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| Statement |
|---|
| Credit tightening actions have improved overall portfolio quality as we have originated roughly 60% of our loans to our top two risk ranks in recent quarters |
| In terms of Illinois and the new states, I mean, we're very happy with the growth that we've seen |
| However, these actions strengthen our balance sheet and realign the business with further cost reductions, both of which position us for future growth with improved operating leverage and stronger earnings in 2024 and beyond |
| The actions we took in the fourth quarter position us for more normalized earnings in 2024 and set us up for a strong 2025 and beyond |
| We pick those parts of the portfolio where we have the highest confidence |
| Certainly, we got to still collect the assets as best we can in the back-book, but we feel good about having positioned the business for the future now |
| So given all these actions, we are positioned to improve earnings this year, and we're seeing a strong 2025 and beyond |
| Now there's always a difference in mix and various vintages, but the tightening is having an impact and that we wanted to have and we're very pleased with the performance of the new vintages |
| We have a strong balance sheet with liquidity to fund our growth |
| While these actions clearly impacted our fourth quarter results, they also set us well to generate stronger earnings in 2024 and beyond |
| Overall, we had solid core operating results in the fourth quarter |
| Our revenue reached record levels from a combination of higher quality portfolio growth and total revenue yields that came in better than our outlook |
| Total revenue yields have benefited from our repricing actions and growth in our higher margin small loan portfolio, which grew by $30 million in the third quarter and $90 million [ph] in the fourth quarter |
| We've experienced strong returns in this segment as demand has been healthy, allowing us to be more selective in the loans we book |
| We also expect to see improving yields as credit outcomes improve in parallel with an improving economic environment |
| Second, we put the incremental stress on the back-book behind us and our front book is performing in line with our expectations And third, we positioned the business to further increase receivable growth as the economic environment improves |
| Now I would say that that is done with confidence, because while this is higher rate, higher risk business, it's got very attractive margins |
| Overall, our model is proven to be very resilient through a period of high inflation that's not been seen in 40 years |
| So again, it's all about putting on our highest confidence assets with the best returns and that's how we run the business |
| We also have a strong balance sheet and continue to maintain ample liquidity to fund our growth |
| We continue to anticipate that our increased pricing will drive benefits to our yields in future quarters as these actions roll through the portfolio over time |
| Fourth quarter results came in better than our outlook when excluding the impact of three discrete items that we took in the quarter |
| We believe considerable growth opportunities remain within our existing branch footprint under this more efficient model, particularly in newer branches and newer states |
| And lastly, our year end 30 plus day delinquencies were better than prior year by 20 basis points |
| As I said, the economic outlook is improving |
| Let me close by saying that I'm optimistic about our future |
| We have a large loan book in the middle and we're increasing the size of our auto secured business on the other end of the barbell, which is obviously, it has much lower credit losses and equally strong returns |
| The team and I are excited as we continue to execute on our omnichannel strategy and remain positioned for stronger growth when the economic conditions arrive |
| As Rob noted, we had solid core operating results despite a net loss of $7.6 million or $0.80 per share |
| This is about finding where there's opportunities really strong returns with the small loan portfolio |
| Statement |
|---|
| In the first quarter, we expect total revenue yield to decline by roughly 40 basis points consistent with seasonal trends |
| Total originations declined 13% year-over-year |
| By channel, direct mail, digital, and branch origination fell by 22%, 16%, and 8%, respectively |
| While we had a net loss of $7.6 million or $0.80 per share, our aftertax earnings were reduced by $12.6 million or $1.34 per share due to these three actions |
| Inflation is falling, real wage growth, unemployment below 4% |
| While the actions taken in the fourth quarter were difficult, particularly on those individuals impacted by the restructuring, they were necessary to position the business for a stronger 2024 and beyond |
| Second, as we did in the fourth quarter of 2022, we undertook a sale of certain non-performing loans prior to their normal charge-off at 180 days past due, which impacted net income by $3.9 million in the quarter |
| Broadly speaking, the difference between this range and the projected range of 10.7% to 10.8% in 2024 is due to a roughly 80 basis points impact associated with slower portfolio growth in 2024 compared to historical growth rates as well as economic stress reflected in the portfolio, including the estimated 40 basis point impact from back book losses associated with the incremental fourth quarter reserves |
| This is naturally very difficult to predict given the economic uncertainty |
| And by year end, we expect to have the back-book down to about 8% |
| Our analysis of this newly defined back-book shows that it continues to be stressed |
| Inflation continues to fall |
| Our fourth quarter portfolio growth was impacted by the fourth quarter loan sales, which accelerated a total of $16 million of loan charge offs and interest accrual reversals from the first quarter 2024 to fourth quarter 2023 |
| I think most importantly though, we put the back -- the higher losses on our back book behind us |
| As we've consistently noted, we've deliberately reduced originations in recent quarters as we appropriately balance growth with credit quality and higher returns |
| Looking ahead, we expect our ending net receivables in the first quarter to decline by approximately $25 million consistent with normal seasonal payment activity during tax season |
| Our front book continues to perform in line with our expectations despite macroeconomic stress |
| If roll rates were to improve to 2019 levels, our net credit loss rate could fall to as low as 9%, but we don't anticipate that outcome in 2024 |
| If roll rates do not improve in 2024, our net credit loss rate could increase to 11% to 11.3% |
| In the fourth quarter, we took a series of actions to place the business back on a more normalized earnings trajectory, including putting the higher losses in our back book portfolio behind us |
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