution of our auto business since then. In the last year, our roster of active dealers grew by 14%, quarterly originations grew by 29%, and we've added more than $400 million of receivables. The auto portfolio pricing has moved up nicely, and the credit performance remains in line with expectations and better than comparable industry performance.

We've made excellent strides in carefully growing the auto business within our disciplined credit policies and are very optimistic about our offering through both independent and franchise dealers. We continue to see the auto finance business as a driver of future profitable growth.

Let me touch briefly on the current economic environment. This quarter, the macroeconomic environment remained consistent with past quarters with policy news causing some volatility, but our customer base continuing to manage their household balance sheets well. The nonprime consumer remains resilient supported by a solid labor market and good wage growth. And there are provisions in the recent tax bill that could benefit our customers, including the reduction of taxes on tips and overtime and some of the expanded family tax benefits.

I spoke last quarter about the resiliency of our business and our ability to manage profitably through the cycle. Our confidence is supported by our long history of serving the nonprime consumer, a conservative underwriting approach that for the past 3 years has incorporated a 30% cushion to ensure that the loans we originate will remain profitable even if the environment experiences stress and a strong balance sheet with tremendous liquidity. Our second quarter execution offered further evidence of this business model.

Our underwriting posture remains very conservative with more than 60% of our new originations coming from our top 2 credit tiers. And once again, we demonstrated best-in-class access to capital markets, raising $1.8 billion in the quarter, in both the ABS and unsecured markets, which provides us with a lot of flexibility for the coming quarters.

Let me close on capital allocation, where our priorities remain the same. We continue to focus on the long-term success of our business, including strategically investing in our expanded product set, data science, digital innovation, as well as profitable growth. Our regular annual dividend of $4.16 per share yields about 7% at today's share price. This quarter, we repurchased 460,000 shares at an average price of just below $46 per share. During the first half of 2025 we've repurchased about 780,000 shares for approximately $37 million, already outpacing the 755,000 shares we repurchased in all of 2024. We will continue to pace our repurchases based on a number of factors, including excess capital available economic conditions and market dynamics.

In summary, it was a great quarter. We are seeing the results of initiatives and actions we put in motion over the past couple of years including careful management of our credit box, innovations in our core loan products to drive originations and new products and channels. all of which resulted in significant capital generation growth year-over-year.

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

Thanks, Doug, and good morning, everyone. I'm pleased to start by summarizing another strong quarter marked by double-digit revenue growth, solid receivables growth and ongoing credit performance improvements. We demonstrated our industry-leading balance sheet management with great market access and funding execution, raising $1.8 billion through issuance in both the secured and unsecured markets providing additional flexibility for future issuances.

Second quarter GAAP net income of $167 million or $1.40 per diluted share was up 137% and from $0.59 per diluted share in the second quarter of 2024. It is worth mentioning that last year's second quarter GAAP results included purchase accounting adjustments associated with the acquisition of Foresight, which were excluded from our C&I adjusted results.

C&I adjusted net income of $1.45 per diluted share was up 42% from $1.02 in the second quarter of 2024. Capital generation, the metric against which we manage and measure our business totaled $222 million up $86 million or 63% from $136 million in the second quarter of 2024, reflecting strong growth in our loan portfolio, improved portfolio yield and the notable improvement in our credit performance.

Given the strong growth in capital generation through the first 6 months of 2025, we are well positioned to generate significantly more capital this year than we did in either of the past 2 years. Managed receivables ended the quarter at $25.2 billion, up $1.6 billion or 7% from a year ago. This compares to 6% organic growth last quarter. It has now been a year since our acquisition of Foresight. So all growth discussed this quarter and going forward is organic.

Our growth highlights OneMain's unique ability to find pockets of growth in higher quality origination segments in our personal loan product, while also carefully growing into our newer businesses and responsibly driving improved pricing across the portfolio. It was just 3 years ago in the second quarter of 2022 that we reached $20 billion in receivables. Since this time, we've been able to increase our receivables by 25% or $5 billion while maintaining a notably tightened credit box and driving new product growth, including $1.3 billion from the acquisition of Foresight.

