Craig Streem – VP of IR Jay Levine – President & CEO Macrina Kgil – CFO.

Moshe Orenbuch – Credit Suisse Mark DeVries – Barclays Capital Sanjay Sakhrani – Keefe, Bruyette & Woods John Hecht – Jefferies & Co. Donald Fandetti – Citigroup JR Bizzell – Stephens Inc. Vincent Caintic – Macquarie Research Equities Henry Coffey – Sterne, Agee & Leach.

Welcome to the Springleaf Holdings Third-Quarter 2014 Earnings conference call and webcast. Hosting the call today from Springleaf is, Craig Streem, Senior Vice President Investor Relations. Today's call is being recorded. [Operator] It is now my pleasure to turn the floor over to Craig Streem. You may begin..

Jackie, thank you very much. And let me wish everyone a good morning, and thanks for joining us. As we begin, let me turn you please to slide 2 of the presentation, which you can find in the Investor Relations section of our website, and which we will be referencing during the call.

Our discussion this morning contains certain forward-looking statements about the Company's future financial performance and business prospects. And those are subject to risks and uncertainties, and speak only as of today.

The factors that could cause actual results to differ materially from these forward-looking statements are set forth within today's earnings press release, which was furnished to the SEC in an 8-K report. And our annual report on Form 10-K, which was filed with the SEC on April 15, 2014.

As well as in the third-quarter 2014 earnings presentation posted on the Investor Relations page of our website. And, of course, we encourage you to refer to these documents for additional information regarding the risks associated with forward-looking statements.

In the third quarter 2014 earnings material, we've provided information that compares and reconciles our non-GAAP financial measures with the GAAP financial information. And of course, we explain why these presentations are useful to management and investors. And we urge you to review that information in conjunction with today's discussion.

For those of you who may listen to the replay at a later date, we remind you that the remarks made herein are as of today, November 14th, and have not been updated subsequent to this initial earnings call.

The call this morning will include formal remarks from Jay Levine, our President and Chief Executive Officer, and Macrina Kgil, our Chief Financial Officer. And as Jackie said, after the conclusion of the formal remarks, we'll have plenty of time for a Q&A session. So now, it is my pleasure to turn the call over to Jay..

Thanks, Craig. Turning to slide 4, let's get right to the highlights of the quarter. Another really good quarter for us. Core earnings of $64 million or $0.55 per share. Driven by continued strong growth in branch receivables, solid yields, and improved credit performance.

We began the rollout of our direct auto product, now being originated in all of our 830 branches with volumes beginning to ramp up as planned. I will have more to say about each of these highlights in a moment. Before I do, I want to quickly review where we stand with our mortgage sale transaction.

Post-September 30, we settled and closed on an additional $330 million of mortgage sales, bring our total loans sold since our Q2 earnings announcement to $6.3 billion. With this sale, Springleaf holds just under $1.1 billion of real estate receivables.

Leaf today is one step closer to achieving its goal of having under $1 billion of real estate receivables by year-end 2014, and we continue to work on a couple of additional mortgage sales which we hope to complete over the coming weeks. Turning now to slide 5.

The key driver of our earnings growth continues to be the ongoing expansion of receivables in our branches. Where, for the fourth quarter in a row, we've grown total receivables and receivables per branch north of 20% year over year.

This growth is coming from both adding new borrower relationships and growing our average loan size, all while keeping the number of stores and branch team members basically flat. I don't need to remind you of the tremendous operating margin benefit we realize from that.

In fact, pretax income per branch continues to trend steadily up, reflecting the significant leverage we get from scaling up the branches. Last quarter, I noted that in 2013, we average a little over $200,000 per branch in pretax income. With that growing to an annual rate of $263,000 for the first half of this year.

As of the third quarter, we are now over $300,000 per branch on an annualized basis, and still believe we have real room to grow that number. As I said earlier, we launched our direct auto finance program in June 2014.

Having completed our first full quarter, I am happy to report that we are now originating direct auto loans through all of our 830 branches. We are seeing good early progress in our direct auto rollout, with $90 million of originations through September 30, and our on track for continued growth.

We expect our monthly origination volume to grow as customers become aware of this additional loan option, and we begin marketing campaigns in support of this initiative. Slide 5 includes some basic characteristics of our direct auto product, so you can see how it compares to our personal loans.

