OMF - NYSE

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 program. 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 Credit Worthy by OneMain, our free financial education program. Since its inception, Credit Worthy 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 Credit Worthy 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 debt 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 PB&C 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 7x the last 6 quarters in the unsecured market, lowering our issuance costs, derisking 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% 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 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. economy, some 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 think 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 the 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 were 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 vane 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 pop 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 enhanced mature -- I mean, the 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 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.

Maybe 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 peek under the hood 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 sale. 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 grades, 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. It'll 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, I was 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 there'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 impacts 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 and you're shying 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 taking a more active pricing posture or anything. So can you maybe give us a little bit more of a detail around 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 and 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 inorganic 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 5 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 and 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 that 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 roles 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 our 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 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 $12.50, if that's still the right bogey, does 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 $12.50. We haven't put a date on it. We definitely don't need the bank charter to get to $12.50. 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.