Craig Streem - SVP, IR Jay Levine - President and CEO Macrina Kgil - SVP, CFO and Treasurer.

Sanjay Sakhrani - Keefe, Bruyette & Woods Henry Coffey - Sterne, Agee & Leach Vincent Caintic - Macquarie Research Equities Don Fandetti - Citigroup Terry Ma - Barclays Capital John Hecht - Jefferies & Company JR Bizzell - Stephens Incorporated Paulo Ribeiro - BMO Capital Markets Robert Dodd - Raymond James Ken Bruce - Bank of America Merrill Lynch Daniel Dionne - Columbia Management.

Welcome to the Springleaf Holdings Fourth Quarter and Full Year 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.

At this time, all participants have been placed in a listen-only mode and the floor will be open for your questions following the presentation. [Operator Instructions] It is now my pleasure to turn the floor over to Craig Streem. You may begin..

Thanks Jackie. Good morning everyone. Thanks for joining us. Let me begin as always with Slide 2 of the presentation, which you can find in the Investor Relations section of our Web site and which we will be referencing during the call this morning.

Our discussion 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 in our Annual Report on Form 10-K, which was filed with the SEC on April 15, 2014, as well as in the fourth quarter '14 earnings presentation posted on the IR page of our Web site.

We encourage you of course to refer to these documents for additional information regarding the risks associated with forward-looking statements.

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

For those of you who may listen to the replay down the road, we remind you that the remarks made herein are as of today, March 12th, and have not been updated subsequent to this initial earnings call. With me this morning with formal remarks are Jay Levine, our President, CEO; and Macrina Kgil, our Chief Financial Officer.

And of course we will have plenty of time for Q&A session following our formal remarks. And now, it's my pleasure to turn the call over to Jay..

Thanks Craig and good morning everybody. Let me apologize in advance and welcome everybody to the sick ward in Evansville a number of us are in the recovery mode of what's been as you guys all know a hectic while and a bit under the weather what the weather changes everywhere. It's hard to believe, it's only been six days since our last call.

And while I guess you have all might have a few more questions on our OneMain acquisition today's brief call is really meant as a review of our strong fourth quarter. Turning now to Slide 3 in the deck. We're really pleased to report another quarter with very solid trends in all the fundamentals of our business.

Our core earnings of $65 million were up 34% year-over-year with core earnings of $0.57 per share. The key drivers of these results were first; continued growth in our branch receivables. This was the fifth consecutive quarter of year-over-year portfolio growth above the 20%.

Our gross yield remained strong in-spite of the growth from our direct auto loan product which carries lower yields in our basic installment loan. Our credit performance remains very solid, the charge-offs coming in as expected for the quarter.

And to finish up on Slide 3, I want to point out that about 3.25 billion of the cash and investments on-hand, which were largely generated from our sale of $8 billion of mortgages this past year will go towards funding our OneMain acquisition. Turning now to Slide 4.

We continue to emphasize driving receivables growth per branch because of the tremendous operating leverage this provides. Let me give you some key stats. At the end of 2012, 60% of our branches managed under $3 million of personal loan receivables. Today that number has declined to fewer than 10% of our 830 branches.

Also in 2012, we had average receivables per branch of about $2.5 million and by year-end '14 that have grown to about 4.6 million or nearly double. Let me tell you, what impact this has had. In 2012, we earned $90,000 pre-tax per branch. For 2014, we nearly tripled this number earning $267,000 per branch.

So while we've almost doubled receivables per store, we've nearly tripled earnings per store.

This growth in receivables results from a number of factors first; a fundamental increase in customer demand for responsible loan products; second, our digital operations continue to drive increased applications and volume with nearly 45% of new customers now sourced online; third, we exit mortgage origination and moved all mortgage servicing of our real-estate out of the branches; and lastly, we've continued to centralize a number of functions that used to be done in the branches.

Finally, let me highlight the growth we've seen from our direct auto product and the potential it brings to our core business.

