OneMain Holdings (NYSE:OMF) reported first-quarter financial results on Friday. The transcript from the company's first-quarter earnings call has been provided below.
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The full earnings call is available at https://events.q4inc.com/attendee/621177414
Summary
OneMain Holdings reported strong financial results for Q1 2026, with capital generation of $194 million and C&I adjusted earnings per share of $1.95, marking a 13% increase year-over-year.
Total revenue and receivables grew by 6% year-over-year, with the company maintaining a conservative underwriting posture while expanding high-quality personal loan originations.
Strategic initiatives included enhancing personal loan offerings, leveraging AI for operational efficiency, and expanding the auto finance dealer network, contributing to robust credit performance across all business lines.
The credit card business saw significant growth, with receivables increasing 45% year-over-year and strong performance in yields and credit metrics.
Management expressed confidence in achieving 2026 financial objectives, maintaining a positive outlook despite macroeconomic uncertainties, and emphasized disciplined capital allocation with a focus on share repurchases.
Full Transcript
Peter Pollon (Head of Investor Relations)
Good morning everyone and thank you for joining us. Let me begin by directing you to page 2 of the first quarter 2026 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 or as of today May 1st, 2026 and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Schulman, 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.
Doug Schulman (Chairman and Chief Executive Officer)
Thanks Pete and good morning everyone. Thank you for joining us today. Let me begin by saying we are quite pleased with the financial results of the quarter which continue the momentum we built over the last couple of years. Our customers remain resilient and we are confident in our ability to execute our 2026 financial objectives as we operate from a position of strength. Let me briefly walk you through a few of the highlights for the quarter and then I'll discuss progress on some of our important strategic initiatives. Capital Generation was $194 million in the quarter. C&I (Consumer and Industrial) adjusted earnings were $1.95 per share, up 13% year over year. Total revenue and receivables each grew 6% year over year. We achieved this growth while still maintaining a conservative underwriting posture. Receivables growth was supported by focused initiatives to drive high quality personal loan originations and important contributions from our newer businesses. Auto finance and credit card credit performance was very good and continues to track well against our expectations both for delinquencies and losses. Our 30 to 89 delinquency declined year over year, improving on last quarter's slight increase quarter over quarter improvement in 30 to 89 delinquency was better than last year and better than the pre pandemic average. CNI net charge offs were 8.4% in line with expectations as first quarter losses are seasonally the highest of the year and we feel good about our full year credit outlook. Consumer loan net charge offs were 8% also in line with expectations and we continue to see strong recoveries across the business. During the quarter we continued to make progress on key strategic initiatives, positioning the company well for continued earnings growth in 2026 and beyond. In our personal loans business, we are always enhancing our product offerings to better serve customers and drive profitable growth while maintaining our discipline underwriting practices. We continue to refine how we deliver debt consolidation loans, making the experience more seamless. This product provides real value to our customers as they consolidate other debt and onto a loan with a single monthly payment that amortizes down over time. In a majority of the cases our customers credit scores improved and one main also benefits from better credit performance. We've also seen an uptick in the number of customers who choose to share bank data with us. By accessing this more granular data, we can offer better loan terms, improve credit outcomes and continue to enhance our credit models over time. We're also encouraged by the early performance of our new home fixture secured loan product which provides one main homeowners with a differentiated way of accessing credit. We continue to pilot this offering and it's performing very well, attracting high quality customers and delivering strong results. These types of innovations are positioning our personal loan business for continued growth. As always, we move quickly but with discipline, testing, rigorously scaling what works and building a pipeline of initiatives that we expect to drive value over time. Turning to auto finance, receivables grew 14% year over year to $2.8 billion. Credit performance was in line with expectations and continues to outperform the broader industry. During the quarter, we continued to grow our dealer network across the country, including through our partnership with Ally. We are also innovating across our auto finance business. Earlier this year we began piloting an agent-based AI tool that improves insurance recovery outcomes on damaged customer vehicles by automating negotiations with insurers. Initial results have exceeded expectations with improved outcomes for us and our customers. We've also deployed AI more broadly across the company where we see clear near term benefits. This includes using AI across the product development life cycle leading to faster deployment of technology at a potentially lower cost. We've also developed an AI tool which gives our team members easy access to a broad array of internal information, increasing their effectiveness, saving them time