Financial Second Quarter 2021 Earnings Conference Call and Webcast. Hosting the call today from OneMain is Peter Pouillon, Head of Investor Relations. Today's call is being recorded. It is now my pleasure to turn the floor over to Peter Poullian. You may begin.
Thank you, Nicole. Good morning, everyone, and thank you for joining us. Let me begin by directing you to pages 23 of the Q2 2021 investor presentation, which contains important disclosures concerning forward looking statements and the use of non GAAP measures. The presentation can be found in the Investor Relations section Our discussion today will contain certain forward looking statements reflecting management's current beliefs about the company's future, Financial performance and business prospects and these forward looking statements are subject to inherent risks and uncertainties and speak only as of today. Factors that could cause actual results to differ materially from these forward looking statements are set forth in our earnings press release And include the effects of the COVID-nineteen pandemic on our business, our customers and the economy in general.
We caution you not to place undue reliance on forward looking statements. If you may be listening to this via replay at At some point after today, we remind you that the remarks made herein are as of today, July 22nd, and have not been updated subsequent to this call. Our call this morning will include formal remarks from Doug Schulman, our Chairman and Chief Executive Officer and Micah Konrad, our Chief Financial Officer. After the conclusion of our formal remarks, we will conduct a question and answer session. Now let me turn the call over to Doug.
Thanks, Peter, and good morning, everyone. We appreciate you joining us today. We'll spend the majority of our time on today's call covering our 2nd quarter But I will also spend time discussing some of the strategic initiatives underway that will allow us to continue to realize our mission Of improving the financial well-being of hardworking Americans. Our 2nd quarter performance Demonstrates the resilience of our business model as we saw strong loan originations in the latter half of the quarter, Resulting in notable growth in receivables as well as record low losses. Capital generation was strong in the quarter, And we remain well positioned for continued growth as the economic recovery continues.
In the quarter, we generated $310,000,000 of capital, dollars 98,000,000 more than the prior year, up 46%. C and I adjusted earnings for the quarter were $2.66 per share. Our credit performance Remains very strong and continues to benefit from the proactive credit tightening actions that we implemented at the start of the pandemic. The unprecedented levels of government support over the past 15 months and our robust underwriting capabilities. 2nd quarter losses were 4.4%, and we feel confident about the continuation of this excellent Credit performance over the remainder of this year.
Receivables, which we refer to as managed receivables In our presentation, grew 3% year over year and 4% sequentially. It's worth highlighting the growth in our loan book was higher than the overall near prime installment loan market, which declined about 3% year over year. We believe our strong performance in comparison to the market is driven by our growth initiatives, including our continued product innovation, new channels and advanced analytics Across multiple functions within the company. Recall that in early 2020, as the pandemic began, We committed to working closely with our customers to help them through a difficult time, But we also said we would continue to stay focused on our longer term initiatives that would position us for growth As the pandemic waned and the economy strengthened, we are now starting to see positive results from many of those initiatives. The economic and business trends we observed in the quarter were positive.
Unemployment rates And jobless claims have started to normalize. And after a year of economic uncertainty driven by pandemic restrictions, A recession and multiple government stimulus packages, we are now seeing consumer demand pick up. Recent Fed data shows personal consumption is up sharply since the start of the year. Importantly, Demand for our product has rebounded to pre pandemic levels. We saw originations improve each month of the quarter, With June activity resulting in a record high for the company.
With that said, we will closely monitor economic conditions, Including the potential for resurgence of COVID associated with new variants. The recent strong economic backdrop is positive for our current suite of products, but also for the products we expect to offer customers In the near future, let me elaborate a bit on that. If you turn to Slide 7 of the presentation, I'd like to touch On the future vision that we discussed on this call last quarter because it is guiding our priorities And the actions we are taking at OneMain. Our vision is to be the lender of choice to near prime consumers, Meeting their current needs when they have a mismatch between income and savings on the one hand and expenses on the other, while also providing products and services that help customers progress to a more promising financial future. We will leverage our foundational strength to continue to be the leader in near prime installment lending, But we are also expanding our suite of products, services and experiences to deepen our customer relationships, Increase engagement and enhance our proprietary data set, all of which will provide real value to customers And make it more likely that they will want to do business with us in the future.
