Q4 2022 Regional Management Corp Earnings Call
Thank you for standing by this is the conference operator.
Welcome to the regional management fourth quarter of 2022 earnings call. As a reminder, all participants are and listen only mode and the conference is being recorded.
After the presentation there'll be an opportunity to ask questions to join the question queue. You May press star one on your telephone keypad should you need assistance during the conference call you may signal the operator by pressing Star N Zero I would now like to turn the conference over to get Edson ICR. Please go ahead.
Thank you and good afternoon Bye now everyone should have access to our earnings announcements supplemental presentation, which were released prior to this call may be found on our website at regional management Dot com before we begin our formal remarks I will direct you to page two of our supplemental presentation, which can change important disclosures concerning forward looking statements and they use 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 and uncertainties and other factors that are difficult to predict and that could cause actual results to differ materially from those.
Expressed or implied the forward looking statements. These statements are not guarantee you said peak performance and therefore, you should not place undue reliance upon you.
For all of your tour press release presentation of recent filings with the F. C. C for a more detailed discussion about forward looking statements and the risks uncertainties that could impact the future operating results and financial condition of regional management Corp. All sorts discussion today may include references to certain non-GAAP measures reconciliation of these measures to most comfortable gap measure can be found within.
Earnings announcement or earnings presentation, and posted on our website at regional management Dot Com I would now like to introduce Rob <unk>, President and C. E O of regional Management Corp.
Thanks, Garrett and welcome to our fourth quarter 2022 earnings call I'm joined today by Heartburn or Chief Financial Officer, We closed out 20 twenty-two having taken several meaningful stamps too embarrassed for the new year.
I will take you through our fourth quarter results discuss our growth and the credit quality of our portfolio update you on our strategic initiatives and share our expectations for the first quarter and 2023 more generally.
Fourth quarter results came in better than our expectations unadjusted basis, we are 2.4 million of that income and twenty-five cents of diluted EPS inclusive of a 2.7 million dollar impact to net income from the sale of $27 million of nonperforming loans.
$17 million, which would have otherwise been written off in early 2023.
Justin basis, excluding the impact of this loan sale, we produce $5 million of net income and 54 cents of diluted EPS banana.
The nonperforming loans allowed us to dispose of a distress portion of our portfolio at an attractive price and enabled us to refocus our personnel an early stage delinquent accounts as we entered the first quarter taxation, which seasonally is our best quarter for collections.
As a result of the sale and the acceleration of the net credit losses on the souled accounts from the first quarter to the fourth quarter or they didn't come with negatively impacted by $2.7 million in the fourth quarter, but it hadn't come will be positively impacted by similar amount in the first quarter.
While the timing issue created some noise in the fourth quarter financial results sale provided operational value and allowed us to put a portion of distress segments of our 2021 and early 2022 vintages behind us.
So loans were funded by our senior revolver and warehouse facilities and excluded any loans and our securitization transactions as a result, the sole portfolio contained a greater proportion of higher rate higher risk loans, and our total portfolio, including 1.9 million of loans from the eliminated direct mail segments and digital affiliate highlighted on prior.
Calls <unk>.
Roughly 38 per cent of the sulfur foil balances apr's greater than 36% compared to 14 per cent of total portfolio balances.
I had an average psycho about 613 compared to 644 total portfolio average.
As a reminder, we began tightening credit in late 2021 and continued are tightening actions throughout 2022 or.
Our second half 2022 vintages are some of the strongest in our portfolio and are currently performing in line with expectations.
At year end or 2021 vintages represent just 22 per cent of the portfolio and we expect that number to decline to around 7% by the end of 2023.
We ended 2022 with a 30 plus they delinquency rate of 7.1% only 10 basis points higher than 2019 pre pandemic levels in our early one to 29th and 30 to 59 day delinquency buckets monthly rotates improve sequentially from the third quarter to the fourth quarter by 80 basis points and 120 basis points.
Respectively.
Delinquency rates in those early buckets were also 50 basis points and 10 basis points better respectively than fourth quarter 2019 levels are first payment default rates were also strong in the fourth quarter improving to 7.1 per cent in December which was 240 basis points better than September 20th 22, and 130 basis points.
Better than December 2019.