With 160 million of origination volume in the quarter or 15% of total originations of the quarter, auto is becoming a meaningful contributor to our growth, especially when you consider it's only rolled out in June of last year and on a limited basis to various divisions at a time.

And most importantly, we remain extremely optimistic about our growth prospects for 2015. Now turning to Slide 5, let’s take a quick look at trends in gross yields, charge-offs and our risk adjusted yield. Gross yields in the branch portfolio remained stable quarter-to-quarter at 27%. Our gross yield was up marginally year-over-year.

Charge-offs were up a touch for the third quarter, reflecting typical seasonal trends as well as the growth in new customer volume and are well within expected range. Net-net, our risk adjusted yield came in at 22% for the quarter down 35 basis points from the third quarter due to the change in charge-offs I just mentioned.

And as we turn to Slide 6, I'm going to ask Macrina to pick up from here..

Thank you, Jay. Turning now to Slide 6, I will discuss our financial results for the fourth quarter. Our core business generated pre-tax earnings of 103 million, which represents a 34% increase from the fourth quarter 2013. Our consumer and insurance segment earned 64 million pre-tax in the quarter significantly ahead of last year's quarter.

The primary driver of our sequential quarter improvement continues to be the growth in receivables. Our Acquisitions & Servicing segment also known as SpringCastle continues to be a strong contributor to pre-tax earnings, generating 39 million in the fourth quarter versus 36 million in the same quarter 2013.

Moving onto our non-core portfolio which is laid out on Pages 18 and 19. We completed our final sale of an additional 360 million of mortgages. In total, we sold nearly 8 billion of receivables this year generating a total pre-tax gain of 720 million.

The proceeds from these sales as well as the transactions announced earlier this year are being carried in the real-estate segment, which generated a negative net interest margin this quarter.

As a result of our reduced real-estate exposure which is now happily under $1 billion at year-end, we began reallocating certain corporate expenses from our non-core portfolio to our core consumer operation. The impact of this in the fourth quarter was roughly 7 million.

This quarter's operating expense in the core consumer segments would be a pretty good indication on the run-rate for 2015. Lastly I want to touch on an important financing transaction which was completed during the quarter. In November, we issued 700 million of new unsecured debt, which had been upsized from 500 million.

The proceeds from the high yield issue were used to repurchase and exchange a portion of our outstanding 2017 note. Now turning to Slide 7, I'd like to discuss our 2015 guidance for the key drivers of our core consumer segment. Please note our guidance does include the impact of our recent announcement of the acquisition of OneMain Financial.

First, we're targeting net receivables at year-end 2015 of 4.50 billion to 4.75 billion, an increase of approximately 20% to 25% over the 2014 level. We expect that a key contributor to this growth will be a full year of auto originations.

We expect our portfolio yield to decrease marginally to 26% to 26.5% in large part due to lower yields on the auto product. As we said before, while yields on the auto product are lower, we expect this to be more than offset by larger loan amounts and lower charge-offs.

We're targeting a risk adjusted yield which is yield net-net charge-offs of 20.5% to 21.5%. This is consistent with a slight decrease in portfolio yield, a range of 5% to 5.5% net charge-offs. Finally, we're projecting pre-tax income for the Acquisitions & Servicing segment in the range of 100 million to 120 million.

And now, I'll turn it back over to the operator to begin the Q&A..

The floor is now open for questions. [Operator Instructions] Thank you. Our first question is coming from Sanjay Sakhrani with KBW..

Just question on leverage, I don’t know if we have anything from OneMain, but I was just wondering now that we have this quarter's numbers from you guys.

Can you just talk about what pro forma leverage might look like and kind of what the expectation is going forward to run that?.

I'd say there is a couple of part to that question. Certainly, you could say how we're looking at things over the next couple of months, or the next couple of quarters as we move towards the acquisition. And I'd say you'll see very low leverage as we're carrying a fair amount of cash.

