OneMain Holdings Inc (OMF) 2013 Q3 法說會逐字稿

Welcome to the Springleaf Holdings third-quarter 2013 earnings conference call and webcast. Hosting the call today from Springleaf is Craig Streem, Senior Vice President, Investor Relations. Today's call is being recorded. At this time all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation.

(Operator Instructions)

It is now my pleasure to turn the floor over to Craig Streem, you may begin.

Thanks, Jackie. Morning everyone, thank you for joining our call this morning. Let me begin with slide 2 of our third-quarter earnings presentation which you can find in the Investor Relations section of our website by registering at the link that you see there. And we will be referencing that slide presentation during this morning's call.

Our discussion today contains certain forward-looking statements about the Company's future financial performance and business prospects which are subject to risks and uncertainties and speak only as of today. The factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release which was furnished to SEC today in an 8-K report, and our Form 10-Q for the quarter ending September 30, 2013 which we filed with the SEC today, and our final prospectus filed with the SEC on October 17, 2013 as well as in the Q3 2013 earnings presentation posted on our website. And of course, we encourage you to refer to these documents for additional information regarding the risks associated with forward-looking statements.

In the third-quarter 2013 earnings material we've provided information that compares and reconciles the Company's non-GAAP financial measures with the GAAP financial information and we explain why these presentations are useful to Management and Investors and we urge you to review that information in conjunction with today's discussion. For those who listen to the replay of this presentation, we remind you that the remarks made here as of today, November 12, and have not been updated subsequent to the initial earnings call.

Our call this morning will include formal remarks from Jay Levine, President and Chief Executive Officer of Springleaf; and Macrina Kgil, our Chief Financial Officer. After the conclusion of our formal remarks there will be time for a question and answer session, and our Chief Risk and Analytics Officer, Dave Hogan, will join us for that portion of the call. Now it's my pleasure to turn the call over to Jay.

Thanks Craig. And than you all for joining us for our first earnings call following our initial public offering. It is important to us to be accessible to all those interested in the Springleaf story and we want to begin that with today's call. In our call this morning we will reviewed the highlights of our third quarter and we'll follow that with an overview of our business and strategy. We won't do this every quarter, but we want to make sure you are all grounded in the Springleaf story which we are all so very proud of.

Today, Springleaf is in the unique position of being a new public company with a very long operating history. Over 90 years in the business of making personal loans to working Americans. Our customers are middle-income Americans with solid job histories and consistent income but who, for a variety of reasons, (technical difficulties). So turning to slide 4, (technical difficulties) we reported a loss (technical difficulties) to debt and compensation expenses associated with (technical difficulties) will give some more color in her remarks (technical difficulties) which we define as our branch operations (technical difficulties) third quarter (technical difficulties) double our core earnings of $21 million in last year's third quarter.

We generated very solid growth of 19% in our consumer loan portfolio, yield expansion over last year of 171 basis points (technical difficulties) portfolio and the SpringCastle portfolio (technical difficulties) as well. One of our most important (technical difficulties) per branch which at the end of the third-quarter reached $3.6 million per branch, up 19% from a year ago (technical difficulties) previous quarter. We believe this initiative not only drives profitable growth, it also takes advantage of the positive operating leverage available to our business.

Historically, our branches originated in service, both consumer and real estate loans. But now that we are no longer originating real estate loans, and with that portfolio in runoff we've begun the process of centralizing the servicing of our legacy real estate portfolio. This is giving our branch employees more time and capacity on our personal loan business and we are leveraging that capacity by driving higher volumes of qualified customers (technical difficulties) costs (technical difficulties) as we focus on leveraging our existing branch operations and staff and we think we have plenty of runway ahead as we scale up our personal loan origination activities. To illustrate potential to scale our branches, our branch headcount is up just 1% from a year ago well our branch receivables grew 19%.

Another highlight this quarter, was our acquisition of the London, Kentucky personal loan servicing center from HSBC where we will continue to service the SpringCastle portfolio. This acquisition brought over 200 employees with average service of almost 8 years. This operation gives a highly scalable platform to service additional personal loan portfolios (technical difficulties) SpringCastle portfolio (technical difficulties) and we took on the servicing of this portfolio in September earning (technical difficulties) portfolio earned by our co-investors (technical difficulties). We also completed a number of important funding transactions in the quarter that will drive our cost of funds lower while also smoothing our maturity profile going forward.