Over the past few quarters, We've discussed our plans to extend our product offering with the rollout of a differentiated digitally enabled credit card Designed specifically for the near prime consumer. I'm pleased to say that we remain on target To be in market later this year, with the initial tests beginning in the next several months. As with our other product rollouts, we will be deliberate and run a pilot before a full rollout. The pilot will test uptake, Line usage and credit before scaling receivables in the latter part of 2022, With the expectation that our credit card will be a multibillion dollar receivables product over the coming years. Once we get through the initial launch and testing, in addition to scaling the credit card, we also anticipate further expanding Our lending products to include a hybrid product, which will combine characteristics of both card And loan solutions to provide even more financial flexibility for qualified customers.
We're really Excited about the future of our product set and the value that it will provide to customers. We also closed on the acquisition of TRIM during the quarter. We are now in the integration process and look forward to offering the multitude of TRIM solutions to our current loan customers As we continue to focus on our mission of improving the financial well-being of hardworking Americans. Finally, as I mentioned earlier, the significant investments we are making in technology, New channels, new products and digital capabilities continue to have a positive impact on our results. There is no doubt that the growth in receivables we reported this quarter would not have occurred without our innovations in product Size and pricing as well as our expanded digital channel.
Before I turn the call over to Micah, I'd like to briefly comment on capital deployment. Consistent with our previously established framework of considering an enhanced dividend each 1st and third quarter and recognizing the strength and resilience of our business, We announced a 3rd quarter enhanced dividend of $3.50 per share, Which, combined with our regular quarterly dividend of $0.70 per share, returns $4.20 per share to shareholders this quarter. In addition, as we discussed on our last call, we commenced a programmatic share repurchase program And bought back 612,000 shares for a total of $35,000,000 during the 2nd quarter. Using our capital allocation framework as a guide, we will continue to invest in loans that provide value to our customers And meet our risk return criteria, invest in the business to position us for the future and return capital to shareholders. With that, let me turn the call over to Micah to take you through the financial details of the Q2.
Thanks, Doug, and good morning, everyone. We had another great quarter as consumer demand returned to pre pandemic levels, Resulting in healthy receivables growth both year over year and sequentially. In the Q2, credit performance continued to exceed our expectations, While interest expense also declined. The improving economic outlook gives us confidence in the future performance of our portfolio And allowed us to further reduce loan loss reserve coverage. We earned $350,000,000 of net income or $2.60 per diluted share in the quarter.
That compares to $89,000,000 or $0.66 per diluted share in the Q2 of last year, which was impacted by COVID related reserve builds. On an adjusted C and I basis, We earned $358,000,000 or $2.66 per diluted share. That compares to 107,000,000
or $0.80 per diluted share
in the Q2 of 2020. Capital Generation or C and I adjusted earnings excluding the impact of changes Loan loss reserves was $310,000,000 in the 2nd quarter, up $98,000,000 or 46% over prior year. As Doug mentioned earlier, we've included in our materials a new metric called managed receivables. This represents the ending balances of C and I loan receivables that we hold on our books, plus those receivables we've sold as part of our loan sale program that began earlier this year. We believe this is an important and relevant metric as it encompasses the full balance of C and I loans that have been originated by and are serviced by OneMain.
Managed receivables for the quarter were $18,300,000,000 Up $705,000,000 from the Q1 and up 3% from a year ago, reflecting a strong rebound in consumer demand And the accelerating impact of our growth and efficiency initiatives. We will continue to report the balance sheet equivalents Of ending net receivables and average net receivables, both of which exclude loans that have been sold and are important for loan loss reserves, Charge off rates, yield and other income statement metrics. And keep in mind, for all prior year comparisons, Managed and ending receivables are 1 and the same as the whole loan sale program started in the Q1 of this year. Interest income was $1,100,000,000 in the 2nd quarter, largely flat to prior year as slightly lower average net receivables was partially offset by higher yield. Interest expense was $230,000,000 down $36,000,000 or 14% versus The prior year as we continue to benefit from the ongoing liability management actions that we're taking to reduce our cost of funds while also extending our maturities.