I think the question is what is it going to look like post closing, and I think I said about a week ago, that’s something we continue to work for as we’ve had conversations with the rating agencies, we continue to chat with our Board and I'd say as we get closer to closing the transaction, I think we will lay out what we expect those numbers to look.

And I'd say probably the most important thing that we're looking towards is for a combination of things sort of as we look at what the pro forma will look like, you've got both tangibles and intangibles that will come.

You've got both debt and unsecured debt and secured debt and then you've got the earning potential and I think all those things will be put in the mix as we look through what's the appropriate leverage..

Would we have a specific number if we were to combine the two entities as of the fourth quarter or not really?.

Well you have -- if we look back….

Do you guys have the numbers if you were to combine the two entities together as of the fourth quarter?.

No we don’t because their fourth quarter numbers are not public..

One follow-up question just on auto, obviously you guys are having lots of success there. Could you just talk about what's driving that success? And kind of how you anticipated it to grow going forward, I know the growth is expected to be strong, kind of where it's going to come from? Thank you..

Sure. The growth is really coming from straight organic originations out of the branches, I'd say we've only really started to use this as giving customers choice.

So customers come in and they generally come in looking for an installment loan which is in general how they thought about us for the last 100 years and when we do sort of come up with various options of how to look at their overall balance sheet which is really what we're trying to do, we're not trying to help with one problem, we're trying to help in how to get your balance sheet to a better place.

How do you get out of debt? How do you take the responsible loan product, the installment loan and use that against your total liabilities? We're now coming and saying instead of just an installment loan of a few thousand dollars, here's other choices.

Take your auto pay out, your existing auto loan, consolidate additional amount to debt, so it's really about giving the customer additional choices. And it certainly is the one that we're highly optimistic that we will be really in play with the OneMain customer base as well..

And what I'd say -- yes the only thing I'd add is we really haven’t begun specific marketing of it, so at this point it's really happening by accident. When customers come into our branch, we're saying here's a couple of different ways to think about it and we do intend this year to be more aggressive about marketing it as a product..

And I guess what would that do to the run-rate of growth on a quarterly basis, I mean obviously it should accelerate then?.

Correct and that's sort of built into the numbers..

Our next question comes from the line of Henry Coffey with Sterne, Agee..

It's very apparent to everyone that you must have terrific tailwinds going on in installment business.

When you kind of break your book down, where are the improvements in charge-offs coming and what does the new customer look like going forward in terms of expected lawsuit?.

As you’d expect there's all kinds of segments within the portfolio in terms of where the charge-offs come from and we spend a lot of time looking at them.

I think I've highlighted in the past, the existing customer where we've known them and he's performed for a while, we're not going to renew a customer and keep him on the books, if he's not one paying well. So by definition overtime that becomes a better credit.

The newer customer, we haven’t had the experience with and while we do our best to underwrite it in general is a customer that we do see higher losses on, so the differentials have remained about the same and I don’t think we’d continue to expect anything dramatically different.

I will say the auto will be a better credit, we expect it to be a better credit.

In general what we've seen within our book, we've had more or less 40% or 50% has been hard secured and has tended to be older auto deals that probably average 10 years old that have what I'd say less collateral value, but even there if you compare our unsecured and soft secured to our hard secured, there is a couple of 100 basis point differential.

And we’ve talked about that with asset-backed investors for some time and we expect the new auto to mirror or even be better than again what we've seen on our own auto with the older vehicles..

Then I have two other questions, so I'll go to the one that's not so much fun. In terms of analyzing the combined OneMain Springleaf business, we obviously only have the September OneMain gated to begin with.

There was that 1.5 billion dividend that they took out in November, is there any chance that they would reverse that and then I have one other question?.

Not to my knowledge, to my understanding the balance sheet we bought with 1.9 billion of capital is more or less the one it's booked to be delivered..

And then in terms of allocating intangibles, I know it's probably pretty early, but either in a very generic, general way or very specific.

How much of the premium gets allocated to intangibles and goodwill? And how much should sort of get allocated onto the loan balances and then how are we going to separate out core from not-core and tangible equity? It's the whole equation that everyone is asking about.

