All right, so we're going to get started. Welcome, everybody, and good morning. Thanks for joining us. My name is Terry Ma. I'm the consumer finance analyst at Barclays. I'm pleased to have Micah Conrad, the CFO of OneMain, with us. So welcome, Micah.
Thanks, Terry. Appreciate it. Good morning, everyone. Thanks for being here.
Yes, I think we'll just jump right into it. I just wanted to start off on an update on the overall environment. Can you just comment on the competitive landscape, demand for credit, and the overall health of the consumer?
Sure. So I think, you know, throughout 2023, we've seen strong demand for loans. The competitive environment's been pretty constructive all year. You know, we, we're very proud of our balance sheet. We think it's a unique differentiator, our ability to access funding. Some of our competitors have pulled back. I think everyone's pulled back for credit reasons, but some have pulled back because they just don't have the access to funding that a company like ours has. And, you know, that's enabled us to really fund the balance sheet and be able to pick and choose our credits and sort of... You know, throughout the year, we've been seeing a better mix of a better mix or a higher mix of better credit quality credits as a result. So that's been very, very helpful.
As we've continued to tighten the balance sheet and tighten credit, we've still been able to see some nice growth and a lot of that funded because of our ability to fund the balance sheet. I think in terms of the consumer and the consumer health, the consumer is kind of facing there's some tailwinds and some headwinds. You know, I think we've seen low unemployment, which has been great. Wage inflation certainly has been a positive factor for this consumer, but they are definitely still struggling with inflation. We've seen electricity costs up something in the neighborhood of 30% since the pandemic began. We're seeing average rents higher.
You know, for our average customer, average rent, about 60% of our customers are renters, and the average rent was about $600 in 2019, and that's now today about $900, dollars. So we've seen a pretty significant impact there.
Got it. So helpful color. So you increased your receivables guide last quarter. It appeared to be influenced by, you know, a combination of better-than-expected demand and lower payment rates from borrowers. Has that dynamic continued?
Yeah, it has. We've seen a couple things going on. One, I just talked about the, the demand for product and our continued growth there, but we have also seen a slowdown in early payoffs. This tells us a little bit more also about the competitive environment. Customers who would pay off their entire OneMain loan, presumably being refinanced elsewhere, has slowed down this year. Below certainly the 2020 levels-2021 levels, we saw stimulus created a lot of cash flow for consumers. We saw that sort of early payoff dynamic pick up. But those two things have definitely contributed to our increased guide. When we started the year, we thought we'd probably grow in the low single digits. I think our original guidance was 3%-5%.
But due to that payment dynamic, due to the competitive situation, we've been able to see some nice growth. We're seeing some good performance and growth opportunities in our ancillary products, some of the different initiatives that we've been building over the last couple of years, but also in our core growth—our core loan growth. And, you know, those two things have caused us now to say, well, I think it might be a little bit higher. I think our guide is 5%-8% from the last earnings call. I think the Q3, we're probably going to see something in the upper range, in the 7%-8% context, and some of that due to our accelerated growth in our card product.
Got it. That's helpful. So just want to turn to credit. Your Q2 net charge-off rate came in at 7.6%. You maintained your full-year guidance of 7%-7.5%, you supplied a seasonal decline in the back half. Can you just maybe update us on Q3 credit trend you?
Yeah. Yeah, so generally in this business, what you will see is that your Q1 charge-offs are always the highest, and it just has to do with the early-stage delinquency trends and the charge-off fallout. Q3 tends to be our lowest charge-off rate quarter of the year. That follows 30-89 delinquency, which is our early-stage delinquency metric, follows that two quarters prior. And of course, two quarters prior to third was Q1 tax season. So we typically see a very significant dip in our 30-89, which leads to that lower charge-off in third. We think, you know, probably in the range of mid sixes is probably a good charge-off rate for the Q3 at this point. Again, following that low 30-89 from the Q1, which will end up with first...
with H2 being a bit lower than the first. We do think because of that seasonal trend, we'll see an uptick in Q4 charge-offs, but it will be something similar to what you saw in the H1. Those are simple seasonal dynamics. You know, we follow the early-stage delinquency really closely in terms of where things are heading. And, Q3, we've seen pretty similar seasonal patterns in our 30-89 to what we've seen over the last year.