Second quarter originations of $3.9 billion were up 9% year-over-year despite our continued conservative credit box. As we look forward to the second half of this year, we expect a more normalized mid-single-digit year-on-year growth in originations as we are now more than a year into the successful personal loan growth initiatives that we started in June of last year. Importantly, we remain very comfortable with our full year managed receivables growth guidance of 5% to 8%.

Second quarter consumer loan yield was 22.6%, up 19 basis points from the first quarter and up 67 basis points year-over-year. The improvement in yield was driven by the sustained benefit of the pricing actions we've taken and the seasonal improvement in 90-plus delinquencies partially offset by an increasing mix of lower yield, lower loss auto finance receivables. While we're pleased with the improvement in yield this year, we expect it to moderate in the second half of the year, due to the typical seasonality of 90-plus delinquencies and growth in our auto portfolio.

Total revenue this quarter was $1.5 billion, up 10% compared to the second quarter of 2024. Interest income of $1.3 billion grew 10% year-over-year driven by receivables growth and the yield improvement I just mentioned. Other revenue of $195 million grew 6% compared to the second quarter of 2024. The primarily driven by higher gain on sale associated with our whole loan sale program and higher credit card revenue associated with the growing credit card portfolio. We now expect our 2025 revenue growth to be at the high end of our previously discussed range of 6% to 8%.

Interest expense for the quarter was $317 million, up $22 million compared to the second 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 5.4%, consistent with the prior quarter and in line with our expectations for the full year. Second quarter provision expense was $511 million, comprising net charge-offs of $446 million and a $65 million increase to our reserves driven by the increase in receivables during the second 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 $54 million, up from $47 million in the second quarter last year. As we have said before, we expect quarterly PBC expense in the low $50 million range.

Let's turn to Slide 8 and look at consumer loan delinquency trends. 30-plus delinquency at June 30, excluding Foresight, was 5.07%, down 29 basis points compared to a year ago, benefiting from improvements in both early and late-stage delinquencies. As we look ahead, the sustained improvement in delinquency will result in continuing loss benefits into the second half of the year. It is worth noting that we're seeing positive trends in both early and late-stage delinquency performance of our newer products, credit cards and auto finance, in addition to our personal loan product. So across the board, we are feeling good about the direction of travel.

On Slide 9, you see our front book vintages comprised of consumer loans originated after August 2022 credit tightening now make up 90% of total receivables. The performance of the front book remains in line with expectations and is driving most of the delinquency and loss improvements we are seeing. While the back book continues to diminish, now making up only 10% of the total portfolio, it still represents 24% of our 30-plus delinquency. And as expected, as the back book continues to run down over the remainder of this year, we anticipate it will contribute less to our delinquency results.

Let's now turn to charge-offs and reserves as shown on Slide 10. C&I net charge-offs, which include credit cards were 7.6% of average net receivables in the second quarter, down 88 basis points from a year ago. Consumer loan net charge-offs, which exclude credit cards, were 7.2% in the quarter, down 110 basis points year-over-year. We remain confident in the continued year-over-year improvement of losses over the remainder of 2025. As we have discussed before, the difference between C&I net charge-offs and consumer loan net charge-offs, comes from our credit card portfolio.

Let me spend a moment to update you on the credit trends of the small but growing portfolio. As a point of reference, we rolled out the credit card business in August 2021, yet the portfolio size remains approximately $750 million today. After our initial rollout of a test portfolio, we have been extremely prudent in the ramp of the business given the uncertain environment over that time frame as we continuously focused on improving the product and user experience. Our losses this quarter in our card portfolio improved modestly to the mid-19% range.

