Regional Management Corp.

Thank you for standing by. This is the conference operator. Welcome to Regional Management Corporation's first quarter 2020 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Garrett Edson with ICR. Please go ahead.

Thank you and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which was released prior to this call and which may also be found on our website at regionalmanagement.com. Before we begin our formal remarks, I will remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates, and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties, and other factors that are difficult to predict, and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, undue reliance should not be placed upon them. We refer all of you to our press release, presentation, and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact the future operating results and financial condition of Regional Management Corp. We disclaim any intentions or obligations to update or revise any forward-looking statements except to the extent required by applicable law. also our discussion today may include references to certain non-GAAP measures. Reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com. I would now like to introduce Rob Beck, President and CEO of Regional Management Corp.

Thanks, Garrett, and welcome to our first quarter 2020 earnings call. On behalf of everyone at Regional Management, I hope that you and your families are safe and healthy. These are difficult times for our customers, the communities we serve, and for all of us and our families as the nation struggles to navigate the COVID-19 pandemic. I'd like to take a moment to thank the healthcare professionals, first responders, and other essential workers who admirably perform their jobs each day to keep our nation safe. I also want to thank the entire regional management team. Our team's response to this crisis has been incredible, both in planning and execution by home office personnel, and in the efforts of our brand staff who continue to work on the front lines to provide outstanding service to our customers. I'm joined by Mike Dimski, our Interim Chief Financial Officer, who will discuss our first quarter financial results. Mike has been with Regional for nearly seven years and has over 25 years of accounting and financial services experience, including as our Chief Accounting Officer. He's been a stalwart member of the Regional team and I look forward to working with him in his new role. Our focus since mid-March has been on serving and supporting our customers during these unprecedented times. While I'll briefly touch upon our first quarter performance, my comments will first focus on a response to the COVID-19 pandemic, including what we're doing to help our customers and how we're positioned to manage through the crisis. As you know, we provide our customers with access to responsible and affordable credit solutions, and as a result, our operations are considered essential services under nearly all state mandates. At this time, 98% of our branches remain open to service the needs of our customers while adhering closely to the CDC guidelines for social distancing. Thanks to a successful implementation of our business continuity plans in March, we've been able to operate our branch network largely without interruption. Our headquarters personnel, including our centralized collectors, have also continued their work from home, following a seamless migration of our centralized operations to remote work technologies. We're in frequent communication with our customers by phone, email, and text message, and our customers also have easy access to their account information and electronic payment options through our online portal. Through these communications, we're able to provide our customers with information about our special borrower assistant programs and to remind them about our convenient electronic payment options, which reduce the need for in-person contact with our branches. We've leveraged our past experience in managing pre-natural disasters to design and implement programs that have been effective in supporting our customers throughout this crisis. These borrower assistant programs include relaxed criteria for deferrals, fee waivers, and special options for our borrowers to make reduced payments and renew their loans. Our special renewal programs allow customers facing hardship to lower their interest rates and extend loan terms in order to lower their monthly payments. In addition, To support our customers, we've enhanced our system capabilities to process these programs electronically, over the phone, in the branches by appointment, and through our centralized teams. More recently, to make our customers feel more comfortable in interacting with us, we've launched curbside service, which allows our customers to close loans, make cash check and electronic payments, and execute payment deferral agreements without having to enter the branch. and later this month, we plan to roll out a new program that will allow customers to close their loans remotely. We're also supporting our team members throughout the crisis, including by providing continued pay to those team members directly impacted by the virus and by expanding our paid time off policy, allowing team members the necessary flexibility to take care of their families and other personal needs during these difficult times. Our proven operating model, New Custom Credit Scorecards, experience managing through natural disasters, and support of our customers and employees contributed to solid credit performance through the end of April. Building on a stable 30-plus day delinquency position of 6.6% as of March 31st, we lowered our delinquency by 120 basis points in April, ending the month with a 30-plus day delinquency rate of 5.4%. We attribute the April delinquency reduction to our borrower assistant programs, as well as the government stimulus programs that have taken effect. While it's difficult to calculate the precise impacts attributable to these programs, we believe they are acting as an important bridge for our customers. Approximately 5.6% of the loans in our portfolio at the end of April had been renewed or deferred during the month under our borrower assistant programs. up from an average of approximately 2.2% over the prior 12 months. We've specifically tailored our borrower assistance programs to help our customers manage their