Okay. That is very helpful. So student loan forbearance is ending soon. Just, any color you can provide on, how many of your borrowers are impacted by that?
Yeah. So I think it's. You know, this is a relatively small portion of our book. Historically speaking, our loans that have student loan trade lines have performed very consistently with loans that do not have a student trade line. So we're not really concerned about it. We're going to be monitoring it closely, obviously, in the Q4. But many of our student loans have been paying over the last year or so. Now, that being said, we took some precautions starting in mid-2020 when forbearance began in more earnest, with more volume. In our underwriting, we do an ability to pay underwriting. So we credit score, but we also make sure that our customer has the ability to pay.
We do non-disposable income, the net disposable income calculation. For a student loan trade line, if that customer was not making a payment, we would impute that into our ability to pay underwriting. We've also made, over the last couple of years, some adjustments to risk scoring and Risk Grades with our borrowers, where it might be a thin-file credit. For us, that's 3 trade lines. You become a thick file if one of those trade lines was a student loan. We were seeing those were not performing as well, so we've made some adjustments around that as well to manage our book going forward. But, you know, we understand our population really well. We have done a little bit of work on customer eligibility for some of the federal savings programs, the SAVE program in particular.
We think a majority of our borrowers would qualify for significant payment relief under those programs. We feel we're pretty high in the payment priority hierarchy as well, particularly with secured loans. Through our financial wellness efforts with our customers, we'd certainly be helping them to understand what's available to them.
Got it. Helpful. So you implemented some underwriting changes last August. Can you maybe just remind investors what you saw that necessitated these changes?
Yeah. So last Q2, Q2 of 2022, we saw a pretty meaningful uptick in delinquency. We saw it in particular with our lower income, lower credit quality, or lower FICO borrowers. And, you know, presumably at the time, and I think it's probably still very much true, that was a function of persistent inflation. I mean, we had... Everyone knows what the level of inflation was the last couple of years. And, you know, for a lower-income borrower with a little bit less cushion, I think that caught up with them starting middle of last year. And the federal stimulus that they had been supported by over the past couple of years also, we think dried up a bit faster for non-prime consumer than it may have for some prime.
So, you know, we took immediate action in July and August of last year to really tighten our credit box significantly, within our Customer Lifetime Value Model, which generates the returns that we would expect to see in a particular cohort of borrower. We imputed a higher level of delinquency, which leads to a higher level of loss, consistent with what we were seeing. We also, out of an abundance of caution, put in what we refer to as an O1, O2 Overlay. So this is an overlay on losses. It turns out to be about a 30% increase in losses, that is, that we have found would be associated with an O1, O2 type of downturn, which you think about 5%-6% unemployment in that scenario.
So effectively, what we're doing in our underwriting, and have since last August, is underwriting to an expected loss that's about 1.6 times normal. Think about normal as 6%-7% for our portfolio, so you've got a 9% range in terms of what we're building into our models. If you still pass our return hurdles under that increased stress, we'll still write that loan. And that's generally speaking, at 20% return on tangible with our current leverage levels. And so that was kind of what I would call a big macro overlay that we put into our underwriting that we think cut out probably $1 billion of annual originations. And, you know, we've been very pleased with what we're seeing.
Now, really, the result of this underwriting tightening is that we went from about 35% of our originations being in our top two tier Risk Grades to now 65%. That's continued throughout this year. So we've been pleased with what we've seen. We measure the expected performance on those vintages against pre-pandemic levels. You know, no period is ever perfect, but we have a lot of data, so we can see, are things performing within reason where our expectations are? We've been very pleased with the Front Book. You know, of course, in this business, also, you're always evaluating. So, you know, we continue every month. We're looking at performance data. Where can we tighten? Where were we wrong on the positive side?