APR's for the direct auto product are lower than our personal loan book, but average loan size is significantly greater and the durations are longer. We have not included details here on credit performance, because it is still early. But based on our history with auto loan collateral, we expect losses to be a good deal lower.

And we anticipate a very solid contribution from this business line. Lastly, given the $900 billion auto loan market size and with an estimated $350 billion to non-prime customers, we see real room for loan growth. So, all-in, direct auto lending should be a real positive for us.

Now turning to slide 6, gross yield in the consumer loan portfolio remained flat in Q2. As the benefit of pricing actions we took over the past years migrated in. Risk-adjusted yield grew sequentially, driven by the typical seasonal improvement in charge-offs, as well as recoveries trending up from 68 to 78 basis points quarter over quarter.

Our risk-adjusted yield grew to 22.34%, up 43 basis points from the prior quarter, largely based on the improved charge-offs. Looking ahead now to the fourth quarter, we do expect the trend in losses and delinquencies to be consistent with prior years.

As indicated by the uptick in delinquencies from June to September 30, we are likely to see some sequential increase in charge-offs reflecting both seasonality as well as our growth in new customers.

Net-net, we are quite pleased with the decline in charge-offs this quarter, and remain quite comfortable with the delinquency and loss trends in the portfolio.

As we turn to slide 7, on Acquisitions and Servicings, I'm going to ask Macrina to pick up from here and take us through the rest of the formal part of the call, and then I'll return for the Q&A..

Thank you, Jay. Turning to page 7, I wanted to provide you with a couple of highlights on our Acquisitions and Servicing segment, known as the SpringCastle portfolio. The SpringCastle portfolio continues to perform really well, with pretax income of $39 million in the third quarter versus $34 million in the prior quarter.

Credit performance has remained strong, with charge-offs continuing to decline. Although, like the branch portfolio, we do anticipate some uptick in the fourth quarter due to seasonality. In early October, we refinanced our 2013 SpringCastle securitization. The completion of this deal generated approximately $540 million of proceeds to us.

After paying down the original debt, we used the excess funds to repurchase and retain a portion of the debt as an investment. Approximately $340 million of the $540 million was invested in rated securities from this transaction, and will generate a blended yield of approximately 6%.

Net of this investment, we are left with almost $200 million of net new cash. Turning to slide 8, I'll now talk about our third-quarter financial results. As Jay said at the beginning of the call, we had yet another very solid quarter.

With our core business generating pretax earnings of $101 million, which represents a 42% increase from third-quarter 2013. Our Consumer and Insurance segment earned $63 million pretax in the quarter, significantly ahead of last year's quarter. The primary driver of our sequential quarter improvement was growth in the Consumer loan portfolio.

And as I just mentioned, our Acquisitions and Servicing segment contributed nicely to our results again this quarter, driven primarily by continued improvements in credit performance.

On a GAAP basis, we earned $427 million after-tax, driven largely by the $610 million pretax net gain on the sale of real estate receivables which we closed during the third quarter. Turning to slide 9, let's go through our guidance update. First, we are tightening our guidance for net finance receivables to a range of $3.75 billion to $3.85 billion.

Reflecting the continued strong growth in our branch personal loan business, and the early volume trends from our new direct auto loan product. Second, we are fine tuning our yield expectation range to be between 26.75% and 27%. Our auto volume is coming in strong, and as we expected, is slightly impacting our yield range.

Overall, we continue to expect this product to be a net positive to our bottom line. Lastly, we are projecting hour risk-adjusted yield to a range of 21.75% to 22.25% for the full year 2014, consistent with the slight decrease in yield. Now let me ask the operator to begin the Q&A period..

[Operator] Thank you. Our first question is coming from Moshe Orenbuch with Credit Suisse..

Thanks. I guess as I look at the progression in your risk-adjusted yield and credit, the numbers actually have continued to improve during 2014. But I just wanted ask about the guidance. The guidance range implies for the fourth quarter, somewhere between something below or slightly above this.

And just maybe if you could just talk about the pieces of that risk-adjusted yield and what things you're looking at both in Q4, and to the extent you want to talk about a little bit for 2015 as well..