debt obligations and maintain their creditworthiness during the health crisis. At the same time, in order to qualify for our borrower assistance programs, we also require that our customers remain engaged and active in repaying their loans, including, for example, by requiring at least one loan payment in the prior two months to qualify for a deferral. The credit quality of our portfolio is clearly our paramount focus during these challenging times, and we are constantly monitoring the changing economic environment. While we've continued to originate new loans, we've done so with appropriately tightened lending criteria. We proactively tightened underwriting standards to reduce our exposure to high-risk lending segments as the COVID-19 crisis developed. We are using our experience and leveraging proprietary data to serve our customers while maintaining an appropriately conservative portfolio risk management program. In terms of new lending, we experienced a clear slowdown in demand in the branches from mid-March into April as customers stayed home. However, branch originations have begun to stabilize, and we are beginning to see slight improvements off the lows in some states. As indicated in the business update that we published in late March, we paused our direct mail and digital programs in the wake of rising unemployment claims and uncertainty around the level of government stimulus. We've since begun to test back into these channels at the higher end of our credit scorecard models where we have significant room to absorb incremental losses and still deliver acceptable risk-adjusted returns. Despite efforts by states to begin to reopen their economies, We expect our finance receivables to further liquidate in the second quarter. Our financial position entering the crisis was never better. We have a strong balance sheet, we continue to operate with a conservative leverage ratio, and we have substantial capacity to absorb losses while still maintaining positive stockholders' equity. As of March 31st, our funded debt-to-equity and funded debt-to-tangible equity ratios were 3.09 and 3.21 to 1, respectively. Combining our stockholders' equity of $251.4 million and our allowance for credit losses of $142.4 million provides us with $393.8 million of capacity to absorb losses on our portfolio. This equates to 36% of our portfolio as of March 31st. In addition, our business model generates additional margin to absorb further losses. Over the past 12 months, our margin, which we define as total revenue plus general and administrative expenses and interest expense, totaled $164.4 million, or roughly 15% of our outstanding portfolio as of March 31st. This compares to a trailing 12-month NCL rate of 9.5%, providing us additional loss protection. Additionally, we proactively diversified our funding over the past few years in anticipation of a credit cycle shift and continue to maintain a strong liquidity profile. As of May 4th, we had $110 million of immediate liquidity, including $50 million of cash on hand and $60 million of immediate availability to draw down cash from our revolving credit facilities. We believe we have enough liquidity to get us through all of 2021 without needing to access the securitization market. In addition, as of quarter end, we had approximately 400 million of unused capacity on our various credit facilities, subject to the borrowing base, allowing a substantial runway to fund future growth. In sum, we believe we have more than adequate capacity to support the fundamental operations of our business throughout the COVID-19 pandemic. Turning back to the first quarter, the fundamentals of our business remain strong. both receivables and revenue increased by double digits compared to the first quarter of 2019. Net finance receivables grew by 18.4% year-over-year, while revenues grew by 17.5% from the prior year period. Credit performance remained relatively benign in the first quarter, with an annualized net credit loss rate of 10.5% compared to 10.7% in the first quarter of 2019. Our 30-plus day delinquency rate was a stable 6.6% as of March 31st, compared to 6.9% at the end of the first quarter last year. Offsetting the solid top line was $23.9 million in additional provision for credit losses related to COVID-19, as well as $1.3 million of additional unemployment insurance reserves, the latter of which is reflected in our revenues. We based our COVID-19 reserve provision on our own customized stress scenario that assumes unemployment will peak at 20% and a 34% drop in GDP from peak to trough in the second quarter, with an economic recovery beginning sometime in the second half of the year. The scenario also assumes that unemployment gradually improves, dropping to 7% by mid-2021. Our reserves also assume modest benefits from our borrower assistance programs and from the impact of the government stimulus programs. The degree of offset from the latter remains to be seen, but given the level of direct stimulus and expanded unemployment benefits, we believe most individuals who are receiving unemployment will on average earn the annualized equivalent of $35,000 per year over 39 weeks of unemployment. For many of our borrowers, we expect the expanded unemployment benefits that they will receive will be as much as or more than the wages they earned while working. We believe the stimulus is an important bridge for our clients and for regional, as a meaningful portion of our customers earn less than $35,000 a year. Given our strong balance sheet and liquidity position, as well as our enhanced infrastructure, including custom scorecards and centralized collections, We remain confident in our overall business and we believe that we are well equipped to navigate through these challenging times. Looking ahead, while we know that there will be some near-term impacts to our business and the entire U.S. economy as a result of COVID-19, we continue to believe we have a bright future. Once the pandemic has passed and we return to a semblance of normalcy, we expect to be well positioned to take advantage of the longer-term opportunities that we continue to see. mainly to further enhance our customer experience while continuing to grow our top and bottom lines. In the meantime, we are keenly focused on credit and supporting our customers through this unprecedented challenge. With that, I'll now turn the call over to Mike to provide additional color on our financials.

