Regional Management Corp.

Greetings. Welcome to the Regional Management Second Quarter 2026 Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Garrett Edson from Investor Relations. Thank you. You may begin.

Thank you and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at regionalmanagement.com. Before we begin our formal remarks, I will direct you to page two of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures. Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates, and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and 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 you should not place undue reliance upon them. We refer all of you to our press release presentation and recent findings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition. Also, our discussion today may include references to certain non-GAAP measures. Reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com. I would now like to introduce Lakhbir Lamba, President and CEO of Regional Management Corp.

Thanks, Garrett, and good afternoon, everyone. Joining me on the call today is Harpreet Rana, our Chief Financial and Administrative Officer. I'll begin with a summary of our second quarter results and an update on our strategic priorities, and then Harpreet will walk through the financial details. In the second quarter, our franchise continued to perform well. We generated strong revenue, grew our higher-quality auto-secured portfolio, improved our operating efficiency, and continue to return capital to shareholders. For the quarter, we generated net income of $8.2 million or 85 cents of diluted earnings per share. On a year-to-date basis, net income and diluted EPS are up 14% and 17% respectively compared to the first half of last year. We delivered total revenue in the second quarter of $168 million, up 7% year-over-year, driven by continued portfolio growth. We also maintain strong operating leverage, improving our operating expense ratio by 80 basis points year over year to 12.4%, while continuing to invest in the business. As we continue to grow our auto-secured product portfolio, which increased 32% year over year, now representing 15% of our total portfolio, and carries a 30 plus day delinquency rate of just 2%. At the same time, we operated in a more competitive environment for customer acquisition and we made deliberate decisions to tighten underwriting in certain higher risk segments that did not meet our risk adjusted return hurdles. Portfolio growth came in below our outlook for the quarter and our net credit loss rate was modestly above our forecast. driven in part by the lighter portfolio growth. As I'll describe, we are acting decisively to improve both our growth trajectory and credit performance. In particular, we've identified and selectively tightened credit in certain geographic and channel-specific segments and we've significantly strengthened our fraud detection and prevention capabilities principally in our direct mail and digital affiliate channels. The early results from these enhanced controls are very promising, and we expect them to support improving credit performance. Consistent with what we discussed on prior calls, we remain committed to our long-term goal of a net credit loss rate below 10%. We are cautiously optimistic about the health of the consumer. We continue to monitor the potential impact of Higher Inflation, including continued elevated gas prices, and we remain disciplined and conservative in our underwriting as we navigate the current macro environment. We are also making meaningful progress across our strategic priorities as we invest to compete and win. First and foremost, we continue to expand our bank partnership program with Column. This program is an important enabler of our long-term strategy, providing greater product and operational uniformity across states, faster entry into new markets, expanded relationships with our customers, a wider addressable market, and attractive unit economics as this program scales. We've accelerated implementation of the program ahead of our internal plan. We've now fully implemented the program for branch originations in Texas, our largest market, and we expect to expand to additional states beginning later this year. We are encouraged by the early results, including origination trends, yield impact, and credit performance. Originations exceed $65 million under the program since its launch, on a run rate basis, originations under the program now represent roughly 28% of total originations. And we expect that ratio to increase materially as we transition additional products and states to the program later this year and next year. We are projecting that pre-tax margin will improve by at least 200 basis points under the program compared to like-for-like loans originated in our state licensed operations. This list and margin reflects an improvement in total revenue yield driven by marketing and servicing fees that are paid to us by the bank and higher interest and fee income earned on originated loans. Offset in part by program costs paid to the bank and a decline in insurance revenue from the elimination of personal property and non-file insurance. Early credit performance is also promising. As of the end of the second quarter, the one plus day delinquency rate on the portfolio of bank partnership loans that we originated in March and April was 160 basis points better than the comparable portfolio of state licensed loans originated in Texas over the same time period. We will continue to scale the partnership methodically as we evaluate results and refine the strategy. We expect nearly all states in our network to be operating under the bank partnership model by the end of 2027. We believe this will be transformative to the operations and returns of our business and a key enabler for net income growth in 2027 and beyond. Second, and building directly on that foundation, in early July, we launched an end-to-end digital lending origination capability. This is a distinct step beyond our historical digitally sourced model in which we generate leads that are underwritten and closed in our branches. With this new capability, customers can complete the entire process online from application through funding in minutes. This technology positions us to compete more effectively with fintechs and lean further into our omnichannel operating model. To be clear, our branch network remains at the core of our operations and our relationships with customers, and the digital channel complements it. Given the importance of credit performance in this channel, we're building it on strong fraud authentication and machine learning-based underwriting, and we will be deliberate and methodical in scaling it, expanding only as we confirm that it clears our risk-adjusted return huddles. Third, we are accelerating the rollout of our new branch loan origination platform and alongside it we're introducing an enhanced machine learning based origination credit model. This is a continuation of the technology and analytics investments we would discuss previously and moving them forward more quickly strengthens both our operating efficiency and credit decision. Both we've made significant progress in enabling artificial intelligence across our operations, including in collections and customer service, which we expect to enhance both the customer experience and our operational effectiveness and efficiency. Finally, we continue to invest in growth. We are diversifying origination channels and our marketing capabilities to strengthen customer acquisition, and we are expanding into attractive new markets. In the second quarter, we entered the state of Florida, our 20th state, which represents a meaningful long-term growth opportunity. Turning to our outlook, we are revising our full year guidance. We now expect full year diluted earnings per share growth of 10% to 13% and portfolio growth of 5% to 7%. AARP will provide additional detail on the quarterly cadence but we continue to expect sequentially stronger quarterly earnings in the third and fourth quarters. This reset on near-term guidance reflects a deliberate choice. We'd rather build from an even stronger foundation and grow profitably than pursue growth that doesn't earn an appropriate return. The actions we are taking across credit, technology, distribution, and our bank partnership, while putting modest pressure on second half results, position us to reaccelerate profitable growth, improve our returns as we exit 2026, and deliver very strong results in 2027 and beyond for our shareholders. I am confident we are building from a position of strength and making the right decisions for the long-term health of the business. With that, I will turn the call over to her.

