Cuộc họp công bố kết quả kinh doanh Q3 2026 của Regional Management (RM): Doanh thu kỷ lục, chi phí tín dụng trở thành tâm điểm

Nội dung chính

• Regional Management Corp. đã báo cáo lợi nhuận ròng quý 3/2026 đạt 15,1 triệu USD và EPS pha loãng đạt 1,61 USD, lần lượt tăng 5% và 13% so với cùng kỳ năm ngoái.
• Doanh thu kỷ lục theo quý đạt 178,8 triệu USD, tăng 8%, nhờ sự tăng trưởng của danh mục cho vay và thu nhập từ phí hợp tác với ngân hàng Column.
• Dư nợ cho vay tài chính ròng vào cuối quý đạt 2,2 tỷ USD, tăng 7,6% so với cùng kỳ năm ngoái. Danh mục cho vay bảo đảm bằng ô tô tăng 25% và chiếm gần 16% tổng danh mục.
• Rủi ro tín dụng vẫn là áp lực chính. Tỷ lệ tổn thất tín dụng ròng là 10,9%, tăng 70 điểm cơ bản so với cùng kỳ năm ngoái, trong khi tỷ lệ nợ quá hạn từ 30 ngày trở lên tăng 50 điểm cơ bản lên 7,5%.
• Ban lãnh đạo đã duy trì triển vọng cả năm nhưng hiện dự báo lợi nhuận ròng quý 4 sẽ thấp hơn quý 3 do tổn thất tín dụng tăng theo mùa, chi phí hợp tác ngân hàng tăng tốc, chi phí vốn cao hơn và thời điểm ghi nhận chi phí G&A.
• Công ty đặt mục tiêu đạt tỷ suất sinh lời trên vốn chủ sở hữu (ROE) hàng năm trên 18% theo thời gian, nhờ hiệu quả kinh tế từ hợp tác ngân hàng, tổn thất tín dụng thấp hơn và quy mô hoạt động lớn hơn.

Dữ liệu tài chính quan trọng

Kết quả kinh doanh và hoạt động

Danh mục cho vay tiếp tục chuyển dịch sang các khoản vay lớn hơn và khoản vay bảo đảm bằng ô tô. Các khoản vay lớn chiếm 79% dư nợ cho vay, so với mức 74% của một năm trước đó. Giá trị phát hành khoản vay lớn tăng 12%, trong khi giá trị phát hành khoản vay nhỏ giảm 22% do công ty thắt chặt quy trình thẩm định ở các phân khúc rủi ro cao hơn.

Danh mục cho vay bảo đảm bằng ô tô, được ban lãnh đạo mô tả là sản phẩm có chất lượng tín dụng cao nhất của công ty, đã tăng 25% so với cùng kỳ năm ngoái. Tỷ lệ nợ quá hạn từ 30 ngày trở lên của danh mục này là 2,2%.

Mối quan hệ hợp tác với ngân hàng Column đã mở rộng sang các bang North Carolina, Louisiana và Missouri. Trong tháng 10, hơn 40% một chút tổng giá trị phát hành khoản vay mới đến từ quan hệ hợp tác này, tăng so với mức khoảng 28% vào tháng 7. Ban lãnh đạo tiếp tục kỳ vọng hầu như tất cả các chi nhánh sẽ hoạt động theo chương trình này vào cuối năm 2027.

Thu nhập từ phí hợp tác ngân hàng đã đóng góp khoảng 120 điểm cơ bản vào tỷ suất tổng doanh thu quý 3. Ban lãnh đạo ước tính rằng chương trình này có thể cải thiện biên lợi nhuận trước thuế ít nhất 200 điểm cơ bản so với các khoản vay tương đương được phát hành theo giấy phép của bang. Các sáng kiến chiến lược, chủ yếu là quan hệ hợp tác, đã đóng góp khoảng 3 triệu USD vào lợi nhuận ròng quý 3.

Regional Management cũng tiếp tục triển khai hệ thống chấm điểm phát hành vay độc quyền mới, tăng cường kiểm soát gian lận và tập trung hóa hoạt động thu hồi nợ giai đoạn muộn. Công ty dự kiến bảng điểm sẽ được triển khai đầy đủ trong quý 4. Kênh cho vay kỹ thuật số toàn trình của công ty đã ra mắt vào tháng 7 và chỉ đang được mở rộng quy mô khi hiệu quả tín dụng hỗ trợ mức lợi nhuận điều chỉnh theo rủi ro mục tiêu.