We attribute these early indicators of credit improvements tighter underwriting and shifting additional collections resources to early stage accounts, excluding the impact of the eliminated direct mail segments and digital affiliate are your and delinquency rate would have been 10 basis points better than pre pandemic levels the portfolio associated with the eliminated direct mail segments.
And digital fill it was down to 22 million at the end of the fourth quarter from 31 nine at the end of the third quarter and we expect it to be off our books and the second half of the year.
Demand for a loan products remains strong in the fourth quarter as it was throughout 2022.
Through our receivables by 92 million to $1.7 billion in the quarter slightly above our guidance.
Strong demand has allowed us to be picky about the borrowers to only bank loans, particularly as we've intentionally slowed our growth rate over the past few orders given the economic environment.
We grew our receivables by 19% year over year in the fourth quarter down from year over year growth rates of 31%, 29% and 22%, respectively and the first three quarters of the year.
Full year receivable growth was disproportionately impacted by growth in the first and second quarters.
Fourth quarter originations rebel the 8% year over year.
We continued to tighten credit in the fourth quarter, most significantly to new borrowers credit tightening actions slowed our year over year receivables growth in the fourth quarter, we believe that the tradeoff between credit and growth is appropriate in this environment new borrowers represented 29 per cent of our 2022 originations compared to 22 per.
<unk> 2019 originations with the increase in 2022, principally attributable to our geographic expansion since 2020th.
New borrowers naturally perform worse on average than our season at present borrowers who remain in that portfolio following loan refinancing.
The higher credit losses on our new borrow a portfolio reflect a component of our investment and growth.
By tightening credit over the past year, we believe we continue to strike the right balance between growth and credit quality.
We all set some little loss I am for my new borrowing credit tightening actions by increasing our former borrower direct mail programs similar to our present borrowing portfolio, a former borrow a portfolio performs better than our new bar overpopulation.
We're able to use past honest credit performance in determining which former borrowers to include in mailings.
Route 2022, we increasingly targeted former borrowers in our mail campaigns in the fourth quarter 45 per cent of our direct mail volume was to form a borrower's compared to 29% in the first quarter and 72% of all originations in the fourth quarter or to present and former borrowers.
The increase former borrow production, coupled with president Barack renewal activity in the branches drove much of our growth in the fourth quarter as we continue to focus on the highest quality originations.
With our credit actions are taught to your wrist ranks made up 63% of originations in the corner up from 46% in the fourth quarter of 2019, and 54% from a year ago.
80% of our third and fourth quarter originations could FICA scores of 600 or a bug compared to 71% in the fourth quarter of 2019.
Nearly all of our new bar <unk> nations in the fourth quarter had FICO scores of 600 or above.
Otto Security portfolio has top 100 million for the first time as a urine.
Credit performance on the growing auto security portfolio has been strong today with a 30 plus day delinquency rate of only 2.2% as of the end of the year.
It's worth a reminder, that for every dollar growth in any given quarter, we lose money on the growth in that corner as we booked a credit reserve upfront to cover lifetime losses.
In the fourth quarter alone, we reserve 9 million pre tax on our 92 million of receivables grow our fourth quarter Reseals growth. However, provided us with a higher jump off point for the new year and will generate nearly 30 million of incremental revenue in 2023.
In addition to the fourth quarter credit tightening. We also completed several key risks and pricing initiatives to support our portfolio going into 2023.
First we completed the rollout of our second generation custom underwriting score card to all of our states.
New advanced model evaluate more than 5000 athletes, including alternative data and has more complex segmentations that will allow us to further fine to our underwriting strategies make better for your credit decisions at the margin and approved by credit last experienced while holding loan volume stable, which should benefit net credit losses is pretty slow.
Our growth in the near term.
Second we expanded our relationship with our external collector improve their capabilities and increased our internal and external collector capacity by 50% in the second half of 2022.
Moves allow our branch team members to focus more of their efforts on early stage collections renewal activity and loan production.
We began rolling out our new customer online portal, which significantly enhances the customer experience and includes improved payment functionality.
Finally, as a result of the rising rate environment and normalizing credit we began to reprice parts of our portfolio and the second half of 2022 <unk>.
Most of the pricing actions will put in place late in the fourth quarter with additional repricing occurring in the first quarter <unk>.
Ah revenue yields fell in 2022, largely due to the mix shift to larger loans below 36% a P. R increase credit tightening on our higher risk higher rate segments, and the impact the worsening credit environment to.