Thanks, Rob. And hello, everyone. I hope you and your families are all safe and healthy. I've been with Regional since 2013 and over the past few weeks I've had the opportunity to catch up with all members of our management team as well as many of our shareholders in the investment community. I look forward to working with all of you and continuing to contribute to Regional's long-term success. First quarter results were a continuation of the strong financial performance achieved over the past five years. I plan to discuss our GAAP financial results for the first quarter I also plan to present results adjusted for COVID-19 and non-operating items. I will provide color on the transition to feasible accounting and share the key underlying macroeconomic assumptions used to build the COVID-19 portion of the reserves. Lastly, I will drill down on our first quarter financial performance for loan growth, revenue, and expenses. On page seven of the supplemental presentation, we provide the first quarter financial highlights. Page eight illustrates results adjusted for COVID-19 and non-operating items. We generated a gap net loss of 6.3 million, or 56 cents per diluted share. Excluding COVID-19 reserves, executive transition costs, and the financial impact of our system outage in January, we generated adjusted net income of 12.8 million, are $1.14 per diluted share. Looking to page 10, we share a year-over-year comparison of each line item of our P&L. Clearly, the $25.2 million of additional COVID-19 reserves had the largest impact on our financial results, along with the $4.8 million of non-operating items. Excluding COVID-19, the increase in our provision for credit losses was roughly aligned with our year-over-year increase in finance receivables. Page 11 displays our net finance receivables as of March 31st. Year over year, our core loan products grew 22% or 192 million compared to the prior year period. Large loans grew 39% and represented 57% of our total loan portfolio, while small loans grew 3% and made up 40% of the portfolio. On a sequential basis, the total portfolio saw just under 3% liquidation which is typical seasonality for the first quarter. Although we had another quarter of consecutive year-over-year double-digit portfolio growth, April originations were well below prior year levels. As COVID-19 began to affect the country in March, we acted quickly to tighten underwriting and temperature for our clients and for regional as a meaningful portion of our customers earn less than $35,000 a year.

Given our strong balance sheet and liquidity position, as well as our enhanced infrastructure, including custom scorecards and centralized collections, we remain confident in our overall business and we believe that we are well equipped to navigate through these challenging times. Looking ahead, while we know that there will be some near-term impacts to our business and the entire U.S. economy as a result of COVID-19, we continue to believe we have a bright future. Once the pandemic has passed and we return to a semblance of normalcy, we expect to be well-positioned to take advantage of the longer-term opportunities that we continue to see, namely to further enhance our customer experience while continuing to grow our top and bottom lines. In the meantime, we are keenly focused on credit and supporting our customers through this unprecedented challenge. With that, I'll now turn the call over to Mike to provide additional color on our financials.