Reiterating the guidance that we provided on our last call, we expect full year interest expense in the range of 5.0% to 5.2%. Other revenue was $148,000,000 in the 2nd quarter, up 3% compared to the prior year quarter. Other revenue in the current period included $11,000,000 of gain on sale revenue from the $120,000,000 of loans we sold during the quarter. Policyholder benefits and claims expense was $48,000,000 in the 2nd quarter, down $42,000,000 year over year. In In the Q2 of 2020, claims expense was significantly elevated at $90,000,000 as we experienced a high level Involuntary unemployment insurance claims during the peak of the pandemic.
IUI claims have consistently moderated since that time And the current quarter expense has trended back to normalized levels as anticipated. Let's turn to Slide 9 to review our originations We originated $3,800,000,000 in the 2nd quarter, up 87% from Q2 2020. Importantly, our originations this period were essentially flat to the comparable pre pandemic quarter of 2019. Originations improved meaningfully each month as the quarter progressed as the impacts of government stimulus programs subsided And economic conditions continued to improve. In fact, our June 2021 originations reached an all time high At nearly $1,500,000,000 and we've seen good momentum continue into July.
Slide 10 lays out how originations measured against comparable periods of 2019 trended throughout the Q2. The bar graphs provide the actual originations, while the percentages below each of the bars shows the growth percentage Adjusted for differences in the number of business days in each respective period. So for example, you can see that while May originations were down on a dollar basis From 2019, when adjusting for business days, May was actually 2% better than 2019. June performance then improved further and ended 10% higher than 2019 levels. Assuming the current economic environment continues, we expect to grow our receivables by 8% to 10% in 2021.
We expect receivables at December 31 will include about $350,000,000 of receivables sold, But serviced by OneMain for our home loan sale partners. Let's now turn to Slide 11 and walk through our recent credit trends. Our credit performance continues to be strong as the adjustments we made last year combined with multiple rounds of government stimulus and improving economic conditions Have all had a very positive effect on delinquency and losses over recent quarters. 2nd quarter net charge offs were 4.4%, A 192 basis point improvement year over year and a 26 basis point improvement over last quarter. After an historic low for 30 to 89 day delinquency in the Q1, 2nd quarter rose seasonally to 1.76%, Up a modest 13 basis points against the previous record low set in Q2 of last year.
Following the strong 30 to 89 performance from last quarter, our 90 plus delinquency hit a record low of 1.36% in the Q2, down 53 basis points year over year. The delinquency levels achieved over the past two The macro environment, we feel great about the outlook for credit and we now expect full year 2021 net charge offs of about 4.2%, A significant improvement from our expectations at the beginning of the year. Our loan loss reserve trends are shown on Slide 12. We ended the Q1 with just under $2,100,000,000 of reserves and a reserve ratio of 11.8%. In the Q2, you can see that we reduced our reserves by $64,000,000 The net reduction reflected an increase of $58,000,000 Associated with our growth in the quarter and $122,000,000 reduction from the expected performance of our portfolio under improving macroeconomic This brought our reserves to $2,000,000,000 and our ratio to 11.1% at the end of second quarter, Still 40 basis points higher than the pre pandemic level of 10.7%.
Turning to Slide 13. 2nd quarter operating expense was $332,000,000 12% higher And the comparable prior year quarter and 7.5 percent of average receivables. The year over year expense growth in the quarter reflects Continued investment in new products and growth initiatives, a year over year increase in production as well as the difficult comparison Again, Q2 2020 operating expenses, which benefited from the cost actions we took in response to the emergence of the pandemic. We expect that our continued investment in the business combined with strong loan demand will result in our operating expenses
Growing in
the upper end of the 5% to 7% range we discussed on our last call, but recall this is after our OpEx declined 3% in 2020. I think it's important to point out that even with accelerating investment and growth in receivables of $1,300,000,000 Since 2Q 'nineteen, our OpEx ratio remains below the comparable period in 2019. This reflects the operating leverage of our model and the efficiency actions we continue to drive across the business. Let's now move on to the balance sheet on Slide 14. We continue to maintain significant sources of liquidity With $1,600,000,000 of available cash, dollars 7,300,000,000 in undrawn conduit capacity and $9,700,000,000 of unencumbered receivables.