So even if it's just a general number, can you give us a feeling for how much of that premium is going to get allocated to intangibles and goodwill and how much to loan balances and other items?.

Well Henry, we're still working through the allocation of what the numbers would look like, but for the loan premium, I would point you to OneMain S-1.

They have a footnote that talked about the fair value of the receivables which I believe is about 1 billion over their carrying value after allowance, so I would think of it as looking at the loans there. There's also going to be other receivables and debt as well that we have to look at for fair value.

And then we'll see the follow out coming through intangibles and goodwill..

So probably in simple terms better than most of us initially thought..

It’s based on that billion at this point..

Yes, yes, exactly it’s not as rough as just putting the two balance sheets together and putting all the premium against equity..

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

I'm going to ask another one on the capital structure, but I'll be more philosophical.

When you think about the kind of leverage you can run, are there any kinds of limitations on that? I know you had a guidance for 3.5 to 4 times the equity before, but now is there anything that actually prohibits you from running a higher leverage? And as a corollary to that, how important are the rating agency ratings and then what to be looked at is it a total equity number or tangible equity? Thanks..

Those are a couple of great questions. So, I'd say on the Springleaf side there are no restrictions in terms of the leverage. The restrictions are really, what is prudent and that is something we spend a lot of time talking about with the Board.

And I think you guys know who our Board is and they are a bunch of people who have significant experience, both around financial services, balance sheets and those things, and these are all conversations we spend a fair amount of time around.

The rating agencies, look we think our ratings are important but much more important than our ratings are access to capital and access to the markets.

We have borrowed, over the last several years through all kinds of markets, through all kinds of ratings and we do pay attention to them, but most importantly is do we manage the company with adequate liquidity and runway to be able to do the things we need to do..

And then one other operational question on the auto loans it sounds like there is lot of opportunity here. Just actually trying to get a sense of how the sale typically works and I think you’ve touched on it, somebody walks into the branch and then ask for a product.

Is it I guess taking a step back, do you have a preference for one loan or the other? Is it typically that the person tries to get an unsecured loan and if that doesn't work, you work on the secured side, I'm just trying to get a sense of how the sale execution actually goes through? Thanks..

Our greatest desire is to make our customer happy, so it's giving them choices. So really, whatever makes and fits the customer best is the loan that’s best for us and that's really what we do believe. So, we have always believed in choices, we have operated in both secured and unsecured in the past.

This is a little bit different because the underwriting on these loans given their size is done by experts with auto underwriting experience a set of people up out of Minneapolis where we have about 100 experts in auto underwriting.

So, when a customer does walk in unlike a normal loan that a branch will approve assuming it’s within its limits, these are loans that will be shipped up to Minneapolis looked at very quickly, turned back and the customer will be given options but I would say what’s really important is that the customer has choices in it, customer makes the choice of what’s best for them..

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

So just Macrina, it looks SpringCastle equity went negative is that just reflecting like a fair value mark on the new ABS deal is that the dynamic that drove that?.

Well the dynamic is really coming from the initial mark that we had on the assets and the debt. And then it is part of the refinancing, we had a good distribution to the equity investors related to the transaction so that's what you're seeing within the financial statement..

And, I guess Jay on the credit front I was wondering if you could talk a little bit about what you're seeing and also where we are in the cycle of credit extension in personal lending, it just seems like every time I turn around there is another company that's providing some type of credit I mean, have we sort of swung to the other level of the spectrum here, where there was very little credit being provided, and now you might have the risk of pushing the envelope?.

Look we see what you see, there are -- it's not hard to start an online shop, you don't even need a lease all you need is a name and a domain and you are in business.

What I’d say is, this is a customer step that we think takes really a personal touch does take underwriting and we've generally seen the bigger of the online players cut off in the mid 600s which is more or less where we go up to in terms of the bulk of our customer base.

So, I don't think you've seen a tonne of people coming down to the in general where we're lending but I agree with you, credit has gotten easier the customer base is definitely in better shape, we're seeing disposable income, we're seeing greater flexibility in budgets and all those things have helped.