Dự báo của Ban lãnh đạo

Ban lãnh đạo đã tái khẳng định triển vọng cho cả năm 2026:

• Tăng trưởng lợi nhuận ròng từ 6% đến 9%.
• Tăng trưởng EPS pha loãng từ 10% đến 13%.
• Tăng trưởng danh mục từ 5% đến 7%.

Đối với quý 4/2026, ban lãnh đạo dự báo:

• Danh mục tăng trưởng khoảng 60 triệu USD.
• Mức trích lập dự phòng khoảng 6 triệu USD, với tỷ lệ dự phòng đi ngang so với quý trước.
• Tỷ lệ tổn thất tín dụng ròng khoảng 11,5%.
• Tỷ suất tổng doanh thu tăng so với quý trước, được thúc đẩy bởi thu nhập từ phí hợp tác ngân hàng cao hơn.
• Tỷ lệ chi phí hoạt động cao hơn chủ yếu do chi phí phát hành khoản vay hợp tác ngân hàng, thời điểm ghi nhận chi phí G&A và đầu tư công nghệ.
• Chi phí vốn khoảng 4,7%.
• Thuế suất thực tế khoảng 20%.
• Khoảng 5 triệu USD lợi nhuận ròng từ các sáng kiến chiến lược, tăng từ mức khoảng 3 triệu USD trong quý 3.

Mặc dù duy trì triển vọng cả năm, ban lãnh đạo hiện dự báo lợi nhuận ròng quý 4 sẽ thấp hơn quý 3. Công ty trước đó dự kiến lợi nhuận ròng quý 4 sẽ vượt kết quả quý 3.

Ban lãnh đạo cho biết họ kỳ vọng năm 2027 sẽ mang lại mức tăng trưởng danh mục nhanh hơn, phạm vi bao phủ hợp tác ngân hàng rộng hơn, chất lượng tín dụng tiếp tục cải thiện và, tùy thuộc vào môi trường vĩ mô, tăng trưởng lợi nhuận ròng mạnh mẽ so với năm 2026 ngay cả khi chi phí vốn tăng. Kế hoạch dự báo chi tiết cho năm 2027 dự kiến sẽ được công bố trong cuộc họp công bố kết quả kinh doanh tiếp theo.

Rủi ro và Các yếu tố cần theo dõi

Sự suy giảm chất lượng tín dụng tập trung chủ yếu ở các khoản vay phát hành trong năm 2025 và ở các phân khúc đối tác liên kết kỹ thuật số rủi ro cao hơn. Ban lãnh đạo ước tính các phân khúc này chiếm khoảng một nửa trong mức tăng 70 điểm cơ bản so với cùng kỳ năm ngoái của tỷ lệ tổn thất tín dụng ròng. Giá trị phát hành khoản vay từ đối tác liên kết kỹ thuật số đã giảm 13% sau khi thắt chặt mức điểm chuẩn và loại bỏ các nhóm khách hàng rủi ro cao hơn.

Ban lãnh đạo cũng dẫn chứng giá xăng tăng cao và lạm phát là áp lực đối với người vay có thu nhập khả dụng hạn chế. Mặc dù mô tả người tiêu dùng nói chung là vẫn chống chịu tốt, xu hướng nợ quá hạn lại diễn biến xấu hơn ở các khách hàng có thu nhập cố định và những người vay có ít đệm tài chính hơn.

Chi phí vốn dự kiến sẽ tăng khi các khoản chứng khoán hóa cũ có chi phí thấp hơn đến hạn phân bổ và các khoản vay lãi suất thả nổi trở nên đắt đỏ hơn. Việc đẩy nhanh áp dụng hợp tác ngân hàng cũng làm tăng chi phí hoạt động trong ngắn hạn do một số chi phí phát hành được ghi nhận ngay thay vì hoãn lại, mặc dù ban lãnh đạo cho biết điều này chỉ ảnh hưởng đến thời điểm ghi nhận chi phí chứ không ảnh hưởng đến hiệu quả kinh tế cốt lõi của chương trình.