Sure. On the risk-adjusted yield, as everyone knows, with the components, we're looking at the yield with the mix with the auto volume, and how that is impacting the full-year yield. We're actually getting great auto volume progress, and that is impacting the yield slightly. On the charge-off side, we do expect the seasonality to impact fourth quarter.

And since this is a full-year number, we're taking that into account to get to the range..

Okay. And just as a follow-up, obviously, the progress on the sale of the real estate assets is obviously significant.

And maybe if you could just comment, Jay, on any plans for the use of cash that you've considered recently?.

I'd say my comments will be consistent with what we've said in the past. That we continue to look at ourselves as being in a enviable position. The cash that we reported as of Q3 has grown post some of the transactions Macrina talked about and additional sales.

And we continue to look at that as a resource to be able to work on and support both organic and inorganic activities, should they become options for us. And I'll also say we've paid off some debt this year as it came due, and there was some debt coming due next year.

So I'd say the combination, in particular of supporting the growth which has been strong. Being able to be in a position to work on inorganic things, as well as our liability structure are all things that, that will be used for..

Great. Thanks very much..

Our next question comes from the line of Mark DeVries with Barclays..

Yes. Thanks. I first just wanted to clarify a point on the cash. I think, Jay, you may have just implied.

But the $2.8 billion in the press release, is that as of the end of the quarter? So not inclusive of the $200 million or so of net cash created from the SpringCastle refinancing?.

That's correct..

Okay, great.

And as you think about that pretty substantial cash position, could you give some thoughts on how much you feel you need to hold to service debt and future maturities? And how much is available to invest in growth?.

That's a really good question. It sort of varies year to year, but there is some element in the hundreds of millions of dollars that we think it's important to keep in the system to support monthly loan growth. We, as I think we've made people aware, we do have significant backup lines and we do have significant free collateral that we could use.

But in general, we think of it in the low few hundred millions is what's required to keep in the business to keep the pipes flowing. And then any given year, if you look at our liability structure, you'll get a better sense. But in general, the rating agencies want to see you have coverage of 1 to 2 years of maturities.

And I'd say over the next 12 months, we're in the neighborhood of $1 billion if you look at December through December maturities..

Okay great. That's helpful. And then just one other question.

Have you observed any change in competitive behavior from your largest competitor as it primps for an IPO or potential sale of the company?.

Look, we seen our business trends, I cant speak to anybody else's, but I will tell you our business trends have been good. Our application volumes, our closing volumes, are all continued to be up nicely year-over-year. The quality of those applications, the quality of the loans we've closed has been consistent by way of risk grades.

So we haven't really seen any dramatic changes on that front..

Okay. Thanks..

Our next question comes from the line of Sanjay Sakhrani with KBW..

Hi, thank you. I guess I've got one question on auto, and then one more follow-up. On auto, I was wondering if you could talk about how the ROAs compare to your core installment lending business? And then secondly, how are you guys factoring in what might be some pressure on used car prices in the future? Thanks..

Thanks, Sanjay. Those are both great questions. I'd say, and I'll take them in reverse order. In terms of Manheim and indexes and used car prices, there has been a little bit of volatility of late. And matter of fact, last month it was positive volatility. But that's certainly something we factored in.

When we set up this program, thought about pricing, and we've paid a lot of attention to used-car prices. And if you look at our historical programs, we were probably very deep in the used car pricing, as we're largely financing much older vehicles. So it's something we pay a fair amount of attention to.

And I say, as we've built the programs, set up pricing, built our risk models. Those were all things that were factored in that you can't build a business based on ever-growing automobile prices. And we certainly didn't do that. As it relates to ROA, it's actually a really interesting question.

Because when you think about our average rate on auto is anywhere from a few hundred basis points to a little bit more, lower than our personal loans. But when we think about it and think about auto collateral, we think on a marginal basis it's quite accretive to our overall business in that the expenses of our branches are largely fixed.

What we had to put in place to add this additional loan product, and the size loans to our business was quite small. And matter of fact, in to get to the point we were able to originate the loans that we did and it was almost in the thousands in the just third quarter, we put all of about 75 people centered in a underwriting center in Minneapolis.