Thank you, Lakhbir, and good afternoon, everyone. I'll now take you through our second quarter results in more detail. On page four, we present our second quarter financial highlights. Net income was 8.2 million, and diluted earnings per share were 85 cents. Our results reflect continued year-over-year portfolio and revenue growth and strong operating leverage offset by a higher provision for credit losses tied to portfolio growth and a net credit loss rate that was modestly above our forecast. Year-to-date through June, net income was up 2.4 million, or 14%, compared to the prior year period, and return on equity was up 80 basis points year-over-year. As Lakhbir discussed, we've updated our full-year outlook, and I'll cover the details when we get to page 14. Moving to pages 5 and 6, total originations were $504 million, down 1.3% year-over-year. Large loan originations grew more than 10%, while small loan volumes declined as we tightened underwriting in higher-risk business and navigated a more competitive environment for new customer acquisition. Ending net finance receivables were $2.1 billion, up 9.6% year-over-year, driven by our large loan and auto-secured products and by the branches we've opened over the past year. Net finance receivables per branch increased to approximately $6 million, up 8% year-over-year. On a sequential basis, receivables grew $44 million as we returned to growth following the normal first quarter tax season liquidation, while remaining deliberate in our originations given the competitive backdrop and elevated gas prices. Looking ahead, we expect third quarter portfolio growth to be stronger than the second quarter, in line with seasonally higher demand in the second half of the year. On page 7, total revenue for the second quarter was $168 million, an increase of 6.7% year-over-year, driven by higher average net finance receivables. Our total revenue yield was 31.8%, down 110 basis points year-over-year, primarily reflecting the continued mix shift toward larger, lower-yielding loans. Total revenue yield was up 30 basis points sequentially, consistent with seasonality and the impact of our bank partnership, offset in part by lower insurance revenue yield. As we move into the third quarter, we expect total revenue yield to be higher on a sequential basis due to seasonal trends and the benefits of our bank partnership. Turning to page eight, our 30 plus day delinquency rate was 7%, a 20 basis point improvement sequentially and a 40 basis point increase year over year. Our net credit loss rate was 12.2%, up 30 basis points year-over-year and modestly above our forecast. After adjusting for approximately 20 basis points of impact from slower portfolio growth, our net credit loss rate was in line with our expectations. Looking ahead to the third quarter, we expect delinquencies to rise on a seasonal basis while net credit losses improve. We continue to monitor macroeconomic conditions closely, including the impact of inflation and elevated gas prices on our customers. On page 9, we increased our allowance for credit losses by $4.5 million during the quarter to support portfolio growth. Our allowance rate was 10.4%, steady sequentially and up 10 basis points from the prior year period, reflecting updates from macroeconomic assumptions. Subject to economic and credit conditions, we expect our allowance rate to hold roughly flat on a sequential basis in the third quarter. Flipping to page 10, our annualized operating expense ratio was 12.4%, an improvement of 80 basis points year over year, even as we continue to invest in technology, digital capabilities, and growth. Total general and administrative expenses increased $2.5 million year over year and the modest sequential uptick in our annualized operating expense ratio from 12.2% in the first quarter was consistent with our expectations. For the third quarter, we expect our operating expense ratio to increase sequentially. Under our state-licensed operations, we're able to defer certain labor and digital marketing expenses, which are recognized over the life of the state-licensed loans that we originate. For loans originated under the bank partnership model, will instead recognize those labor and digital marketing expenses immediately at origination. While this change in accounting treatment will accelerate the timing of G&A expense recognition, the revenue benefits of the bank partnership program will far outweigh the impact on our operating expenses. Turning to pages 11 and 12, interest expense was $23 million in the second quarter, or 4.4% of average net finance receivables on an annualized basis, with our cost of funds up 20 basis points year over year. We continue to maintain a strong balance sheet with $442 million of unused capacity, available liquidity of $128 million, diversified and staggered funding sources, and a fixed rate debt representing 80% of total debt at a weighted average coupon of 4.8%. We expect our funding costs to tick up to 4.5% in the third quarter due to the maturation of lower cost fixed rate funding. On page 13, we continue to generate capital and deploy it in a disciplined manner. During the second quarter, we repurchased approximately 136,000 shares of our common stock at a weighted average price of $36.68 per share, and our board declared a $0.30 per share dividend for the third quarter. On a year-to-date basis, we generated approximately $27 million of capital and returned approximately $18 million to shareholders through dividends and share repurchases. Finally, on page 14, let me provide you some additional detail on how we expect the balance of the year to progress. As Lakhbir described, we now expect full-year diluted earnings per share growth in the range of 10% to 13% and portfolio growth in the range of 5% to 7%. For net income, we anticipate full-year growth of 6% to 9%. Within that outlook, we expect net income in the third and fourth quarters to be meaningfully higher than in second quarter and for fourth quarter net income to be sequentially higher than third quarter net income. The primary driver is the expected growth in receivables as we exit the second quarter, which will support higher revenues across the back half of the year. Provision for credit losses will increase as we reserve for that growth at levels comparable to the second quarter, allowing revenue growth to translate into stronger earnings. From a credit standpoint, we expect net credit losses to improve in the third and fourth quarters, and we expect the benefits of our strategic initiatives, including our bank partnership, to build as we move through the second half. That concludes my remarks. I'll now turn the call back over to Lakhbir.