We had a busy funding quarter, raising $1,700,000,000 In May, we issued an $850,000,000 5 year revolving ABS deal with what we believe was a very impressive cost of funds of 1.56%. In June, we completed a $750,000,000 6 year social bond, which was affirmed by S and P To be aligned with social bond principles. Net proceeds of the bond will finance loans to individuals residing in credit insecure Or credit at risk counties as defined by the Federal Reserve Bank of New York and at least 75% of which will be allocated to minorities and women. We are all very proud of this issuance as it is emblematic of how we serve all hardworking Americans. As I mentioned earlier, we also completed $120,000,000 of whole loan sales during the quarter, and we expect this level of loan sales to continue in future quarters.
Our mature funding programs remain a hallmark of OneMain, and we believe they stand out as a clear competitive advantage for us. We continue to deliver on our capital allocation framework, which includes delivering portfolio growth at attractive returns, Investing in our business and our future and returning considerable capital to our shareholders. Consistent with this Framework, we announced an enhanced dividend of $3.50 per share in addition to our $0.70 per share regular quarterly dividend. On Slide 17, we've laid out our consistently strong dividend history, including the $4.20 per share dividend to be paid in August, We will have paid out $9.30 per share during the last 12 months, equating to a yield of approximately 16%. In the quarter, we also repurchased over 600,000 shares of our stock for a total of $35,000,000 As of June 30, we had $120,000,000 remaining under our current authorization.
We continue on our disciplined capital allocation framework, while maintaining our leverage ratio. Our net leverage at the end of the second quarter was 4.5 times, Comfortably in the low end of our strategic range. In closing, let's move to Slide 19, where we provide some updated financial strategic priorities for full year 2021. We expect the yield on our average net receivables To remain stable at approximately 24% for the full year, we expect our interest expense to range I think between 5.0% and 5.2% of average net receivables. As I mentioned earlier, our loss Experience in 2021 has been quite strong, and we expect full year net charge offs will be approximately 4.2%.
We expect operating expenses to come in at the high end of our 5% to 7% year over year growth range. And lastly, assuming a continued positive economic backdrop, We expect our receivables to grow 8% to 10% this year.
With that, I'll turn the call back to Doug. Thanks, Micah. The resiliency and strength of our business model is now showing through as the market stabilizes and consumer demand picks up. We are pleased that the technology and operational enhancements that we made to digitize our business before the pandemic Allowed us to continuously provide outstanding service to our customers throughout this unprecedented period. And we will continue to meet our customers where they want to be met, providing service in whatever channel they choose, In person, on the phone or through digital interactions.
We are committed to continuing to invest in our business To ensure we can meet customer needs and to provide the financial products and solutions to help our customers improve their financial well-being. I'd also like to mention our inaugural social bond that Mike had discussed earlier. I was incredibly pleased by the Strong demand we saw for this bond as the market validated the efforts we've made across our entire organization To ensure that hardworking Americans from underserved communities have access to the financial solutions they need. I'm proud of OneMain's strong record of supporting our customers and am committed to continually advancing these efforts. The strategic initiatives and innovations we have executed over the past several years are continuing to pay off As many parts of the economy have reopened and consumer demand has picked up, and we believe that the investment in our business, Which we accelerated in 2020 and into 2021 will position us for growth in the years to come.
Thank you for joining us today, and we're happy to take your questions.
The floor is now open for questions. Thank you. Our first question will come from the line of Michael Kaye with Wells Fargo.
Hi, good morning. Thanks for taking my questions. With the uptick in inflation, I was wondering what's your view on the impact to the business? For example, how should we Think about the potential impact from a loan growth, operating expense, debt cost and a consumer credit perspective.
Hey, good morning, Michael. It's Micah. Thanks for the question. It's a good one. I think as we think about inflation With respect to originations, could be marginally positive.
Things cost a little bit more than they've cost in the past. I think you hit on the other big piece of this, which is potentially rising rates. I'll remind you less than 5% of our debt is Floating, so we feel like we're in a pretty good position with respect to that. We have a long maturity structure. We've been really opportunistically We're replacing a lot of our higher cost debt that's in our stack with lower cost debt from the very recent really strong markets.