Điểm nhấn phần Hỏi & Đáp với Chuyên gia phân tích

Ban lãnh đạo cho biết sự chuyển dịch sang các khoản vay lớn hơn phản ánh sự tăng trưởng trong mảng cho vay bảo đảm bằng ô tô và nhu cầu phù hợp với tiêu chí lợi nhuận điều chỉnh theo rủi ro của công ty. Các khoản vay nhỏ vẫn là một phần của chiến lược, nhưng các gói chào vay và mức định giá sẽ ngày càng phản ánh rủi ro và khả năng chi trả của người vay.

Về khoản dự phòng, ban lãnh đạo cho biết tỷ lệ dự phòng 10,4% đại diện cho ước tính tốt nhất hiện tại của công ty về tổn thất trong toàn bộ thời hạn khoản vay. Các quyết định dự phòng sẽ tiếp tục kết hợp cơ cấu sản phẩm, điểm FICO, tình trạng nợ quá hạn và các yếu tố kinh tế vĩ mô. Bản thân quan hệ hợp tác ngân hàng không dự kiến sẽ làm thay đổi mức dự phòng cho các khoản vay tương đương khác vì tiêu chuẩn tín dụng vẫn giữ nguyên.

Ban lãnh đạo mô tả cho vay kỹ thuật số là một kênh tăng trưởng dài hạn thay vì là sự thay thế cho các chi nhánh. Các thách thức chính bao gồm sự cạnh tranh, độ nhận diện thương hiệu, định giá, gói chào vay, phòng chống gian lận và xác thực khách hàng. Công ty dự định mở rộng kênh này một cách từ từ khi hiệu quả khoản vay xác nhận các mức lợi nhuận dự kiến.

Toàn văn biên bản cuộc họp công bố kết quả kinh doanh

Toàn văn cuộc gọi công bố kết quả kinh doanh

Phần trình bày của ban lãnh đạo

Operator

Greetings, and welcome to the Regional Management Third Quarter 2026 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Garrett Edson. Please go ahead.

Garrett Edson

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, which were released prior to this call and may be found on our website at regionalmanagement.com.

Before we begin our formal remarks, I will direct you to Page 2 of our supplemental presentation, which contains important disclosures concerning forward-looking statements and the use of non-GAAP financial measures.

Part of our discussion today may include forward-looking statements, which are based on management's current expectations, estimates and projections about the company's future financial performance and business prospects. These forward-looking statements speak only as of today and are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements. These statements are not guarantees of future performance, and therefore, you should not place undue reliance upon them.

We refer all of you to our press release, presentation and recent filings with the SEC for a more detailed discussion of our forward-looking statements and the risks and uncertainties that could impact our future operating results and financial condition.

Also, our discussion today may include references to certain non-GAAP measures. Reconciliation of these measures to the most comparable GAAP measures can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com.

I would now like to introduce Lakhbir Lamba, President and CEO of Regional Management Corp.

Lakhbir Lamba

Thanks, Garrett, and good afternoon, everyone. Joining me on the call today is Harp Rana, our Chief Financial and Administrative Officer. I'll begin with a summary of our third quarter results, spend some time on credit performance and the actions we've taken to improve credit quality and then update you on our strategic priorities and outlook before Harp walks through the financial details.

In the third quarter, we delivered strong net income, record quarterly revenue, 8% year-over-year portfolio growth and 16% annualized return on equity. We grew net finance receivables by $62 million during the quarter and ended the quarter with a portfolio of $2.2 billion. We generated net income of $15.1 million or $1.61 of diluted earnings per share, up 5% and 13% year-over-year, respectively.

We produced quarterly revenue of $179 million, up 8% year-over-year, driven by portfolio growth and fee income from our bank partnership. We continue to manage expenses carefully, improving our operating expense ratio by 20 basis points year-over-year to 12.6%, even as we absorbed the upfront costs of an accelerated bank partnership rollout.

Our auto secured portfolio, our best credit quality product, grew 25% year-over-year, now represents nearly 16% of our total portfolio and carries a 30-plus day delinquency rate of just 2.2%.

Our net credit loss rate improved 130 basis points sequentially to 10.9% in the quarter, 20 basis points above our outlook and 70 basis points above the prior year period. Our 30-plus day delinquency rate of 7.5% was up 50 basis points, both sequentially and year-over-year. The drivers of the year-over-year variances are concentrated in specific segments of the portfolio, primarily loans originated in 2025. In addition, slower portfolio growth than last year has also lifted our loss rate, while elevated gas prices and inflation continue to pressure borrowers with lower discretionary income.