In addition, we added significant backup funding capacity in the form of $650 million of undrawn revolving facilities. And not to be forgotten, less than a month ago we completed the IPO of Springleaf with net proceeds to the Company of just over $235 million (technical difficulties) to our capital base. This was a milestone in our Company's history and I want to thank all 5,000 Springleaf employees (technical difficulties) and also share my vision of Springleaf as the leader in personal (technical difficulties).

Now let's turn to Springleaf's business model on slide 5 (technical difficulties) and our new acquisition and servicing business. We exclude the legacy real estate and other non-core activities. For those of you who may be new to Springleaf, we ceased originating real estate loans in the first quarter 2012, and sales finance loans in the first quarter of 2013 and then allowing those portfolios to runoff.

It's Craig again, I understand that the call is breaking up. To a fair degree, I don't know if you all can hear me or not but, I think our best course is to terminate and then we're going to dial back in, at about 2 minutes from another phone line. It's, apparently we've got a problem on our end here so, we're going to break it off and I guess, we will dial back in. I think you can all stay on the line. We'll dial back in as the host in about 2 or 3 minutes. I apologize for that, so bear with us and we'll get right back on, thanks

Ladies and gentlemen, this is the operator. I do apologize but there will be a slight delay in today's conference. Please hold in the conference will resume momentarily. Thank you for your patience.

Hello, it's Craig again. I hope you are all hanging with us and I hope you enjoyed the music. (laughter) And our apologies for the problem. We think it was on our end and I'm sorry about that. What we're going to do is not go over the Safe Harbor disclosures once again, but I am going to ask Jay to begin his comments from the top and we'll just go from there. Thanks.

Thanks Craig, and again apologies if anybody has to hear the first opening a little bit, or twice. And again, thanks for joining our first earnings call following our initial public offering. It's important to us to be accessible to all those interested in the Springleaf story and we want to begin that with today's call. In our call this morning we will review the highlights for our third quarter and we'll follow that with an overview of our business and strategy. We won't do this every quarter but we want to make sure you are all grounded in the Springleaf story which we are all so very proud of.

Today, Springleaf is in the unique position of being a new public company with a very long operating history. Over 90 years of making personal loans to working Americans. Our customers are middle-income Americans with solid job histories and consistent income but who, for a variety of reasons, may find traditional credit providers to be less accessible.

So turning to slide 4, lets begin with the highlights of our third quarter. Before the market opened this morning, we reported a loss for the quarter of $91 million or $0.91 per share largely due to charges related to the early retirement of debt and to one-time non-cash compensation expenses associated with our IPO. Macrina will give you some more color on those items during her remarks. More importantly, our core consumer operations -- which we define as our branch operations less acquisitions and servicing, earned $48 million after-tax in the third quarter or $0.48 per share, more than double our core earnings of $21 million in last year's third quarter. We generated very solid growth of 19% in our consumer loan portfolio, yield expansion over last year of 171 basis points in our branch portfolio and the SpringCastle portfolio added meaningfully as well.

One of our most important levers to drive earnings growth is our effort to grow average receivables per branch which at the end of the third quarter reached $3.6 million per branch, up 19% from a year ago and 6% from the previous quarter. We believe this initiative not only drives profitable growth it also takes advantage of the positive operating leverage available through our business. Historically, our branches originated and serviced both consumer and real estate loans but now that we are no longer originating real estate loans and with that portfolio in runoff, we have begun the process of centralizing the servicing of our legacy real estate portfolio. This is giving our branch employees more time and capacity to focus on our personal loan business and we are leveraging that capacity by driving higher volumes of qualified customers into our branches.

We incurred very little incremental cost to generate this growth as we focus on leveraging our existing branch operations and staff and we think we have plenty of runway ahead as we scale up our personal loan origination activities. To illustrate the potential of our scale, our branch headcount is up just 1% from a year ago while our branch receivables grew 19%. Another highlight this quarter was our acquisition of the London, Kentucky personal loan servicing center from HSBC where we will continue to service the SpringCastle portfolio. This acquisition brought over 200 employees with average service of almost 8 years. This operation, this is a highly scalable platform to service additional personal loan portfolios which we hope to acquire in the future.

We completed the SpringCastle portfolio acquisition in April and we took on the servicing of this portfolio in September, earning servicing income on the portion of the portfolio owned by [Yarco] investors. Very little of that servicing income hit our numbers in the third quarter, but will begin to have a larger impact on our results beginning in the fourth quarter. We completed a number of important funding transactions in the quarter that will drive our cost to fund lower, while also smoothing our maturity profile going forward. In addition, we added significant backup funding capacity in the form of $650 million of undrawn revolving facilities.

