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Good day, everyone and welcome to today's OneMain Financial Q3 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Today's call is being recorded. I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Mr. Peter Poillon.

Thank you, operator. Good morning, everyone and thank you for joining us. Let me begin by directing you to page 2 of the third quarter 2024 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 30 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 and thank you for joining us today. We feel very good about our results for the quarter and year-to-date. Credit results are trending in a positive direction and we continue to make good progress on our strategic initiatives to position OneMain for success in the years to come. Capital generation was $211 million and C&I adjusted earnings were $1.26 per share this quarter both up significantly from last quarter. Our receivables grew 11% year-over-year driven by an increase in loan originations and our expanded product offerings while total revenue grew 8%. Despite our very tight underwriting pause here third quarter origination volume grew 13% year-over-year. This is the first time since we tightened our credit box more than two years ago that we've seen year-over-year growth in originations and we expect to see continued growth going forward. The momentum we saw this quarter in originations was the result of two factors that I discussed briefly last quarter, the current constructive competitive environment and our continued use of granular data analytics and product innovation to find profitable pockets of growth. We are pleased to have strong originations even as we maintain a tight underwriting posture. Turning to credit. Any way you look at it we like the trends we are seeing. Our 30 to 89-day delinquency was 3.01% which is down 27 basis points year-to-date as compared to down 9 basis points last year and only down 12 basis points on average in pre-pandemic years. These better-than-normal seasonal trends hold true for the quarter-over-quarter movements as well. Delinquency was up four basis points from last quarter, as compared to up 22 basis points last year in the same quarter and up 18 basis points on average pre pandemic. These positive credit trends are a result of the swift action, we took on credit two years ago, our disciplined underwriting since that time, our unique business model and an unparalleled understanding, of how to best serve the non-prime consumer. Net charge-offs were 7.5% in the quarter, down about 100 basis points from last quarter and consistent with our expectations, given the delinquency levels, earlier in the year. Our credit trends make us feel very positive about the earnings trajectory of our business. Barring a recession, we believe we saw peak losses in our consumer loan business in the first half of 2024. We expect this will lead to growth in capital generation in 2025 and future years. And continued positive macroeconomic trends like lower interest rates, stable employment and reduced inflation could provide even more tailwinds going forward. Our strong balance and mature funding program, continue to stand out as clear competitive advantages for us. In August, we completed a $750 million unsecured social bonds at an interest rate of just over 7%. The net proceeds of the offering will finance loans to individuals, residing in credit and secure or credit at risk counties as defined by the Federal Reserve. This kind of focused lending is part of the fabric of OneMain and illustrates how we provide responsible access to credit, across the entire nation. Moving to our newer products. Both auto finance and credit cards are important parts of our commitment, to help more customers meet their needs today, and progress to a better financial future while driving profitable growth for our shareholders. We now have about 3.3 million customers, and our multiple products are allowing us to meet more consumers with different needs and at different times in their financial journey. Auto finance receivables were $2.3 billion at quarter end. Credit performance in the auto business remains in line with our expectations, and better than comparable industry performance. The integration of Foursight is going well, and we are now operating our entire auto finance business under the OneMain auto brand. All of the moving parts of the integration are progressing on plan including technology, platform consolidation, data integration, vendor cost consolidation and more. We feel great about our competitive positioning in the auto business and now have the capability to serve both franchise and independent card users. We'll be cautious in our growth and maintain very tight underwriting, but believe, we are well positioned for the future years. In our credit card business, we added 122,000 new accounts and $84 million in receivables during the quarter. We've been measured in our credit card growth, given our cautious view of the environment, but we continue to invest in data analytics that help us run the business more efficiently and profitably, as well as an improved customer self-service features that enhance the digital user experience, while also reducing costs. This has led to our service calls per customer being down more than 40% year-over-year as more customers are using the app to make payments, check balances, redeem a reward and more. We're also launching and developing more online partnerships to broaden our acquisition channels. So when the time comes to accelerate growth, we are ready. We are confident that we have a differentiated card product that resonates well with our target customer, and we will continue to develop the business to position us for future expansion. Finally, let me touch on capital allocation. Our priorities remain unchanged. First and foremost, we invest in the business to position us for ongoing success, including making all the loans that meet our risk return hurdles, while also continuing to invest in new products and channels as well as data science and technology to further advance our competitive position. We are also committed to our regular dividend, which at $4.16 per share annually yields 9% at today's price. In the quarter, we repurchased about 420,000 shares for approximately $19 million. Share repurchases will be an important part of our capital return strategy in the years to come. The pace of future share repurchases will be determined by a number of factors, including our excess capital, capital needed for growth, economic conditions and market dynamics. With that, let me turn the call over to Jenny.

