Hello and welcome to the Third Quarter 2015 Regional Management Corporation Earnings Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Senior Vice President of ICR Garrett Edson.

Thank you, Lauren and good afternoon. By now, everyone should have access to our earnings announcement, which was released prior to this call and which may also be found on our website at regionalmanagement.com. Before we begin our formal remarks, I need to remind everyone that part of our discussion today may include forward-looking statements, which are based on the expectations, estimates and projections of management as of today. The forward-looking statements in our discussion are subject to various assumptions, risks, uncertainties and other factors that are difficult to predict and which 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 undue reliance should not be placed upon them. We refer all of you to our recent filings with the SEC for a more detailed discussion of the risks and uncertainties that could impact the future operating results and financial condition of Regional Management Corp. We disclaim any intentions or obligations to update or revise any forward-looking statements, except to the extent required by applicable law. Also, our discussion today may include references to the certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement and posted on our website at regionalmanagement.com. I would now like to introduce Michael Dunn, CEO of Regional Management Corp.

Thanks Garrett. Good afternoon everyone and welcome to our third quarter 2015 earnings conference call. And thanks for your continued interest in our company. I’m here with our EVP and CFO, Don Thomas, who will speak a little bit later about our third quarter financial results in some more detail and I am also joined by other members of our financial team. As we start out today, I would note that the third quarter net income that we reported today of $6.5 million continues to trend reporting sequential increases in quarter-over-quarter earnings that began back in the fourth quarter of last year. The company has undergone many changes in the business model over this time period and we continue to be gratified that we can produce these kinds of results during this period of great change. I'll point out some highlights for the quarter and then Don will provide more details in his remarks. The main driver of the trend in increased earnings throughout this full quarter period has been our ability to significantly grow our portfolios. The total portfolio at the end of the quarter was $601.6 million, the first time the company has crossed the $600 million threshold. This is a 10% growth rate versus the year ago quarter which had included a significant amount of volume originated from the bad solicitation during 2014. Large loan portfolio continued its strong growth trajectory growing to $119.7 million at the end of the quarter up almost three-fold from last year and now represents about 20% of our total portfolio. We believe that we have continued opportunity in this space going forward. Convenience checks and small loans which had historically been the core portfolios and the engines of growth for the company also grew strongly during the quarter with the convenience…

Thanks Mike and good afternoon everyone. The trend of increasing quarterly net income that Mike mentioned results in year-to-date net income for 2015 that is 40% higher than year-to-date net income for 2014. The latest quarterly net income of $6.5 million in the third quarter of 2015 represents a strong 4.5% return on average assets on an annualized basis. Diluted EPS for the third quarter of 2015 was $0.50 per share. This EPS result is calculated on 177,000 more diluted shares in the 2015 quarter than in the 2014 quarter which impacts our EPS by about a penny per share. The increase in diluted shares is primarily the result of our incentive plans and we expect that trend of small increases in diluted shares to continue. Moving on to our loan portfolios and related revenue I'll provide more information about branch small loans and convenience check loans. Inside the branch small loan and convenience check portfolios, there is a mix shift in process that is contributing to a declined in yield of those portfolios. As you know in 2015 we established a credit risk function and have been making a number of changes to improve our underwriting guidelines. These changes focus the business on better quality customers who in many cases have slightly more income and call out our four slightly higher loan amounts. Generally speaking as loan size increases rates decrease. In our 2015 originations the average loan size for convenience checks has increased about 13% and the average loan size of branch small loans has increased about 33%. Within the branch small and convenience check portfolios this mix shift towards high dollar amount loans with low rates while still a very good loan to book has reduced our portfolio yield. Another reason we are seeing these higher loan…

Thanks Don. In closing, we have made great progress from where we stood one year ago to today, the ability to grow the receivable base, change in the mix of the portfolio, put in place improved credit controls and better manage our expense base have all combined to produce the improved operating performance. And again we were pleased that our bank group expressed their confidence in the company and the management team by renewing, expanding and extending our bank facility. As I said we remain focused on our top objectives of growing our core small and large loan portfolios as well as keeping a close eye on the credit profile and RM’s management to ensure we can continue to consistently grow the top and bottom lines and ultimately create long-term shareholder value. Thanks for your time and interest. I'd now like to open the call for questions.