Where there was a significant amount of auto underwriting experience and talent, where we've built the center. And the way we're running the business is, the customer will come into the branch. And now we have the ability to show them multiple options.

Instead of just a personal loan, now we'll say, look, if you've got a recent model car that has higher value, we'll now, which we think is very important, show the customer multiple options.

A matter of fact, we're now seeing customers that historically may not have been interested in the higher rate personal loans, but are now interested in a lower rate auto loan just based on the sticker rates on the 2 loans.

But in general, when you look at – when you think about ROA, we're thinking about what's the rate on the loan, what's the marginal cost of the branch, and what's the direct cost of either marketing or that underwriting center. And they're both quite low.

So as we've thought about this, we think it will actually be quite accretive to marginal ROA today, as well as going forward. I'd also add that when we thought about this, auto loan financing is probably the deepest market in the asset-backed market.

And when we think about funding options, leverage, and those things, around auto loans, we think it's one of the really will add to our liquidity profile as well..

Okay great. Just one follow-up.

I know you can't comment specifically on M&A deals, but maybe you could just talk about how you think about OneMain as a company and perhaps their business model?.

Well I certainly can't comment on anything M&A. And in general, I don't like to comment on competitors that I don't know a lot about. But what it will say is, I think everybody's aware an S-1 was filed. We all learned, and I think probably everybody on this call learned a fair amount as a result of that.

And I'd say we've always had real respect for them as a company. Them as a competitor, we think the space they're in, the 36 and under or what we call the responsible lender, makes them a very important player in the market.

And I'd say what we were pretty I felt was very significant, when we looked at earnings and earnings per branch and receivables per branch, we actually thought that was really significant. In that, it really validated the path that we've been on in terms of migrating up receivables. And if you back into their earnings per store the possibilities.

But I'd say net-net from everything we know of them in the industry and everything we see, we have huge respect for them as a player and wish them all the luck in whichever way they wind up going..

All right. Great. Thank you..

Our next question comes from the line of John Hecht with Jefferies..

Good morning, guys, thanks for taking my questions. The first one is, just thinking about credit. Pretty consistent results, and obviously, there's seasonal implications.

But should we just be thinking about in terms of your ALL that the ALL given the consistency of credit will just grow with the portfolio growth? And how should we think about your goals for setting the ALL?.

Good morning, John. This is Macrina. Absolutely right, with the growth of the portfolio, we do anticipate the growth in our provision. And that's exactly what you're seeing as well..

Okay. And you guys suggest that recoveries would normalize, they've come up the last couple quarters.

Is this the range that we should be seeing or expecting for recoveries going forward, or is there more volatility in that component of credit now?.

I think you'll see them continue to slowly migrate up. Certainly, if we undertook a big sale again, we certainly created a little bit of noise in the actions of a 1.5 years ago. But there are no major sale plans. So I would expect so long as we hold them, they will steadily increase.

It may be a lower level than we once achieved, if we've got a growing portfolio where before it was measured on a even more static portfolio. But I think all things being equal, they'll probably migrate up slowly, and hopefully in time, return to where they once were..

Okay. And a conceptual question, you guys, going back a year, you had I think about a $5 million per branch receivables goal – or $4 million, excuse me, I think that migrated up.

Where you now with respect to intermediate term goals or receivables per branch? And has that been change with the development of the auto product?.

The answer is, we don't have a particular number goal. We have branches of every shape, size, and color, in every type of community from cities as small as 5,000 to major metropolis' with millions of millions of people. So it's hard to say any 1 size could fit everything. But I will say, we continue to be on the exact path we're on.

Which is, we want put on as much responsible growth as makes sense. I think we've been pleased with the rate that we've been growing. I think we're happy with where we are today.

But we continue to think that with the infrastructure we have in place, with the comfort that borrowers have today in taking out additional credit, that there is room to grow that number. And I'll say, smaller communities will have smaller sizes, bigger communities – but we haven't broken it out.

We've got today a lot more loans, a lot more branches that are over $5 million. I think somebody said for the first time this quarter, we've actually got a few branches that are over $10 million. So everything is achievable, but I'd say it's a fluid number and it varies by branch and location and all those things..

Great. Appreciate the clarification..