Thanks, Doug, and good morning, everyone. Our third quarter was highlighted by the continued improvement in credit trends, high-quality originations growth, strong revenue growth, thoughtful expense management and great execution of our balance sheet funding with our second ever unsecured social bond issuance. Third quarter GAAP net income was $157 million or $1.31 per diluted share, down from $1.61 per diluted share in the third quarter of 2023. C&I adjusted net income was $1.26 per diluted share, down from $1.57 in the third quarter of 2023. Capital generation this quarter amounted to $211 million, which compares to $232 million in the third quarter last year, reflecting the impacts of the current macroeconomic environment on our net charge-offs, partially offset by higher revenues from portfolio growth. Managed receivables finished the quarter at $24.3 billion, up $2.4 billion or 11% from a year ago. Adjusting for the acquisition of Foresight, our organic growth was $1.1 billion, up 5%. Demand for our products remains quite strong. Third quarter originations of $3.7 billion were up 13% year-over-year. And as Doug discussed, this strong growth is the result of a constructive competitive environment, along with our focused efforts to drive originations while maintaining our conservative underwriting posture. We are continuously analyzing our credit box for segments where we can expand or tighten but there is no net change in our overall approach to our return requirements or credit appetite. We expect this origination growth to continue through the fourth quarter and feel very comfortable that we will end the year with at least $24.5 billion of receivables. This growth in originations has been achieved while maintaining pricing discipline. Third quarter consumer loan originations APR was 26.8%, up approximately 40 basis points since last quarter and 10 basis points over prior year. In fact, cumulatively, since the second quarter of 2023, we have raised pricing approximately 100 basis points. These pricing levels are above the average APR in our portfolio and will gradually support our yields going forward as the book matures. You can see this starting to take hold in our third quarter consumer loan yield of 22.1%, which was up 15 basis points compared to the second quarter. And while consumer loan yield remains 10 basis points below prior year due to our expanded auto finance portfolio, the year-on-year compare has improved from last quarter. Moving to revenue. This quarter total revenue was $1.5 billion, up 8% compared to third quarter 2023. Total revenue comprises interest income of $1.3 billion, which was up 9% year-over-year driven by higher average receivables and other revenue of $181 million, down 1% from the prior year. Interest expense for the quarter was $299 million, up $34 million versus prior year, driven by an increase in average debt to support our receivables growth and modestly higher cost of funds since last year. It is worth noting that interest expense, as a percent of receivables in the quarter, was 5.2%, down from 5.4% in the second quarter, which as I mentioned last quarter, was elevated due to the timing of our issuance and use of those proceeds to proactively manage our debt maturity stack. Provision expense was $512 million comprising net charge-offs of $432 million and an $80 million increase to our allowance driven by the increase in receivables during the quarter. I will touch on lawsuits in a bit more detail in a minute. Policyholder benefits and claims expense for the quarter was $43 million compared to $48 million in third quarter 2023, reflecting positive reserve adjustments from favorable claims performance in our portfolio. In the quarters ahead, we expect around $50 million for policyholder benefits and claims expense. Let's turn to slide 8 and look at consumer loan delinquency trends. Our 30 to 89-day delinquency on September 30, excluding Foursight, was 3.01%. This is down 27 basis points since the end of last year and up 4 basis points quarter-over-quarter, both of which are notably better than normal seasonal pattern as you can see on slide 9. If you adjust for the slower pace of growth on our book from our conservative credit box, our year-over-year 30 to 89-day delinquency