As we look forward, we expect continued improvement over the remainder of the year with credit card losses anticipated to decline by around 150 basis points in the second half of the year. This is primarily driven by the seasoning of the credit card portfolio. and improvements across both early and late-stage delinquencies. We are 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. More broadly, given the trajectory of our early and late-stage delinquencies through the first 6 months of the year, across all our products, we are confident that our full year net charge-offs will come in within the lower half of our original guidance range of 7.5% to 8%.

Recoveries continue to remain strong, amounting to $87 million in the quarter or 1.5% of receivables as we continue to utilize the various strategies we have available to optimize recoveries. Loan loss reserves ended the quarter at $2.8 billion. While the credit performance of our portfolio is improving as reflected in our delinquency and charge-off metrics, our 11.5% reserve coverage stayed flat during the quarter. as we maintain an appropriately conservative macroeconomic overlay in our reserve. As a reminder, the higher loss, higher yield credit card portfolio contributes to the reserve adding 35 basis points to the overall reserve ratio at June 30.

Now let's turn to Slide 11. Operating expenses were $415 million up 11% compared to a year ago. Our second quarter 2024 operating expenses were unusually low due to the expense actions we took in the first quarter of last year. Adjusting for those benefits, expense growth was aligned to our receivables growth even as we continue to invest for the future. The 6.7% OpEx ratio this quarter is 9 basis points higher than last quarter and is in line with our expectations. As we've said before, our OpEx ratio can fluctuate from quarter to quarter, but we feel great about the inherent operating leverage of our business. We remain confident in our full year 2025 operating expense ratio guide of approximately 6.6%.

Now turning to funding and our balance sheet on Slide 12. During the quarter, we continued to optimize our balance sheet. We raised a total of $1.8 billion through 2 issuances. In May, we issued a 7-year $800 million unsecured bond at 7 1/8%, callable in 3 years. The bond proceeds were used to partially redeem a significant portion of the 7 1/8% bonds that mature in March 2026. The as we proactively manage our balance sheet by reducing our nearest maturity. At quarter end, only about $400 million of the original $1.6 billion of March 2026 bonds remain outstanding with no further unsecured maturities until January 2027.

In June, we also issued a 3-year revolving $1 billion ABS with a cost of funds under 5%. Both of our issuances during the quarter had strong market demand, including a healthy number of new investors in our name, with $3.3 billion of funding raised through the first half of 2025, we have great flexibility on amount, purpose and timing of funding over the remainder of the year. Additionally, our bank facilities totaled $7.5 billion at quarter end with unencumbered receivables of $9.7 billion, contributing to our best-in-class liquidity profile. Net leverage at the end of the second quarter was 5.5x, flat to last quarter.

Turning to Slide 14, our full year 2025 guidance. Given the strong performance of revenues and net charge-offs in the first half of the year, we are updating our guidance on those metrics. Total revenue growth is now expected to come in at the high end of the previously provided 6% to 8% range. C&I net charge-offs are expected to come in between 7.5% and 7.8%, narrowing to the lower half of the guidance range we gave you at the beginning of the year. We are maintaining our full year managed receivables growth in the 5% to 8% range our operating expense ratio guide of approximately 6.6%. With all of these metrics moving in the right direction, capital generation in 2025 will significantly exceed 2024.

So I'll end with how I opened. We had a really strong quarter with improved credit performance, excellent originations, growth in total revenue and continued balance sheet strength. We have notable momentum as we move into the second half of 2025 and look forward to delivering outstanding shareholder value in the quarters and years ahead.

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

Thanks, Jenny. As I mentioned at the beginning of the year, as we actively managed the business over the past couple of years, we created very positive trends in credit and originations. These tailwinds that I spoke about then are clearly present now. as we are on pace to deliver significant capital generation growth in 2025. We are confident in the strength of our business model and our strategic initiatives and we have positioned OneMain very well for the long term with intense focus on our core loan business as well as our new products and channels.

We are operating from a position of strength with an experienced team, resilient business model, strong and diverse balance sheet, credit expertise and long experience serving the non-prime consumer, all of which should benefit our company, our customers and our shareholders, both in the near and the long term.