Where do you see it going, well you continue to hope, and remain optimistic that the economy remains good that employment remains good but we underwrite as if we're going have to continue to debt recycles as we have in the past..

Our next question comes from the line of Terry Ma with Barclays..

Can you maybe just give us a sense of how much of the auto loan product is embedded in your guidance for this year and also how you expect that would evolve post the OneMain acquisition whether or not you’re going to roll that out in OneMain as well?.

Well I’ll take a shot at it and then Macrina can add as well. The goal is we can’t wait for OneMain to settle because we’ve got some work to do. So it’s a little early to talk about, which products we’ll be able to roll out but the goal will be and I think I laid this out originally.

We will be running them as two separate brands at least for the first year. So there is definitely some technology and other work to be done whether or not we can get products in there as soon as we’d like, we well figure out in the coming months.

As it relates to what percentage of our overall volume, I think you saw the fourth quarter number was 15% and I am not sure that it's probably as good an indication as one might see for the year..

Just wanted to get some color on your outlook for credit, looks like you guys increased the high-end of your implied NCO range this quarter in guidance, and can we just talk about that?.

Sure, as I’ve sort of said over the last year or so the new customers do pose an additional credit risk that the existing customers haven't in the past and as we look to grow the new book, that’s in general where the credit challenges will come from.

And so I’d say we've added that as we think about growth that is where I'd say the change in the number we expected to see..

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

Real quick one on the quarter, in the core earnings there is other income item of a negative 8 million.

I am wondering is that a one-time or is there an offset to that number?.

John, are you looking at the appendix section?.

Yes..

It is a one-time I am assuming you're looking at Page 16 for the consumer and insurance..

It's actually Page 15 the core earnings non-GAAP the other income of negative 7.983 million..

That's correct. We have some of the one-times related to the SpringCastle refinancing and some of the debt repurchase as well..

And there is not an offset to that to be I guess to be clear about my question?.

Can you repeat the question?.

What do you mean by an offset?.

I guess the high level question is if you're including a one-time item in your core earnings, are your core earnings actually higher than the bottom-line you reported this morning?.

If that's a one-timer, you can interpret anyway you want but we don’t expect to refinance SpringCastle every quarter..

Second question, gross yields they have been very stable and then you're forecasting your guidance, as there is more stability although there is some fluctuation.

And is the fluctuation related to mix shift or is there other kind of market conditions we should consider there?.

I’d say it's strictly mix with auto, we haven't -- our pricing has been generally pretty consistent over the last year or so, the states there haven’t been a lot of change as much as there was a year ago where North Carolina and a few other states made a number of changes to their rate caps.

So this is largely coming from really the mix of auto and I think if you look at the numbers you'll see autos in general several hundred basis points lower on rate. And clearly something that's between scale and lower charge-offs so we think actually ultimately the higher net present value and the amount of the company..

And then one question, OneMain I guess I know it's early on but as you look deeper into the organization.

Are you guys finding either human resources or technological or operational capabilities that you may be able to port over, that you think you may be additive to the combined organization?.

Look I'd say what we have seen was what we saw during diligence. At this point we're both sort of doing what we need to do to run our respective businesses while the transaction migrates to the normal course. But we’re thrilled and excited by everything we saw in diligence.

We wouldn’t still be here today if we weren't excited about the people, the talent, the potential for adding-on growth and products as well as the technology they had invested in as well as the compliance infrastructure and other things have been inside city for as long as they were..

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

Jay more specifically digging in on this auto loan discussion, could you kind of give us an idea of what your customer demographic kind of looks like right now? What kind of customer you're dealing with now? And then as we roll out this appointed marketing for auto in '15, do you expect that customer demographic and I guess more specifically that rate and customer in general to stay the same? Are you going to kind of go up FICO or down FICO, just give us an idea of kind of how you're thinking about that marketing program?.