has improved notably as compared to last year. These positive delinquency trends are indicators of future loss performance. As you know, as delinquency trends improve, charge-off trends will follow. So we're pleased that our active management of credit over the last two years is making a positive impact on our delinquency results today and that should translate to improved loss performance in the quarters ahead. Our front book vintages which we define as originations starting as of August 2022, now comprise 81% of total receivables as compared to 76% a quarter ago. We remain pleased with the quality and performance of the loans we are booking today and the performance of the front book remains in line with expectations. It is also worth noting that while the back book makes up 19% of the total portfolio, it represents 37% of our 30-plus delinquencies. We continue to see the overall book transition to front book vintages which should further benefit our delinquency and loss metrics going forward. Let's now turn to charge-offs and reserves, as shown on Slide 10. C&I net charge-offs were 7.5% of average net receivables in the third quarter. That's down about 100 basis points from the second quarter and in line with our expectations and seasonal patterns in our portfolio. Consumer loan net charge-offs which exclude credit card were 7.3% in the quarter. We remain confident that consumer loan losses peaked in the first half of 2024 assuming a steady macroeconomic environment ahead. Recoveries remained steady and strong in the quarter amounting to $79 million or 1.4% of receivables, as we remain diligent in our strategies where we look to maximize recovery value. Loan loss reserve ended the quarter at $2.7 billion. Our reserves increased by $80 million in the quarter, driven by portfolio growth, while our reserve coverage remained steady at 11.5%. For the rest of the year, we expect to remain at approximately this coverage level, subject to any macroeconomic changes. Now let's turn to Slide 11. Operating expenses were $396 million in the quarter, up 6% compared to a year ago, driven by the acquisition of Foursight on April 1 and our continued investment for future growth. Our operating expense ratio was 6.5% in the quarter, down 28 basis points from third quarter a year ago and up modestly from last quarter. As we mentioned on our last call, we are tireless in our focus on expense management, while also committed to investing for the future in new products, people, data science and technology. And while the OpEx ratio may moderate from quarter-to-quarter, we expect it to continue to trend down over time. Now, let's turn to funding in our balance sheet, on Slide 12. During the third quarter, we issued a $750 million 7-year unsecured social bonds at 7.18% [ph]. The offering this quarter was once again well executed and oversubscribed with a strong list of investors. We have no unsecured maturities until March 2026 and have excellent funding flexibility over the remainder of this year and next. Net leverage at the end of the third quarter was 5.7 times comfortably within our four to six times leverage range. Let me finish up briefly with Slide 14, reviewing our 2024 priority. We expect to end the year with managed receivables of at least $24.5 billion above our original guidance. We expect revenue growth to be at the higher end of our range. Interest expense is expected to land at approximately 5.2% for the year and we expect our full year net charge-offs at the higher end of our range. Finally, we expect our operating expense ratio to be around 6.7%. Other than managed receivables, which is better than our original expectations, all of our current guidance metrics are within the range of expectations we have laid out at the beginning of the year, demonstrating the team's constant commitment to driving positive outcomes for our customers and strong financial performance for our shareholders. I'll conclude by saying, we're pleased with our results this quarter. And as we look forward with a steady macroeconomic environment supporting these trends in credit, origination, yields and operating leverage we believe we can drive significant capital generation growth in the future. With that, let me turn the call back over to Doug.