So there's always some puts and takes and opens and closings within our credit box, but I would say net, over the last year, we've been net tightening the credit box. And, you know, coming back to some of the demand benefits we've seen in originations, we've been able to really tighten that down, pick the loans we want to underwrite, and still growing quite nicely.
Got it. Got it. Okay. So at the end of last quarter, you mentioned about 50% of your book was this post-tightening, book, Front Book. You've got it to about 70% by the end of the year. Is that still on track? And maybe can you just touch on, what 2024 looks like if this, mix shift continues?
Yeah, right. I would expect it was 50%, this Front Book . So when I talk about Front Book , so everyone understands the term, it's everything we've originated since August 2022. And right now, in our receivables, our $21 billion or so of receivables, half of that is from this Front Book , which is performing in line, as I mentioned, with our expectations. That'll grow by about 7-8% this quarter, and then it'll grow by another 7-8% in Q4. So we anticipate about 65%. You know, we had anticipated about 70% at the beginning of the year. That early payoff behavior has caused us to revise that down to about 65%. But it is growing.
It continues to perform well, and the good news is the older book that is performing with delinquency levels above expectations is rolling off... So, you know, hard for me to get into 2024 guidance quite yet, but, you know, I think it stands to reason that as the Front Book continues to grow with that good performance, hopefully, knock on wood, we get a little bit of inflationary pressure relief and the macroeconomy, you know, macro environment really continues to improve. We should see yield improve and also credit performance. We do reverse income on loans when they become 90 days past due, so that impacts our yield. But, you know, we're also taking a proactive approach with our pricing.
We've made some significant recent, recent increases in certain segments of our book in the aggregate from a total portfolio origination APR. So this is, you know, for our originations in totality, we've increased pricing by about 100 basis points since early June. And so, you know, with $2 billion-$4 billion of quarterly originations, that'll take some time to flow through our $21 billion book. But, yeah, we feel there are some headwinds there, and some tailwinds for 2024 that, you know, assuming a stable macro environment, we're going to start to see.
Got it. That's, that's helpful. So let's just turn to funding. Can you just talk about the overall liquidity profile, and the funding needs over the next several years?
Yeah. So as I mentioned earlier, I think we feel really, really good about our balance sheet. It is definitely a strategic differentiator for us. We use a mix of different funding sources. We rely on, you know, very heavily the ABS market and the efficiency of that market. We've been doing a lot of ABS issuance this year. We also do a good amount of issuance in the unsecured high-yield market. That's been a little bit more disrupted over the last couple of years. But we also have introduced our whole loan sale program, which has been a nice add-on for our existing core programs about secured and unsecured.
Then, of course, we also have $7.5 billion of undrawn warehouse lines with a number of banks across the globe. So all of those things create a very positive situation for us, where we can pick our spots on issuance and really manage our balance sheet closely.
Got it. You guys did a bond deal back in June. Can you maybe just talk about that? What did demand look like, execution?
Yeah. End of June, we did an unsecured deal. We raised $500 million. It was a 2029 bond. I would say it was a very positive execution. It was a tricky week. High-yield spreads increased 50 basis points from Monday to Friday that week, that we were in market. But we thought we got good execution. We priced where we, where we whispered , so that was a, that was a positive for us. And, you know, I think we saw 20 or so new investors to the platform, and, you know, we continue to be out there and talking to debt investors all the time. We do all the conferences, et cetera, and make sure to build good relationships with, with all of our investors.
That proves to be very, very helpful when, you know, times get a little bit trickier in the unsecured market. But we were very happy with that execution. You know, and then I'll add to that: we followed on in August, $1.4 billion ABS deal. So that was actually the largest market deal we've done in the history of the company. We had three large anchor orders from, again, very important investors and one new investor actually from overseas, which was nice to see also. So we continue to move positively in the markets. We signed another whole loan sale. Renewed one of our whole loan sale partners in August, so we feel pretty good about where we are.