I'll close by thanking all of the OneMain team members for their continued dedication to helping our customers improve their financial well-being. Their hard work and dedication to our customers is unmatched.

With that, let me open it up for questions.

[Operator Instructions] Our first question is coming from Moshe Orenbuch with TD Cowen.

I guess, Doug and Jenny, you talked a little bit about the growth in originations and the changing rate of growth there. Could you just talk flesh out a little bit about the underlying competitive dynamic other factors that are causing this -- that are driving behind the success that you've had and kind of how you see that going forward?

Sure. Let me just talk Moshe. I will talk about the competitive environment for a minute and then Jenny may want to add. The competitive environment remains quite constructive for us. As you mentioned, we've had nice origination growth despite continuing to have a very tight credit box. I think you can look at our pricing, so we're able to take some price, which shows that our offers are quite competitive and 60% of our originations are in our higher risk grades, which is usually where there's more competition, and we seem to be getting our fair share.

I think in general, there are a lot of competitors out there, especially for unsecured loans. Half our loans are secured within auto, not very separate from our auto finance business. And so it's a competitive market, and we have to earn our customers' trust. There's a lot of capital available. So at different times in the market, if the capital markets are tight, competitors sometimes can't get access to capital, can't get it at a rate they want so can't loan. I think there's abundance of capital. So that's not a constraint on the competitive environment.

But we feel quite good about our positioning. We got loyal customers, we have this expanded product set we're making the kinds of enhancements I talked about around product and customer experience. And so the competitive environment remains -- there's a lot of competition out there, but it's -- we feel good about our positioning in it.

The only piece I'd add there is -- and Doug touched on this, but really, it's high-quality originations growth, which we like. So it starts with credit who are you underwriting and our ability to do that while maintaining a pretty tight credit appetite is very good. And then to be able to do that also while having good pricing, I think, is another piece that is very good. And the growth is really the outcome of choices there. And so I think we're quite happy with where it stands.

Got it. And as a follow-up and maybe kind of dovetailed with that a little bit, Jenny, you kind of alluded to a couple of times the stronger capital generation. And obviously, we see that you bought back some stock even kind of at the higher -- closer to the higher end of your leverage target. So maybe you could just talk a little bit about how you think about kind of deploying that in the next 6 to 12 months in terms of having that stronger capital generation and a relatively kind of constructive environment from a loan growth perspective.

Yes. Let me take this on our capital generation and our capital allocation policy. We've been quite consistent for many years. First use of capital is building a great business and investing in our products, our people, our digital capabilities, our data science and putting money -- putting our capital into every loan that meets our risk-return criteria. Second is our dividend and we have about a 7% yield now. It's a strong dividend. It's part of the value proposition we have to shareholders. After that, we will use our capital in a discretionary manner where we think it has the highest return to shareholders.

There's going to be more excess capital. I think you've seen that as capital generation goes up. You've seen quarter-over-quarter higher share repurchases. You've now seen year-over-year already, higher share repurchases. We could use that for more share repurchases. We could use that for something strategic, and that's kind of how we think about it.

And next, we'll go to Terry Ma with Barclays.

Maybe a question for you, Doug. You kind of called out the card portfolio to kind of mature and eventually kind of reach the same return on receivables as a personal lending business I guess, one, any sense on kind of timing of when that happens? And then two, as you kind of get to that point, how do you think about sizing that business and kind of growth going forward?

Yes. Look, we're not giving any like forward guidance on card per se, but let me tell you how I think about it, which is over time, the card yields will remain above 30%. They're already above 30%. They will move up and down a little bit, but in general, they'll -- we're confident they're going to be above 30%. Losses are kind of in the mid-teens. You -- it's lower actual operating expense because it's a digital product and without needing the branch infrastructure to do it. And so if you add all of those things up, you get to a similar capital generation return on receivables.