Thanks Jenny. All of the work that we've done in the last two years to manage the business and serve our customers is showing up in the continued positive direction of credit. We are proud of how our experienced team has navigated the company through the many uncertainties affecting the nonprime consumer, demonstrating our long history and understanding of how to best serve our customers and drive our financial performance. We like our competitive positioning, including the growth potential of our core business and new products and believe we have many tailwinds in the business going forward. So while we're pleased with how the business is performing today, we're even more excited about the future. All of this is driven by the great team members of OneMain, who come to work every day to make a difference in the lives of our customers and to drive value for our shareholders. With that, let me open it up for questions.

Thank you. And the floor is now open for questions. [Operator Instructions] And our first question is coming from Terry Ma with Barclays. Please go ahead.

Thank you. Good morning. Just almost a house keeping …

Good morning, Terry.

…question to start off with, does your net charge-off guidance range for the full year of 7.7% to 8.3%. Does that include the impact of the Foursight policy adjustment last quarter or not?

That does include the impact of the Foursight policy in the last quarter or two. Jenny, good morning.

So got it. So it does not kind of strip out the incremental charge-offs from the policy adjustment is what you mean?

Correct.

Got it. Okay. That's helpful. And then, I guess, just I guess when you guys constructed the guide at the beginning of this year I'm assuming the base case was the midpoint. So any color you can kind of provide on what's driving the guide to be closer to the higher end of the range? Whether or not it's driven by the front-book or back-book? Any color you can provide?

Yeah. We're coming in within our guidance. So we're happy with where we're landing. We shouldn't -- we don't think it should be surprising given the delinquency that we've seen in the past few -- how they drive our costs. We've provided that beginning of the year loss rates around an expected outcome. And we saw some slower growth in the origination beginning of the year and then macro environment improve much throughout the year. So all of that sort of driving [Technical Difficulty] for the year [Technical Difficulty] to expect [Technical Difficulty] in the range, but at the higher end of the range.

Got it. That's helpful. And then maybe just one more follow-up, you indicated you expect charge-offs to peak in the first half of this year. Maybe provide some color on kind of just what gives you confidence of that going forward? Thank you.

I think really when you look at delinquencies, they drive your charge-offs about two quarters later. So really, what we're seeing is like the trends that we're seeing in delinquency. If you look at delinquency this quarter were relatively flat, but would have been better than last year if you took into account growth. And so we're liking that direction of travel and you should see that start to translate.

And I think Terry is all the things we've been talking about, which is much tighter credit box for the last couple of year that becomes a bigger part of our delinquency numbers I think it's all about how we're managing the business.

Thank you. And next, we'll take our next question from Michael Kaye with Wells Fargo.

I had a question about originations. They were a lot higher than our expectations, but it really didn't translate into higher loan balances for the quarter, at least compared to my projections. So I'm wondering, is there anything in that mix of originations like perhaps a higher percentage of renewals or maybe more prepayments this quarter or some other factor I should consider?

I think Michael. We're happy with our originations. But as you know, we view growth as an outcome. So we have a tight credit box. We have a really good competitive positioning. Some of the competitors, especially banks are still kind of out of the market. We've been able to have price with our originations. And so we're happy to see originations uptick. It's as expected, I think, in the numbers. So not sure our team can follow up with you about translation originating balances, but there's nothing surprising.

Okay. I want to talk a little bit about the asset yields. They're up nicely I think, 15 basis points quarter-on-quarter. And someone asked last quarter, you thought they would be more flattish quarter-on-quarter. I was surprised to see them up so much. So was there anything that surprised to the upside on asset yields versus your expectations? And should we see that kind of momentum continue at least in the near term?

Yeah. Thanks. I'll take that. Our third quarter yield was 22.1%. That was up about 15 basis points from the second quarter. On the second quarter, we've been talking about some of those pricing actions we've been able to make in the competitive environment starting to take hold. And really, those come through gradually and over time. And so we did start to see some of those come through. I think it's very hard to predict exactly when those are going to come through. And most of those are coming from our personal loan portfolio, and that's the major driver for that 100 basis points increase since the second quarter of 2023 that I spoke about earlier. And so we've been -- in my mind, we've been talking about this for a while. And we're doing that while also growing our book and growing originations and growing our lower yielding and lower loss content auto finance book. So all of that is helping, and you're seeing it take time for pricing to come through yield. I think you saw that little bump. I'd say in terms of where yields going, I wouldn't expect a major bump, but over time you should start to see that pricing come through yield if we stay in this competitive environment.