[Operator Instructions] Our first question comes from the line of J R Bizzell from Stephens Incorporated.

Yes, good afternoon guys and thanks for taking my questions and congrats on another good EPS growth quarter.

Thanks J R.

Mike we talked last quarter and I know convenience check in the small dollar portfolio were one that you were focused on last quarter and you clearly have shown that you’re growing that again and it is performing well from a credit standpoint. Just wondering if you can kind of go through what you did different maybe from the first year maybe in 1Q where you saw it down just making changes as to now in 3Q and how you’re kind of managing that portfolio as you move forward?

On the checks, I think first of all the first quarter typically in our industry is liquidating quarter. So I think point of what happened between fourth and first across all the portfolios is just that seasonal trend where our customers tend to pay off large proportion of their balances. On the checks also as you remember, the trend from fourth to first to second greatly influenced by those bad solicitations. So as we rolled off a lot of those loans, it affected our trend line if you will in the balances. Just sticking with checks for the moment though, in the fourth quarter of the last year and after the problems of middle part of 2014 management team came together and changed a lot of internal processes in terms of identifying customers that we wanted to mail to if you will. And as we move through the year and Don has sort of mentioned in his comments there has been a lot of changes on the convenience check funds and so let’s just do the marketing for a moment. So marketing is we mail out every month we have solicitation for our check campaigns. We have improved the identification of those customers through used as outside consultants or internal credit group or internal marketing group. What we’re trying to do is which is obvious is we’re trying to marry the best response rates and the best credit quality customers. And every month we look at our response rates, look at our price point offers and we make changes. So as we work through the year, that has incorporated results if you will into the convenience check portfolio in our trend line. The other thing that Don and the other thing Don mentioned is, last year the rates were really,…

Right. And kind of building on the volume there, large loans continue Mike to perform extremely well. I think you said it is 20% of your portfolio now.

Correct.

I guess my question here is that is proven to be something that you are very confident and is performing somewhat it sounds like to your expectations. Just wondering if that large loan opportunity is it more of a governor that you’re putting on it at this point and the demand is very strong you’re just making sure you’re going through it very methodically or is it something that you’re kind of countering with opening up as we continue to move forward?

Governor no, we are very confident. I mean you have to remember where we are coming from, we had $43 million base in the third quarter of 2014 when a few of us out here including Jody [ph] from One Main name and we knew the opportunity that we had in that space given the market share or the size of the market that One Main is friendly with those guys played into it. So we just set out to solicit new customers to the company on the basis of large loan offers and to take our existing customers who qualify and selling into a larger loan with longer term and lower rates. And as I mentioned before we continue to get in terms of the growth about the third of our growth is coming from new customers and about the other two thirds are coming from selling our existing customer base up to larger loans. And again large loans, long term, lower rates, but better revenue over time. So there is no governor and we’re actually continuing to refine our offers and our targeting and looking at different states, looking at different rate structures within the states, but we think that this again I think as I mentioned in my remarks has continued upside opportunity for us in terms of growth.

Can you help us out with maybe an internal early innings kind of expectation of how big it could be as a percentage of your portfolio?

I mean, first of all it went from 8% a year ago to 20%. And the book – I’m sorry the portfolio has grown about 10% or 11% up 10.7% over the same timeframe. And but there is other movements in that portfolio at the same time with the auto decline showing that net liquidation. I think as we look forward where we have a lot of opportunity to grow our overall portfolio given the immaturity in some cases of our branches and other cases given the fact that some of our branches need to continue to mature to our target of we put in our external 10-K about $2.5 million per branch. So we think as we look forward I think the dollar growth that we’re seeing on a quarter-over-quarter basis can continue for the foreseeable future. And we have to be subject to some changes in the way we do things. But I think it will continue to grow and it could be given a year from now, it could probably be in a 30% range, 25% to 30% range.