Thank you, Harpreet. Before we open the call for questions, I want to leave you with a few thoughts. The second quarter did not meet our growth expectations, and we've adjusted our full year outlook accordingly. We are choosing to prioritize a stronger operating foundation, one that we believe will support more sustainable growth, stronger returns, and greater value creation for shareholders. At the same time, we are moving with purpose and agility on the initiatives that will drive our next phase of growth, advancing our bank partnership, leaning into our omnichannel operating model, accelerating our investments in technology and analytics, Deploying AI across our operations and expanding into attractive new markets. I am confident that the disciplined decisions we are making today will position us to increase returns in this business and reaccelerate profitable growth, with tangible progress on both fronts becoming increasingly evident over the next 12 months. Later this year, we plan to share a longer-term framework that will outline how our bank partnership will be transformative to the returns of our business and will begin to show up in our 2027 results in a material way. I want to thank our team across the company for their continued dedication to our clients and their hard work this quarter. We are building from a strong foundation and I'm confident in our strategy, our people, and our ability to create long-term value for our shareholders. With that,

Operator, please open the line for questions.

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment while we pull for questions. Our first question is from Vincent Cantik with BTIG. Please proceed with your question.

Hey, good afternoon. Thanks for taking my questions. First question, you talk a lot about the The low growth trends and what kind of drove the miss for the second quarter and kind of the lower guide for the rest of the year. But I was wondering if you could maybe separate out some of the different drivers or factors that have been causing this. So you did talk about, so if you can maybe separate out like how much of this was macro driven, consumer driven and are you still seeing those kind of trends in July or have they maybe eased on that? How much of it was, you know, competitive pressures and what are you seeing there and has that maybe eased or alternatively accelerated? And then I don't think that column bank would yet have any impact but there's, you know, you have several initiatives and so I'm wondering how maybe some of the initiatives maybe causes could cause some pickups in the near term or, you know, as things kind of ramp up and getting systems in place and so forth. So maybe if you could separate all of those and talk about also kind of where it stands today at the end of July.