Thank you. And our next question comes from Vincent Caintic with BTIG. Please go ahead.

Hi. Good morning. Thanks for taking my questions. First one on credit. So very helpful credit commentary this morning. If you could maybe just a broad question but -- at what point do you expect to see a year-over-year positive improvement to the net charge-off rate? And if you could also remind us and help us thinking about the typical seasonality that we should be expecting with net charge-off rate. Thank you.

Yes. So let me take the second one first. Vincent and I'll just start with we're not providing 2025 guidance on this call, will come back with our fourth quarter results and give a better sense of 2025. But in terms of the loss seasonality the first quarter is our typical low delinquencies where we have tax refunds. And that translates into what you're seeing in our losses now at the 7.52% in the third quarter. And we expect to see our delinquencies be better year-on-year soon and they would have been better this quarter if we've been growing at a higher growth rate. So excluding growth -- they would have been better than last year. And then those translate into losses to later -- two quarters later. So I think that should really give you a sense of when you're going to see losses start to thumb down. But again we're not going to give a specific guide on 2025 right now.

Okay. That's helpful. Thank you very much. And then kind of relatedly so it was nice to see that the origination volume did grow year-over-year. I'm just wondering how you think we should be thinking about that growth rate going forward? And we've been talking about the front book dynamic for some time. I'm curious at what point do you think we should be primarily just talking about that front book and the positive trends from that. Thank you.

Yes. I think we're pleased to see the originations growth we had as I mentioned earlier it's been -- we're not though we're not managing the work [ph]. It all starts with our credit box. We going to originate for our customers to be successful within that -- the fact that [Technical Difficulty] we are not relaxing our credit box. We're actually keeping it quite tight right now. Then you put in marketing having a great product at a fair price with a great value proposition, customer experience the investments we're doing in digital and full and will have the output that we have for originations going forward [ph]. So we like what we see. We have really good demand and it depends on marketing [Technical Difficulty] set.

Thank you. And our next question comes from John Hecht with Jefferies. Please go ahead.

Good morning, guys. Thanks very much for taking my question. Doug talking about a fairly constructive competitive environment. I'm wondering, does that -- is that across all three product sets the auto, the personal loans and credit card? Or is there any differences that are worth pointing out?

Yes. Look, we talk a lot about our balance sheet, one of the reasons we put on long-term unsecured debt and we have excess bank facilities that we fairly have and then we have a robust ABS program, is to have a fortress balance sheet, one to make sure there's plenty of liquidity in any environment. But two, so we can keep doing all of that we’ll be able to do any side. I think you saw, we've seen two cycles at least [indiscernible] the pandemic came and the capital markets grows up. A lot of people didn't have. I think we actually now that we had depths of the market. And then again, in mid-2022, a lot of facilities dried up or competitors who jump in time and they fold out of the market. As you said, I think a lot of investors are now back in the market looking for yield and searching for yield. So I think it will be lumpy and it will affect competitors who use that avenue block for [indiscernible].

And we'll take our next question from Moshe Orenbuch with TD Cowen. Please go ahead.

Great. Thanks. I think you've gotten a bunch of questions on credit. And I think the message was pretty clear that delinquencies are getting better. But the reserve rate has been flat. Can you talk a little bit about your thoughts as to what it would take either from your portfolio or the macro environment or both to see that reserve rate start to come down?