Perfect. Thanks for taking my questions and have a good afternoon.

All right J R. Thank you.

Our next question comes from the line of Sanjay Sakhrani from KBW.

Hi this is actually [indiscernible] on for Sanjay. Maybe bigger picture we can pull up and think about receivables per branch and your scale, especially since you are moving to the new risk procedures and as well as thinking about the large loans, is there a specific level you think that each brand – mature brands can get to over time?

Yes that is a question of the mix issues which I sort of just alluded to. Obviously there is a capacity issue in the branches that relates to the numbers of accounts that we service and how we service them today and so for example on that point today as we mentioned many times in the past to all of our customers come in to the branches to pay their loans, 99% of our customers pay their loans in the branches every month. We have variety of initiatives underway that we will allow for ACH or debit cards going forward. That should leave some of the traffic in the branches which probably will allow us to grow the branch accounts, that is kind of one thing we’re working on, size of the loan for large loans is another important factor. We stated in the 10-K we think mature branches in that $2.5 million range, our branch average size right now is about $2 million, a little more than $2 million and a lot – when you look at the average size, it is about in terms of the de novos which we opened over the last two years, they are obviously on the low end of that spectrum with more of our mature branches on the upper end. And one of our initiatives in 2016, end of 2015 and 2016 is going to be accelerated in the maturity of those branches that we have opened over the last couple of years. That is under performing, we want to make sure to pay attention to them, to support them with proper marketing support. So, that they kind of accelerate their growth. But I think with the obviously there is a great leveraging effect when you can put more volume and more revenue into a branch by growing the amount of people working in the branch. So I think it is – I think $2.5 million would be still a right target over the near term and if you took $2.5 million we took $2.5 million which is $0.5 million for branch, 300 branches just that all will be really significant increase in the portfolio size.

And in terms of helping those kind of underperforming branches scale up, I mean what kind of marketing initiatives, is there more personnel or is it mostly a marketing push?

It is a variety of things. Not all of this has been flushed out if you will but it is marketing support, it is in cases it is training for the different products, a lot of the branches, even though we have trained all the branches we are ready multiple times on large loans as an example. Not all of them are performing at the same level. We are soliciting through mail and through branch activities. Large loan customers keeping with that same – loan example and they are just not performing the same way that some others in similar areas. So it is a variety of initiatives and I wouldn’t call it underperforming and I would call them, they haven’t matured as fast, maybe that is a little bit of variation on the same theme but we’re really, we have branches. We have them in the right place and they just haven’t been performing as quickly as we thought and so we’re trying to figure out how to accelerate that. So it is all of the above but we are really are concentrating on increasing the average portfolio size for branch over the next year.

Okay. And then I guess my final question is on, I guess the newer convenience checks and smaller loans versus there is a little bit of a decline in the yield, but you’re getting a little bit of a pick up on the higher credit quality, could you talk about the difference I mean maybe the loss curves and what you’re seeing early on between the newer loans and the older loans that you have originated maybe last year?

Yes, there is a couple of things going on. And I mean, and I think Don referred to some of them, so just taking checks out as an example, within checks taking the marketing of them, in the past we had marketed to range of customers using FICO as a proxy somewhere between 5 in a quarter on the low end to upper to 675 to 700 in the high end. Different offers based upon obviously their credit quality and different response rates for each of those offers. And with the credit group that we now have, we have been able to continue to split those cycle bands by attributes into much finer cuts if you will. And on the convenience checks I think that if you take a look at the loss rates over time if you go back to couple of quarters or three or four quarters even without the issues from the 2014 solicitations, there has probably been a 200 basis point improvement in loss rates. And on small checks the trend line is the same and in this quarter as Don noted and as I noted, our loss rate for the second quarter was 9.4 and this quarter was 8.5. So that by itself also gives you an indication that the loss rates are coming down.

Okay. Thank you.

Our next question comes from the line of David Scharf from JMP Securities.