Thanks, Rob, and hello, everyone. I hope you and your families are all safe and healthy. I've been with Regional since 2013, and over the past few weeks, I've had the opportunity to catch up with all members of our management team, as well as many of our shareholders in the investment community. I look forward to working with all of you and continuing to contribute to Regional's long-term success. First quarter results were a continuation of the strong financial performance achieved over the past five years. I plan to discuss our GAAP financial results for the first quarter relative to the prior year. I also plan to present results adjusted for COVID-19 and non-operating items. I will provide color on the transition to feasible accounting and share the key underlying macroeconomic assumptions used to build the COVID-19 portion of the reserves. Lastly, I will drill down on our first quarter financial performance for loan growth, revenue, and expenses. On page seven of the supplemental presentation, we provide the first quarter financial highlights. Page eight illustrates results adjusted for COVID-19 and non-operating items. We generated a GAAP net loss of 6.3 million for 56 cents per diluted share. Excluding COVID-19 reserves, executive transition costs, and the financial impact of our system outage in January, We generated adjusted net income of $12.8 million, or $1.14 per diluted share. Closing to page 10, we share a year-over-year comparison of each line item of our P&L. Clearly, the $25.2 million of additional COVID-19 reserves had the largest impact on our financial results, along with the $4.8 million of non-operating items. Excluding COVID-19, the increase in our provision for credit losses was roughly aligned with our year-over-year increase in finance receivables. Page 11 displays our net finance receivables as of March 31st. Year-over-year, our core loan products grew 22% or $192 million compared to the prior year period. Large loans grew 39% and represented 57% of our total loan portfolio, while small loans grew 3% and made up 40% of the portfolio. On a sequential basis, the total portfolio saw just under 3% liquidation, which is typical seasonality for the first quarter. Although we had another quarter of consecutive year-over-year double-digit portfolio growth, April originations were well below prior year levels. As COVID-19 began to affect the country in March, we acted quickly to tighten underwriting and temporarily pause direct mail and digital originations.

These prudent actions

coupled with lower loan demand will lead to further portfolio liquidation and unemployment increasing to 20% in the second quarter of 2020 with a decline to 7% by mid-2021. The macroeconomic scenario was then adjusted for the potential benefit of the federal stimulus and internal borrower assistance programs. Flipping to page 16, G&A expenses of 46.2 million in the first quarter of 2020 were 8.1 million higher than in the prior year period, which was in line with our expectations. The first quarter of 2020 included 3.8 million of executive transition and system outage costs, along with increased expenses to support 2019 account growth and de novo expansion. Even with our ongoing investments in digital capabilities, de novo expansion, and the corresponding account growth, we continue to perform well in managing our expenses as evidenced by the improvements in our operating expense and efficiency ratios. As we anticipated additional portfolio liquidation in the second quarter, we proactively and prudently reduced branch and home office costs and indexed our expense base for portfolio changes during the economic disruption. Including those cuts, we expect G&A expenses in the second quarter to be about $5.5 to $6 million higher year over year. most of the increase is related to lower loan origination cost deferrals and higher expenses from 2019 account growth and de novo expansion. We expect that our second quarter operating expense ratio will increase by approximately 50 basis points compared to the prior year period. Turning to page 17. Interest expense of 10.2 million was 400,000 higher in the first quarter of 2020 than in the prior year period primarily reflecting higher average levels of outstanding debt used to finance the strong growth in receivables offset by a lower cost of funds. Our first quarter interest expense as a percentage of average net finance receivable was 3.6%, a 50 basis point improvement from the prior year period, primarily due to reductions in the Fed funds rate. We are forecasting interest expense as a percentage of average finance receivables to be flat sequentially and expect interest expense to approximate 9.6 million in the second quarter. Page 18 is a reminder of our strong funding profile. The $130 million securitization that we completed in October 2019 added borrowing capacity and fixed rate funding at a weighted average coupon rate of 3.17%, our best execution to date. We are forecasting sufficient liquidity to get us through all of 2021 without needing to access the securitization market. As of March 31st, we had approximately 400 million of unused capacity on our various credit facilities to fund future growth. Our first quarter funded debt to equity ratio was 3.09 to one. And as of May 4th, we held 110 million of immediate liquidity, including 50 million of cash on hand and 60 million of immediate availability to draw down cash from our revolving credit facility. That concludes my remarks. I'll now turn the call back over to Rob to wrap up.

Thanks, Mike. We are grateful for all of our team members' incredible efforts as we managed through this unprecedented period. Now more than ever, Regional is playing an indispensable role for our customers to help guide them economically through this pandemic. And as the nation begins to reopen in the weeks ahead, we will continue to be there for our customers and our communities.