And Base rates have been great, but I think the strength of our programs and our credit spreads have also been a contributor. We issue anywhere from $3,000,000,000 to $4,000,000,000 a year, Which is not a huge portion of our close to $18,000,000,000 of debt. So to the extent there is rate increases, we think It'll be sort of ratable over time, but hopefully offset with our continued strong credit spreads. I think those are the 2 biggest pieces.
Okay. Great. I wanted to ask about the IRS trial tax credit dollars. How should we think about how that impacts your loan growth? I mean, is this more like a Goldilocks scenario where it isn't too big given your average $8,000 average Ticket, but it's big enough to be helpful for credit?
Yes, I think that sounds right, Michael, I mean, this is in some ways some of this is an acceleration of credit and also the credit has increased from $2,000 to $3,000 or $3,600 depending on the age It only affects maybe about 30% of all filers, but we view it as an incremental Monthly amount that I'm sure will be helpful to consumers. But in the grand scheme of things, I don't think it's meaningful enough For it to impact our business or originations in that way.
Okay. Thank you very much.
Thank you.
The next question will come from the line of Kevin Barker with Piper Sandler.
Good morning. Thanks for taking my questions. Given the tighter underwriting in 2020 and how strong the consumer has been with the amount of cash and Do you expect to have structurally lower net charge off rates as we go into 2022, Just given the back book should start to look better, just given the tightening underwriting that we saw?
Yes. I mean, losses we're experiencing today, Kevin, are certainly well below normal for our business with Our Q2 charge offs were 192 basis points below the prior year level. We don't think the losses will stay this low forever, but we do Expect them to up to be below normal for some time. I mean, if you look at our early delinquency trends of 30 to 89 is a good indicator for that. They remain Well below about 40 basis points in the quarter below 2019, 2Q 2019 levels.
And I think Consumer balance sheets have continued to be strong. Average credit card debt is down about 25% from a year ago. Applicants that are coming into our business are their revolving debt to annual income It's down about 30% or 40% from a year ago. So I think with the strong consumer balance sheet, we should expect to see very strong credit Going forward, that said, credit has been certainly influenced by several rounds of government stimulus. So As we saw in 2020, we do expect to see a migration up towards 2019 trends.
I think it's just going to happen over time versus a cliff.
Okay. And then earlier today, there was a comment about one company that's a consumer lender that was not releasing as much reserves as it had Previously or versus peers and they cited, the expiration of foreclosure moratoriums and forbearance programs That could impact credit in the back half or early back half of this year and early 2022. Do you anticipate any impact from the expiration of those government Programs, just given the outsized impact they had over the last year to 18 months?
Yes. We don't see this as a big risk with our customer base. We're monitoring our payment trends very closely and they remain strong Even into July, I would remind you also as a precaution in our underwriting since really about 2Q 'twenty, We've been adjusting for forbearance in both our risk scoring and our ability to pay underwriting. So meaning we would If a loan was in forbearance on the Consumers Bureau, we would have treated that as an expense for our underwriting. And So we don't expect it to impact us materially.
The next question will come from the line of John Hecht with Jefferies.
Good morning, guys. Thanks very much for taking my questions.
Good morning, Peter. The first one
is just because a couple of credit card companies have reported and I mean, I guess we're seeing the early Stages of demand recovery across the board, but you guys are back to full throttle. And I'm wondering, do you think it's a structural Is it something structural tied to the product or is it that you're gaining market share? Do you guys have any thoughts as to why You've rebounded in terms of demand trends relative to other consumer finance products?
Yes. Look, we If you look at June, we've had an upward trend through the quarter. In June, our originations were up about 10%. And we're measuring things against 2019 because we think that's a more normalized way to measure it because In June 2020, there was a lot of things going on with the pandemic. Demand was actually flat.
So the demand for our product was the same in 2019 as it was in 2021 in June. We attribute a lot of our growth to the initiatives that we started building towards in 'eighteen and 'nineteen and that we accelerated in 'twenty and 'twenty So innovations around our loan size, innovations around pricing and competitive channels, Our digital customer experience, which gives people options of how to interact with us, a lot less fall off through the pipeline because we've enhanced the customer When you're on our website, the clarity of our offering. And then there's a whole lot of Small but important operational changes that we've talked about before, routing algorithms, using machine learning to get Any applicant routed to either the right branch or centralized call center, propensity models about which calls to be making first as People come in, and then we've continually improved our model. So, I do think our product is different Credit cards, so they're going to have different trends. But even within installment loans in near prime, Year over year, our balances are up 4%, while the market is down 3%.