The credit environment has caused a larger portion of our loans to reach nonaccrual status as they enter later stage link, let's see an increase in the reversal crude interest when these phones or retinol.
We expect that a recent pricing actions will help to stabilize revenue meals over the longer term and while we anticipate continued yo pressure in the near term as a result of recent credit tightening and higher rate <unk>, we expect yields will improve in the future at the macro impact on credit reverses back to more normalised levels.
As we look ahead to new year, we believe that the actions. We took in 2022 position is to address potential further deterioration in the macro environment.
<unk>, we will continue to play soccer focus on our highest confidence originations emphasizing quality over quantity, we will originate loans only where we can achieve a return hurdles under an assumption of additional credit stress beyond today's levels as well as higher future funding cost.
The greater percentage of our originations will be the present and former borrowers with new borrower lending disproportionately skewed to our newest states.
As a result, we expect receivables growth to slow to the mid to high single digits in 2023.
There to 19% in 2022.
As we begin to benefit from a more meaningful impact of second half 2022 credit tightening we anticipate the delinquencies will begin to improve in the first half of 2023, which will support improvement in our neck credit loss rate and the second half of 2023 by the end of 2023, we expect our second half 2022 and 2023 bench.
Which is will account for more than 80% of our total portfolio.
While we expect an economic downturn in 2023, most signs indicate that our customer base will fare better than average we're encouraged by the recent trends in inflation and the continued strength of the labor market, including low unemployment high number of open jobs and strong wage growth and our customers industry and income bands. However, if conditions.
Worsen are tightened underwriting provides a powerful mitigate to further economic deterioration.
As a result of expected stronger credit performance and higher revenues on the second half of 2023, we anticipate that our net income will be strongest in the third and fourth quarters of the year.
<unk> will monitor a credit performance and the macroeconomic barroom. It closely will make further adjustments to underwriting is dictated by the circumstances, most critically or modern the inflation rate and how it compares to weigh drug for lower income segment should we observe in improving macroeconomic environment, we have the ability to quickly leaned back into growth.
From an investment standpoint will seek to capitalise on the opportunities available to us and the 72 states that we've entered over the past couple of years, which have increased our addressable market by nearly 80% will tightly manage are expensive slower pace of new state entry significantly and open the only five to seven new branches in 2023.
And the first quarter, we plan to enter one new state that carried over from 2022, and we may enter and secondly state and the second half of the year if justified by the economic conditions are.
Our expense growth in 2023 will be driven primarily by the carryover impact over 2022 investments as we look to grow and capitalized on prior your investments.
Which will include the completion of several important technology digital and data and analytics projects as we continue to modernize that involve omnichannel business strategy.
I want to thank all of our team members for their tireless effort. This past year together, we made major strides in growing and transforming our business and these efforts, including the actions taken in the fourth quarter <unk> strong position going into 2023.
The economic environment remains uncertain I'm confident that the actions we took in 2022 position as well for 2023 and beyond.
Now I'll turn the call over to harp to provide additional color on our financial results.
Thank you Robin Hello, everyone and that'll take you through that for what the result in more detail.
On page three in the supplemental presentation will provider one quarter of financial highlights magenta.
Degenerated GAAP net income 2.4 million and diluted earnings per share of 25 cent gap.
<unk> 2.79, or 29 cents per diluted sure charge related to the long <unk> that prompt described earlier.
<unk> would have generated net income of 5 million and diluted earnings per share.
Our core resolved regarding once again, my high quality portfolio and revenue crab and careful management and extensive partially off that <unk> pollio crowd increased interest expense and macro economic impact for 2022 reproduced returned at 3.3 per cent <unk> 17.
<unk> <unk>.
Turning to page for our long products continue to experience strong demand, enabling us to drive high quality crowd. Despite a number of credit tightening action and an increased focus on collection activities in our branches.
Fourth quarter of direct mail origination <unk> compared to the prior year with an emphasis on form or bar right, well digital and branch origination each trailed the prior year, we had 470 million a total of intonations in the corner and eight per cent increase over the prior year period eight per cent increase if modest compared to the fourth.
Order, a blast here, where origination 19 per cent they're over here.
As you can see on page five we continue to grow our digital channel through affiliate partners expansion in the fourth quarter degenerated digitally forced origination of $48 million, representing 27 per cent of our new borrower volume in the corner, we continue to meet the needs of our customers term multichannel marketing strategy.