Our next question comes from the line of Donald Fandetti with Citigroup..

Jay, I was wondering if you talk about the depth of the securitization market for personal loans. Obviously, you did a big deal this quarter.

Are investors very receptive to this product? And also, it looks like you retained some of the notes, was that more opportunistic this quarter?.

Great question. What I'd say is a couple things. I think there are 2 different types of transactions. First, on the personal loans, which is supporting our business and I think we've seen both ourselves and our OneMain competitor both tap those markets.

I think we've both experienced overwhelming demand, large numbers of new investors coming into each transaction. And probably both times and a few times we've gone, as well as I think from what we've heard. When they went to the market, there's been real demand and we all could have of done larger size than was anticipated at the time.

So I would say while it's a reasonably new market or a back to the future market, what that had been bigger while ago but has been renewed over the last couple years. We think there's significant room to expand beyond where either of us have gotten so far. And the piece that we kept on the SpringCastle, Don, it was strictly opportunistic.

We had cash, there were liquid securities, there was significant demand. But we thought it was a good place to put some of our cash to work given our comfort with the portfolio..

Got it. And then on your customer behavior, what are you seeing these days? Are your customers more willing to take on debt? Obviously, gas prices have come down, that's meaningful to the sub prime market.

Does that make you feel a little bit better about the portfolio as well in terms of coverage?.

Absolutely. It's funny how important just gas on the margin can be to a lot of our customers. I've used this stat probably on every call and every time. Nearly one out of 2 Americans doesn't have the liquidity they need in the bank to support an emergency. And certainly gas prices help.

But in general, we're seeing better job stability, we're seeing better income numbers, I think across the board our customer tends to be in better shape..

Okay. And then just lastly, to check the box on regulatory for personal loans.

Any updates from last quarter, or is it pretty much the same?.

I'd say status quo. You see what we see. The CFPB has yet to write specific rules around installment loans. There was guidance put out and regs put forward in terms of auto lending. We think that's largely focused on the indirect lenders.

And if you look at all the guidance and everything that they targeted, and challenges, and issues, it was all around the role that the dealer plays. And none of the lending that we're doing is via the dealer track from the dealer.

It is all about the customer coming in and us having that relationship with the customer, and almost exclusively refinance business..

Got it. Thank you..

Our next question comes from the line of JR Bizzell with Stephens Inc..

Morning, guys, congrats on the quarter, and thanks for taking my question. Most of my questions have been asked. But I just wondered, given the continued strong performance from your Servicing and Acquisitions segment.

Wondering if you've moved additional accounts over to that London facility? Have you fully leveraged that yet as you've shown strong performance there?.

That's a really good question, and welcome, JR. I'd say we have continued to use that facility in London, Kentucky for a number of other functions to support the rest of the Springleaf business. And that is proving to be quite, I won't say transformative, but quite important in terms of supporting the branch growth.

We've started migrating some of our later stage delinquency loans that have – in some of the branches to London based on the performance. We're hoping that they'll be other portfolios that'll make sense in time, and the answer is no.

It's not fully utilized, but we are beginning to utilize it with other Springleaf functions and they seem to be doing a great job..

All right. And building on that, Jay, I know talking with you recently, it feels like that acquisition landscape has been quiet.

And I wonder if you've seen a change there, and wondering if there's been any portfolio acquisition rumblings in the space?.

The answer is no. There has not been any significant portfolios that we're aware of that we've been disappointed we haven't bought. We're certainly aware that pricing is different than it was a few years ago, but I think we are in the flow.

We've worked on a number of things, and we've generally found financial institutions more willing to hold on to assets than they probably were a few years ago..

Excellent. And switching gears and last one from me. iLoan, we haven't really touched on that yet. And I'm just wondering if you could give us an update on iLoan, its progression? And then I'm guessing you're seeing a nice application increase, and your expectations around that..

Great question. We continue to do a fair amount on the digital side, in particular, around the customer experience. So I think most are aware, iLoan is a channel today that is responsible for bringing the apps in, and then sending them out to the branches.

We're doing everything we can, and what's important is getting to that customer as quick as you can. That customer may or may not just be applying to us, and the response time is one of the most critical times. So the team that we have in place supporting iLoan and in turn all the internet activity, is one of our most important teams.