And not to be forgotten, less than a month ago we completed the IPO of Springleaf with net proceeds to the Company of just over $235 million which further strengthens our capital base. This was a milestone in the Company's history and I want to thank all 5,000 Springleaf employees who worked so very hard to bring the Company to where we are today and who also share my vision for Springleaf as the leader in responsible personal lending.

Now lets turn to Springleaf's business model on slide 5. As we look at Springleaf's business today, we define our core activities to include our branch operations and our new acquisition and servicing business. We exclude the legacy real estate and other non-core activities. For those of you who may be new to Springleaf, we ceased originating real estate loans in the first quarter of 2012 and sales finance loans in the first quarter of 2013 and have been allowing those portfolios to runoff. The foundation of our strategy is to grow receivables at appropriate levels of risk in a cost-efficient manner.

Historically, receivable growth has been generated directly through our branches but increasingly, will come through our online channel, iLoan. Our branch originated personal loan portfolio grew to just under $3 billion at the end of the quarter, again up 19%, driven by increased demand as evidenced by rising application, and by our use of sharper marketing tools and analytics. At the same time, our credit performance in the branch business remains quite good, a function of our face-to-face underwriting and servicing that are so fundamental to our operating model as well as by our use of sophisticated modeling and risk analytics.

Turning to slide 6, I want to give you a quick overview of the Springleaf business. We are a leading national consumer lender serving over 1 million customers with over 830 branches in 26 states and in fact, most of our branches have been in their respective communities for decades. We focus on -- we focus our branch operations in the states where the population and potential customer base allow us to operate in a cost-effective manner and where the business climate allows us to operate in a profitable manner. At the end of the quarter, we had almost $6.5 billion of personal loans that we originated through our branches, or acquired as part of the SpringCastle acquisition. Our 830-plus branches handle about 325,000 applications each month and we close on average over 60,000 loans each month.

Our loans are designed to help our customers manage their individual financial situations and as they do, see their credit profiles improve. We are known for our high levels of customer service and timely solutions. In all cases, the loans we originate each and every day are traditional, closed-end installment loans. Fixed-rate and fully-amortizing with no balloon payments and no prepayment penalties. These are important characteristics because they help ensure that our borrowers will be in the best possible position to repay us and wind up in a better financial position. In addition, we continue to build on our reputation as a responsible lender.

Turning to slide 7, I want to highlight the opportunity we see for organic receivable growth. We restructured our branch network in 2012 to optimize operational and economic efficiency and scale. And at the same time, started to deploy more sophisticated acquisition analytics that are today driving our branch growth and we believe will provide Springleaf important advantages going forward. The key measures of branch efficiency that we focus on are shown at the bottom of the slide. And I want to highlight the significant growth we have seen in a number of these metrics.

First, applications per branch for 2013 on an annualized basis are more than double the level of 2011. Second, the number of closed loans is almost 50% higher than in 2011 and the number of loans per branch employee is about one-third higher than in 2011. All of these demonstrating that branch productivity has improved significantly over the last couple of years. I should add, that during this period we have also seen steady improvement in our risk-adjusted yield. You can clearly see the progress we have made and the opportunity ahead of us. We believe we can continue to do even better.

And while the numbers are not on the slide, for the year-to-date period, applications per branch are up 66% and closed loans per branch are up 29% reflecting the high level of customer demand for Springleaf personal loans. As you can see in the chart on the right, since we refocus the branch business on our core personal loan product we have put together a great track record of consistent growth in receivables and we are really pleased with that performance. Looking ahead, we expect that loans per branch will improve even more as we complete the transfer the mortgage loan servicing out of our branches.

On the next slide, our personal loan credit performance has been very solid. Driven by our almost 100 year approach to underwriting and servicing. We use proprietary models for initial scoring and follow that with face-to-face interaction with the customer in the branch where we do a full cash flow-based underwriting. In addition, we seek collateral with every loan and our extensive use collateral is a factor in our loan performance. Approximately 85% of our loans are collateralized with over half of those backed by hard collateral which in most cases is the borrower's automobile.

The other half of those loans are what we call soft-secured meaning the borrower secures the loan with household goods. Our personal loan delinquency and loss levels have been quite strong and in fact, have been below what we would consider our long-term averages. As our portfolio grows, we expect our net charged off rate to range between 4% and 5%.