Page six display of our portfolio growth and product next through the fourth quarter. They closed 2022 with net finance receivables and 1.7 billion at $92 million from the prior quarter.
Lee ahead of our prior guidance.
Robinhood <unk> <unk> intentionally slow growth in recent Cornbury and while our portfolio is at 273 million or 19% year over year much of the annual growth rate is attributable to the strong origination activity early in the year.
On a product basis, we continue to shift to a large loans and loan at or below 36% as of the end of the fourth quarter or a large lump <unk> comprised 71 per cent of our total portfolio and 86 per cent of our portfolio carried in a P. R at or below 36 per cent.
Looking ahead, we would expect to see normal seasonal liquidation in the first quarter as we continue to monitor the macro environment and keep a close handle on our underwriting.
The first quarter, we anticipate that our nets Nance receivable will contract by approximately 25 million.
Noted before we're focused on smart controlled growth and if dictated by the circumstances, well further tightened our underwriting which would impact receivables at the end of the first quarter.
As shown on page seven or growth initiatives lighter branch print strategy in your state and a recent branch consolidation actions and legacy eight contributed to another strong same store and year over year growth rate at 15 per cent in the fourth quarter.
Receivables per branch bright an all time high of 4.9 million at the end of the year.
We believe considerable growth opportunities for a name within our existing branch, but particularly any of our branches.
Turning to pay J total revenue grew 11% to $132 million in the fourth quarter total revenue yield an interesting field for 32.1 per cent and 28.5 per cent respectively.
<unk> continued next shift towards larger higher quality loans credit normalization and the impact of the loan sale I total revenue yield an interest and see Ya'll declined 300 basis point and 290 basis points, respectively, you're over here.
Those declined 40 basic point is attributable to the loan fail, which involve the acceleration of credit losses and interest accrual river itself from the first order to the fourth quarter.
We estimate the credit impact from the macro economic conditions on revenue reversals and non accrual loan to be approximately 100 basis points with the remainder of the decrease in Neil.
The result credit tightening and the next shift a larger higher quality loans.
We continue to believe that tightening underwriting on higher risk higher yields segment.
The shift in our portfolio towards higher quality large loans, it's appropriate in light of the uncertain macro economic environment in the first quarter. We accept total revenue yield an interesting field can be approximately flat for the fourth quarter as the impact of continuing credit normalization, an additional credit tightening is off that by the first <unk>.
<unk> benefit <unk>.
Credit environment, any creams or yield will also benefited.
Benefited also by the pricing actions that Bob described earlier.
Moving to page nine or 30, plus day delinquency rate is a quarter and was 7.1 per cent downturn basis points sequentially and 110 basis points you over here to the macro economic impact partially offset by the benefits under loan fail.
Credit loss rate in the fourth quarter. It came in at 15 per cent with approximately 320 basis points at the end see alright attributable to the loan fail and 90 <unk> appointment attributable to be eliminated direct mail segment and digital feeling it that rahm discussed earlier.
Putting the loan fail or not credit loss rate for the fourth quarter would've been 11.8%.
In the first quarter, we expect a link when faith can prove consistent with normal seasonal trends and we expect that net credit losses will be approximately 42 million or 20 million lower than the fourth quarter as the first quarter benefit of the loan fail more than off set the typical seasonal increase in net credit losses.
Turning to page 10 allowance credit losses declined slightly in the fourth quarter as a reserve rejection of $11.8 million due to the loan fail more than offset a reserve build at 9.1 million to the portfolio gross and 1.7 million of additional macro related reserved.
As a quarter and the allowance get at 179 million or.
10.5%, a nap nance receivable.
Our allowance model contemplate that unemployment rate will pick at 6.7% in the fourth quarter of 2023, and then gradually decline. The allowance continues to compare favorably tour 30, plus the contractual delinquency of $120 million and includes the macro related reserve of 21 million.
These macro related reserves amount to 12% of our total allowance credit losses.
Strong position as we continue to monitor the health of the economy.
Yeah.
And the first quarter step to build reserves as of late stage delinquency buckets, partially empty due to the loan fail begin to refill spilled.
<unk> will be partially offset by a small belief in the base for their due to seasonal first quarter portfolio liquidations.
As a result, we expect in the corner with a reserve right between 11, and 11.1 per cent subject to macro economic condition.