Thank you. Vincent, good afternoon. Lakhbir, I'll take it. I think the factors, I think one, I mentioned the response rate. and our direct mail campaigns we do were lower than expectation, creating an impact straight to origination numbers. When it comes to competitive pressures, if you just look at industry data, the share of originations that are driven by fintechs has been going up in the personal lending business. So we believe some of that is creating the pressure in our business. There is a segment of consumer that wants to originate the asset digitally end-to-end and not come to the launch. So we are tracking the response rates. That's number one. Number two, as I mentioned in the last quarter, I've been seeing various segments of the business by geography, by channel, by product, by risk segment. really looking through year over year and over time where the margins have been compressing, where the returns are not meeting our expectations. If you look at the appendix, there's a page on the earnings presentation, the digital affiliate channel, the business we originate through digital affiliates, the growth rate has slowed down there. Partly it's driven by some of the segments we looked at and we wanted to make sure the returns were there. In parallel, we, as I mentioned, enhanced fraud controls. We've implemented pretty strong sort of prevention detection capability in the last four months. And so we wanted to make sure we, you know, we're getting the returns before we unwind some of those tightening actions back up. So that's number two, describing the portfolio growth production. I think the third thing you mentioned The initiatives we are doing or columns, they are not really creating the hiccups. You know, there's obviously when you're launching a new loan origination system and or a bank partnership in the launches, there's some change management we have to go through, but that's not really, you know, to our knowledge, creating the hiccups, if you will. I would say in summary, it's really two things. One is the deliberate actions we took to make sure we were making money in each of the cells as we grow them, and then two for the response rates in our direct man campaigns. When it comes to July, maybe answer that question.

Yeah, so in terms of July, Vincent, we're tracking to the guidance that we have given for both third and fourth quarter. You mentioned in terms of, right, like we've lowered our guidance on E&R growth. and that is very much as a result of the competitive pressures that we are seeing in new borrower acquisition. However, I want to frame all of this for you in terms of, you know, many of the strategic initiatives that Lakhbir spoke about. So, in terms of digital, you know, end-to-end origination. So, we are seeing competitive pressure from the FinTech, but we are positioning ourselves to be able to compete in that channel. Now in that channel, right, you do tend to have some bad actors and the fraud tools and the fraud controls that Lakhbir talked about that we implemented will not only help us in that channel, but also in our, you know, mail channel, in our branch origination channel. So we're actually, you know, quite pleased with the early results that we see there. Now, the good news on that is once you're able to eliminate the bad actors, what you're able to now do is take a look at your policy and you're able to open that up for customers who actually want to be paying customers and take loans. So we're actually very, very excited about both the digital end-to-end origination, the fraud tools that will permit us to actually compete with the fintech and so, you know, that may take us, you know, just a little bit of time in order to get all of that right. So, as a result of that, we've lowered our guidance for the year, but we're working on all of these strategic initiatives and we do believe that they will help us compete and, you know, our acquisitions will get, you know, back to sort of, you know, where we had guided to at the beginning of the year.

Okay, great. That's helpful. Thank you. and then kind of following up all these initiatives like column and some of the other things in terms of generating origination volume. I guess how much of that is contributing to third quarter and fourth quarter in our guide versus how much more is really coming, you know, in 2027 or beyond? I'm assuming it takes some time, but I'm just curious how much lift you're getting so far for the rest of the year. Thank you.

Yeah, so if you look at page 14 of the supplement, the earnings driver's slide that we provide for quarterly earnings, we do have strategic initiatives. So all of our initiatives are embedded in that line. That list is expected to be, you know, so it's included in our guidance, but it's 2.5 that, you know, those initiatives are contributing to the overall guidance of 6% to 9% year-over-year net income growth that we gave. and the 5% to 7% E&R growth and then the 10% to 13% EPS growth. So it's embedded in those numbers. And then we expect that to be about $5 million in fourth quarter of 26. So in the growth guidance that we gave you of $60 million per quarter, it is already embedded in that number.

Okay, good. And it seems like...

27 and beyond Vincent, Lakhbir mentioned in his prepared remarks that we actually were able to accelerate the bank partnership program in branch originations in Texas. We're probably going to do one or two more states before the end of the year and we do expect to fully convert all of our states and branches through 2027. So you will see a meaningful lift from that. Right now, we estimate that lift between bank partnership and, you know, under the state license. We're, you know, estimating that lift to be about 200 basis points in pre-tax margin just from the difference on, you know, the same loan. So, for on like-to-like loans, we're expecting a list of 200 basis points on the unit economics of each loan.