Thanks, Moshe. You're right this quarter our reserve -- it actually -- it increased by $80 million that reflected the growth in our portfolio. There was no change in our coverage rate and we feel pretty good about our reserve levels today. I wouldn't expect anything to change materially this year. We have a conservative stance to reserve levels any change in reserves really dependent on consistent charge-offs, the direction of the macro and sort of product mix and the portfolio. So before we release reserves, we want to feel very comfortable with where the book is and what the future will look like.

Got it. And maybe following up on John's question before, I'm just wondering if perhaps there aren't -- there are other lenders out there who kind of use their turndowns and create reasonable -- larger revenue streams based upon selling them through those types of arrangements either directly or indirectly? And is that something that -- and by the way and often continuing to service the loans, I mean is that something that you've considered as a benefit from the possibility of higher participation by private equity firms?

Yes. No, it's a good question, Moshe. We -- it's something we actually do a little bit of in our auto business. And there's a variation our whole loan sale is a variation on that where we sell off not necessarily turn downs, but just having a different channel to funding. One of the reasons we built the pipes in our auto business and we built the pipes to have full loan sales is to have that flexibility if we choose to pursue that path. So it's definitely something we thought about. It's always traded off about what we want to put on our book, what's profitable? What are the market conditions? And then just bandied, how much we want to go chase stuff that we normally would turn down and figure out what kind of incremental revenue and return we can get. So it's a long answer to say yes, we definitely would consider it. We do a little bit of it today and we'll keep it on our radar. And if we think it's going to have good ROE and a good return for our shareholders, we'll do more of it.

Yes. I would just -- this is Jenny. I would just add. I mean, it's the same point, but it's all about the economics. We're always reviewing whole loan sale programs than what we could put off balance sheet and that market is pretty competitive right now and we like the economics of putting the most -- putting loans on our own balance sheet and we think that's the best return for shareholders. But we do have full loan sales and we do get that gain on sale and that servicing fee. We like the funding flexibility that we have with the whole loan sale program. And so, it's there if we want it I'd say.

Thank you. We'll take our next question from Mihir Bhatia with Bank of America. Please go ahead.

Thanks for taking my questions. I wanted to go back to the origination growth this quarter. And I was wondering, I know you've tightened your credit book pretty materially compared to two years ago but was there any -- I imagine you consistently looking at the box and making changes at the edges. Was there any type of loosening, any type of you're seeing the environment get better getting more confident so you feel like you can maybe start underwriting. Just a tad bit deep or anything like that going on with the credit standards this quarter where you maybe loosening a little bit?

Thanks Mihir. We did not loosen the box this quarter in aggregate. But as we've mentioned before that we are always adjusting pockets based on geography risk rate product channel and we look at it in very micro detail. And both Jenny and I talked about earlier some of the product invasion or investment in digital and technology we're doing. Let me give you the example of one of the things we did at the end of the second quarter, which helped drive some growth this quarter, which is for three years we've had access to payroll data. So you apply for a loan with us, you say you make $100,000. We used to ask you to upload documents to prove that some base up and then we put it through fraud and make sure it's accurate. We now can actually with a lot of employers ask people to just get access directly and we can tap it into electronics. We're very careful when we introduce new data sources, especially for something like income verification. And so, we put that in place three years ago, we watch the credit of that versus our traditional methods of upload and bringing it into the branch and inspecting documents. We saw the credit was good or even slightly better, because it's actually quite reliable are plugging into that. But it also says, it's a much better customer experience, because you don't have to either upload a document or come into a branch or do something. So it creates a slight uptick in the pull-through rate the number of customers who apply and go all the way through the process. And so it's product innovations like that not any relaxing of credit that we're always tweaking our business model just to improve it for the benefit of the customers and obviously for them.

Got it. No, that is helpful, and sounds quite interesting. Maybe just staying along the lines of just origination and consumer behavior. Are you seeing consumers increasingly looking at -- I guess coming to your question the salience of the branch network. Are you seeing consumers now looking to engage more online and through apps than coming into the branch or wanting to come into the branch? Can you just talk a little bit about that? Because it feels like your competition is really shifting more towards online like, I think you mentioned banks are still pretty tight and so, just curious if you're seeing any impact from that?