Turning to slide 9, one of the key drivers of increasing application volume and loan growth has been the rollout of our online application capability which we call iLoan. Essentially, iLoan allows us to be open for business 24 hours a day, 7 days a week, whenever it suits a potential customers to engage with us. At the present time iLoan operates as an acquisition channel for us, allowing us to do initial automated underwriting then, if conditionally approved, the leads are moved to the closest local branch where we work with the customer to close the loan following our traditional underwriting process.

As you can see it on the chart, the volume of closed loans initiated online has been growing nicely and is becoming a bigger piece of our new customer volume. At the present time our focus is on using iLoan to drive increasing levels of screened applications. Importantly, this improves branch productivity but we're also testing processes to complete the loan closing in a more automated manner. We are also looking very carefully at the scoring, screening, and verification models to see how we can further enhance profitable growth through iLoan.

Turning now to slide 10, I want to talk for a minute about our newest growth opportunity, portfolio acquisitions and servicing. Our first transaction here -- and hopefully with more to come, with the acquisition of the $3.9 billion SpringCastle portfolio in April of this year from HSBC and the related purchase of the London, Kentucky servicing center. The servicing operation has over 200 experienced employees with an average tenure of almost 8 years, we have a very solid foundation to build upon. We earn in 47% of the portfolio economics from the portfolio, plus a servicing fee from our coinvestors on the portion of the portfolio owned by them.

Our share of the SpringCastle earnings in the third quarter was $28 million pretax with very little contribution from servicing which we just took on in September. This incremental revenue stream will further benefit our earnings in the fourth quarter. This is a great model for future acquisitions where the economics are enhanced by the servicing income and we have the ability to divest a portion of the risk if appropriate. The characteristics of the transaction and the portfolio are shown on the slide so you can see just how compelling the transaction is but the potential value goes beyond the economics of the SpringCastle deal.

We are now in a very strong position to acquire other personal loan portfolios and handle servicing in a very cost efficient manner and we expect to take a close look at additional personal loan portfolios over time. We believe very few competitors have in place the licensing, compliance, and technology framework that Springleaf has on a nationwide basis which should give us an advantage in competing for these portfolios going forward.

Turning now to slide 11, as with our other reporting segments, we present this information on a historical accounting basis which eliminates the anomalies associated with our push-down accounting. All of our segment reporting is broken out in the appendix for you. The legacy real estate portfolio was down to $9.6 billion at the end of the quarter, $1.2 billion lower than last year and $300 million lower than last quarter. Our credit metrics remains stable, losses and a delinquency ratio remaining fairly consistent over time. In fact, delinquency dollars have been declining which is the right metric to look at for a runoff portfolio.

Loss provisions related to TDR loans came down from the second quarter to the third quarter reflecting a slowdown in loan modification activity. We continue to believe that in certain circumstances a loan modification will result in a better outcome for both Springleaf and our customer. As you can see, the majority of the losses in the legacy real estate portfolio have been attributable to provisions for TDRs related to loan modifications which is a non-cash reserve build. We anticipate that a significant portion of these reserves could eventually be released back into our P&L as the modified loans pay off.

Before I turn the call over to Macrina for her comments on financials, I want to comment briefly on slide 12, liquidity and funding. As you can see from the chart on the left side of the slide, coming into 2013 realigning our debt maturities was an important objective and I am really proud of the work done by our team to accomplish the results you see displayed on the right side. Through a series of prepayments and refinancings, we have achieved an important smoothing of our maturities and have also reduced our overall funding cost.

We have recently utilized a variety of funding vehicles successfully with excellent reception and strong demand for our asset-backed, mortgage-backed, term loan and unsecured debts offerings. We were also very pleased to see ratings upgrades from Fitch and Moody's recognizing the progress made. In addition, we have put in place $650 million of backup liquidity in the form of undrawn revolving capacity. You can get the details of all our recent capital markets activity in the 10-Q that we filed this morning. That concludes my portion of our formal remarks so I will turn the call over to our Chief Financial Officer, Macrina Kgil for her review of the third-quarter financials. Macrina?

Thank you, Jay. Lets move to slide 13 for a summary of our financial results. For the quarter our core operations generated $73 million of pretax earnings or $48 million after-tax, more than double the quarter a year ago. Growth in our consumer loan portfolio and expansion of yield, two key metrics that drive revenue, were both positive this quarter compared to a year ago. And together with lower funding costs and a modest increase to our operating expenses resulted in stronger performance year-over-year. The SpringCastle portfolio also contributed to core earnings compared to the quarter a year ago and with servicing now onboarded, we anticipate increased earnings contribution in the fourth quarter.