We've taken several actions to address these drivers of credit performance.

First, we've tightened underwriting where performance has [ lacked. ] The largest driver is our digital affiliate channel. We exited or tightened score cutoffs in our highest risk digital affiliate segments and eliminated other high-risk cohorts in our portfolio, which we believe accounted for roughly half of the 70 basis points year-over-year increase in net credit losses. As a result of these tightening actions, digitally sourced originations volume declined 13% year-over-year.

Second, in June, we began implementing enhanced fraud controls across all of our channels. These include third-party fraud scores, step-up identity verification and a dedicated central fraud operations team. Early first payment default reads on our July originations are better than a year ago in every channel, reflecting both the new controls and our earlier credit tightening. We'll have a clearer view as these loans mature.

Third, we are upgrading our credit decisioning with a new proprietary origination scorecard. The model delivers stronger rank ordering of risk and sharper separation between performing and nonperforming accounts with the greatest lift among new borrowers and in our digital channel. It's live in the majority of states today, and we will complete the rollout in the fourth quarter.

And finally, earlier today, we announced the appointment of Liz Canini as the Chief Credit Risk Officer. Liz brings more than 25 years of credit risk and consumer lending experience at Citi, PNC and HSBC, and we are excited to have her on the team. I also want to thank Manish Parmar for his several contributions over the past 6 years. The actions we are taking are already shaping the quality of what we are originating today, and we remain committed to our long-term goal of a net credit loss rate below 10%.

Turning to our strategic priorities. The most important continues to be our bank partnership with Column. Since the last call, we've extended the program to 3 additional states, North Carolina, Louisiana and Missouri. So far in October, just over 40% of total originations have come through the partnership, up from roughly 28% on a run rate basis when we spoke in July. We continue to expect substantially all of our branch network to be operating under the partnership by the end of 2027.

The partnership is already contributing meaningfully to our results through fee income, as you saw in our record revenue this quarter. It added roughly 120 basis points to total revenue yield in the quarter, and we are projecting that pretax margin will improve by at least 200 basis points under the program compared to similar loans originated in our state licensed operations.

Early credit performance on partnership loans has been broadly comparable to our state licensed originations, though it's still early. Just as important, partnership enables pricing that is better aligned to risk, which should reduce adverse selection and support volume, credit performance and risk-adjusted margins over time. We are scaling the partnership with discipline and we'll continue to expand it as results confirm its economics.

We are also completing the rollout of our new front-end loan origination platform, which will be live in all of our branches this quarter. The platform will enable significantly faster credit decisions than our legacy system, has been well received by our branch teams and gives us a scalable foundation to improve sales, the customer experience and operating efficiency as we continue to enhance it and our origination process over time.

We've also strengthened collections by centralizing late-stage accounts, enabling our branches to focus on sales and early-stage delinquency. In addition, we've enabled enhanced contact data, branded calling and AI-enabled tools to improve customer engagement, cure rates and overall collection efficiency.

In addition, we launched an end-to-end digital lending in July and are scaling the channel with discipline, expanding only as credit performance validates our risk-adjusted return expectations. Over time, we expect digital originations to complement our branch network and become an important contributor to growth. Looking further ahead, our bank partnership and our investments in technology, data and analytics also creates opportunities for disciplined geographic expansion and over time, a broader set of products for our customers.

Finally, we are building the team to execute the strategy. In addition to Liz, we are adding leadership talent in the marketing and human resources functions, including a new Chief Marketing Officer with deep financial services and digital marketing experience, who will join us in mid-November.

Turning to our outlook. Our expectations for the full year remain unchanged from last quarter. We continue to expect full year net income growth of 6% to 9%, diluted earnings per share growth of 10% to 13%, and portfolio growth of 5% to 7%. Harp will provide more detail on the fourth quarter.

Looking beyond this year, we are targeting an annual return on equity above 18% over time. We see 3 primary levers to improve returns. The first is higher yields from our bank partnership through higher fee income. The second is a lower net credit loss rate driven in part by the credit actions I described today, continued improvements in underwriting and enhanced risk-based pricing. The third is greater scale and efficiency from portfolio growth and our investments in technology, data and AI.