Okay, great. That's super helpful. Thank you.

Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our next question is from Zach Oster with Citizen Capital Markets. Please proceed with your question.

Hi, good afternoon. Thanks for taking our questions. I wanted to dig in a little bit more on the macro side of stuff and see if the change in the competitive dynamics were really kind of the driver of the tightening in the different segments that were mentioned or if that was more just, you know, kind of macro trends or if there's any kind of weakness going on for customer health, more if it's really just, again, from that competitive side. It stands a little bit in contrast to kind of a more benign competitive environment that other lenders have been speaking about this earnings season, so I wanted to see if we can get a little bit more color in that. Thank you.

Good afternoon. When it comes to, you know, the segments we tightened, you know, I won't sort of correlate that to for your kind of macro driven. I think the competitor environment simply is like personal loan originations in the U.S. are growing, a big part of them. You know, the share of fintechs is growing within that. When you look at sort of various geographic segments we are playing in or segments, and, you know, I looked at the margins and losses over time. In certain cells, when we looked at first payment defaults, et cetera, our hypothesis was, you know, there is, I would say some synthetic fraud or first party abuse or credit builder trade lines, et cetera, embedded in those segments and hence our focus right away on enhancing fraud prevention detection controls, which we did. And so, and that's all at this point almost implemented. And so, so I would say less macro driven in terms of, and the impact on the consumer of gas prices and inflation. We did look at bands of customers by debt to income ratio or we call it free income, how much free cash flow the consumers have. And customers who have low free income or free cash flow, we do see some on the edges impact of elevated gas prices. It's kind of natural. but that's not the biggest issue we see in terms of where we tighten the fuel. But we are monitoring that, as I said, cautiously now that gas prices are back up to some elevated 85 bucks or what have you level in terms of crude oil prices.

Got it. That's helpful coverage.

Yeah.

Sorry, go ahead.

No, no. I just can't answer the question.

Yeah, no, that was a very helpful color. Yeah, I just wanted to also kind of follow up on that and see if there's more color specifically on each segment in terms of small loans or large loans. It looks like the small loan growth came in kind of lower expectations and large loans was more in line. So that's kind of a read-through to competitive trends at different APRs.

So, Zach, how I would think about that is, you know, large loans, you know, did grow for us year over year. That's driven by auto security. which has been doing fairly well for us. How I would think about what's happening on small loans is really new borrower acquisition. So when you have competition in new borrower acquisition and particularly in our new borrower acquisition channels, that tends to impact small loans more. So that's really what you're seeing there is just the impact on small loans of that environment. Now, you know, a couple of things that I will add is, you know, there is volume to be done should you want to do volume. We want to do responsible volume. And so we've been very disciplined about making sure that the loans that, you know, we're putting on the book meet our return hurdle. So that's how I would think about that. You know, it does not mean that, you know, we will not do small loans. We will do small loans, and particularly when, we get some of these initiatives that we talked about fully off the ground. So we will continue to do small loans. It's just that's where we're seeing new borrower acquisition competition.

Got it. Understood. Thank you. Our next question is from Alexander.

Villa Lobos with Jeffries. Please proceed with your question.

Thanks for taking my question here instead of John Heck. But on the funding side, you mentioned that the cost of funding was ticking up just a slight bit, up to 4.5%. But just a little bit curious if you could give us like just like a quick overview of kind of like where the Thank you. Yeah, so hi, Alex. So as you know, we have a diversified set of lenders.

and we've done a fairly reasonable job of keeping our cost of debt and our cost of funds low through the cycle. You know, we are a programmatic issuer of securitization. So, one of the things that you are seeing is you are seeing debt that we put on in 2021, you know, that is going to roll off and as that rolls off, you know, we will replace those securitizations at CurrentRates. And that's really what you see in terms of the tick up on the cost of funds. It's really that it was coming off of a low. And now that we're replacing some of that debt at market rates, it will tick up until it cycles through. In terms of how we think about funding, I mean, we have enough liquidity for what we want to do today. We have unused Thank you.

Thank you.

Our next question is from Bill Desalem with Titan Capital Management. Please proceed with your question.