We're really not chasing growth in card. We're being quite measured. And right now, we're kind of perfecting the product making sure we feel really good about the cards we put on our book, driving -- when you're in the early stages yet higher unit costs. And then over time, those unit costs go down, they go down just by the nature of more receivables against the fixed cost base, but they also were actively working to drive those down in every year, they're going down some. And then we will ramp it as appropriate.

We've actually been quite conservative. I mean we've been at this 40 years, and we still have under $1 billion of receivables. During that time, we had a non-prime consumer economic cycle. And so we're in no rush. We think this is a great product. We now have a bunch of customers. We have almost 1 million customers. We're seeing some really nice results from our test of cross-sell from people who have cards to loans, and we're just going to keep the pace as appropriate. At some point, we probably will accelerate growth, but we're not at that point now.

Got it. Super helpful. And then as a follow-up, just on the recently passed one big beautiful bill, you kind of also called out a reduction of taxes on tips and over time and also the expanded credits. Any idea how -- what percentage of the portfolio this would kind of benefit for your borrower base?

Yes. Look, first of all, I want to be really clear. My comments were that some of the provisions could help some of our customers. We are not baking anything into our internal projections or our guidance or anything around the bill. So I want to be really clear about that.

But just to dimension it, if you look at a bunch of industry segments, health care, manufacturing, construction and then you add retail and hospitality that is around 40% to 50% of our portfolio. Those are likely places that either have overtime or tips. The question is, how much of an impact is it going to be? How much are they going to save? And is it really going to affect payment patterns at all? I think it's TBD and way too early. And then there are some other provisions like childcare benefit, child tax credits. -- that generally could help our customers. And so that's the dimension of it. I mentioned it because it's a -- could be a net positive, but it's not something we've baked in.

Our next question comes from Mark DeVries with Deutsche Bank.

With the front book now 90% of the portfolio on the back book down to 24%, how much longer should we kind of expect this year-over-year an improvement in credit to [indiscernible]? In other words, how much longer do we kind of have this tailwind?

Thanks. I'll take that. Listen, I think overall, in terms of -- it's hard for me to give you exactly a sense of how long will we continue to see it. I think we really like what we're seeing, and we're really liking the trends and -- so we're -- the 30 to 89 being down 8 basis points compared to last year and that 30 plus down 29 basis points compared to last year. I mean I think we really like this direction of travel. And the quarter-over-quarter improvement may vary some, but we're really liking where we're going. And we're also seeing better later stage roll rates which leads to better loss outcome.

So I think generally, we're feeling quite good about this. I don't know that I can give you a specific moment when we'll get back to a place where year-over-year were not coming down.

Okay. Fair enough. And then I just wanted to clarify my understanding of, I think, Jenny, in your prepared comments calling out kind of a moderation of growth in the back half of the year, at least relative to the first half trend. Is that attributable more to just tougher comps? Or are you pulling back a little bit on credit?

Really, if I look at our originations growth last quarter, last quarter, our originations growth was 20%. And then if you look at that organically, it's 13% -- it was 13%. And so this quarter, we were at 9% growth in originations -- and I think really, what you're seeing is we've been very focused on how growth outcomes while maintaining our credit box, and we've been doing that for about a year.

So if I do think you're starting to lap some of those initiatives. And so you'll see that with some of the moderation in the origination growth. We're very pleased with where we are and sticking to our guidance of that 5% to 8% receivables growth for the year. So that should give you a sense of where we're expecting to land.

Our next question comes from John Hecht with Jefferies.

Just a couple of things. I mean, I guess, touching on the on the credit side of the business. It looked like payment rates accelerated a little bit in the quarter. So I'm wondering if there's anything to take away from that? And then tag on to that is any impact from the, I guess, the student loan repayment update in terms of reporting and requirements.

I'll take that. I'd say in terms of payment, I don't think we see anything particularly unusual on payments. I had mentioned before, but we are seeing good trajectory on delinquency. I think what you see there is that customers are going delinquent but seem to be able to then make a payment after falling delinquent, and that's a phenomenon. We've seen for a while. I don't know that I'd call it a trend yet. So that's just one interesting piece here.