And so we do think we're picking up some market share because we've really been focused on our customer.
Okay. Thank you for the comprehensive answer. Second question is just a little bit of liability management. Micah, what do you think is there a long term, I guess, Goal of the mix of secured versus unsecured debt? Or is that a dynamic kind of decision based on rates and spreads?
Yes. We've always had a little bit of a range of I mean, we've always said, John, that we like to be fifty-fifty. I think that just signals really that we want a nice mix of the 2. The ABS markets are deep. They tend to be lower cost.
We did an issuance this quarter, as you heard on our prepared remarks, that was below 1.6%, certainly very attractive cost of funds. We also though like the longer term duration and tenor of the unsecured market, which gives us the ability to really Manage our liquidity runway. So the 2 are sort of beneficial in different ways and we just seek a balance. We've been actually running more towards the 42%, 43% of our debt in the secured category. ABS deals, as you know, do amortize as well.
So those sort of naturally amortize down and we have Replace them with new issuance where the unsecured are more bullets. But I would say there's no magic to it other than we like to have the balance of the And we also have very chunky issuance where we're doing $750,000,000 to $1,000,000,000 sometimes in the debt market. So that will move around from quarter to quarter
The next question will come from the line of Mark DeVries with Barclays.
Yes, thanks. Could you give us an indication, if you've seen it so far, what the trends are for loan growth in July? Are you continuing to kind of Build on the momentum from June, and is there anything to call out from a product perspective on Whether kind of some of the new initiatives are contributing to the acceleration?
Yes. Look, July remains Strong, similar to June. We don't anticipate seeing the kind of acceleration we saw April through June Going forward, but at least the beginning of July is strong. Assuming there's The economic reopening continues and there's not some major shock with the delta variant. We think loan growth is going to be strong for the remainder Of the year.
I don't think anything particular to call out with product. We had talked about, we did have a product that we rolled out close to a year ago that offered people a Smaller dollar loan, it's not a small dollar loan, it's $2,500 $3,000 for people who didn't qualify For an $8,000 loan, but could meet those payments and that's been a very good product. People have been as their credits grown, some people have Taking out larger loans after that, and we're very excited. Our credit card is going to the pilots are going to launch very soon. So we think that's going to be a great product in the market.
Our TRIM product, which is really now a value added Way for customers to save money on bills, we're integrating that. And in the Q1, we anticipate offering that Current customers after we have a fully integrated onto our app. So I think good continuation of The product innovations and a lot of things coming over the next year.
Okay, great. And could you talk about how You look to size the loan sale program every quarter. And then I think there's clearly an arbitrage in the capital markets Between what the fixed income investors are willing to pay for those loans and what equity investors are paying for the cash flows. So obviously sales and share repurchases look pretty attractive here, but just how are you thinking about weighing those factors?
Yes. In terms of the loan sale, the whole loan sale program, Mark, I assume that you're asking about the we don't necessarily size that Differently in any given quarter, these are programmatic relationships and we look at it as obviously an enhancement to our existing funding programs. Our loan sale agreements are 2 year flow agreements. So there's a commitment to buy a certain amount of loans over a 2 year period that obviously is liquidity and longer term funding for us. And so those agreements are In place and the counterparty on the other side will buy the same amount every month at the agreed upon price.
So I wouldn't say we're trying to Change those from quarter to quarter in terms of the levels we're selling.
Okay. Are you looking to add partners here? Are You're kind of at the level you want to be at?
Yes. I mean, I think we've said in the past, I'll say it again, and we're committed to keeping the vast majority of our loan production on our balance Chi, you heard about our very much successful quarter in the funding markets with unsecured Social bond and also our ABS at very attractive rates. We do remain open to additional loan sale agreements at the right terms, And I'll leave it at that.
Okay. That's helpful. Thank you.
Thank you.
The next question will come from the line of Moshe Orenbuch with Credit Suisse.