Thank you. I'd like to pursue the column relationship. And I guess I'm going to expose my ignorance here, but you'd mentioned that the early results look promising. Would you dive into that a bit further? And then how do you view this as and ultimately changing the trajectory of the growth of the business as you referenced in the release. And maybe finally, you'd reference that delinquencies will be lower when you're originating under the column relationship. And I guess in my mind, I would think that you would be using the same lending criteria. So why would that delinquency rate end up being lower? So apologies for throwing you with a multi-part question, but I can repeat anything you need me to.

Hey, Bill. It's Harpreet. I'll start on the early results. So the early results are just in terms of, you know, the income that we're seeing. So our early results are, hey, it's working the way that we want it to. You know, we're recognizing, you know, that income. and the other income line and we pay a platform fee for it. And then when you compare that to how we would have done this under state license loans, it has a lift and that's the list that I referenced earlier in terms of we're estimating that list on like-to-like loans to be about 200 basis points over time. and so what we're seeing is tracking to that in terms of the early results. So that's what I would say in terms of the early results. You know, on the delinquency rate, you know, right now we're seeing a benefit on the delinquency rate, but we're still originating those loans under our current credit. So it's going to be like for like, really, right? But we're monitoring it just to make sure that it would continue to be like for like. So we are seeing a little bit of a benefit on the delinquency rate from what we're generating. But again, we would expect those to be like for like under the bank partnership or under the state loans. and in terms of, you know, the things that column could unlock for us, you know, I'll turn that over to Lakhbir and he'll talk a little bit about that.

Thanks, Harpreet. Yeah, Bill, as Harpreet said, I think, you know, one is sort of we increase revenue opportunity on existing products and clients. So there are in markets specific segments of customers where we don't take the risk because we can't price for that risk. And so this partnership allows us to price for the risk and we are able to charge, you know, be it origination fees or what have you, depending on the state itself. And so that creates a lift in the business. Number two, it helps us increase speed to market. So, you know, historically, we basically said, hey, we'll build branches and enter states as we build additional end-to-end capability with the right within the right credit box, we could use a uniform product set using the column charter and enter the markets faster. And then third, I would say, the column tech stack and the partnership enables us to get into a broader product ecosystem over time. Again, that's not today or this year, We can work on launching an expanse of products that we couldn't do today ourselves. The question on delinquencies, what I will mention is we are wanting to make sure that as we enter in blank partnership in various markets, that we don't see a credit performance that is worse than how we do it under state license models. And so the early read, we're just tracking and making sure it's not impacted negatively. And so to your point, the credit policy that we are using is sort of what we do day-to-day in the business. And so delinquency shouldn't be impacted, but we are confirming it. And the other thing we are confirming is, as we mentioned, we are eliminating over time as we launch back partnerships in various markets, the personal property insurance. And so we want to make sure that as we are making those changes on the top line that on the credit line, there aren't any changes. So that's why we say it's an early.

That's very helpful. And then one additional follow up. So if you are able to charge higher rates to higher risk customers that you otherwise would not be lending to, is the implication then that this will accelerate your small loan originations and theoretically it should increase your feeder pipeline for the large loans as those new borrowers that you would not otherwise be lending to, some of those will demonstrate their credit worthiness.

You have it exactly right, Bill. That's exactly the goal. Our current, as you mentioned, our feeder to new client acquisition is through our small checks, and our leads coming through digital affiliates that are digitally sourced. In some of those cells, to your point, the loss rates are high and we can't price for them. And so with bank partnerships, we can price in certain those cells. We can get those clients as new customers of regionals. And we can, over time, renew them into larger loans. And so that's That's exactly sort of one of our opportunities as we go forward.

Great. Thank you both.

Thank you.

Thank you. This now concludes our question and answer session. I would like to turn the floor back over to Lakhbir for closing comments.

Thank you so much. Yeah, I think in closing, I just want to say four things. One, we are choosing to prioritize a stronger operating foundation. As I mentioned when I joined the company, we want to get returns up in the firm. It's our number one focus. We want to make sure this foundation continues to be really strong. Number two, we are moving with purpose and speed. in making sure we execute, have a strong, consistent execution culture. And that's, as you've heard, a number of initiatives, especially bank partnerships that we are pushing on. Number three, bank partnership, as I mentioned, Bill, just to your question, we believe it is going to be transformational and accretive to the company as we go forward in It will help us grow the firm and net income significantly. And then lastly, I just want to thank our team. As we execute a number of initiatives, the team is working hard and will be working hard and dedicated to our clients and helping us grow this company responsibly. So thank you.

With that, back to you, operator.

Ladies and gentlemen thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.