Got it. Okay. So just turning to the credit reserve, can you just remind investors, what's actually embedded in the credit reserve and how that ratio should trend over time?
Yeah. So CECL, there's a lot goes into CECL models. You know, things like the current book, and people often forget that, and we, we always focus on delinquency, but the non-delinquent portion of our book is 94%-95% of our receivables, so we have to impute and, under CECL, a loss expectation on those loans. Of course, we also factor in our delinquency levels. What is the expectation on roll rates for the various delinquency buckets? What are we thinking in terms of lifetime recoveries on our charge-offs, and of course, the macro environment? So there's a lot that goes into that process. In terms of the macro, we use a variety of macroeconomic sources. We use Wall Street Journal survey of economists. We kind of use Moody's as our baseline for what we anchor to.
But we end up making judgment calls on where we think that that should sit relative to our expectations. Right now, we have about a 4.5%-5% unemployment rate factored into our future loss expectations. And so we have, obviously, a lot of history in our company, so we were lucky to go through only, I guess, if you can say it that way. And so we have a lot of history on how unemployment changes our expectations on losses that we use within those models. But, you know, we've not experienced the kind of inflation that we've seen in this country for a long, long time. So we do use that macro factor of unemployment to also consider continued and persistent levels of inflation if we don't necessarily see the unemployment levels increase.
And so, you know, we do—we will look at that quarterly. We continue to also just look at observed performance and adjust our expectations accordingly. You know, and we'll see how that goes. But that's, you know, an ongoing process, and so I tend to be a little bit on the conservative side, just where we are on those reserves.
Got it. Helpful. So I wanted to switch gears and maybe just talk about strategic initiatives. You guys have the BrightWay credit card. Can you maybe just give an update on that product?
Yeah. So this has been a 2-3-year journey for us. Hard to believe it's been that long already, but, you know, we look at the BrightWay card as a very, very big opportunity. This is a market for non-prime that is five times the size of the installment loan market, so, about $500 billion of total addressable market. And, you know, our first objective with the card was to build a great product that had a lot of use for our target customer and was very much designed around our target customer. You know, the core of our credit card is the concept of reciprocity, and what that means is we're sharing in the good behaviors and positive performance of our customers as they exhibit those behaviors.
So, you know, to be a little bit more tangible on it, every time a customer makes six months of on-time payments, they get to choose digitally through our app, whether they want to reduce their APR or increase their credit line. And so, we think that's very unique in the non-prime space, and we believe this will... You know, this kind of product, when executed on correctly, will allow us to be a really serious player in the market in the coming years. We've seen very positive trends. So we've... You know, on our card, we've... and then after a couple of years, we, we're really monitoring utilization rates, revolve rates on the card, what are customers spending on? You know, we see them using the card for gas, groceries, everyday usage, which is a very positive attribute.
One, customer pulling the card out of the wallet every day and using it and getting an association with OneMain, but also you don't want someone putting a wallet, a card in the drawer and pulling it out when all their other cards are maxed out. So we really focus on that very, very carefully, and we've seen good trends there. We've seen good digital engagement. Most customers are making payments directly on the app, and we've seen positive credit performance. You know, it hasn't been perfect, but, you know, we've been able to now identify pockets of segments and channels and areas where we think we can effectively expand with a good degree of confidence there.
You know, even after a couple of years, we only have $200 million or so of balances, and so we've been very disciplined and very cautious on the rollout, given the macro environment. But, you know, I think we're at the point where we're now ready to scale. We've been building out our operational capabilities, our collections capabilities, and we're now actually using some of our own experiential data with this card in our underwriting. So I think you'll start to see us ramp up some of that. Of course, on a in a very risk cautious way, but start to ramp up our growth in the card. And I think over time, you'll start to see some of the benefits also of a multi-product strategy.