Assuming the credit improvement described earlier by Rob materialize it by ear and we would expect our reserve right to decline to between 10.5% and 10.7 per cent.
Over the longterm once the macro economic environment proved we expect that our net credit loss rate will be in the range of 8.5 per cent to 9% based on our current product next an underwriting and we believe that our reserve rate dropped to as low as 10 per cent with the improvement attributable to our shift a higher quality amount.
Of course, as we've always done well manage the business in a way that maximizes direct contribution margin and bottom line result.
Flipping to pay the 11th we continue to manage our janney expensive tightly in the face of normalizing credit <unk>.
Jamie expenses for the fourth quarter were 55.1 million better than our prior guidance are.
Annualized operating expense ratio was 13.4% in the fourth quarter, a 290 basis point improvement from the primary pairing it wherever.
Very pleased with our disciplined expense management, and it's challenging economic environment.
We will continue to manage our extensive tightly and prioritize those investments that are most critical to achieving our strategic objectives.
Over the longterm, we believe that our investments and our digital capabilities geographic expansion data and analytics and personnel will drive additional sustainable growth improved credit performance and greater operating leverage in the first quarter. We expect janie expenses can be approximately 62.5 million.
Trying to page 12 or interest expense for the fourth quarter with 14.9 million.
In the first quarter, we expect interest expense can be approximately $17 million.
Page 13 displays are strong funding profiling healthy balance sheet over the last several years, we have diversified our typing sources of funding, enabling us to mitigate interest rate risk and maintain access to liquidity throat economic cycle.
At the end of the fourth quarter, we had 555 million of unused capacity on our credit facilities and $101 million is available liquidity consisting of unrestricted cash on hand, and immediate availability to draw down a revolving credit facilities.
Our dad has staggered revolving duration stretching out to 2026, providing protection against short term disruptions in the credit market.
With ample capacity to fund our business, even it further access to securitization market for independent restricted.
We have also aggressively managed or exposure to arriving interest rate is 88 per cent of our dad is fixed rate as of December 31st with a weighted average coupon at 3.6 per cent and a weighted average revolving duration of 2.1 ear.
Our fourth quarter funded debt to equity ratio remained at a conservative 4.4 O. One we continue to maintain a very strong balance sheet with low leverage healthy reserves ample liquidity to fund our growth and substantial protection against rising interest rates.
We experienced at 1.2 million dollar tax benefit in the fourth quarter data R&D tax credit.
For the first order, we expect an effective tax rate of approximately 26 per cent prior to discrete items, such as any tax and packs of equity compensation.
During the first quarter, we will continue our return of capital to our shareholders. Our board of directors declared a dividend 30 cents per common share for the first quarter.
<unk> will be paid on March 15th 2023 to shareholders of record as of the close of business on February 22nd 2023.
We're pleased with our fourth quarter results in 2022 performance are strong balance sheet in or near and long term prospects for controlled sustainable growth that concludes my remarks, I'll now turn the call back over to Rob.
Thanks, Carp, and there's always I'd like to thank our team for their strong execution in a challenging environment pleased with our fourth quarter results in a meaningful steps that you took to prepare ourselves for 2023.
We entered the new year, we feel good about having put a portion of our stress loans behind us starting the year with 30 day delinquencies nearly flat to pre pandemic levels and observing early signs of credit improvement, including lower first payment default and lower delinquency and improved you're already in our early stage delinquency buckets compared to the third.
Quarter and pre pandemic levels.
These green shoots are thanks to tighter underwriting our next generation scorecard and improved collections capabilities.
With these proactive steps on credit and increased pricing, we're well positioned as we enter the first quarter tax season and are prepared to whether additional economic stress if it materializes.
Cautiously optimistic that we'll see an improvement in delinquencies in the first half of the year and that credit loss rates in the second half of the year. If so our sophisticated underwriting model will enable us to respond quickly to take advantage of the improving macroeconomic conditions.
As we've done in the past and manage are expensive tightly will continue our investment and those things that will generate the greatest returns in the form of controlled disciplined portfolio growth improve credit performance and greater operating leverage ultimately these efforts will position us to sustainably grow our business expand our market share and create additional.
No value for our shareholders. Thank you again for your time and interest and I'll open up the call for questions. Operator could you. Please open the line.