and speeding up customer service. And we are launching pilots in key customer service areas where the risk is low and and the learning potential is high. We are taking a focused, strategic approach to AI by implementing where we have high conviction and piloting in other areas to build capability and scale over time. Turning to our credit card business, we delivered strong results for the quarter with receivables increasing 45% year over year to just under $1 billion and customer accounts are up 40% year over year to nearly 1.2 million. All of the key metrics in the credit card business were very strong. As we saw increased yields, improvement in loss trends and decreased unit costs, we're driving profitable growth in the card business. Our by combining product innovation with deeper customer engagement. As the business has matured, we've enhanced line management processes for our best customers. We are developing differentiated offerings across rewards and pricing to increase our share of wallet with lower risk customers. And our data science team has refined marketing and credit models to make better offers to customers more likely to use the card, thereby creating more value for the customer. And for one main all of this shifts our portfolio mix to our best customers and supports profitable long term growth. We're also implementing initiatives to improve delinquency and collections performance while driving cost efficiencies and as we scale taken together, we expect these efforts to position the business for profitable growth this year and beyond. We've also seen a steady rise in customer adoption of our Financial Wellness offering which has recently been enhanced and rebranded. One main My Money. Our customers use OneMain My Money to monitor credit scores, manage budgets, track expenses and negotiate bills to save money. It's another way we build deep, long lasting relationship with our customers and help them make progress towards a better financial future. These are just a few examples of strategic business initiatives across our company that are driving both short and long term value. Let me briefly touch on the consumer. While the current economic environment continues to have some uncertainty, our customers remain resilient. A year ago, tariffs were top of mind. Today, geopolitical tensions and their impact on energy prices are the broader risk. However, unemployment remains low, providing ongoing support for credit performance. As always, we are closely monitoring trends across the consumer and our portfolio and we are maintaining our cautious underwriting posture. But credit is performing well as the actions we have taken over the past several years put us in a strong position. Turning to Capital allocation, Our first priority for capital remains extending credit that meets our risk adjusted returns while also investing in the business to meet customer needs, drive efficiency and build an enduring franchise. Our regular dividend, which is currently $4.20 per share on an annual basis, represents a 7% y at today's share price. As I discussed last quarter, all things being equal, we expect incremental capital returns to be weighted more towards share repurchases going forward. In the first quarter we repurchased 1.9 million shares for $105 million. Over the last two quarters we've repurchased 3.1 million shares for $176 million. As we look ahead, we will continue to pace share repurchases based on several factors including the capital needs of our business, market dynamics and economic conditions. I'm feeling very good about our business as we are operating from a position of strength with disciplined underwriting, a proven team that is experienced in serving the non prime consumer and a resilient diversified balance sheet. We remain confident in our competitive positioning and like the trajectory of our credit performance and we anticipate continued capital generation growth this year and beyond as we execute on our strategic priorities. With that, let me turn the call over to Jenny.
Jenny Osterhout (Chief Financial Officer)
Thanks Doug and good morning everyone. Let me begin by summarizing our solid first quarter performance which supports our continuing confidence in the trajectory of the business. We delivered revenue growth, credit performance and capital generation in the quarter that was right in line with our expectations. We saw good performance in our personal loan business coupled with growth in auto and outsized improvement across key financial metrics in the credit card business. Additionally, we executed across all our businesses on several strategic initiatives that we expect to deliver significant value in the quarters ahead. Funding was once again a highlight as we further strengthened our balance sheet and accessed markets favorably even in a challenging environment. Demonstrating the strength of our programs and our access to capital, we increased our share repurchases in the first quarter to $105 million. While we remain committed to our dividend as the primary means to return capital to our shareholders, we continue to expect to use share repurchases as a means to bolster capital returns in the future. In the first quarter, we generated higher excess capital due to our seasonally lower growth needs and returned that excess capital through our share repurchase. Looking ahead for the year, we expect to continue generating excess capital, though at more moderate levels as we deploy additional capital to support higher seasonal growth in the business. As a result, we expect share repurchase activity to adjust accordingly. First quarter GAAP net income per diluted share of $1.93 was up 8% from $1.78 in the first quarter of 2025. CNI adjusted net income per diluted share of $1.95 was up 13% from $1.72 in the first quarter of 2025. Capital generation totaled $194 