We believe that the enhancements made to our balance sheet and our infrastructure over the last few years have made us more resilient and unemployment increasing to 20% in the second quarter of 2020 with a decline to 7% by mid-2021. The macroeconomic scenario was then adjusted for the potential benefits of the federal stimulus and internal borrower assistance programs. Flipping to page 16. G&A expenses of 46.2 million in the first quarter of 2020 were 8.1 million higher than in the prior year period, which was in line with our expectations. The first quarter of 2020 included 3.8 million of executive transition and system outage costs, along with increased expenses to support 2019 account growth and de novo expansion. Even with our ongoing investments in digital capabilities, de novo expansion, and the corresponding account growth, We continue to perform well in managing our expenses as evidenced by the improvements in our operating expense and efficiency ratios. As we anticipated additional portfolio liquidation in the second quarter, we proactively and prudently reduced branch and home office costs and indexed our expense base for portfolio changes during the economic disruption. Including those cuts, we expect G&A expenses in the second quarter to be about $5.5 and more. We expect that our second quarter operating expense ratio will increase by approximately 50 basis points compared to the prior year period. Turning to page 17, interest expense of $10.2 million was $400,000 higher in the first quarter of 2020 and in the prior year period, primarily reflecting higher average levels of outstanding debt used to finance the strong growth in receivables offset by a lower cost of funds. Our first quarter interest expense as a percentage of average net finance receivable was 3.6%, a 50 basis point improvement from the prior year period, primarily due to reductions in the Fed funds rate. We are forecasting interest expense as a percentage of average finance receivables to be flat sequentially and expect interest expense to approximate $9.6 million in the second quarter. Page 18 is a reminder of our strong funding profile. The $130 million securitization that we completed in October 2019 added borrowing capacity and fixed rate funding at a weighted average coupon rate of 3.17%, our best execution to date. We are forecasting sufficient liquidity to get us through all of 2021 without needing to access the securitization market. As of March 31st, we had approximately 400 million of unused capacity on our various credit facilities to fund future growth. Our first quarter funded debt to equity ratio was 3.09 to one. And as of May 4th, we held 110 million of immediate liquidity, including 50 million of cash on hand and 60 million of immediate availability to draw down cash from our revolving credit facility. That concludes my remarks. I'll now turn the call back over to Rob to wrap up.

Thanks, Mike. We are grateful for all of our team members' incredible efforts as we managed through this unprecedented period. Now more than ever, Regional is playing an indispensable role for our customers to help guide them economically through this pandemic. And as the nation begins to reopen in the weeks ahead, We will continue to be there for our customers and our community.

It was in large part driven by both federal stimulus kicking in as well as some of your assistance programs. Just want to make sure I'm clear. In terms of the way the 30 plus state delinquency rate is presented, in your eyes, should we be viewing this as a 120 basis point monthly reduction sequentially. That's sort of normalized or is part of it just the fact that once some deferrals kick in programs, there's a fair number of people that aren't in the early stage bucket that normally would have been?

Well, the 30 plus will be across all buckets. So if you look at our deferral program, which As you can see from the percentages, the amount of customers that are taking advantage of the various borrower assistance programs, including deferrals, is at 5.6% up from 2.2% on average last year. So those deferral programs, some portion are in the pre-delinquency bucket, but the majority are in the 30-plus delinquency bucket. So that would bring customers back to current if they took advantage of those deferral programs. Similarly, the government stimulus, and it's hard to be very scientific as to what has driven the drop in delinquencies, because as we ask for or accepted deferral. To keep the customer engaged, they have to make at least one payment at two months. Now, their ability to make that payment could be driven in part by the government stimulus, and that's the kind of science that's a little hard to break apart as to where we are in terms of how much we do to government stimulus versus how much to the deferral program. But as of a point in time at the end of the month, our 30-plus delinquency bucket stood at the 5.4%.

Just one last quick question. In terms of loan modifications, if there are any, are there any permanent changes to the effective rates on any of the loans as part of the borrower assistance? Should that impact you?

We do some loan modifications. We did more deferrals than loan modifications and and others. Thank you, David.

rate modifications and term extensions to help the customers through certain time periods. If the customer is revitalized over time and they renew the loan, they will go back into traditional market-based loan terms, but we do carry a certain portion of the portfolio in all cases that have term extensions and rate modifications at the More of the stressed end of our modification programs.

Got it.

Yeah, David, I would just add to this. You know, these programs are well-oiled and time-tested here at Regional. We obviously deploy them, particularly during times of natural disasters and hurricanes. And they're proven to not only bridge the customer through difficult times, but also to reduce losses for Regional.