The customer today and I think we laid out a little bit of it on the slide, but in general it's a marginally higher credit customer with marginally more income and why do I say that 1 million of numbers but two they have newer cars. So if you think about who has got the newer cars, here is an amazing stat and I am always blown away by.

Couple of hundred million cars on the road, it’s actually 250 million cars on the road the average car is 11 years old on the road today. 11 years old is the average car. So 250 million you only produce 16 million-17 million new ones. So those that tend to have the newer cars, tend to be those with bigger incomes that can afford the bigger payments.

So by definition it's probably a customer with marginally more disposable income. The FICO was about 10 points higher from what I recall compared to the rest of the book, which is why and I think we talked about this the OneMain customer has about 30 point higher FICO on average compared to our customer.

So we expect there to be a newer vintage vehicles and we expect this product to fit a lot better. There's a fair amount of targeting that goes into auto marketing.

And I'd say the really interesting thing about the product is there aren’t a lot of people banks and otherwise who want a same day basis can close a $10,000 to $20,000 auto loan out of the branch. And I think that's one of the things that’s really differentiates us..

And just asking about that marketing has that already begun in '15 or is that something that will start in the second quarter and moving out?.

I think we're still in the learning phases on our marketing. It’s just beginning and it's something that that we'll be rolling out really in the second half of the year..

And then switching gears, given your commentary around the online strength that you saw I think you said 45% plus of customers sourced online. And then I know on the M&A call we had six days ago, you kind of spoke to another product that you're excited about.

Could you just kind of give us an update on your online product and how you view it this year and then maybe over the next three years, kind of where you see that headed?.

Sure. Trust me, we spend a lot of time talking and thinking about all the things going on online is some of the earlier questions were about. Today we use springleaf.com, we continue to upgrade our Web sites we continue to do everything we can to make it as user friendly and experience for everyone that so to start their loan today.

And 99% of our loan when a customer does start online will ultimately wind up getting closed in the branch and wind up being a receivable service to out of our branches and managed by our outstanding branch staff.

The other 1% is actually where we don’t today have Brick-and-Mortar, so we're in 26 states, there is a number of states where there are qualified customers and many were even former customers where we had branches and we try and service those, but it's a very small portfolio.

As we look forward then I think brand is yet to be identified and a couple of other things.

We are looking at taking all the experience and learning and analytics and data that we've gathered over the years which is honestly the hardest part about lending is knowing when you look at patterns who are the right customers to market to, to close to and actually build again independent online channel, probably initially starting for a higher credit grade customer than we're lending out of the branches, but ultimately hopefully being able to provide the credit to a broader swap of customers.

We have world class servicing in London, Kentucky and other facilities and I think you have seen the results there in the SpringCastle so between putting together I think our great servicing facility, our phenomenal analytics we think we're in a great place to launch a independent online channel that will ultimately start small but could become an important and meaningful part of our business..

And just to clarify that would be something that you would use that e-signature product and that customer wouldn’t necessarily come in the store, am I thinking about that correctly?.

Correct, it would be -- look, at this point what's important, given customer choices, we're giving him choices on products and we want to give him choices about how they close assuming they meet the appropriate criteria..

Our next question comes from the line of Paulo Ribeiro with BMO..

Macrina, I just wanted to gather a little more color on the impact to non-controlling interest that was asked earlier.

Where should we see it going from here and if I understand correctly you said it was mostly due to distribution to the partners and not so much from the impact of the securitization that caused this drop, is that correct? And again, what should we see it going and if it was from distribution, where do we see it in your numbers, your portion of it? Thank you..

Sure, a lot of questions in one. So I will start with the non-controlling interest and the trend that we're expecting. As the earnings grow in SpringCastle which what that's what you've been seeing in the last couple of quarters, the non-controlling interest negative number would be growing closer to zero.

So you'll see that trend as the quarters’ progress. In terms of the distribution since SpringCastle is a consolidation within Springleaf, I don’t think you would see that anywhere unless you look at the statement of equity in the financial statements which you'll see that in the fourth quarter and you'll see it when we file our 10-K..