million, comparable to the first quarter of 2025. Managed receivables ended the quarter at $26.1 billion, up $1.5 billion or 6% from a year ago. First quarter originations of $3.1 billion increased 3% compared to the first quarter of last year and we see opportunities to continue our growth across our products. In our personal loan business, we saw good performance as the initiatives we've discussed continue to gain traction moving to our newer businesses. Auto originations this quarter benefited from the expansion of our dealer network and new partnership activity which has helped support scale and momentum across our auto business. We like the pace and performance of our auto business and expect it to continue to grow and contribute to our future capital generation. In our card business, we saw growth in both account openings and receivables as our increased customer engagement continues to support the enhanced value proposition of the brightweight card product. Notably, in April we crossed $1 billion in card receivables, marking another important milestone in scaling the card business. As we look forward, we expect both of our newer products and personal loan innovation initiatives to help drive receivables growth throughout the year. Turning to yield, our first quarter consumer loan yield was 22.5%, up 13 basis points year over year. Consumer loan yields are up over 60 basis points since second quarter 2024 resulting from the proactive steps we took to optimize pricing in certain customer segments since the middle of 2023. Despite the mix shift headwinds from the growth of our lower loss lower yielding auto business, we expect consumer loan yield to remain around current levels throughout the rest of the year assuming a steady product mix and competitive environment. While the credit card portfolio remains a relatively small portion of our overall portfolio, we continue to see strong yield momentum with total revenue yield of 33.9% increasing roughly 300 basis points since last year, supporting our overall revenue growth as the card portfolio scales. Total revenue was $1.6 billion, up 6% compared to the first quarter of 2025. Interest income of $1.4 billion grew 6% from the first quarter of last year, driven by receivables growth and yield improvements. Other revenue of $198 million was up 4% from last year, primarily due to higher servicing fees on our growing portfolio of loans serviced for third parties and higher credit card revenue as we grow the card business. Interest expense for the quarter was $322 million, up 4% compared to the first quarter of 2025, driven by an increase in average debt to support our receivables growth. Our interest expense as a percentage of average net receivables was 5.3% this quarter, down from 5.4% in the first quarter of 2025, helping our profitability as we grow the book going forward, we expect our funding costs to remain at approximately this level throughout 2026. First quarter provision expense was $465 million, comprising net charge offs of $512 million and a $47 million decrease in our reserves driven by the seasonal sequential decline in receivables during the first quarter. Our loan loss reserve ratio of 11.5% remained flat to prior year and last quarter. Policyholder benefits and claims expense for the quarter was $52 million, up from $49 million in the first quarter last year. Looking forward, we expect quarterly claims expense in the mid to high $50 million range over the remainder of the year. Let's turn to credit Starting on slide 8. 30 to 89 day delinquency on March 31st excluding foresight was 2.62% down 1 basis point compared to a year ago. This year over year performance is in line with our expectations and modestly better than the performance we saw a quarter ago. And as seen on slide 9, the 48 basis point sequential improvement was better than the 43 basis point sequential improvements both last year and in the pre pandemic benchmark period. Our front book continues to perform in line with expectations while our back book which represents only 5% of the portfolio still accounts for 14% of 30 plus delinquencies. This is more than double the impact we would typically expect from vintages on the book this long, so the back book continues to present a headwind for total portfolio credit metrics moving to net charge offs for the quarter as shown on slide 10. First quarter CNI net charge offs, which include the results from our small but growing credit card portfolio were 8.4% up 24 basis points year over year in line with expectations. Consumer loan net charge offs, which exclude credit cards, were 8.0% of average net receivables in the first quarter, up 19 basis points from a year ago and in line with our expectations. Strong recoveries continued to support our results, increasing 18% year over year to $104 million in the first quarter. Recoveries as a percentage of receivables increased to 1.7% from 1.5% in the first quarter of 2025, largely due to continued enhancements to our internal recovery strategies. And it is worth noting that bulk sales of charged off loans, which is one of the strategic tools in our overall recovery strategy, were slightly less than prior year as net charge offs are seasonally highest in the first half of the year, we expect losses in the second half of the year to significantly decline following the improvement in early delinquencies we have seen. This normal seasonal improvement is reflected in our full year CNI net charge off guidance range provided on our last earnings call which remains 7.4 to 7.9%. And as a reminder, CNI net charge offs include losses in our credit card portfolio which has higher yields and higher loss content and will continue to pressure
Doug Schulman (Chairman and Chief Executive Officer)