As this is our first earnings call I will explain how operating leverage works for us. Our operating expenses are largely fixed in nature, the key components being the investment required to operate a fully staffed branch and the level of support from headquarters for risk technology, legal compliance and marketing. We're also able to take -- we are able to take advantage of the operating leverage that comes with our scale. As consumer receivables for branch grow the increase in our cost basis is just marginal. And therefore most of the incremental interest margin earned from loan portfolio growth and yield expansion goes straight to the bottom line.

Compared to the second quarter, pretax core earnings decreased $53 million. This decline as discussed in our IPO prospectus was a result of two separate items. First was the sale of a large portfolio of charged off accounts in June generating $40 million of gain in the second quarter. This sale will also lead to reduced charged off recoveries in subsequent quarters. Secondly, we booked an additional provision of approximately $20 million related to SpringCastle as the portfolio seasoned post-acquisition.

We also discussed the impacts of third-quarter non-recurring items in our IPO prospectus. First, we retired a portion of our 2017 unsecured notes, which accelerated the recognition of push-down GAAP discount attributable to the set. We also recognized a one-time, non-cash compensation expense associated with our IPO. These items combined were $166 million which significantly impacted our pretax income for the quarter. Overall, a solid quarter less the impact of non-recurring items with good growth in our receivables, yield expansion and credit performance in line with our expectations.

What that, we'll turn the call back to the operator for the Q&A instructions.

The floor is now open for questions

(Operator Instructions)

John Hecht, Stephens

Congratulations on all you've accomplished in the third quarter. First question, you had a good uplift in the average portfolio to the consolidated yield, is this a mix shift or were you able to price up some of your products or is there a combination going on there?

Look, it's a great question and thanks for asking. I think it's a combination of all the above. I think you've seen some lightening up on the regulatory, on the state side which has certainly had a big impact, you're aware North Carolina changed its rules as did a number of other states and that's beginning to have some impact. I'd also say sharper analytics and being crisper on everything has also made a difference.

A follow-up related question is that we are aware that Texas and North Carolina has some recent regulations or laws that passed that allowed for increasing certain fees associated with a product, have you implemented those fee increases and if you've done so have you done so to the full amount or just a portion of the amount?

In North Carolina the day it was available to be implemented, we were able to implement and did. In Texas we're beginning to roll it out. And North Carolina was pretty significant, it's one of our larger states and I believe on average it will be several hundred basis points of incremental to those dates.

Jay, you talked about, you're hopeful for acquisition opportunities to continue to utilize the servicing center you bought and drive some incremental servicing fees. Anything in the pipeline now? Is there any commentary given some of the opportunities there?

I'd say the same thing we've said, a few weeks ago, there's interesting transactions because they really come about when peoples change their strategies in other things. I'd say unique sets of circumstances need to line up. We've looked at a couple of things, haven't traded yet but we're optimistic and hopeful.

Final question. You took onboard the servicing in early September, you had about $10 million of servicing fees for the quarter, what's the best way for us to think about having a full quarter of opportunity there in terms of the run rate revenues?

Hi this is Macrina. For July and August our servicing fees were minimal. It's a little bit over $1 million per month and the we actually saw the full impact in September of around $7 million. So the portfolio is declining so, we will be seeing a slight decrease to the run rate of $7 million in September so around about $20 million or so is where we're thinking for fourth quarter.

The other thing I'd add, is, I think that we've disclosed, we're earning 225 basis points, it's about a $3.5 billion portfolio, and if you say our portion is roughly half of that, and then we've got a pretty decent margin built in. So you can sort of work backwards, the gross fee would be on the whole thing, we sort of net back out the portion that's attributable to us and the earn a decent margin on the portion that is attributable to our two economic partners.

Thanks for the color guys.

Sanjay Sakhrani, KBW

This is actually Steven Kwok filling in for Sanjay. My first question is around the net charge-off rate. In terms of the sale of the charged off accounts, how long is that expected to impact the charge-off rate? Is there at some point where we can see the net charge-off rate normalize a little bit?

Sure, this is Dave. I'll take that question. We expect that over time the recovery rates will return to normal. It will take a while for that portfolio to build back up, anywhere from 8 to 10 months.

Got it. Are there any other one timers that we should be aware of in the fourth quarter or over the near term?

Currently we are not anticipating any but we're still early in the quarter.

Moshe Orenbuch, Credit Suisse

Starting off, nice growth in the consumer receivables. You mentioned a couple of pricing-type changes and the like, are there any other rollouts or things that are going to impact your -- impact or add to your ability to grow over the coming months?