Each of those levers is already in motion and will contribute to strong growth on our bottom line in 2027. We'll provide more detail with the 2027 outlook on our next earnings call early next year.

With that, I'll turn the call over to Harp.

Harpreet Rana

Thank you, Lakhbir, and good afternoon, everyone. I'll take you through our third quarter results in more detail and then provide additional color on our outlook for the fourth quarter.

Beginning on Page 4, net income for the third quarter was $15.1 million or $1.61 of diluted earnings per share compared to $14.4 million or $1.42 per share in the prior year period. Revenue grew $13.3 million year-over-year, which largely offset higher net credit losses, G&A expense and interest expense, a smaller reserve build than a year ago, reflecting slower portfolio growth accounted for the balance of the year-over-year increase in pretax income.

Turning to Pages 5 and 6. Total originations were $530 million, up 5.3% sequentially and 1.5% year-over-year. Large loan originations grew 12% year-over-year, while small loan originations declined 22%, reflecting the tighter underwriting in higher-risk segments that Lakhbir described. Ending net finance receivables were $2.2 billion, up $157 million or 7.6% year-over-year and up $62 million sequentially, in line with our outlook. Large loans now represent 79% of our portfolio compared to 74% a year ago. Net finance receivables per branch were $6.2 million, up 6% year-over-year and same-store receivables grew 6.7%.

On Page 7, total revenue was a record $178.8 million, up 8% year-over-year, driven by an 8.5% increase in average net finance receivables and by fee income from our bank partnership. Other income, which includes bank partnership fee revenue, more than doubled from the prior year period to $12.3 million.

Our total revenue yield was 32.9%, down 20 basis points year-over-year. Interest and fee yield declined 100 basis points, reflecting the continued mix shift towards larger and auto secured loans, which carry lower yields and lower loss rates as well as pricing changes and the impact of higher credit losses on revenue.

Insurance income also declined in part because certain insurance products are not offered on bank partnership loans. Bank partnership fee income added approximately 120 basis points to our total revenue yield, offsetting most of those declines. Sequentially, total revenue yield increased 110 basis points, driven by bank partnership fee income and seasonality.

Turning to Page 8. Our 30-plus day delinquency rate was 7.5%, up 50 basis points both sequentially and year-over-year. Our net credit loss rate was 10.9%, down 130 basis points sequentially as losses seasonally declined, but up 70 basis points year-over-year and 20 basis points above the outlook we provided in July, driven by the factors Lakhbir described.

On Page 9, our allowance for credit losses increased $6.8 million during the quarter to $230.8 million, primarily to support portfolio growth. Our allowance rate was 10.4%, flat sequentially and up 10 basis points year-over-year. Our allowance of $230.8 million compares favorably to $165.8 million of loans that were 30 or more days past due at quarter end.

Moving to Page 10. G&A expenses were $68.6 million, up $4.6 million year-over-year. Our annualized operating expense ratio was 12.6%, a 20 basis point improvement year-over-year achieved despite approximately 40 basis points of upfront origination costs associated with our bank partnership.

As a reminder, under our state license model, we defer certain origination costs and recognize them over the life of the loan. For the bank partnership loans, we recognize those costs at origination. As the partnership scales, the difference increases our near-term operating expense ratio. It changes the timing of expense recognition, not the underlying economics of the program, which continue to be accretive to our earnings.

Turning to Pages 11 and 12. Interest expense was $24.1 million, and our annualized cost of funds was 4.4%, stable both sequentially and year-over-year. We ended the quarter with $324 million of unused capacity, available liquidity of $104 million and fixed rate debt representing 74% of our total debt with a weighted average coupon of 4.8%. Several of our older lower-cost securitizations have now exited their revolving period. And as they amortize, we expect our cost of funds to move higher.

On Page 13, during the third quarter, we repurchased approximately 266,000 shares of our common stock at a weighted average price of $37.64 per share or $10 million in total. On a year-to-date basis, we've generated $50 million of capital and returned $31 million to shareholders through dividends and share repurchases while growing stockholders' equity by $8 million. Our Board also declared a dividend of $0.30 per share for the fourth quarter.