overall losses as the portfolio grows. With that in mind, we are seeing improvement in our credit card net charge offs which declined 176 basis points year over year to 18% in the quarter. We also continue to see strong performance in card delinquency as 30 plus delinquency fell 105 basis points year over year in the first quarter, a notable improvement from the 83 basis point decline we saw in the fourth quarter. While we like the sustained improvements we are seeing, we remain committed to measured growth and disciplined underwriting. Loan loss reserves ended the quarter at $2.8 billion. Our loan loss reserve ratio remained flat both sequentially and year over year at 11.5%. The continuation of the steady improvement in our card portfolio I just spoke about was also reflected in our reserves this quarter as the reserve rate on the credit card portfolio dropped 80 basis points from last quarter. However, given it's a higher yield higher loss business, the card portfolio maintains a higher reserve rate than the consumer loan book and will continue to pressure the overall reserve rate of the company. This quarter, the credit card portfolio continued to add approximately 40 basis points to the overall reserve rate and we expect that to increase slightly over the remainder of the year consistent with the growth of the portfolio. Looking forward, in addition to the shifting product mix of the overall portfolio, we will continue to be prepared to adjust reserves if and when the macroeconomic environment changes. Now let's turn to slide 11. Operating expenses were $437 million, up 9% compared to a year ago, driven by thoughtful investment in growth initiatives in our newer products and solutions, as well as data and technology capabilities to better serve our customers, accelerate product innovation and drive operating efficiency in the future. Our OPEX ratio this quarter was 6.8%. As the year progresses, we have a clear line of sight to lower quarterly expense growth which combined with expected receivables growth will drive the OPEX ratio lower and we remain confident in the full year OPEX ratio guide of approximately 6.6%. Now turning to funding and our balance sheet on slide 12 during the first week of March, even with escalating geopolitical tensions and market uncertainty, we were able to issue an $850 million three year revolving ABS. The offering saw very strong demand and was executed at attractive pricing of 4.63%, once again demonstrating our excellent access to markets and strong ability to execute even in difficult market conditions. The proactive measures we took last year to reduce our secured funding mix, redeem and repurchase, near term maturities and refinance. The 9% 2029 bonds reduced our interest expense and gave us significant flexibility on both the mix and timing of issuance in 2026, an important advantage especially given the increased volatility in markets so far this year. At the end of the first quarter our bank lines totaled $7.5 billion, unchanged from last quarter. These bank lines add significant liquidity and funding flexibility to our program. Our balance sheet is a core strength highlighted by staggered long term maturities, strong market access and experienced execution, a balanced funding mix and significant liquidity. We view this as a durable competitive advantage that supports our business through economic cycles. Our net leverage at the end of the first quarter was 5.4 times in line with last quarter and within our targeted range of four to six times. Turning to slide 14, we are reiterating our 2026 guidance that we provided last quarter. We had a good first quarter that was in line with our expectations and we are pleased with our performance for full year 2026. We expect to grow managed receivables in the range of 6 to 9% while maintaining our current conservative underwriting posture. We expect C9 net charge offs in the range of 7.4 to 7.9%. And we expect our full year operating expense ratio to be approximately 6.6%. All of this supports the strong capital generation of the company for 2026 and beyond. In closing, we are encouraged by our first quarter performance and start to the year. Our credit metrics are in line with expectations supporting good momentum over the remainder of the year. We see opportunities to grow through innovation and product expansion while improving efficiency, which we expect will deliver outstanding shareholder value in the quarters and years ahead. So with that, let me turn the call over to Doug. Thanks, Jenny. In closing, we remain very confident in the strength and trajectory of our business. We are serving more customers with products that meet their diverse needs and strengthen one main's position as the lender of choice for hardworking Americans. We remain focused on profitably scaling our auto finance and credit card businesses to provide value in both the short and long term. Credit is performing well and in line with our expectations and our industry leading balance sheet remains a key competitive advantage supported by a diversified funding model, consistent market access and a strong liquidity position. All of this points to our expectations of driving increased capital generation this year and beyond. Let me conclude by thanking our team members for their outstanding execution as well as their commitment to our customers and to each other. With that, let me open it up for questions.
OPERATOR
Thank you, Mr. Shulman. Ladies and gentlemen, the floor is now open for questions. At this time, if you do have a question or comment, please press Star one on your telephone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. Again, we do ask that you please limit yourself to one question and one follow up. We'll go first this morning to John Hett with Jefferies.
John Hett (Equity Analyst)
Hey guys, thanks very much for taking my questions.
Doug Schulman (Chairman and Chief Executive Officer)
Yeah, good morning, John.