And customer responsiveness to be able to take that customer off the market after he applies. We're really seeing – and what you do have though with online is a lot more credit seekers. People that are just willing to look for money that we have a much lower, as I think all the internet lenders do, much lower pull through of internet applications.

Just because you have a lot more people just trying to get money anywhere. So we've got to put filters in to make sure that makes work. But it continues to be an important part, I'd say customer responsiveness, we've worked a lot on in the quarter. And I think are doing a much better job.

And I'll also add that we've rolled out what we call e-signature capabilities with both within the branches and elsewhere, allowing greater ease in terms of loan closing. Again, we want every new customer to come into a branch. So we can have that experience of meeting him, and understanding his budget needs, and financial needs.

But we're actually beginning to explore things like renewals of whether or not the customer may or may not actually have to even come into a branch. So again, customer service, and customer experience can tend to be some of the important things we work on..

Excellent. Thanks for the detail, guys..

Thanks for the question..

Our next question comes from the line of Vincent Caintic with Macquarie..

Hello, thanks, and good morning. The branch profitability continues to be strong alongside receivables growth. And I was wondering how much operating leverage you have, so the receivables per branch growth without having to add more infrastructure or headcount? Trying to get a sense of how much more profitability beyond the $300,000 that you cited..

Look, it's a interesting dynamic question. What I will say is in the quarter, we basically kept headcount more or less flat across the branch. About 3,500 in the field, and that's more or less a number we maintain. A lot of the leverage we've begun to get in the last quarter and in future quarters, will come from centralized functions.

So the fact that all this auto underwriting could be done in one place, and the branches can take advantage of centralized things that we can get greater efficiencies out of.

Is something that we are looking at, including these backend collections of once a loan goes 2 or 3 pays down, is there a more efficient way with better technology that you can get at a centralized areas that you can't get at branch areas. So we are going to continue to work towards those things.

The balance of both centralized and branch functions, that hopefully will allow us to keep scale and costs in line for the branch system. But I don't have, unfortunately, an exact number of how much branch expenses are going to go up.

But I'll say we are doing everything we can to make the branches as efficient as they can around the customer relationship, the sales process, and the early-stage collections.

And working and supporting them in a number of other functions and centralized areas, and we think that combo will provide a fair amount more leverage for growth out of the branches..

Got it. And my second and last question. We've seen some other specialty non-prime lenders and online loan brokers start to move into the unsecured large installment lending space. And I was wondering if you're seeing more competition in the market, and if that competition is pricing rationally? Thanks..

The question was asked a little bit – we haven't seen a ton more competition at least from the banks. We think what some of the online lenders are doing based on the loans that we've seen, have been generally higher FICO, up market stuff which is generally borrowers that probably wouldn't wind up in Springleaf.

And again, one of the real advantages of a customer coming to us is service. I'll remind everybody, that if you walk into a branch with the required documentation, which is basically income and identity, you can walk out of that branch in an hour. From what we know of the online lenders, it's a few day experience at best.

And most of our customers, given the financial profile they're in, generally need the money that day of the next day. So the fact you can walk into a branch, get a loan in an hour. And they're more concerned, while the rate is very important and we always think we're a leader in rate.

They're very concerned about payment and affordability, and how it fits into their budget. So all things that we think about. So I will say as long as, and we continue to focus on experience, service, and making sure that, that makes a difference.

But net-net, long answer to a question is we're not seeing a ton of competition to our borrower set from the online players..

Got it. Thanks very much..

[Operator] Our next question comes from the line of Henry Coffey with Sterne Agee..

Good morning, everyone, and thanks for taking my question. In terms of understanding just the loan product, the auto loan product.

The customer comes in, is his motivation that he or she gets to walk out of the store with more cash? With a lower rate on that auto loan? Or what's drawing the customer to the product?.

Hey, Henry. It's a really good question. I'd say it's a few things. First of all, we haven't specifically gone out and done marketing campaigns. But we're told people, if you have an auto loan, let us help you refinance it. Either with a better rate.

So what today it is, is it's a customer walking in and saying I need to borrow whatever they need to borrow to deal with whatever the situation happens to be. Whether it's a home repair or an auto repair, a bill consolidation, a life event, whatever the typical reason.