Great. Thanks. And I guess I was thinking about asking a similar question to Mark. I think that When we look at it, you've generated a tremendous amount of excess capital from just the core operations of the company. And so perhaps there isn't as much of a need to generate more by loan sales, but I guess maybe just to re ask the question, Have you looked at that relationship whereby the fixed income markets are Paying a double digit premium for your loans and perhaps could be higher if expanded and not necessarily lower, I guess, and how you think about that?
Yes. I think Moshe, for us, this is all about balance within our balance sheet and also within our funding program. So certainly, The pricing has been very accretive. But again, I think we want to maintain a certain level on our balance sheet that we feel we're comfortable with. Certainly, those returns are there.
We think about the price in terms of what happens if we keep the loan, what does that look like and what happens if we sell the loan. Obviously, in these loan sales, they're also very capital efficient source of earnings. But I think we'd like it as An addition to our already existing funding programs and not sort of a new strategy for the company at that size.
Got you. Okay. Thank you. That's very helpful. You talked a little bit about kind of funding Opportunities and obviously the bond that you just did and spreads have been really, really good.
Are there any other ways to kind of accelerate, take in more of the low rate environment Kind of into the cost of funds?
Well, there's a few maturities out there in the near future that are Of a coupon that's higher than what we're able to raise debt at today, if you look at our entire stack, our coupon on our unsecured bonds are A little bit over 6% and the yield on those on that stack is just under 3%. So there's obviously some room there as you think about Those bonds rolling off and new bonds coming on. Obviously, the markets are very dynamic and will change. But coming up in the near term, we've got A 22 bond in May that's at 6 and an 8. So that's certainly above where we can Issued today, so we're thinking about that bond.
And there's a bond we issued in the when the capital markets were And a little bit of a challenge state back in early last year that will become callable. It's a nice part of what we added over the last Three bonds we added a callable feature to our programs and so that gives us the ability to do this liability management a little bit more effectively and That bond becomes callable in next May, and it's an 8.25% coupon. So I think that's the way we're going to think about it is replacing that higher cost debt with What we hope will be continued strong yields in the new issue market.
Great. Thanks so much.
Thank
you.
The next question comes from the line of Rick Shane with JPMorgan.
Hi, guys. Thanks for taking my questions. I'd like to sort of combine a couple of observations. Michael, you mentioned that the reserve rate is still 40 basis points above Day 1 levels. Kevin Barker had made the observation about the change in Underwriting over the last year, given the short term nature of your assets, so there has been so much churn, Should we actually consider the possibility that over the next year, the reserve rate goes below Day 1 levels because of the shift in the portfolio and the economic outlook?
Rick, thanks. It's Great question. I mean, it's certainly one we think about. And I think the short answer to your question is, yes, it's possible. I think it's too early to sort of Offer much more of a concrete view on that.
One of the things with our reserves, you'll remember CECL is You have to incorporate unemployment assumptions for the lifetime of the losses that you're forecasting. The unemployment rates Right now, in terms of forecast, are still above what they were when we struck these reserves at 10.7% right post Implementation of CECL. We continue to take a prudent approach with our reserves. If you look at our loss performance and delinquency and roll rates, we've seen some things over the last year plus that I don't think any of us would have expected to see even in our recoveries. You think about post charge off recoveries In the quarter, we're $57,000,000 Our average is $35 ish $40,000,000 a quarter.
And so We're just seeing really strong payment performance and collections across all aspects of the delinquency spectrum In our reserves, we don't necessarily expect that to continue as we think about the life of a loan in the future. And It's one of those things we're just going to continue to look at on a quarterly basis. The reserves are moving down and there's a lot of dynamics that go into that. But I think The net view is it's positive, but we're being cautious as there's still some uncertainty on the horizon.
Got it. Yes, I think it's an important consideration just In the context of how we're looking at reserves more broadly in consumer finance because you guys are uniquely Positioned to sort of recast your portfolio every 12 to 18 months.
Yes. For us, It's also a reason why we focus on the capital generation of the business, which excludes those reserving because it is, especially under CECL, very much a timing Event and so we try to stay focused on the actual economic returns of the business for that reason.
Got it. Great clarification. Thank you guys very much.
Thanks Rick.