John Hett (Equity Analyst)
Thanks very much. First, maybe you any update on the bank application? It's any sense of timing and so forth there,
Doug Schulman (Chairman and Chief Executive Officer)
No updates this quarter; the process continues to move forward. Timing is uncertain, but we remain optimistic, as we continue to believe we have a very strong case for approval. We're having constructive dialogues with the FDIC and the Utah Department of Financial Institutions. So we're optimistic and we'll keep folks posted as, you know as things evolve.
John Hett (Equity Analyst)
Okay, thanks. And then, you know, you talked about a lot of focus on technology and, you know, using AI for productivity reasons. Any update on the branch versus Digital kind of activities and how they integrate together. And any thoughts on like, I guess, the trajectory, the branch system over time?
Doug Schulman (Chairman and Chief Executive Officer)
Yeah, look, we've over the last seven eight years really focused on being a multi product omnichannel lender. And so we've obviously added card and auto which are not dependent on the branch but our core personal loan business. We have this model where you can do business with us in person, on the phone or digitally. We do think our branches are a competitive differentiator and one of the key strengths of how we serve the non prime customer very well. Where they can walk into a branch, they can work out issues with us, it gives them confidence that we can advise them on getting them into a loan that they can afford and getting them into the right type of loan. And so over the years what we've done is generally our branch footprint shrank from like the late teens to the early, you know, till five years ago shrank from about 2000 to about 1400. It's remained somewhat steady. It'll, you know, it's gone down about 100 over the last couple of years. But what we've done is really try to make sure our branch team members are spending time working with customers either in lending or in servicing and getting as much as the of the lower value work into either technology and automated into self service or into our call centers. And so we've made a lot of progress now around automating information. The branch used to need to get initiating outbound calls when someone applies but their application isn't complete just to get the application complete and then the branch team member can work with them. I've talked before about getting DMV data so the branch doesn't have to go and look that up and get the VIN. But it's automatically, it's just in their hands when a customer walks in. And so we continue to invest in technology to make our branch team members more productive and free them up to work with customers in the AI front. I think AI gives you great opportunities around everything I talked about, whether it's automating things, having chatbots get information either for the branch. I mean one of the great examples is all of our internal information now which people used to need to go onto our intranet and look up and do certain search terms or would be in different applications is fed into an AI program where someone can just ask hey, what's the policy for loan size in you know, Tennessee? Or you know, hey, can you tell me the policy about health insurance for My kid. And so they can just have a chat with the system again. It frees up branch team members just to get information at their fingertips.
John Hett (Equity Analyst)
Great. Thank you very much, Doug.
OPERATOR
We'll go next now to Moshe Orenbuck with TD Cowan.
Moshe Orenbuck (Equity Analyst)
Great, thanks. I was hoping to talk a little bit about, you know, credit quality. And you definitely, you know, kind of called out that you expect credit to improve, I guess, more than seasonal patterns by the second half. And you've got, you know, a lower level, probably even at an improved rate of, you know, the back book sitting in there. And yet it's been a little bit stubborn in terms of that maybe, you know, if you could kind of just expand a little bit, you know, about what is actually going on with those, you know, with those loans, those customers and, you know, what gives you the confidence that you'll get to that back half levels.
Jenny Osterhout (Chief Financial Officer)
Yep. Hi, Moshe, it's Jenny.
Moshe Orenbuck (Equity Analyst)
Hi, Jenny.
Jenny Osterhout (Chief Financial Officer)
This, this quarter we saw that back book represent about 5% of the portfolio and it contributed 14% to that 30 plus delinquency. Those loans are continuing to go delinquent at about a two times higher rate than we would have expected. So I think what gives us the confidence there is that, you know, our loans typically are about five years. And that gives you a sense that, you know, as those loans get older and we start to see them burn off, we should get closer to our historical range. And then obviously there's also growth as a piece of that equation.
Moshe Orenbuck (Equity Analyst)
Okay, thanks. I was also intrigued, you know, to hear, you know, you talk about the credit card business turning to profitability. I mean, can you talk about, you know, the level of investment and what that had represented, you know, in the card business to date and how you think about the ultimate profitability when you compare it to, you know, your core installment product and you know, what that might mean for overall earnings for one main.