To move to your question on student loans. We monitor the whole portfolio very closely, and we've been highly focused on this since that deferral period ended in October of 2023. So it's been a while since the Fed collections action started in May, we have not noted any significant difference in the performance of the segment of the portfolio that has a student loan compared to the segment of the portfolio without a student loan. And just one other piece to mention on this is that many of our customers are current on their student loans and many are also still in deferred status. But it's clearly something that we'll be watching and closely monitor versus our other population.

Okay. And then, Doug, just maybe your updated thoughts on the branch network versus the online channel. I know the branch network is important from a servicing and customer interaction perspective. But where are you now kind of on this journey of becoming more digital? And how does that impact your thinking about the branch network?

Yes. Look, we view that we're going to be able to serve our customers across multiple channels, in person, on the phone, and online or on a mobile app. And we're always working to optimize exactly which of these channels it's a combination is most value added to our customers and our business model and then where the customer preference is. Our real focus with the branch network is -- our customers really like having personalized service, someone to talk to someone to help think about managing their debt, getting them into the right size loan, thinking about a loan consolidation and paying off credit cards and getting into a single monthly payment.

And then they also really like if they have a hiccup in their life. One spouse loses a job or they're between jobs that they have someone to call and we will work with them. And so value-added is the customer interactions that our branch team members have. And our branch managers have average tenure or 15 years, they really know their customer base and they know how to work with this customer.

So what we're always trying to do is our branch team members up to do value-added work. And so a lot of what we put into the app is make a payment, change your payment date, forgot my password, check my balance. And so we continually made that easier and gotten more and more people to use the app for that. And then we've also supplemented our branches with our central call centers. So if there's overflow in collection or a branch is busy booking loans and they need to have some help -- and so a lot of what we're doing is optimizing the work for maximum efficiency for us, maximum efficiency for our customers and making sure our branches are focused on engaging with customers, which customers really like.

We'll take our next question from Rick Shane with JPMorgan.

Look, you've done a good job sort of laying out the case of on credit of dilution of the back book, tightening in credit on the front book. The one factor that's probably a little bit harder for us to understand is what's really going on from a macro perspective. If you were to look at cohorts on a like-for-like basis on credit category, are you seeing your consumer stable, improving, deteriorating? Just to give us a sense of where we are in that cycle.

Yes. Look, our consumer has been quite stable, I'd say, for over a year now, as you know, that there was deterioration in '22 and into '23. I think like for like, we're booking better quality credit than we did if you go way back to prepandemic and we're managing the book to be about the same. So we've got tools in our toolkit that allows us to kind of manage what we put on the book. But I do think the overall the nonprime consumer has been stable. I don't think they've seen their economic situation get wildly better, it also hasn't gotten worse. It's been stable the last 12 to 18 months.

I think what you've seen us do is carefully manage the business. So our numbers have continued to get better. And we know how to kind of manage within any sort of economic environment to make -- to drive positive capital generation.

Got it. And look, if we were to go back to 2022 in the April to August time frame where credit shifted rapidly. That was obviously triggered in part by the rapid spike in gas prices, we estimate that your customer probably their spending at the pump is high single digits of their spending. What are the inputs that you're looking at right now to sort of measure the health of your consumer? And what are you seeing? Obviously, gas prices have been a nice tailwind. What are the offsetting headwinds in terms of other expenses.

I mean, look, we we're interested in macro trends, and we're all over them. And we understand whether it's food or housing or transportation costs like we watch that. But the real inputs we look at is each customer that comes in, do they have a job, don't they? How much do they make? How much do they spend? What's their net disposable income, what's their debt load and can they afford what can they afford to, a, take a loan from us? And if so, what is the price.

So the main input is like customer by customer. I think in a macro setting, I do think -- and to your earlier question, wages in aggregate have over -- about a year ago, caught up with inflation in aggregate. And our customers now have more net disposable income than they did before all of this down cycle and even really before pre-pandemic. And so we underwrite to net disposable income. I mean we obviously have we have 1,000 factors that go into our models, but it's relatively straightforward. How much do you make? How much do you spend? How much is left over? And can you afford the loan that we're putting you into.

