Mihir Bhatia: Got it. I appreciate that. That makes sense. Maybe just taking a step back at a higher level. Can you talk a little bit about just the competitive intensity right now? I mean it sounds like you’re tightening underwriting a little bit. But like obviously, last year, you’ve seen a big pullback from the Fintechs that used to play a lot in this space. Are you seeing them come back? How are you thinking about that over the next year? And in your guidance, do you expect the environment to continue to be similar where you have more demand than the actual stuff that you can actually book or you want to originate right now?
Douglas Shulman: Yes, thanks, Mihir. Look, it’s a really good competitive environment for us. What I would say is going back to ’21 and early 2022, there was a ton of supply in the market, and there was a fair amount of irrational pricing, meaning people were making loans to people with high expectations of losses at 10%, which just didn’t make any sense, and people lost a lot of money when that happened. In ’22, early ’23, a lot of our competitors just couldn’t get funding. And so we had a pretty wide-open market. But that shifted by mid-2023. I think it was back to a more normal competitive environment, where prices had risen, people with really strong balance sheets like us, had plenty of money to loan. People who didn’t have as much history or not a strong balance sheet, both had tighter credit box, higher pricing and had to find funding, which was more expensive and harder to find.
We’ve looked hard at the environment. I think right now, overall, the amount of loans being made is less than it was pre-pandemic, but it’s higher than it was a couple of years ago. All of this leads us to say we plan to win, and we plan to do good business and we plan to serve customers regardless of what’s happening with the competition. I mean we have a healthy amount of respect for the competition. But that’s why we’ve built out digital originations. We’ve expanded our product set. We’ve expanded our channels. And so your question, does the growth take into account the competitive environment, it would have to change a lot for us to have to change our strategy due to the competition. I mean we kind of stick with our knitting. We have a long-term view.
We stay in the market. We’re incredibly disciplined around credit and it served us well. We continue to look, and we have in our deck on Slide 11, our credit results continue to be better than competition. And so I think it’s because we have a long-term view, and we make sure that we’re comfortable with the business we’re booking.
Mihir Bhatia: Thank you for taking my questions.
Douglas Shulman: Yes, thank you.
Operator: Thank you. We will take our next question from Arren Cyganovich with Citi. Your line is open.
Arren Cyganovich: Thanks. I was just hoping you could give a little idea of the magnitude of net charge-off rate increase in the first half versus the second half. I think typical seasonality, the first quarter tends to be the highest and improves in the second quarter. It sounds like the dynamics will be maybe a little bit different this year?
Micah Conrad: Yes. I think generally speaking, Arren, it’s Micah. We’re typically what we will see in the first half is a loss rate that’s about 100 basis points higher than what you will see in the third quarter with something a little bit in the middle of those two in the fourth. So the natural trend of 30 to 89, which starts the clock on charge-offs is for 30 to 89 to kind of bottom out in February, March during tax season. And then it begins to rise throughout the year. I think just a general seasonal trend, you would follow charge-offs six months later, effectively. And as long as that relationship holds then you would expect to see that the charge-offs will be lowest in the third quarter; second lowest in the fourth and then highest in the first and second.
Arren Cyganovich: Got it. All right. Thank you.
Douglas Shulman: Hey, everybody. Thanks so much for joining us today. As always, we’re available for follow-up questions, and we look forward to seeing everybody soon.
Operator: Thank you. This does conclude today’s OneMain Financial fourth quarter and full-year 2023 earnings conference call. Please disconnect your line at this time, and have a wonderful day.