Our financial specialists in the branch will sit down with that customer, and say, here's a few options. We can write you a secured auto loan, we can first write you an unsecured loan, and here's what it would be. And it would solve that $2,500 to $7,500 problem.

Or we can write you a $15,000 loan, and that might pay off the $7,500 car loan you have today and put that – the other $7,500 you're looking for in your pocket. The payment will hopefully be lower than what it would have been otherwise if you took those 2 payments.

And generally the customer is winding up with more disposable income when all is said and done. So generally, it's another option. Potentially at a lower rate, but it's at the end of the day, what available cash is left.

And we're generally finding that when we do make it, we're usually potentially paying off another car loan, or paying off other debts such that their winding up in a better place with one payment. And generally, a lower payment than it would have been if it was a sum of the loans..

So the auto loan is really just part of the customer solution?.

Correct. And as I like to say, it's one more tool in the tool chest that we can sit and say and talk about real options of what makes sense..

Exactly.

And with your primary product, it's unsecured – is it unsecured completely, or are people putting up pseudo – like I said to someone the other day, collateral you'd never want to take back?.

I'd say our personal loan portfolio today, which is almost 900,000 customers, is really split. It's split between what we call hard secured, and soft/unsecured. And it's roughly call it 55%-ish, soft and unsecured, which is exactly as you said.

It's predominantly soft collateral, some form of a household good, that let's hope we never have to take back. And then when we talk about hard, they're actually titled vehicles. But they tend to be older. Most lenders stop lending when cars get to 10 years old.

And I think on one of the pages we broke out what is the profile of the cars, the older cars. They tend to have higher mileage, but they're still a very important asset for that customer. It's a means of them getting to work, and their performance tends to be better. And as you'll see, we price them differently. Because the loss profile is different.

So we do have now what we call I would say we have 3 loan programs. We have a softer unsecured loan we can make. We have a what we call hard secured, secured by the title of what tends to be older cars.

And then our auto loan program today is really focused on newer vintage, probably the last 5 or 6 years models, but lower mileage which is why you have higher values..

So on the iLoan, is the loan closed and approved, subject to verification on the internet, or is the iLoan just really an application process?.

The iLoan is largely an application process. All income is verified exactly as it was in the branch, employers are generally called, and it's done the exact same way. As it is for the auto loan or anything else. We're never lending against collateral.

Our underwriting process is about verifying income, and as importantly, not just verifying the income, but making sure that borrower can afford that payment. Affordability and the net disposable income after the payment, are the single most important things for us in terms of making sure that borrower qualifies for that loan..

Would you ever – when you look at the online market that they're making credit decisions in 5 seconds.

Would you ever migrate in that direction, or do you think the Springleaf business is what it's always been, that basic branch business?.

Look, there's more technology and information available today than there ever has been in terms of borrowers. And but I think we are very comfortable with how we underwrite, we're very comfortable that the borrower experience works. But where appropriate for the right customers, we'll make decisions, but we're not going to stop the verification.

While on paper, a customer may look very good based on a bureau and an application an income, we may say you are qualified for a loan. It's still going to be subject to the same verifications of identity and income to make sure everything trues up..

Good. Just a final question unrelated to this topic. You've got approximately $3 billion of cash, assuming you don't make a major acquisition, there's an implicit cost to carry with that because there is still unsecured debt. How should we treat that, that – it's almost like unutilized senior debt that's behind the cash.

How should we treat that in terms of that going to core earnings in your view, or is that a below the core line item, or how should we think about this come the March quarter of next year?.

I think from an allocation standpoint, Macrina can jump in. At this point, that was the debt that was supporting the mortgage business. The cost of that debt rolls through, will continue to roll through our non-core segment. Because that's what it had been supporting, and as time goes on I think we'll all have greater clarity..

Great. Thank you. Thank you and congratulations on a good quarter..

Thanks very much, Henry..

There appear to be no further questions at this time. I'd like to turn the floor back over to Craig Streem for any additional or closing remarks..

Sure, Jackie. Thank you. And our thanks to everybody who participated this morning. And if there's anything else we can help you with, certainly you know how to find us. Thanks, and I wish all of you a good day. Bye..

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