Hi good afternoon. Thanks for taking my questions. On the yield trends for the convenience and in branch small loans, I certainly understand qualitatively why they’re trending down, but can you give us a little bit of a roadmap into perhaps how we ought to think about – how we should forecast that yield maybe going out a year as you contemplate the shifting mix and the type of quality credit you’re underwriting and the size of those loans that you anticipate?

Yes I have to do a size in a second, but David on the trend line of convenience checks, we obviously there is a couple of things going on at convenience checks and small loans, it is marketing originations as well as branch originations. Things done in the branch and we watch these originations and information that we get on originations each and every month and we knew that the new originations, the way we are making offers, we were making offers that on the net basis was going to lower the rates. During the third quarter, we saw that the rates start to level off if you will on both portfolios. So when you take the look as Don mentioned in his remarks on the convenience checks in the aggregate and he talked about couple of different quarters in a couple of different yield rates, the yield on convenience checks which really at this quarter was 42.8 is kind of where it is going to be our guestimate is at this point going forward. And we had good volumes in this quarter, we continue to get good volumes in that portfolio and we continue to think that that will be as I said also a major driver going forward as it was, as it has been in the past. And similarly on the small loans we, again as Don said and I often said it is a combination of things that have happened and it is selling our smaller loan customers who qualify because of their credit scores and attributes into higher value, but still small loans and we didn’t talk about rate structures in our safe, but typically as you go up in dollar value of dollar size of the loan, the rates drop, and were kind of now on a new run rate or new run rate I think is the right way to say it, and I think also that the rates, yields on the small loans have also kind of leveled off in the quarter. We saw that a little bit in the third quarter. There might be some small minor changes going forward, but that is not what we anticipate. So I should think about going forward, I think where we are is kind of where we’re going to be for the next few quarters.

Got it, that is very helpful. Switching to expenses and I may have missed this in Don’s comments, but as we looked at three quarters of sequentially declining, both headcount and G&A at the home office, should we be thinking about that reaccelerating is the third level of $6.5 million to $7 million for quarter a good way to think about the run rate going out and then recognizing operating leverage off of that base?

Just on the head office and the headcount, we mentioned I think in the first quarter call that there has been a – there was a lot of growth, had been a lot of growth from the first quarter 2015 to the first quarter of 2014 and we mentioned that, that was the build-up the staffing for the departments that we thought necessary to run this place effectively which included for example credit. But at the end of the first quarter when we were at 125 folks, we mentioned that we were kind of leveling off at that level and that as we kind of run through the balance of the year, we thought we would add a few folks from time to time as necessary to continue to build out the credit department as to continue with that example. And in this quarter from the first to the second we dropped five heads, five people if you will and that was more just timing of some people leaving and not getting replacements in place until we, towards the end of the second quarter and in this quarter we added a couple more credit there was an auditor. As the branch size expands you need to add some folks because their needs are bit sort of variable. So the heads are sort of where we – on head office where we think will should be, the heads, just need to ask the question of the heads and the branch count not counted with those remained also flat 1205 in the second to 1208 people in the third. But as Don did mention I think in his comments, the home office G&A expenses, the non-marketing piece there is a lot of variability in that category. And we disclosed and I’m looking…

Got it, got it and on the topic of branch level staffing and I know another question asked about ultimately how productive these branches could get in terms of servicing. If you are planning on selling charge offs on a regular basis through flow arrangements, does that potentially lessen the need of how much you invest in branch level collections? And in addition to that are there any plans to centralize more of the collections into servicing and take that out of the branches?