Yes. I mean look, post pandemic a lot of people shifted behavior to digital and we have the option for our consumers to interact with us on the app or on their browser. We actually can co-browse with you. We can take you through the documents. We can show you the disclosure of the different products. And so we have not seen in the last couple of years any major movements. But the vast majority of our customers start online. So they about -- apply online. Some of them choose to come into a branch because there are people who want to have that personal interaction some of them choose to do it on the phone with us and through their -- and through their browser or through their app. Our strategy is to be omnichannel. We think our branches are a huge competitive differentiator which is for in community. People know us. People drive by the branch. We're a real company even people who never come into a branch say they like to know that we have a physical presence and it gives them confidence in doing business with us. So I think it has some brand effects in addition to just the pure physical get to know your customer. It makes it much easier to do a secured deal with someone them – with someone else. And so trends are more people like to do more digitally. But we and some of the major banks also continue to be very focused on having friendship [ph].

Thank you. We'll next go to Rick Shane with JPMorgan. Please go ahead.

Thanks. For taking my question this morning. I'd like to talk a little bit about loan yields and mix shift and then think about this on a risk-adjusted receivables basis as well. So obviously you guys have been successful, high-grading the portfolio, raising yields on what appear to be your higher-quality buckets. As the -- as you grow the alternative products, how should we think about the impact on yield? When could we start to see those products particularly for square on a top-line basis start to drag a little bit on yield? But more importantly when we think about bottom line when we think about risk-adjusted return -- or excuse me receivable adjusted returns, do you think that those three products will continue to generate comparable returns particularly on a levered basis because you probably have a little bit more opportunity to leverage some of those new asset class.

Yes. Thanks. Let me take that. Listen, one let me just start with our auto business today is about $2.3 billion of receivables of our book which is $24.5 billion in receivables. So you're absolutely right. Today it's included in our consumer loan yield. And as that mix shift -- as we grow in auto and it becomes a larger portion of our book that will obviously have an impact on -- on yield but it's there today and there are a lot of things that go into yield that are also there today. So we've been very deliberate in taking pricing actions and increasing that APR on our consumer loan originations both in our auto product and also in our personal loan products. And a lot of that is coming from personal loans. But some of it is also coming from auto. Our yields also continue to feel the impact of credit and that will get better over time of course but that's depending on the rate and the pace of improvement. And then there is that impact from auto which is that lower yielding but lower loss content business. And so overall over time we like the returns that we're seeing there. In our Investor Day we laid out some of what we see in terms of our expectations on those returns. And credit card is similar to slightly higher than what we see on personal loans and auto is slightly lower. But I think in terms of thinking about where yield is going to go you should expect to see even with the growth of the auto book you'll start to grow gradually overtime.

Got it. Okay. That's helpful. And then just one follow-up, if we can really try to dial in on this, if we think about the personal loan book, can you give us a sense on sort of a like-for-like basis in terms of your top quality loan bucket, how much pricing power you've had in terms of incremental yield maybe over the last 12 months? I think that's what investors are kind of wondering.

I think that is the best one there is the one that I gave earlier that is that we've raised our consumer loan portfolio around 100 basis points since the second quarter of 2023. A lot of that is coming from pricing power that's coming at the higher. If you think about where we're making pricing adjustments, I mean most of that is on the higher end of our book, because there's less competition normally on the lower end of the book. So I think overtime in this type of environment, I'm not just sure there's that much more room to go on pricing. So again, this is more about seeing the pricing that we've already put in come through.

Thank you. And we'll take our next question from Mark DeVries with Deutsche Bank. Please go ahead.