Understood. Thank you very much. It was in large part driven by both federal stimulus kicking in as well as some of your assistance programs. I just want to make sure I'm clear. In terms of the way the 30 plus state delinquency rate is presented, in your eyes, should we be viewing this as a 120 basis point monthly reduction sequentially. That's sort of normalized or is part of it just the fact that once some deferrals kick in programs, there's a fair number of people that aren't in the early stage bucket that normally would have been?

Well, the 30 plus will be across all buckets. So if you look at our deferral program, which As you can see from the percentages, the amount of customers that are taking advantage of the various borrower assistance programs, including deferrals, is at 5.6% up from 2.2% on average last year. So those deferral programs, some portion are in the pre-delinquency bucket, but the majority are in the 30-plus delinquency bucket. So that would bring customers back to current if they took advantage of those deferral programs. Similarly, the government stimulus, and it's hard to be very scientific as to what has driven the drop in delinquencies, because as we ask for or accepted deferral. To keep the customer engaged, they have to make at least one payment at two months. Now, their ability to make that payment could be driven in part by the government stimulus, and that's the kind of science that's a little hard to break apart as to where we are in terms of how much we do to government stimulus versus how much to the deferral program. But as of a point in time at the end of the month, our 30-plus delinquency bucket stood at the 5.4%.

just one last quick question in terms of loan modifications if there are any are there any permanent changes to the effective rates on any of the loans as part of the borrower assistance and should that impact you?

Yeah, so we do some loan modifications we did more deferrals than loan modifications and the month of April. Mike may have more clarity on the specifics, but in general, when we lower the interest rate or extend the terms, it's to reduce the payment for the customer. Mike, do you want to add anything?

Sure. Thanks for the question, David. We have multiple borrower assistance programs, and delinquent renewals are one of those programs. And in many cases, in more hardship circumstances, those delinquent renewals do come with and many more. We do carry rate modifications and term extensions to help the customers through certain time periods. If the customer is revitalized over time and they renew the loan, they will go back into traditional market-based loan terms, but we do carry a certain portion of the portfolio in all cases that have term extensions and rate modifications

more of the stress down our customer portal to let them know what customer assistance programs are available to them. So, you know, that real life contact with them, particularly when we get them on the phone, we assess what their needs are and, you know, what program may best fit their needs. You know, we're able to do the deferrals over the phone so they don't have to come into the branches. and as indicated earlier in our call is we're starting to do remote loan closings for borrowers that want to renew. So we've got the tools in place to meet those needs of the customers through these programs.

Thank you guys very much for answering my questions. Thanks. Our next question comes from John Rowan with Jenny Montgomery Scott. Please go ahead.

Good afternoon, guys. Just two questions. In the absence of loan originations, how fast does your loan portfolio amortize down?

Yeah, that's not something we've ever disclosed in terms of the duration of our assets. You know, the tenor of the loans when we put them on at origination For small loans, average 21 months, and for large loans, 44 months is the average at that origination.

Okay, so it's safe to assume that the effective duration is well over a year then for the portfolio?

Yeah, I mean, that sounds about right.

Okay. Okay. I appreciate the information you guys gave about your unemployment assumptions. It does seem as if your assumptions are more aggressive than some of your peers who have come out and basically said that they were using a 9% assumption because that's what Moody's was forecasting at the time they closed their books. Can you give us an idea of when you made that assumption, how has that projection changed? Because it does seem like you guys have included Frankly, more of this pandemic into the reserve here in 2Q than what we've seen from some of your peers. That's all from me. Thank you.

I don't want to speculate as to what decisions others made. Clearly, large banks were similar in that range. The way we've looked at it is over the last six weeks, there's been 30 million of unemployment claims filed. And if you just look at the trajectory of that, you're already heading towards the high teens on an unemployment rate. And from a credibility standpoint, given that we're announcing earnings at six weeks after that level of filings, I just don't think it would be prudent of us to not reflect a reserve that is indicative of that level of unemployment, at least at a near-term peak.

Okay, thank you.

Our next question comes from Guiliano Bolona with BTIG Research. Please go ahead.