Doug Schulman (Chairman and Chief Executive Officer)
Yeah, so I'd say this. I mean, I think as everybody knows, card businesses are challenging to set up and take some time. And I think what's really been remarkable here is that we were able to, coming out of COVID actually start this card business and really leverage the overall, the whole company and our company scale and size and breadth and knowledge. Right. So as you're setting up this card business, you know, looking at, you know, we've got, obviously we've got lots of corporate functions and we've got a great funding program, all these pieces. And so I think that's really been quite helpful as we've set that up. You know, we did mention we're now profitable. And I think from here it's all about making sure that we can continue to scale this business in a way that we like. Now if I also turn then to the returns, because I think that's really one of the more remarkable pieces. You know, personal loans obviously has a very good return profile if I look at credit cards and probably one of the few businesses that we could go into for the nonprime consumer where you would have a similar or slightly higher return profile. And so, you know, you can, you can see our revenue yields in the, in the low 30s. You can, you know, able to support, you know, over time credit coming in closer to a 15 to 17% range. And then we're very focused on operating expenses and I'd say unit operating expenses, that's where the focus really is for cards. And so I think that team has been very focused on how you can scale and as we scale, you get more benefits. So we're always looking sort of at a longer term trajectory for that business, but quite pleased with where we've gotten and where we're going to be able to go from here.
Moshe Orenbuck (Equity Analyst)
Thanks very much.
OPERATOR
Thank you. We go next now to Aaron Saganovich with Truist.
Aaron Saganovich (Equity Analyst)
Good morning. Thanks. In terms of the personal loans, they are up, looks like on balance sheet only around 2%. I know you're kind of selling a portion of those as well. Maybe you could talk about the balance of, I guess pushing personal loans or the demand for personal loans relative to the card and auto that you're starting to increase if there's any kind of push and pull there in terms of how you're focusing on originations and then maybe just touch on the overall health of the consumer given that we have the rising oil prices and how that might be impacting your customers.
Doug Schulman (Chairman and Chief Executive Officer)
Sure. I think there's two questions in there. So let me take, take them both. You know, one is we, we run the three businesses, you know, independently. So we're not trying to balance how much personal loans are we doing versus card versus auto. You know, we're quite disciplined operators. Each loan we make, whether it's issuing a credit card, making an auto loan or making a personal loan needs to meet our 20% ROE threshold. It's all based on credit box cost of funds, opex and losses and the formula over time. And so they're going to move at different Now we have a very big market share in personal loans. And so by definition kind of growth, we're growing from pretty large base and so we don't expect as much percentage growth, although it remains, you know, the biggest part of our originations in any year. I mean, I think auto and credit card, you know, these are huge markets where credit card we have a billion of receivables in a $500 billion market and auto, we've got 3 billion of receivables or just under and a 600 billion market. So I think we would expect those to be, you know, growing relatively faster. But each business is running independently with a team, you know, focused on each business because they have, you know, different characteristics, different needs, different competitive in different competitive environments. On the consumer side, look we, you know, what I would say is what I said before, our consumer remains resilient. I think they're holding up well. We're seeing our credit perform just where we expected our credit perform. And so our on US data is our best data. If you look at kind of the last year across the board, all the external employment remains low. It ticked up a little bit in the second half of 2025, but it's actually been stable recently. Wages have been stable, savings have been stable. The thing that's gone down a lot in the last six months is sentiment. So I mean, I think everything you hear and see and feel is people don't feel great, but we're not seeing it show up in our numbers. And you know, obviously we, we said before we're paying attention to the geopolitical tension and the, you know, the cost of oil. We haven't seen that creep into our book at this time. And the other thing I'd say, you know, our, our other two data sources is we do have unemployment insurance. We've seen no uptick in that. We have a branch survey that we just ask our branch managers what are they seeing and feeling and that's been stable over the last couple of quarters as well.
Aaron Saganovich (Equity Analyst)
Thanks. Just a follow up on the personal loan side. Is there a higher competitive environment today in terms of the fintech lenders that you compete with? I mean, just wondering why that product. Or maybe it's just the credit overlays that you still have on there that are kind of keeping that from maybe growing a little faster than what I would expect.