Finally, on Page 14, let me provide additional detail on the fourth quarter. As Lakhbir noted, we continue to expect full year net income growth of 6% to 9%, diluted earnings per share growth of 10% to 13% and portfolio growth of 5% to 7%.

I also want to be clear about one change in the shape of the year. In July, we said we expected fourth quarter net income to exceed the third quarter. We now expect fourth quarter net income to be lower than the third quarter. That reflects seasonally higher net credit losses at a level above our prior outlook, higher upfront costs from a further acceleration of our bank partnership implementation, higher funding costs and a shift in the timing of certain G&A expenses from the third quarter into the fourth.

Turning to the specific drivers. We expect fourth quarter portfolio growth of approximately $60 million, supported by seasonal loan demand and a reserve build of approximately $6 million with our allowance rate flat sequentially. We expect a net credit loss rate of approximately 11.5%, reflecting a seasonal increase from the third quarter and the credit trends we've discussed.

We anticipate that total revenue yield will increase sequentially, driven by continued growth in bank partnership fee income, partially offset by lower interest and fee yield and lower insurance income. We expect our operating expense ratio to rise sequentially, primarily reflecting higher bank partnership origination volume and the G&A timing shift as well as continued investments in technology and digital capabilities.

Our cost of funds will increase to approximately 4.7% as lower cost fixed rate funding continues to amortize and rates on our variable rate debt rise. And we expect an effective tax rate of approximately 20%, reflecting a reduction in state tax expense in the quarter. Finally, we anticipate that our strategic initiatives, principally the bank partnership will contribute approximately $5 million of net income in the fourth quarter compared to approximately $3 million in the third quarter.

That concludes my remarks. I'll now turn the call back over to Lakhbir.

Lakhbir Lamba

Thank you, Harp. Before we open the call for questions, let me leave you with 3 points.

First, we delivered strong net income, record quarterly revenue and solid portfolio growth in the third quarter, and we expect the same for the fourth quarter.

Second, we've dimensioned and addressed underperforming segments of our portfolio, and we are confident in the quality of loans we are originating today.

Third, through our bank partnership and investments in talent, technology, data, analytics and AI, we are building the foundation to generate consistent returns on equity above 18% over time.

Looking ahead, we're still completing our 2027 planning, but we expect it to be a strong year with faster portfolio growth; the expansion of our bank partnership to substantially all of our branches; continued progress on credit; and subject to the macroeconomic environment, strong growth in net income compared to 2026 even as funding costs rise. We'll share our full 2027 outlook on our fourth quarter call.

Our commitment to disciplined execution is firm, and we look forward to updating you on our progress. I want to thank our team members across the company for their hard work and dedication to our customers. And I also welcome Liz to our leadership team.

With that, operator, please open the line for questions.

Operator

[Operator Instructions] And our first question will come from Zach Oster with Citizens Capital Markets.

Phần hỏi đáp

Zachary Oster

I wanted to dig in a little bit more on the mix shift between the large loans and small loans and see if we can get a little bit more color on what drove the specific decisioning to kind of move around on the credit side and kind of drive those metrics a little bit differently and also kind of what the outlook is for small dollar loans going forward?

Harpreet Rana

So Zach, it's Harp. So the mix shift on large loans and small loans is very much what we've been talking about in other quarters. It is we are growing our auto secured. And so our book is moving more towards large loans. We have not abandoned small loans by any means. We will go ahead and meet demand where it is as long as it fits our risk-adjusted box. So in terms of small loans, what you're seeing there is just the mix shift of where the demand has been, which fits our risk box.

Zachary Oster

Got it. And is there any -- within the context of the discussion on the credit decisioning, any kind of updates on that mix shift based off of that? Or is it kind of still just that same high level shifting to larger share -- to a higher share of larger loans?

Lakhbir Lamba

Yes, Zach, this is Lakhbir. I can -- I think, it comes to credit and even pricing, I think what we are basically talking about going forward is sloping our loan offers to customer risk and customer affordability and then doing the same on the pricing side, having risk-based pricing. And so as we slope things to risk or products, I think the mix of the product set will evolve.

To Harp's point, low risk -- relatively lower risk clients that have auto security, doing an auto secured loan at a larger amount with the appropriate LTV and all, we can price it right, we can take that risk. On the smaller end, where we are getting paid for the risk, and by the way, bank partnership helps us with that, where we're getting paid for the risk, we will do more of that business. And so we're just looking at all those elements as we make the decisions on product mix as we go forward.