We actually had our first card customer in July who converted—who went into a OneMain loan. And so, you know, we like that because it's a nice credit positive way for us to bring a customer in with a lower balanced card, get to know them, learn along with them at a very low acquisition cost. And then when they move into the loan, of course, the acquisition cost is virtually zero. So, you know, we feel very, very good about it. Again, very cautious about the rollout, not of any particular growth aspirations in mind, but, you know, we're trying to build a card for the future, and I think something that'll be a big differentiator for us in a couple of years.
Got it. And then longer term, are there any other ancillary products that make sense?
Yeah, you know, the one that comes to mind, it's not really an ancillary product, I guess, but it's an expansion of our existing product. You've probably heard us talk a lot about our new distribution channels, which is really finding ways for us to acquire new loans that aren't coming through the traditional branch channel. We have. You know, we view it as an extension of our secured lending capabilities. There's a lot of things we do really well, making sure we get lien perfection on our loans. We have 99% lien perfection rates, we have collateral management, we know how to run a book of secured lending, and so this area has been very, very successful for us.
We're basically operating through places like Dealertrack or RouteOne Dealer Center, through powersports dealers and connecting with our consumer at the point of purchase. These loans are still underwritten directly by us, most of them include a conversation with the customer. But I think, you know, the growth here has been really nice, and I think it's a nice ancillary add-on to our existing distribution channels. We now have close to $600 million in receivables from these channels. We've been doing it since about 2020. So, you know, again, cautious and a prudent approach, but it's starting to build quite nicely, and the credit performance has been really outstanding.
Great. Great. Maybe just touch on capital returns, dividend, and buyback.
Yeah, I mean, I think, you know, dividend, we continue to have the $1 quarterly or $4 dividend. We, that dividend, we say, is sacrosanct to us, and that is, you know, outside of growing our book, and investing in the business, that's our first priority in terms of capital returns. We've been a bit more cautious this year, giving ourselves some strategic flexibility around with share repurchases. We continue to be in the market there, but at a lesser level than what we were doing in 2022, just out of an abundance of caution and making sure we create that optionality on our balance sheet.... No, no major changes to our philosophy or our strategy there.
Got it. All right, I'm going to pause here, and I'll open it up to Q&A. Anyone have any questions? We have one up here.
Hey, Mike, in the Front Book, does your ratio, does that improve?
Yeah, it shifted a little bit. I mean, renters tend to be a little bit riskier, if you will, than homeowners, just in terms of our scoring. So we've moved about 10 percentage points on the mix. But I think as we probably know, in this country, there's a lot more renters now than there were five years ago, and you know, so we continue to feel good about our renter population. It has shifted a little bit more towards homeowners. Our tightening also tends to move our originations a little bit more present customers than our new customers. And of course, the Risk Grade changes. Those are the larger sort of differences when we do tighten in terms of the macro picture.
We have one back there with a microphone first.
Hi, Mike. How are you? Question in and around your auto-secured book, have you made any changes to your models based on a different perspective on what that auto collateral will be worth? Do you still find it to be as attractive as a channel?
Yeah, let me touch on the core business first. The new distribution channel is a little bit different in that we're doing purchased auto there as opposed to our personal loans. So first, no one comes into our branches really looking for an auto loan. So generally speaking, where a customer will end up with an auto loan is either we require collateral to be able to offer a loan to that customer, or we have what we call a multi-offer, where, you know, you're of a good enough credit, you qualify for an unsecured loan, but you also qualify for a direct auto loan. This is, generally speaking, an auto loan where the auto value, the auto age is less than 10 years.
You know, we'll go through a process with the customer of understanding their balance sheet, their bureau data, and very often the direct auto loan; it's a debt consolidation loan as a result of that conversation, and so we can get them better pricing on it. The reason I bring this up is because it's a little bit different dynamic in terms of LTVs and the way we think about risk, because we were willing to give that customer an unsecured loan to start with out of the gate. And so we generally have seen historically that frequency of loss is really the driver of performance in our secured book. So if you look at our cum loss curves on a unit basis and also on a dollar basis, they're almost on top of one another.