Doug Schulman (Chairman and Chief Executive Officer)
Yeah, I mean one, we have a very conservative credit box given that and we've had it now for a few years because we don't think the macro uncertainty is fully cleared. There's no change in, you know, from what we can tell in competitive environment there's always fluctuations here and there. But what I would Say is the last 18 months it's been quite competitive. There's been plenty of funding available for our competitors to make loans. Different competitors have different views of how they, you know, what are their return profiles and what kind of premium do they put on growth. We really don't chase growth. You know, we, we make sure we focus on profitability. Our receivables are our originations. We're still booking. 60% of our originations are in our best or lowest risk customers with very attractive pricing, which is an indicator to us that our competitive position, you know, remain strong. And as I mentioned before, we've got a pipeline of product innovation and so I think it'll fluctuate quarter to quarter. I don't get too fussed about that because, you know, as someone told me when I was coming into consumer finance many years ago, like anyone can make a loan, you just have to be good to get paid back. And so we focus on, you know, having a great product, getting our marketing to the right people and then booking loans that meet our risk adjusted returns. 6% year over year. Receivable growth we're fine with.
Aaron Saganovich (Equity Analyst)
Sounds good. Thank you.
Doug Schulman (Chairman and Chief Executive Officer)
Thank you.
OPERATOR
We'll go next now to Mahir Bhatia, west bank of America.
Mahir Bhatia (Equity Analyst)
Hey, good morning guys.
Doug Schulman (Chairman and Chief Executive Officer)
Thank you for taking my question.
Mahir Bhatia (Equity Analyst)
Good morning, Mehir.
Doug Schulman (Chairman and Chief Executive Officer)
So I wanted to just turn to credit for a minute. There's a few moving pieces this quarter. It just, you know, the gross charge offs and recovery is both stepped up pretty materially year over year. So I guess what is driving that and then I'll just ask my second question up front. You also have early stage DQs, you know, the 30 to 89 bucket basically flat with the 90 plus bucket increasing. But is there something going on in roll rates where folks are finding it difficult to cure once they are delinquent? Can you just help us frame like what, what's going on with credit? Thank you.
Mahir Bhatia (Equity Analyst)
I heard, I heard a couple questions in there so let me try and get to get to them.
Doug Schulman (Chairman and Chief Executive Officer)
But so we, we focus really on net charge offs and you know, like I said earlier, we ended net charge offs in line with expectations. But Mehir, you're right, there were a couple things going on when you look at the puts and takes of the way we got to those net charge offs and we have seen historically low roll rates from delinquency to loss since the pandemic. And this quarter we did see some normalization in those roll rates but we're not expecting that to continue through the rest of the year. And just again we really remain well above better than pre pandemic. Then secondly, I just say the efforts on recoveries I think really paid off and we saw very strong recoveries in the quarter that helped offset that GCO and those recoveries largely came from improvements that we made to our internal capabilities. So that's what really was driving the majority of those improvements, that improvement I mentioned earlier. But you know, we had about a little bit less actually year on year in terms of the gross sales that we did. So in general I think we are feeling good about where credit is and where it's going and I think you're absolutely right. There's some puts and takes in terms of how things are moving and you can see that with those roles and that's, you know, a little bit of what you're seeing in that 90 plus. But we're not expecting that to go forward and we're feeling quite good.
Mahir Bhatia (Equity Analyst)
Thank you for taking my question.
OPERATOR
Thank you. We go next now to John Pankari with Evercore isi.
John Pankari (Equity Analyst)
Good morning.
Doug Schulman (Chairman and Chief Executive Officer)
Morning John.
John Pankari (Equity Analyst)
Just to go back to that credit point, you know, regarding the back book indicated, Jenny, that the loans are going delinquent two times faster than expected. But you're still confident in the charge off expectation given the burn off. Is that view predicated on that two times faster DQ formation slowing or is it predicated on it remaining stable? I know in your just the answer that you just gave to me here that, that you had indicated that you don't expect that to worsen. But you know, what is your assumption around that DQ formation that's been impacting the back book when it comes to your charge off outlook?
Doug Schulman (Chairman and Chief Executive Officer)
Let me. So I really think about that back book and you've seen that its contribution to delinquency has shrunk slightly over time. You can see that in the presentation, right? And it varies a little bit in terms of, you know, it's not just completely linear based on the size of that book running down, but I think in general when you look at a. Let me just. When you look at a personal loan curve as you get older, you typically see some plateau in where the back book's going. I think really for us when we look at the second half of the year, we look at the composition of the vintages and we do also see see newer vintages coming on. So I think when we look forward and we see both this factbook contribution coming down slightly, I think you can assume it's approximately two times, maybe slightly more than two times what we would have expected in the same pre pandemic. But it's really also about what you can think the good and young loans that we're starting to put on the book coming into that portfolio and that playing out in the second, second half of the year.