Look, I appreciate that. The simple description of it. It's funny. Sometimes we lose sight of that, and you guys probably don't appreciate that as outsiders, it's hard to sort of appreciate that.

Our next question comes from David Scharf with Citizens Capital Markets.

Doug, I actually wanted to just revisit. I think it was the very first question on just the competitive environment. We've been seeing pretty much across the board this reporting season so far, credit-related beats. So obviously, all lenders and not necessarily direct competitors to OneMain. I mean, it's a variety of asset classes, but credit's clearly been performing or outperforming for most. And I assume that also is the case for many of your private competitors and private credit has been flowing freely as you noted.

Is -- are there any either early signs of more price competition? Or I'm wondering if past cycles are indicative of maybe how many quarters it is before you start to see competitors become much more aggressive on pricing or you mentioned it's constructive right now. But can you provide a little more color on kind of what you're seeing on the margin?

Look, having been through -- I mean, in late '21 and early '22 as people were feeling more comfortable from the pandemic competitors flooded into the market and we watched it and we actually watched competitors take a little bit of share at that time. And we stuck to our knitting, and we have a credit box and we have our product and we have our marketing and we have our customer experience, and we work on that every day to make it better and more refined and more specific and more granular. And whatever we can book, we book within those parameters. And we actually don't get too fast about if the numbers go up a little bit and go down a little bit. I mean I've talked about it before as growth is an output.

I think some of the places where there's more price competition, like a Credit Karma or LendingTree, some of the aggregators, we're seeing plenty of competition. Some of the competitors that got burned in 2022 trying to manage nonprime credit and didn't have the expertise we had have come back in but haven't come as far into nonprime. And so there is more competition at the, call it, 660 and above, then the FICO than there is 660 and below.

And so we track very carefully with the we can get our hands on, originations, volume product. As I mentioned before, plenty of competition in the market right now, but we feel good about the fair share we're getting. And we, as a management team, always check any impulse to get too fast any given quarter about if origination growth is exactly some place. Instead, we just stick to our discipline have a great value proposition to our customer, and we're pretty confident that we do this very well for the nonprime consumer.

Got it. No, that's very helpful color. And maybe just a quick follow-up on the auto side. I mean, it's been a year since the Foresight acquisition closed. I know you gave some kind of growth metrics around originations in rooftops. But more specifically, can you provide just some -- maybe your observations about the franchise business in particular? How -- just how it's performed relative to kind of your expectations a year ago either in terms of kind of penetration of franchise rooftops and sort of just the traction you've gained within F&I managers?

Yes. Look, we actually looked long and hard and debated whether we were going to build it ourselves and we found Foresight, which we think was a best-in-class auto lenders, they actually had very good sales team, a very good technology, which were -- have converted our whole auto business on to, which includes a portal for the dealers. They -- and we've grown that nicely. I mentioned that active dealers are up, and we've seen active dealers up. And so I think Foresight for a very small auto lender was very good at competing head-to-head with the bigger auto lenders inside franchise dealers. And so our growth has been in both franchise and independent dealers over time.

I think you probably know in the auto business, the dealer wants a good price for their customer, and they want fast execution, so they can move cars and free up their showroom and their F&I dealer to move to the next customer. and Foresight does a decision in under 15 seconds. And for franchise dealers, the bigger auto loans, they're usually a higher credit quality customer. And so we've been really pleased with it, and we're kind of growing it commensurate with the rest of our business.

But again, we put the same discipline of stress. We're assuming we put a 30% extra stress on our underwriting models so that we've maintained a conservative credit posture even in our auto business. So that [indiscernible].

So we're up against the hour. Thank you all very much for joining the call. If we didn't get to your question, our IR team is happy to engage, and we look forward to seeing everybody during this quarter and on next quarter's call. So thank you very much.

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