Another question is you mentioned that about 7 million of expenses that were in the non-core real-estate were reallocated to the core portion.

Is that operating expenses, right?.

That's correct, that's corporate overhead expenses..

And then you have still left economies staking about 50 million and that we should see being re-distributed soon because I guess in the merger call you guys mentioned also that that interest expense will be reallocated and it's the same happening with the overhead in the coming quarters?.

So in this quarter for the non-core portfolio, you also see some debt losses and debt repurchase losses and some transaction cost coming through the operating expense, so it's higher than expected for real-estate as well. So with the coming quarters, we expect that trend to go down and to continue to see reallocation of corporate overhead..

And just sneaking one quick one, you talked so much about auto and OneMain. I just wanted some color on the different trends that we have.

We have and OneMain if I'm not mistaken, the auto portfolio declining and you growing what is happening there? It’s not a focus for them or they had some problems to the extent you can talk about it, I would imagine you would reverse that trend if anything will hurt your strategy?.

Paul at this point Jay shared our optimism about the opportunity to roll out products through the OneMain network. We really can't speak at all to what's going in their business today..

Our next question comes from the line of Robert Dodd with Raymond James..

Just speaking to auto right now, can you give us any color on what proportion and obviously you say, but what proportion of these customers are new to Springleaf versus existing customers that are just coming in and renewing the larger loan. And is there a dynamic and obviously on the Web site click on loans you can see auto is available.

Is there a difference between auto versus installment in terms of the digital success in that 45%..

I guess a couple of parts to it. I would say our mix of new auto origination which are the bigger loans on the newer vintage is coming from a combination of new customers and former customers. It's also coming from some of our existing customers but what's interesting even within our existing customers many of them are previously unsecured customers.

So we're actually winding up in a better place with a bigger loan with collateral et cetera. So as a matter of fact that's the vast majority of it. So we spend a lot of time looking at the money we lent, how much especially new money and it's the vast majority of all the dollars we're putting out.

The second half of the question you got to remind me what it was?.

In terms of the online I think….

The online, right I think the online is really getting the customer into the branch with the personal loan and we're having some upside in terms of giving them choices. I think just like that we spoke about we're going to be more aggressive in marketing auto as a specific product we're going to do the exact same digitally..

On the credit side obviously, you project a pretty stable blended credit in terms of roughly 500 basis points delta between gross and risk adjusted yields. Obviously you have already talked about the dynamics that new customers tend to be high auto is lower, et cetera.

How much of this stability is the function of mix versus and maybe the new auto versus do you like for like do you see credit being stable or deteriorating slightly into 2015?.

I would say like-for-like in general it's stable..

Our next question comes from the line of Ken Bruce with Bank of America Merrill Lynch..

Just to blabber the order of discussion, I just want to make sure that we're thinking about this properly. It sounds like just the way that you've described it. Really it tends to be a kind of a debt consolidation products, somebody comes in looking for an unsecured loan.

You're able to wrap a bunch of things into effectively an auto loan and you take a little bit lower yield, you get a little bit better credit at the end of the day. But the real benefit as you get a much bigger balance out of that transaction.

Is that right?.

You nailed it..

And then I guess the discussion around the capital structure, understanding you guys have to be careful about what to say because there is still decisions to be made and alike.

But the way that we've looked at it, you've got the potential to write up the assets at billion dollars per city, looking at the way that you should be able to accrete earnings over the next couple of quarters and continue to accrete capital that may be there's a billion dollars or so that needed to be kind of right sized the equity base to kind of get you back to your targeted capital levels.

You got a strong market backdrop.

What would prevent you from wanting to do an equity deal at this point and then separately is there anything from just a technical process standpoint that has to occur before you would do that?.

I would say certainly the most important thing is the Board and management coming to a position of what we think makes the most sense. There is clearly a number of other things that go into it filings and other things that financials that we put together.