The next question comes from the line of Kenneth Lee with RBC Capital Markets.
Hi, good morning. Thanks for taking my question. Just around the improvements in origination volumes you saw in the quarter, Wondering if there's any other details you'd like to call out either in terms of geographies or particular customer segments That you saw any market improvement versus others? Thanks.
Yes. Thanks, Kenneth. We're seeing strong Demand across all of our geographies and across all of our customers. So there's really Nothing particular there. I mean, I'll just point out again, demand was flat 2019 to 2021, we were up 10%, and we do credit many of our Product innovations, channel innovations, adding new channel partners, operational enhancements, It's a lot of things that we've been talking about over the last couple of years starting to come to fruition and seeing it in our results.
Got you. Very helpful. And just one follow-up, if I may. Pete, any changes in terms of underwriting or your credit box over the near term? And was there any changes in the most
Yes. Look, we continue to refine our credit box. And Every month, there's changes based on looking at economic input, looking at things across Geographies and Industries, we're always refining our model. We're always getting more proprietary data. Broadly speaking, we're no longer expecting stress losses in most geographic Regions and Industries, we do still have some anticipated increased loss.
So What I would say is we're very disciplined. We underwrite to 20% ROEs across our portfolio. There's a lot of inputs that go into that and we continue to hone it. But our credit box is definitely more open now than it was A year ago, but that's gradually been shifting and it's been refined across geographies and industries. But At this point, our underwriting is largely assuming not a lot of stress In the market or for our customers going forward.
The next question will come from the line of John Rowan with Janney.
Good morning, guys.
Just a
quick question. Most of my questions have been answered. Is there any timing Around the possibility of a change in the composition of the Board?
Look, our Stockholders' agreement governs the right of the consortium that bought a large share in 2018 to appoint members to the Board, And that agreement is publicly filed. At certain thresholds of ownership, Their ability to appoint directors decreases. Regarding timing, we expect any transition to happen in an Orderly manner over time. That agreement, which again publicly filed, is contemplates That the timing of any resignations of directors is no later than when the director is next up for reelection. So I think Any changes, we would want to make sure are orderly.
I'd also note that That group appointed a number of highly qualified independent directors who played an important role in the success of the company. As a Board, there's definitely a consideration around continuity and stability So that we don't have any interruption in the forward momentum that we've got as a company.
Certainly, I don't think that there's any You know, rush to make a change, but the shareholders or the Board members that would, you know, Gain the majority there, when do they come up for reelection?
Yes. We have 3 year terms on a rotating basis. So it just all depends on the Board member.
Okay. All right. Thank you.
The final question will come from the line of Kevin Barker with Piper Sandler.
Yes. I just wanted to follow-up on the growth outlook. How much of that growth has been driven by Some higher FICO digitally based lending that you typically wouldn't target pre pandemic or earlier than that. I realize if you expand it a little bit more lending towards borrowers closer to 700 FICO versus the 620 FICO. And so just can you give us an idea of what that looks like by making those 700 FICO digitally baselines?
Yes. Kevin, I'll touch on that. It's Micah. The one of the things we've talked about in terms of our strategic initiatives Doug laid out that we think it's The majority of our growth, particularly in June, has been driven by the things we've done in the business. One of those is around Loan and pricing optimization.
So we've talked about it in the past with the word strategic pricing as well. I think that's what you're talking about. So I would say we're still we remain focused on being the lender of choice for near prime. We've seen an opportunity over the last year to use some pricing leverage to add customers that are in that 6 $80,000,000 to $700,000,000 FICO range, particularly on our affiliate channels where there's a little bit more rate shopping. And so that's where we've been successful there.
You've seen a little bit of a shift in the originations towards a higher FICO, but I would say, we remain focused on that near prime customer.
Okay. Thank you very much.
That does conclude the question and answer After the session of today's conference, I would now like to turn the conference over to Mr. Shulman for closing remarks.
Yes. Hey, just want to thank everyone for joining us. No, it's a busy time for you. Our team is here. If you've got follow-up questions, love to hear from you and hope everyone has a great day.
Thank you. This does conclude today's OneMain Financial Second Quarter 2021 Earnings Conference Call. Please disconnect your line at this time and have a wonderful day.