Yes, I will answer the question and you probably didn’t asked. So on the first part, branches worked very actively on collecting all delinquent accounts up to the time that the accounts were written off, so 180 days past through in most cases other than the cases of an auto when we report a car. After 180 days it is sent to more central unit that we have here in Greenville for then the post [indiscernible] collection activities. So, the phone call is not going to influence staffing in the branches. The second question you asked is we have been thinking about a model which others in the industry use of taking later stage delinquencies out of the branches and centralizing them. We might do that, if we do that, we will test it first to see the efficacy if you will on that before we move to a full scale. So we haven’t done that yet and you have to remember the branches have been really actively working 180 days for a year now. They have some more latitude a year ago in prior sort of loans earlier than the 180 days as we had mentioned. The capacity of the branches and the branch people though is dependent upon the activities in the branches obviously. And couple of things we have already done is going back and getting back to the fourth quarter of 2014 is on the field calls, is the field cost for collections. And these delinquent accounts and we start field calling into places of business in the fourth quarter last year and began facing out what was completed at doing field calls residences beginning in April this year. So as we have four folks per branch on average and more of those people stay in the branch and during the course of the day and then not out doing field calls that by itself increases the capacity. If we add in these ACH and debit card payment methods and channels, that also will add capacity in the branches. So we are looking at all of that, but I think just directionally using the four persons per branch as a proxy for efficiency and the accounts per branch, I think we have a capacity and an ability to increase the capacity of branches from an account standpoint and I think as I guess it was J R mentioned, I might be misstating here, but we can increase the loan size in the branches without increasing the people in the branches. And there is for all the reasons I just mentioned there is great room to add to the accounts in the branch because of these other initiatives as well.

Okay. And as long as you mentioned loan size, can you just put into context help us understand better, what is the delta between a larger small loan and a large loan and average size and maturity?

Large loans as we define them over 2500 bucks. And the large loans we have been originating in 2015 are in the $4200, $4300 range. On the small loans and the convenience checks the average new borrowers going back to the first quarter of this year on the average of let us say last year $1300 and now it is up to $1800 third quarter. So there is a significant increase – that is a significant increase that is 30 something percent increase that Don mentioned. So that gives you a sense on what our small loans and convenience checks are defined by $2500 or less.

Okay. But they’re averaging the newer originations around 1800? So still less than half of what the large ones are. And by the way back to the flow deal, just do we understand do you just have one portfolio sale, you are negotiating or do you actually have a forward flow partner for let’s say the next 12 months that you’re going to sell charge offs to?

No we haven’t – what we announced is, we are, intended we are marketing our written off accounts and charge off accounts and we had, this is from we looked at all of the inventory, we have never sold off charge off accounts before and so what we are marketing is a portfolio in the aggregate that is slightly over $100 million. This has been scrubbed many, many times. So obviously our written off accounts over time is much greater than that, probably three times greater than that. So we are marketing, we want to sell that as one piece as well as we want to sell the forward flow. And we’re out there the bids are we announced today that we’re doing this, we expect bids back by the 19th of November. We will sort through the bids. We have some indicatives or indications of what those bids might be based upon the broker that we’re working with and so we will do it separately, but we will sell the $100 million, $102 million portfolio separately. And as I mentioned, if that happens we will get a gain once we do that we will get income line when we will get that. And then on the forward flows we will sell that as well and right now we have a small group of people who will do the post write up collections. And we think that whoever we sell it to will probably be getting an increase in the recoveries from our current levels. So we’re going to look at both types of this and make a decision.

Got it, got it. That is helpful. Thank you very much.

All right.

Our next question comes from the line of John Hecht from Jefferies.

Good afternoon thanks guys. I know this has been asked in some ways, but I just want to make sure I hear you right. You are underwriting the larger loan balances and lower yields and your loss rate have been coming down, but just so I understand do you think that the overall loss content will drift lower than say your kind of average historical loss content with this consumers is more just kind of balancing revenues in portfolio size as you grow?

Well let me do like to like. I think that, I tried to answer similar question before by saying with the improved identification the customers that we want to market to whether it is checks or small loans, we expect to get a better credit outcome going forward from this point and going forward than we have gotten in the past. So from a portfolio perspective, looking at loss rates, we expect to be better going forward than we have been in the past. On large loans we are tracking to what our model was, we think losses for that portfolio are going to be in the mid 5% to 6% range. And then when you add up those small and the large and the convenience check portfolios and given the mix change as I mentioned before the large was 8% year ago was now 20%. The overall portfolio loss rate will also decline. So we think we will get improvements in convenience checks and small, we think that proportion of large will continue to grow and the overall loss rates should come down.

Okay. That is helpful, second is you mentioned in auto ABS still looking forward that is great news, do you have a sense for maybe a range of cost of funds based on other private label deals in the market recently?