John Pankari (Equity Analyst)
Okay. Okay, thanks for that. And then separately, I'm not sure there's much you could say here, but if you can maybe give us an update on the status of the state ag lawsuit filed back in March, maybe any developments there, any progression to the courts, maybe thoughts on your exposure, fines, remediation settlements? I know you've indicated that this issue had been to an extent addressed by the CFPB in a previous action. So if you can kind of walk us through that, thanks.
Doug Schulman (Chairman and Chief Executive Officer)
Look, first you should look at our statement on the website, which is our public statement on it. The bottom line is the claims made by the states are untrue and they have no merit. They're trying to relitigate issues that were already reviewed by the CFPB and resolved. And we are happy to go to court on this and confident that we can win. Regarding sizing again, these are matters that have been fully resolved with the cfpb and it's only a fraction of the states and so we do not view this as a material matter or one that's going to have any material impact on our business.
John Pankari (Equity Analyst)
Okay, great. Thanks Doug.
OPERATOR
We'll go next now to Rick Shane with JP Morgan.
Rick Shane (Equity Analyst)
Hey guys, thanks for taking my questions this morning. Look, there's an interesting dynamic. You guys have had a tight credit box. You know, sort of consistently tightened your credit box since August of 2022. And if we go back and look at commentary from out 20 throughout 2022, the real driver was the sensitivity to your lower quality borrowers, to inflation, housing prices, gas or housing and gas were sort of the two standouts. We're now two months into substantially higher gas prices. I'm curious sort of how you think about the credit box now. You guys were tight. The environment is arguably worsened. Had you anticipated loosening the credit box and you're going to maintain status quo or do you tighten from here?
Doug Schulman (Chairman and Chief Executive Officer)
Look, we think we have a good conservative credit box and we've kept it conservative just, you know, for things like what's happened recently, you know, and so we just to be clear, we have a 30% stress overlay in our credit box, which means what our models predict. We're then putting 30% peak loss overlay on it in order. And you have to Even with that 30% piece peak loss meet our 20% marginal return on tangible equity return. So that's the credit box we have. I wouldn't say things have gotten worse from 2022. I mean, what I would say is we're now like three years plus into a world where you keep looking to say, gosh, I wish the uncertainty would clear and everything was great. Things have actually been pretty good despite the uncertainty. But you know, we haven't declared coast is clear for the economy and there's no risk going forward. And we've been able to construct a book of business with better quality customers which has allowed us to drive losses down during that time and drive up profitability. So you know, I don't think we don't look at oil prices and all of a sudden oil prices are going up and therefore we're tightening our credit box. Like we look at the whole picture of on US credit, external factors, you know, early defaults. We run these weather vane tests which, you know, we're always booking a little bit, you know, a small de minimis amount under our 20% thresholds to see if they pop up above our 20% return on equity thresholds. And so there's nothing in there that says let's put more overlay on now. But we're also not at the point where we want to take the overlay off. I would say though, we're always making tweaks. So we'll see, you know, a data source that indicates some weakened credit someplace and will put a different factor on that data source or we'll see, you know, a type of customer with a set of characteristics that's very much outperforming and on that, you know, micro segment will make an adjustment. And so we're making adjustments, you know, every month across the board with, you know, by customer, by geography, by product type, etc. But the overall overlay is remain constant and you know, as of now we'll, we'll change it when we see fit, but as of now we're keeping it constant.
Rick Shane (Equity Analyst)
Got it Doug, I appreciate the answer and I do want to clarify, I'm not suggesting things are worse than they were before that that's not fair to you guys and I, if I suggested that that's not my intention. I did want to ask a follow up though, which is that again, thinking back to the sensitivity that you guys pointed to in 22 and there are reasons to see analogs today, incumbent in your guidance is a pretty significant improvement in credit in the second half of this year. Does that change in environment over the last couple months reduce your confidence in your ability to achieve that. I know you reiterated guidance, but I'm curious how you think about that.
Doug Schulman (Chairman and Chief Executive Officer)
Yeah, the answer is no. I mean, like what we've seen right now doesn't change anything. We always put the caveat. I mean, if the economy tanks, our business changes. But as of now, we're assuming things to be relatively steady and we feel confident in all of the things we've said about maintaining our guidance, et cetera.
Rick Shane (Equity Analyst)
Thank you for taking on my questions. I know they were long today.
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