Zachary Oster

Understood. And if we could just squeeze in one more question. If you guys can just give a little bit more color on the consumer health and consumer trends in the past 3 months?

Lakhbir Lamba

Yes, I can take that, Zach, and then Harp feel free to add. Consumer, I would say, overall, we see still being resilient. As you can see even from the Fed minutes today, I think consumer spending remains strong. The inflation and the energy prices are clearly impacting what we can tell like consumers with low discretionary income or low "free income" as we call it. So where that band [ is real thin, ] so consumers who's on fixed income or doesn't have a lot of cushion. We see the delinquencies there rise a bit. But overall, I would say it's pretty resilient consumer, so.

Harpreet Rana

Yes, Zach, the only thing that I would add to that is, as you know, right, we always watch the unemployment rate. We also look at the number of open jobs. They still stand at about 7 million. We're keeping an eye on oil and gas prices just because that plays into affordability. And again, right, we're watching the customers that have lower discretionary income to see the impact of that. And then we're making adjustments for credit boxes we need to based upon what we're seeing there. But again, the customer remains resilient. There is plenty of loans to be done. We're just being very diligent about the loans that we do.

Operator

We'll go next to Alexander Villalobos with Jefferies.

Alexander Villalobos-Morsink

Just wanted to ask if you could maybe describe a little more the 200 basis point increase on the yield with the partnership with Column Bank. Just kind of high level there.

And then second question on the reserve, just curious how we should think about that going forward based on the mix shift as you leverage the partnership as well.

Harpreet Rana

So I'll take the question on the reserve first, and then I'll come back to the one on bank partnership. So in terms of the reserves, we look at products, we look at FICO, we look at delinquency status, and we look at macroeconomic factors. So we look at both quantitative and qualitative factors when we set the reserve. So we will continue to look at that the same way that we've always looked at it with those metrics and how we calculate that every quarter.

Now I can't tell you where the reserve is going to go because where the reserve was at -- at the 10.4% is our best guess of lifetime losses right now based upon the data that we have. But of course, as macro changes, we will pull that into sort of the qualitative as well as into the quantitative.

Now in terms of bank partnership or large loans, our credit box is the same for large loans under state license versus large loans under bank partnership. So you really shouldn't see any changes in the reserve just due to that variable. The variables really are the ones that I spoke to, right? It's the product, it is the delinquency status, it is the FICO, it is qualitative factors that can't be in your history. So right now, the reserve is set at our best estimate of lifetime losses.

Moving over to bank partnership. We've talked a little bit about this in the last call. What you all will see is some changes in the lines of where BT -- the impact on the revenue and the impact on expenses will be. So on the revenue line, you're seeing this on the other income. We do get a marketing fee from Column. So you're seeing that show up in the other income line. So that is a very, very large driver in terms of revenue. But what you will also see is an offset on the expense line.

So under the state license loans, there were things that we could defer, marketing fees and some digital affiliate costs. Those we can no longer defer. They will now be booked at origination. So what you will see is higher revenue, but you will see higher expense. And then there are other fees. There's servicing fees that are paid to us and then we pay a platform fee, but those are smaller. And when you put all of that aside, on a loan per loan basis, the lift that we expect from bank partnership.

So again, same loan, same place, same customer, same product, keep all of those variables constant. What you should see is a net of all of that is -- we approximate that to be a 200 basis point lift.

Operator

Our next question will come from Bill Dezellem with Tieton Capital Management.

William Dezellem

A group of questions here for you. First of all, let's start with the digital originations, if we could, please. What do you see as the biggest opportunities and the biggest challenges maybe in the opposite order, maybe biggest challenges and biggest opportunities with the end-to-end originations?

Lakhbir Lamba

Well, I think with the end-to-end business, we've just literally launched and we have originated very few loans. The challenge is it's a competitive marketplace. You have a number of players in the market that are originating billions in assets every quarter. And so to compete in that marketplace, not only your digital experience has to be really smooth, which our capability we are building is -- I'll put it against anybody in the marketplace.