That's a great question. We think about that a lot. At this point we certainly see no shortage of demand in our core product. I think the applications show at all. I would say, when you think about the Internet you get a lot more people that just randomly apply, so we've got to spend a little more time sorting through but, our biggest single challenge is really getting through the quality of the applicants that we see today. We think, post the rollout out of real estate next year there'll be additional capacity to think about other things but I'd say, as long as we can continue to get the kind of growth and consistent growth we've seen in our core product I think we're looking to stay on the track we're on.

And as it relates to -- you talked a little bit about the acquisition opportunities, anyway to talk about what the types of portfolios? Are they unsecured? Are they real estate secured? What's out there at this juncture?

What I'd say is, it's a little bit of everything. The few things that we've looked at have been a very seasoned old second lien portfolio, I'd say there's been a couple of automobile portfolios, it's been a hodgepodge of different things. But I'd say with where we are, we're in a position to look at most anything given the licensing, the technology and the things that are in place. I think the things we're not looking to be part of is getting back into the real estate business.

Last question is, you mentioned that you're in the process of consolidating the servicing the real estate. Are there any ways to enhance your efficiency post that? Is there an outsourcing option? Is there something -- is there a second stage to that?

At this point we think the most important thing is while efficiencies and costs are important, keeping the losses in line is our most important goal. And given the size of the loan and the types of loans that are coming out of the branches, as much as we went out and tried to say, who are the best servicers, typical loans of $50,000 to $75,000, there was nobody great that could do it, which is why we decided to do it ourselves. Because again, a marginal few basis points compared to hundreds more in losses was much more the driver for us. So, if it gets to be a very seasoned portfolio I think we've said we'll look at all kinds of things that make sense, but at this point we're pretty content with the path we heading on.

(Operator Instructions)

David Sharp, JMP Securities

Jay, can you talk a little bit about the profile of the customers you're seeing there iLoan and online in general? Obviously given the growth of that channel? Are there any material differences to your overall portfolio in terms of, average loan size, credit quality, other aspects?

I'll give a quick second or two and then I'm going to really turn it over to Dave Hogan who tracks all this stuff very closely. What I'd say is the loans we're looking to close are identical. We're not looking for the internet customer to provide any kind of different situation than a customer who would walk into a branch or call a branch. Now, it turns out that there are some differences in the demographics and I'll let Dave spend a minute on that.

Sure. So this is Dave. The typical applicant that you see coming in online tends to be higher income, a little bit younger, as you might expect. A little bit more urban in terms of the profile. But since we passed them all through the same underwriting, platform decisions, et cetera, and judgmental process the loan that we get out the other side is nearly identical in terms of the profile of the customer we ultimately end up booking.

Got it. Makes sense. And just for a point of reference, can you give us a sense for what the approval rate then would be for those applications that are coming in initially through the online channel versus your basic walk-in business?

Sure. Online you're going to be in the high single digits to 10% range in total. Outside of that channel you're more looking at 25% to 30%.

Very helpful, and then just one last question. Circling back to the discussion on yield and the portfolio, you talked about a little bit of boost you got from some recent legislative developments in North Carolina and Texas. The yield on the portfolio is still considerably below ceilings arguably in many of your markets and probably your self-imposed ceiling. Ignoring legislative developments, is there any kind of pent-up pricing leverage that you see right now that we might be expecting over the next year or so or should we expect just as general business practice probably APRs holding where they are?

I think in general we're pretty comfortable where our pricing is today. I'd say yes, you make a very good observation in a lot of states and probably on the average portfolio, we are under the maxes and one of the reasons, two things that we look for in a loan that we've seen provide better performance and we offer better rates for that. One is hard collateral and the other is loan size. Two very important things that have both provided some of the strongest portfolio -- some of the strongest performance as part of the portfolio. And we think about this on a risk-based level and in turn there's lower pricing or better pricing for the customer with those products.

Got it. Thanks and congratulations.

That was our final question. I'd now like to turn the floor back over to Mr. Streem for any additional or closing remarks.

Thanks Jackie, and let me ask Jay to come on for a moment.

The one thing I want to say and, again, I apologize for the technical difficulties it was a first call and a last glitch, we promise that one again. And most importantly thank you all for taking the time to listen today and I'll turn it back over to Craig.

Any follow-up you guys have my contact information from the earnings release, you know how to find us. And we'll be available to the extent we possibly can. Thank you.

Thank you, this does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.