Certainly we will now begin the question and answer session to join the question queue. You May Press Star then one on your telephone keypad, you'll hear a tone acknowledging your request if you're using a speaker phone. Please pick up your handset before pressing any cheese to withdraw your question. Please press Star then too.
We will pause for a moment as colors joined the queue.
Our first question comes from David Sharp of J M. P Securities. Please go ahead.
Hi, good afternoon. Thanks, Thanks for taking my my questions Robyn.
I wanted to you know.
Kind of dig in a little bit to maybe.
Sort of some of your underlying assumptions.
Your plays out kind of recognizing how many variables there are and I think one of the things that sort of.
Sort of piqued my interest I may have heard it incorrectly, but when you were discussing reserved levels.
Did you.
Say that your forecasted year and unemployment rate.
I heard 6.7%, but it was that.
Correct, Yeah, yeah. So what we have is our model contemplate that the unemployment rate will peak at 6.7% in the fourth quarter of 2023, and then just for reference right in the third quarter, our unemployment peaked at 6.4% in third quarter of 2023.
<unk> so the reflection of that increase in the unemployment rate is based upon scenarios that we use from a large ratings agency and it is basically a reflection of a higher probability of recession that you're seeing there yeah and David just <unk>.
Clear is when we made those assumptions it was obviously before the most recent you know unemployment figures were released.
Right.
Yes that that was maybe really what I wanted to dig into Rob a little bit I mean.
You know that's even even prior to that very strong January jobs report I know quite a number of.
Tears and they're here and earnings calls.
You know based reserve levels under the assumption of four and a half 5% and it seems to be consistent with kind of a lot of.
Economists out there and.
I'm just wondering you know.
What are some of the.
Metrics.
That you may have your eye on and how quickly might those come in terms of just maybe one or two more months of jobs reports well.
Well I think I only I crochet up yep, so yeah. It it what I'm really getting at is I'm wondering you know it is the.
Not not just as the reserve level should we view it as maybe very very conservative but.
Would more.
More granular or more comfort that unemployment is going to peak.
Potentially 200 basis points lower your N, 4.5% seems to be more of a consensus would that impact your origination plans as well.
Yeah. So let me address that stuff from a social standpoint, you know we would probably why no. We were more waited two words, you know a little bit more weighted towards a harder landing in a softer landing at the end of the year and we made that shift obviously, you know looking ahead and not being <unk>.
Sure what the impact was of the rapidly increasing fed funds rate and impact on unemployment, particularly with all the lay offs, we've been reading about and hearing about and particularly the tech industry. So you know we we we took a slightly more conservative approach in the fourth quarter.
Uhm increased our macro reserve by $1.7 million. So it stands at $21 million today, you know and again that was before the most recent print I think if you're if we're thinking about what are the levers that would you know and do sauce to lean back into growth you know besides the.
You know the early credit indicators and we talk about some of the green shoots and unprepared comments, we'd like to see that continue for a period of time, but then it also it is as we said it's where's the inflation rate, particularly you know those categories. Most sensitive for our customers you know food home energy and the like and how.
That stacks up relative to to wage growth now one of the things that.
You know where we've been tracking more closely is that you know you know one indicator real wage growth is if you look at non supervisor and production workers, which includes you know services workers as well five on the last six months, there's been a real wage growth now.
On a 12 month basis, that's still you know 1.1 per cent negative on a real wage basis, but you know seeing that trend for five or the last six months and will be watching it will be important now some economists would come out and said wage growth is slowing but I think the indicator that I, just mentioned, which I haven't.
Seen many people talking about or anybody talking about when you look at you know real wage growth. Overall, you know I think what's slowing may be for higher income folks the lower income folks based on the matrix I. Just quoted you seem to be you know at least the last six months.
Doing better than inflation, which is you know hopefully a good son, so we'll be watching all of that and that will help US you know decide when we might lean back into growth and of course, there's 11 million open jobs out there and as I've.
<unk> said before now a couple of quarters, that's that's a plus for for our customer base. When you know they have multiple opportunities if they lose their job to replace their income.
Got it understood. Thank you very much.
Our next question comes from John Rowan of Janie. Please go ahead.
Good afternoon sort of clarify two things so the Genie Gardens, you gave was 62 million correct.
For <unk>.
Yeah, 62, and a half.
Okay and then the.
The <unk>.