Don do you want to answer that?

Yes the market has held reasonably well, although maybe spreads have widened a little bit, but our all-in cost will be probably as good as our current bank credit lines, slightly better. So may be 3.75% to 4% all-in is where we’re looking at a deal coming in.

Okay. And is there a fixed and adjustable component to that or is it all fixed?

It is all fixed.

Okay. And then I think it’s pretty widely publicized that as Spring lease gets closer to I guess closer to this acquisition One Main there might be some branch dispositions as part of the regulatory review. Would you guys be interested in that type of opportunity, if there was a couple branches in your footprint that might fit that well or is that just business is so different from what you do that it wouldn’t fit?

No we’ve heard a lot of the same things that a lot of folks probably at the conference a month ago and there was lot of chatter about that and at the time I think which we’ve heard since then as well seems to be in the instead of the DOJ may be at the state AG levels. So will be heard and we have been trying to find out much as we can that might be a state by state basis divesture if you will and given and given that, that’s long then – but we would be interested in both. So the interested in something that would make sense for us and state that not currently operating in but want to operating them and also if the opportunity came up to add branches to our existing footprints and they make sense for us we would also do that. Again it’s a question now of where they are and then what the pricing would be and what if do, if we tried on our own? So have to evaluate that, but making an acquisition would be it could a way to jump start branch expansion into a new territory if you will. So we would look at very seriously.

Okay, thanks very much.

Okay.

Our next question comes from the line of Vincent Caintic from Macquarie.

Hi, thanks guys, just a one question and this is on the charged off accounts that your marketing, could you give us a sense of perhaps the economics behind the account and may be how the sale of that might benefit your fourth quarter and going forward such as what may be the sales price might be and how much demand there is for these charge off accounts.

Now as I mentioned, we just announced today that we’re marketing it. Obviously we are marketing with some folks that have been out there talking to people. So these folks that were working with have lots of experience in the space. As I mentioned we’re selling $102 million of receivables that have been scrubbed. They are probably some little more scrubbing to be done but we think we’re pretty much, it’s pretty much completed at this time so $100 million it takes from the charge off you were to say from what we have done through June of this year and then back to I guess its seven years which goes back to 2008 I suppose. And obviously the longer, although written off accounts have less value then the more current written off accounts and that’s part of the estimates that we have received from the folks that we’re dealing with in terms of giving us a sense of how much that could be. I don’t want to comment on that other than to say that we've had this inventory and we have been working it and we just think it might be the time to monetize it if you will. As I mentioned from a timing perspective the bid day to back to us is 19 of November and then it’s just a question of sorting through the things you need to sort through when you receive the bits and put them all side by side and of course they will all be different no doubt with different terms and so that will take us some time to execute the sale if you will. And then when we do that there will be a gain and then similarly on the forward depending upon the offers we get as well once they have a chance to take a look at the types of accounts we have written off, again indicatively we think it would make sense for us, but we have to see what the bid charge. So, and then that will again, we hope it will improve our current run rate levels from a recovery perspective. So it is just is an opportunity for us to as I said monetize the masses that were sitting here and then target our Chief Credit Officer and his team who worked very hard on this and so we were very interested to see what transpires.

Got it thanks and that will appear as a reduction in charge offs?

Actually the bulk sale is another income item that is more of a gain on sale of assets. The former [indiscernible] there will be a reduction of net credit losses and well impact the provision.

Got, okay great. Thanks very much guys.

Okay.

Our next question comes from the line of Bill Dezellem from Titan Capital Management.

Hi, thank you. I’ve got a couple of questions. First of all, now that you have the securitization approval in place on the auto lending, how is that going to influence your lending going forward, both in terms of volume and type of credits that you are lending too?

And specifically on the auto side right? Yes.

Unless it impacts some other aspect of the business too.

Yes, so the key parts obviously of a consumer finance company is liquidity and this just enhances our liquidity significantly. The ability to secure the paper that we originate. So it is a very attractive part of looking at the auto business.