So nothing prevents us but I would say the most important thing is trying to figure out what does makes the most sense for the long-term balance sheet and stability of the company..

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

When we analyze your balance sheet the core earnings former loan business is obviously growing of course then the next question is the SpringCastle portfolio is shrinking, it's a high return "low value business" from that point of view.

Is there anything that would prevent you from selling net interest off thereby shrinking your assets and potentially boosting equity?.

No, nothing would, we haven't thought about it. I would say the servicing and all the things that have come with it we've been able to renew a number of the customers in that it’s 275,000 relationships.

Those relationships are important to us overtime, so not something we've thought about because how well it's worked out eventually and I think what a good job we've done on these customers, but there's nothing that prevents us..

So, but we keep the service and keep the customer instead the asset, not a crazy thought? Thank you..

No, interesting..

Our next question comes from the line of Daniel Dionne with Columbia Management..

Just I think I asked this question a few quarters ago Jay, but are you seeing any competition or increased promotional activity from any other peer-to-peer lending sites which seem to grow pretty rapidly and are you targeting any of your core customers in your opinion?.

It's a hard one to answer. The answer is absolutely they're out there and they're growing.

You look at the volumes for any of the peer-to-peer that have been made public for the fourth quarter and they're growing, so you can't look the other way on that, but in some way if you're like the invisible competitor, you don’t really see among a corner, so it's a little bit harder is we'd like to say, but we're not really seeing any faster payoffs on our existing loans.

We're not seeing drops and pull-throughs on customers to come in, so, but we know they're out there. It's something we're paying attention to and it's exactly why we're going to start up our own channel..

Again and just best to be digital I guess move previously you guys have been pretty straight forward about bringing in most of the customers to the branches part of the balance sheet structuring process for the customer. I guess when you switch to an online channel whereby originating and issuing of loans the people that has not come into the branch.

I guess what kind of things you think about in terms of additional risks that that might bring to the company and are you also trying to sell these specific customers any insurance products that the CFPB might look at differently than those customers are coming out of bank or the branch sorry?.

I'd say we're still in the early stages of sorting out exactly how it's all going to work in terms of the products we're going to offer.

How the whole channel is going to work? I think the online players today are largely working through other financial intermediaries some of the other banks, the Web banks and the others and generally aren’t offering the other products I think we are still again as I said sort through exactly what the customer experience will be.

The things we think a lot about are the whole fraud channel, but again the branches have been great at eliminating fraud.

As one thing when you come in you have to bring identity and income, when we know who you are and live in the communities, huge differential so I'll also say if you look at similar stratus of some of the peer-to-peer companies who publish their loss results by FICA and other channel, I think we'd say our numbers are significantly better because we do go through that experience with the branch.

But that's one of the things we're going to be spending a fair amount of time on the fact that we have the years of data and analytics and experience, we think we'll go a long way, but I'd say early days in terms of the exact product offering, fraud is the thing we think about the most.

And the other benefit of the branch is that we're going to try and figure how to get the best of both is maintain that customer relationship. It's the renewal that that customer stays with us a lot longer, we maintain that relationship and it's not just an anonymous third-party vendor.

That's something that we're going to work to try and get the best out of them. We think our London, Kentucky facility will be very good at that..

Just one more if I could squeeze it in, as you look to close the acquisition and OneMain obviously got a lot of things on your plate, but just looking at your capital structure. You still do have a lot of legacy high-cost debt.

Just wondering your thoughts about capital allocation there and if you think you can get any improvements to earnings through liability management?.

I'd say we're always looking at our liabilities. We continue to be successful. I think we were a few weeks ago with the new asset-backed securitization where I think we got north of $1 billion raised in the low 3s but we're going to be very cognizant about our mix of secured and unsecured.

Most of our debt has non-core features, but a good chunk of that will be rolling off over the next couple of years and in general assuming rates stay where they are I think we expect to replace at a lower cost debt..

And we have 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. Thank you all for your attention. Lots of good questions and we'll endeavor to stay available to you day by day. So thanks and have a good day..

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