Justin figure that you gave a 54 cents.
That does not include.
Eight an hour to see a reversal, but that does not exclude the 1.2 million top 1.2 million dollar tax game that you reported in the quarter.
So that that does so the R&D credits. So the 1.2 is included and all of those numbers.
The only thing that's exploded as the loan sale from the okay. So cause it looked like it looks like in the press release at the table still had a tax credit in the non-GAAP table. So I assume that that 1.2 million dollar gain is included in the 54 cents of adjusted earnings that you reported to make sure I have that correct yeah.
That's actually it for me thank you.
Hey, before I take the next question one thing that that I wanted to mention is I wanted to correct. One thing in my prepared remarks, so I misspoke earlier, when I said, our December 20, twenty-two first payment default rate was 130 basis points better than December 19th it's actually.
<unk> 170 basis points better so I just wanted to correct the record on that and and sorry about the miscommunication. So it will take the next question.
Once again, if you have a question. Please press Star then what.
Our next question comes from Bill.
<unk> of Titan capital. Please go ahead.
Alright. Thank you I was hoping that you would discuss the difference in the rate loan origination growth between small loans and large loans and whether that was something that you all had done intentionally and if so why or if it was related to the environment and and how that was.
A driver please.
Yeah sure absolutely they'll so yeah, what you're saying here is as we were tightening credit really since the fourth quarter 21, but more aggressively after July of 2022, we we tightened credit on or a higher rate higher risk loans, which tended to be disproportionately small loans and so that's.
Why you see the the growth rate you know slow there now that is obviously done because of the the current environment and the uncertainty, but you know where we'd cut is also where there's opportunities to lean back into growth when we see the economic environment and have a little bit more certainty.
Naturally within you know help our yields and and the like so it's really just you know the result of or tightening credit and you know taking risk off in this environment.
Great. Thank you.
Excellent.
This concludes the question and answer session I would like to turn the conference back over to Mister back for any closing remarks.
Thanks, operator, and thanks, everyone for joining this evening I'd also like to thank our team again for their you know exceptional execution in a in a challenging environment.
You know we've taken numerous actions in the fourth quarter of 2022 that I think put us in an even stronger position as we enter as we entered this year. So you know just a quick summary, as I said, we began tightening in fourth quarter 21, obviously, we increase that tightening in.
In July or mid 2022, and we tightened again here you know in the fourth quarter, but it's important to note that you know as an ear and I'm 2022, 47 per cent of our portfolio I've been originated since July 1st and by ear and 2023 more than 80 per cent of our portfolio will have been originated.
That time as well and obviously those are the you know.
The portfolio that has the tightest Titus underwriting you know, we still have a incredibly strong balance sheet, 88% of our dad is fixed it a year and we have plenty of liquidity fund growth for the next 12 months you know based on you know our growth projections.
For 2023, you know it's great that we're entering 2023 with 30 day delinquencies nearly flat to pre pandemic levels, you know, having after having sold the $27 million of distress loans and a quarter and we are seeing early indications of proofing credit as I said in the prepared remarks, so besides the first payment.
That was 7.1% and as I said 170 basis points.
Mmm lower than 2019, when it was at 8.8% we saw improvement in the early bucket roll rates versus the third quarter or early bucket delinquencies are down versus pre pandemic levels as I said in my prepared remarks, and a 30 to 89 day delinquencies or flat compared to four quarter of 2019.
And we attribute these green shoots if you will to our tighter underwriting next shift and the early impacts of our next generation scorecard that we fully rolled out in the fourth quarter. We also have a sudden began to reprice the portfolio more aggressively and we increased our collection staff by 50 per cent in preparation for the taxes.
And Ah this quarter.
While inflation is coming down as I mentioned in the queue and I. We're encouraged by you know that continuing to to drop we're encouraged by you know what's happening with the number of open jobs for.
Our customers were encouraged by what looks to be fairly strong real wage growth in recent months and with all that you know where you know remain cautiously optimistic that we'll see improvement in delinquencies in the first half of the year and that credit loss rate in the second half of the year and of course, if the macro economic conditions improve later.
This year, we know that our sophisticated underwriting models will enable us to respond quickly and take advantage of the better operating environment. So thanks again for joining you have a good evening.
This concludes today's conference call you may disconnect. Your lines. Thank you for participating and have a pleasant day.
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