But your brand recognition, your pricing, your loan amount offers that they have to be rock solid. The fraud and authentication capabilities have to be rock solid, which we have built. And so the opportunities, the way I see it is there are segments of the client base that we serve today and we want to serve more of in the future that is more digital by nature, right? And so the propensity of some of that customer persona is to go originate the assets through a digital app or their mobile app. They don't necessarily want to go to the branches. So for that persona, I see a big opportunity for growth.

I also see an opportunity for us to, in a very responsible, prudent way, obviously, expand into other markets not just be dependent on branches to be able to expand in other markets. So if we can underwrite the asset right, price the asset right and reach that consumer, then we can enter new markets. And by the way, the bank partnership capability allows us to have a simpler common notional contract that we can leverage as we scale up.

So as I said in the call, we believe it's another channel that we can add to our mix. It doesn't replace the branches. It doesn't -- it's an addition to it. And the way we are thinking about it is we serve a number of customer persona types. There are a lot of customers we serve today that want that relationship in the branch, and that doesn't go away. But there is a persona that wants to do it digitally -- originate asset digitally, and we want to be able to enable that for them.

But we're going to do this prudently. We want to make sure we underwrite it right, watch the credit performance right before we scale it.

William Dezellem

That's very helpful. And then I have a couple of questions relative to the small loans. You had referenced, and I'm actually making an inference here that when you reference consumers with lower free income that those tend to be consumers with -- that would fall into your smaller loan bucket rather than the large loan bucket. Maybe that's inaccurate. And if so, you can correct me here.

But those consumers with a lower free income, are you raising rates essentially to increase your ROE and making them fit your profitability metrics? Or are you simply saying for now, you're going to really reduce the number of those loans and just in terms of the quantity that you originate?

Lakhbir Lamba

Yes. Let me take that, Bill, and then Harp feel free to add. The way we underwrite, Bill, small loans, to your point, or underwrite large or small loans, I guess, is we have a matrix of our proprietary score that we have using the scorecards we have, and we sort of do an orthogonal of that to the discretionary income or free income the consumers have. So based on those 2 metrics, we decide what kind of loan size and yield we can offer.

In each cell, to your point, at the end of the day, we are trying to optimize the return on capital, right? If there is an opportunity to increase price, but still meet the customers' need, we obviously will look at that. There are markets where there are caps on these rates in a nonbank partnership model. So we need to sort of obviously follow the regulation there. But we also want to be careful in each cell not to price outside of the bounds in the marketplace. Otherwise, we'll get adversely selected. So we are constantly sort of talking about those cells and what we can do in terms of pricing.

And in terms of risk, I think it's really just about making sure we are monitoring various cohorts we're originating by cell. And then constantly, we are looking at a -- what cells we can expand or do more of, what cells can we get a return on capital if we were to actually do lower the loan size versus sort of do a higher loan size and actually make money. And so that's a constant analysis we are doing as a team, and that's kind of what's showing up in the numbers.

Harp, anything you want to add?

Harpreet Rana

No, I don't think there's anything I want to add to that, Bill, unless you have a follow-up question.

William Dezellem

Totally separate, but related. Relative to the small loans, given what you are seeing and how you are managing the business, when do you anticipate that small loan origination growth will turn positive or that you will return to growth?

Lakhbir Lamba

Well, it's hard to give an exact timing, but what I can share is we are actively talking about making sure we are balanced in terms of higher-margin, smaller loan business and lower risk larger loan business, that balancing act has to play out. We want to meet customers' needs on both ends of the spectrum. And so we are actively actually talking about adding some offers to enable that.

And by the way, in certain states, through our bank partnership, we can price precisely for risk, and we will leverage that to be able to compete in some of those states better.

William Dezellem

Congratulations on a solid quarter.

Operator

And this now concludes our question-and-answer session. I would like to turn the floor back over to Lakhbir Lamba for closing comments.

Lakhbir Lamba

Thank you. I think, to just close the quarter, I want to thank you all for joining us and the questions tonight.

Just to reiterate, we delivered a strong quarter. We are acting decisively on credit. We have a clear momentum, as you can tell, behind the bank partnership and our investments in technology, data, AI, talent as we're building the company towards -- for the long term with returns above 18%.

Most of all, I want to thank our team across Regional. They show up for our customers every day, and they deliver this quarter with discipline and care. Everything we talked about tonight is possible only because of them. We look forward to sharing our '27 outlook on our next call. Thank you, and have a great evening.

Operator

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