Which tells you that it's that, it's that collateral that puts us higher in the payment hierarchy with the customer. Our customer needs that car to get to work. They're not living in Manhattan generally and taking public transportation, and so they prioritize that secured loan payment. That's what has historically driven performance that we see in our business, in our core loans. That said, we do watch collateral values. We will remarket cars 12-14,000 a year on 900,000 secured loans, so it's not a lot, but we will do it, and we are sensitive to auto prices.
Out of an abundance of caution, we've put in on three different occasions over the last couple of years, reductions in the amount of collateral value we will give the customer credit for, with the LTV calculation. So we put in that caution there. Auto loans, obviously, auto values have started to come down a bit and, you know, we're watching closely, but we feel pretty well protected there.
Got it. I think we had a question up here. Can someone get him the mic? Here first.
Thank you. In terms of the overlay you mentioned earlier, the O1, O2 overlay, triggered a question for me. What-- You know, how do you arrive at your, you know, your economic forecast? Is that internal? Is it external? And then what would cause you to put an O8, O9 overlay on? Is that your call, or is that some external party's call about the outlook?
Yeah, I think, you know, all this stuff is our call. I mean, it is our business, and we make these decisions. I've gotten questions before about maybe reserving being a bit different than how we're thinking about underwriting, and that's okay. We have. You know, there's a lot of specificity in our reserving models, and, you know, again, we use a number of different forecasting sources for our unemployment rate assumptions. I would call the O1, O2, not a projection of what we think is going to happen, but simply a conservative approach to our underwriting, particularly in an environment where we kind of have a lot of opportunity to write good loans.
You know, this was our mechanism and our method for tightening down the credit box in a very methodical way, where we can then shift our mix up to a higher credit quality instrument. I mean, we could have just said, we're going to cut off Risk Grade below a certain level, but because we have a state-based model, we can underwrite up to 36% in California. In Maryland, we can only underwrite up to 22%. And so those different states require you to think about risk in different ways because of the APR dynamics there. And so the best way for us to employ those strategies is to increase loss expectations in our models. That produces a different outcome in California than it does in Maryland, and it's much more effective than us just saying, "Cut off Risk Grade-...
08 or whatever we want to decide there. And so again, those are all hard decisions. I think, 2008, 2009 was pretty rough, as you know, some of us in this room remember. I personally don't see that. I think the way we're underwriting today, though, is almost pretty spot on what we saw in 2008, 2009. So when I mentioned the 1.6x loss expectation earlier, that was 30% rough math, 30% higher delinquency today from persistent inflation, plus 30% unemployment stress from 2001, 2002. When you put those two together, it looks like what 2008, 2009 looked like. We topped out at about 10% annual loss rate in 2008, 2009 with, you know, teens% unemployment.
And so we feel good about where our underwriting is today. And keep in mind, when we have that cutoff of 20% return on tangible. So even in an O8, O9 downturn or in the current construct with O1, O2 plus inflation, we're still making a 20% return on tangible. And so that gives us a nice bit of cushion to feel comfortable about where we are.
One question back there.
So I'm not familiar with the OneMain story, but you said something about your Front Book being 50% of the receivables, and it was originated just last year. So I mean, that, that implies that the average life of loans is about two years, which given that you also have auto loans, which in recent years, the life there has only increased. So if you can just explain a little better.
Yeah. So our average loan is about 18-20 months, and I think the thing you have to remember about OneMain is our customers there, and we have about 50% of our originations end up as it being a renewal. And our average, about half-- and said another way, half of our new customers will end up renewing their loan at some point in the future. That's that whole life of loan is probably a little different from our purchased auto, those distribution channels I talked about, which are a smaller part of the book. But for our core loan book, it's about 18-20 months on the loan.
The customer relationship is longer, but once we re-underwrite that customer, we're pulling a new bureau, we're doing a full incremental underwriting, and we do that incremental underwriting with our new tighter credit box. And so that's why our book does turn over as quickly as we're talking about here. It's a more conservative thing, so it has shifted our origination mix to a higher credit quality of borrower, with about 65% of our originations now in our top two Risk Grades, which you can think about as a good proxy is 60+ or prime.