Good afternoon and thank you for taking my questions. Starting out on the commentary that you made around the unemployment benefits being at about $39,000 versus your portfolio income rates being closer to $35,000, Do you know, are you looking at that on your state exposure or on a nationwide basis?

Yeah, so on that one, the number that we've been referring to, 35,000 annualized, is the average unemployment benefit at the state level plus the special $600 kicker for the first 16 weeks at the federal level plus the $1,200 stimulus check if you're an individual. Now, obviously, if you're A married couple or a family of four, that stimulus check goes up, but we didn't factor that in. When you analyze that number, I think it's 29,000 on our customer portal, to let them know what customer assistance programs are available to them. So, you know, that real-life contact with them, particularly when we get them on the phone, we assess what their needs are and, you know, what program may best fit their needs. You know, we're able to do the deferrals over the phone so they don't have to come into the branches. And as indicated, you know, earlier in our call is we're starting to do remote loan closings for borrowers that want to renew. So, you know, we've got the tools in place to meet those needs of the customers through these programs.

Thank you guys very much for answering my questions.

Thanks. Our next question comes from John Rowan with Jenny Montgomery Scott. Please go ahead.

Good afternoon, guys. Just two questions. In the absence of loan originations, how fast does your loan portfolio amortize down?

Yeah, that's not something we've ever disclosed in terms of the duration of our assets. You know, the tenor of the loans, when we put them on at origination for small loans, average 21 months, and for large loans, 44 months is the average at origination.

Okay, so it's safe to assume that the effective duration is well over a year then for the portfolio.

Yeah, I mean, that's Sounds about right.

Okay. I appreciate the information you guys gave about your unemployment assumptions. It does seem as if your assumptions are more aggressive than some of your peers who have come out and basically said that they were using a 9% assumption because that's what Moody's was forecasting at the time they closed their books. Can you give us an idea of when you made that assumption, how has that projection changed? Because it does seem like you guys have included Frankly, more of this pandemic into the reserve here in 2Q than what we've seen from some of your peers. That's all from me. Thank you.

I don't want to speculate as to what decisions others made. Clearly, large banks were similar in that range. The way we've looked at it is over the last six weeks, there's been 30 million of unemployment claims filed. And if you just look at the trajectory of that, you're already heading towards the high teens on an unemployment rate. And from a credibility standpoint, given that we're announcing earnings at six weeks after that level of filings, I just don't think it would be prudent of us to not reflect a reserve that is indicative of that level of unemployment, at least at a near-term peak.

Okay, thank you.

Our next question comes from Guiliano Bologna with BTIG Research. Please go ahead.

Good afternoon and thank you for taking my questions. Starting out on the commentary that you made around the unemployment benefits being at about $39,000 versus your portfolio income rates being closer to $35,000, Do you know, are you looking at that on your state exposure or on a nationwide basis?

Yeah, so on that one, the number that we've been referring to, 35,000 annualized, is the average unemployment benefit at the state level plus the special $600 kicker for the first 16 weeks at the federal level plus the $1,200 stimulus check if you're an individual side. The tightening started in the month of April, so you may not see the full impact of the tightening at this point in time.

That's helpful. And then I'd like you to pontificate, if you would, on your one-day overdues. They're down as of the end of March. And the question is, do you think that there's anything to do with customers simply being unemployed and home and therefore more attentive to their bills and less distracted and actually paying on time for that reason. And if it's something different, why do you think your one day and over past dues fell?

Look, I think it can be a couple things, right? There were some deferrals in the one to 29-day bucket. I think it can be, you know, as I said earlier, the government stimulus. You can have people that now are more flush with cash and pay down and didn't, you know, slip. and more, like they might have done historically. There's probably lots of factors going into that that we're still analyzing. Great. Thanks for taking the questions. Great. Thanks, Bill.

This concludes the question and answer session. I would like to turn the conference back over to Rob Beck for any closing remarks.

Thanks, Operator, and thanks everyone for joining. As I said earlier, retail has never been in a stronger position entering into this crisis with our strong balance sheet and strong liquidity profile. We do see plenty of opportunities post the crisis. We are focused on all the things we've talked about, our customer collections, credit quality, managing our costs, and ultimately preserving capital. But we are investing in digital and looking to position ourselves for the post-crisis when the economy rebounds. So I appreciate your questions and look forward to talking further again.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.