We mentioned this again, say into the second quarter and mentioned it today that the auto business that we have in place is being restructured and we're bringing in some resources new to the company who have extensive experience in this space to help with that restructuring and there has been a lot of work that has been done in the last couple of last two or three months on that restructuring. And that runs everything from dealing with vendors and vendor contracts and one seasoned reps and expectations from dealers and pricing with dealers and pricing with customers and underwriting and looking at types of warrantees will finance or not and everything through origination corrections and loss mitigation efforts. It is the whole business processes if you will. So we are not yet completed with that, but having said that which we intend to complete this quarter, having said that the availability of our securitization that Don and his team work very hard on is a plus for the business.

Good and so will that securitization the initial one and anything on a go forward basis target a specific type of auto borrower or are you anticipating that it is going to be broad based or in essence whatever you decide on going forward in terms of your strategy that it will encompass really 100% of what you do going forward?

Yes, I think that we have a set of different ideas on what we want to do with what we call our auto business and the types of auto products that we want to sell and obviously the ones that will be eligible for securitization will influence that to some degree. But we're really focusing on our lay business here as well. And so we won't pursue anything that does not need our internal ROE targets. So but the securitization again and maybe Don you have some other, but the securitization just allows us to have a broader base of financing about to us.

Yes it does and Mike I know you had commented on the auto business in our previous call and unlike some of the categories that are core and central to our business maybe you described this one as being a little bit on the margin. And so Bill, just moving forward this is a nice product that is incremental to average branch volume so it helps us to build the size of the branches as is very beneficial from that perspective. The customer is probably a lot like our existing customer finds that more of a used car customer than a new car customer, based on our customer demographic. So I think you could think about it that way and certainly we're not intending to rent this out like a complete auto business and we will continue to look at it as a marginal product.

Marginal product as you said before that a lot of our customers use and we want to have that for our customers.

So we should think of this I think you may be even alluding to this on the last call is really focusing on the direct side of the business as opposed to the indirect lending?

We move through both, but it will probably end up that way and again we haven’t fully flushed out all of our thoughts on this and as part of which [indiscernible] part of the thinking that we're going through right now and you know obviously that there is a difference between how we market and how you retract and how you get customers from the indirect versus direct channels and there is a difference. And again, we are focusing on making sure two things as Don said, that we and there was sort of the conversation we had in a couple of calls ago is adding volume and portfolio to our existing branch footprint. So this is a nice add on product. We are also focusing on making sure that we get the proper ROAs. So we're not going to be doing anything to chase business on this, but we're going to make it available. We're going to do it as best we can and we're going to get the right returns on it.

Great and one additional question please, your online efforts would you please go into a little bit more detail and expand on your opening comments?

Yes, so we know that we need to have different channels for the layout customers come to us and deal with us and as I mentioned and we've mentioned it many, many times due to whole series of history as well as system limitations our customers today come to us through the branches. We do get customers through the Internet. We do book loans through the Internet but they are closed in the branches. They refer to and they are closed in the branches. And we know that the Internet is going to be an important channel for this industry going forward and we have to have that and we did not have it. So the test that we're doing in the fourth quarter is going to be limited to one of our states. So it is not going to be throughout all of our eight-state footprint if you will. It is going to be very carefully done, but the test that we are envisioning is where a customer comes on through the Internet and makes an application, there is a bureau poll. We have a credit search and engine. We give a decision. We ask for some information that the customer can take a picture of and forward to us and within the session if you will, if approved and if the customer wants the loan we can fund his account. Expectations we are going to start this out very, very carefully since it is a pilot. We have to get a lot of learning down about validating or verifying again and some of the income information and the other information we require. We will also start with very small loan sizes and we will watch very carefully the results and the originations that we do through this channel. So we're going to do a very carefully we think we do it. We'll start very carefully and once we get a learning and have more comfort with the low structure we will have it. And now as I mentioned and I think it will have my comments but I think I think I used the word pilot, so it is really a test and as I said only in one of our states, not through all, but eight of our states.

Thank you both.

Okay, thank you.

I will now turn the call over to Mike for closing remarks.