Any other questions from the audience? I'm going to go to one audience response question that I have. Can you queue it up, operator? Over the next year, would you expect your position in OneMain to, one, increase, two, decrease, or three, stay the same?
I'll not take this as a personal reflection on my performance here today.
Okay. So, so pretty bullish. Okay, so maybe just to follow up on the mix shift in Front Book, Back Book, you spoke about 66-65% of your originations are in the top two Risk Grades. I think, that compares to about 40% pre-pandemic. I guess maybe talk a little bit more about what you need to see to change that and what the overall impact on, I guess, credit and yields are.
Yeah, I mean, I think the truth is, across the FICO spectrum, we've seen consumer stress. If you—we've tranched our originate—we don't underwrite to FICO, but it's a, it's a helpful tool to understand, you know, general degrees of risk for the consumer, and everyone understands it. We've tranched our originations into FICO buckets, you know, call it 580-600, 600-620, 620-640, etc. And you see, if you look at a like for like customer against pre-pandemic, 2018, 2019, delinquency levels are higher across the spectrum.
And so, you know, we've been able to tighten our underwriting and shift our mix to that higher credit quality, better-performing customer, and therefore, we've seen our Front Book performance look more like 2019, 2018, but on a like customer, that wouldn't be the case. And so I think what we need to see to start to get more comfortable with credit is that that starts to roll down a bit, and that like-for-like credit score starts to perform more like pre-pandemic levels. And I think, you know, you have to think about that. The driver of that has to be inflation and consumer behavior. This consumer is pretty—they've been pretty resilient, historically and found ways to match incoming revenue and outgoing expenses. We've always said our customer is very, very stable.
They've had a couple of dents, you know, in their credit along the way, but are good-performing consumers. I think just with all the federal stimulus that occurred, and then you kind of pull all that away, and then you replace it with everything costing more, there's been a bit of a disruption in the non-prime consumer. You know, we feel like we're helping them navigate through, and I expect that will moderate over time, and the consumer gets used to whatever environment they're in.
Great. Looks like we have one last question up there.
... Hey, Mike, thanks again. Not to take this question personally, but you know, your company, and I haven't looked at the valuation multiples as of today or as last, last month, but for a long time, it's traded in around 6x PE for a market leader with great returns on capital. Why do you think that is? And are there catalysts in your mind that can take the valuation up to maybe the longer-term averages for the sector, which would be high single digits, even low double digits?
Yeah, I'm watching the timer tick down here and don't think I have enough time to answer that question. It is one that I've spent a lot of time thinking about. I think, you know, being in a wholesale-funded balance sheet in the non-prime sector tends to be something that people shy away from, for whatever reason. I've been with this business for 10 years. I've known it from when Citi owned it, and I don't really understand that mentality. I think, you know, our returns are second to none. We feel really, really confident that in any type of environment, we can be successful. You know, I talked about our funding programs, and our access to funding is second to none. I wish I knew the answer to that question.
You know, we certainly don't get credit for our return on tangible. We sort of sit off regression lines there, and I think for us as a management team, we can't be too focused on that. We're trying to run a great business, deliver great returns for our shareholders and fit in a very, very important segment in this United States. About half of the United States is not prime, so, and we are the biggest player. And I think as long as we continue to execute, we get through this strange little market that we've been in for, sad to say, three years. I think that will improve over time. We're working on multi-product strategy such that we aren't sort of pigeonholed into our historic, just branch-based network.
We've got the cards, we've got a lot of acquisition opportunity in the general market for cards, and we're working on distribution channels with purchased auto. So, you know, I can see our business continuing to grow, and that's all we can do, you know, as a management team, to try to continue to deliver for all of our shareholders. Thanks for that question. I don't take it personally.
Okay, great. I think we're just about time's up. So thank you.
Thanks, Terry. Thank you, all. Appreciate it.