Yeah. Thank you. Understanding you don't want to give guidance on charge-offs for 2025. I think it will still be helpful for us to think about, what you need to see for charge-offs to trend down year-over-year. Am I right in that thinking the main thing we want to look at is improvement in delinquency trends relative to seasonality kind of similar to what you observed this quarter with the early-stage delinquencies only up 4bps Q-on-Q versus the pre-pandemic average of 18. And if I'm right about that could you also just talk about the trajectory you've seen over the last several quarters is kind of in that trend relative to seasonality?

Yeah. Listen, I mean I think, first of all, I'd say what in your -- the statement that was in there was pretty accurate. I mean really what we're looking at for next year's losses is the trajectory of delinquency. And I think what you're hearing from us today was, number one, we saw peak losses in the first half of 2024, and we feel confident in that based on where our delinquencies are today. We're very pleased with our front book performance. So those vintages are in line with our expectations. And that should further drive improvement in our delinquency performance as that becomes a larger piece of the book. And so we're really seeing the benefits of those tightening actions we took early on starting in August 2022 in our results. And so it's really dependent on the pace of that improvement and pace of the increase in that front book, right, the macro environment, if the macro were to get better, obviously, that's helpful. And then trying to get it -- we're just trying to get across generally that we see the direction of travel moving in this direction. And we'll come back -- as we said, we'll come back with more loss guidance for 2025 when we come back with our fourth quarter results.

Got it. Could you also remind us what your policies are on recoveries and what the outlook is going forward, just given kind of the larger inventory of charge-off receivables you have today?

Yeah. So we continue to see really strong recovery performance, positive trends. We remain above that pre-pandemic recovery level that we had -- this quarter, we had $79 million in recoveries, which is about $9 million of post charge-off net sales. That's in line with last quarter, so not much of a major shift. We're always looking to maximize returns and the value of internal versus external collections versus bulk sales and making decisions there. But overall, right now, we're quite pleased with our recoveries and would expect something similar for the go forward.

Thank you. And next, we're going to go to John Rowan with Janney. Please go ahead. John, your line is open.

Sorry, I was on mute. Can you hear me?

Yeah, we can hear you, John.

Okay. So just on expenses. Year-to-date, the expense ratio is 6.5. You're staying with 6.7% for the year. But obviously, to get to 6.7% for the year after 6.5% for the first nine months, that implies based on my math, a fourth quarter number of 7.3-ish. That would be well ahead of last year. I think I have 6.9% for an OpEx ratio. Can you just explain how we get to that OpEx number for the fourth quarter? And just if it is higher year-over-year, just compare that to your statement that the OpEx ratio will continue to improve over time. Thank you.

Listen, I think we look at OpEx in terms of the trends still multiple quarters. So, I would just start there when we talk about those trends, we're talking about where they look from a year-on-year perspective. Expenses can be lumpy and we're focused on really running a good business, running it efficiently. We left our guidance unchanged around 6.7%, which has come-in in that area. So overall, yes, we're seeing great operating leverage in our business and think of it as a real strength. Can we come down a lot from where we've been over the past couple of years? And so, we're careful towards of our spending. I think in terms of the fourth quarter back in your map that's slightly higher than I would expect. But overall, I'd say we kept our guidance around that 6.7% range.

Yes. And the only thing I'd add John is, we're super careful and I've talked about this aging part. Not spending money on things that don't add value. So there's a program that is put in place and it wasn't a good idea to get executed and shut it down, if there's something that the company has been doing for a long time, we try to see how we are efficient. And so we're always taking aggressive expense action. That's one of the reasons you've seen our OpEx ratio been down. Second is it's just a great business model as inherent leverage. But as you know, we're also running this business for the next three to five years making sure we have great competitive position to create long-term share value. So we're also made investments there. And I -- we never get too excited for the quarter to exactly to update the expenses but work every day making sure we don't waste money and we make it expenses, that's our talent.

Thanks. All right. Thank you.

Thank you.

I think we are out of time. So, I want to thank everyone for being here today. As always, feel free to follow-up with our team. We're here and available. And I hope everyone has a great day.