Regional Management Corp. (RM) Q1 2020 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to Regional Management Corp. First Quarter 2020 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Garrett Edson with ICR. Please go ahead.

Thank you, and good afternoon. By now, everyone should have access to our earnings announcement and supplemental presentation, 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 will 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 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, undue reliance should not be placed 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 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 certain non-GAAP measures. Reconciliation of these measures to the most comparable GAAP measure can be found within our earnings announcement or earnings presentation and posted on our website at regionalmanagement.com. I would now like to introduce Rob Beck, President and CEO of Regional Management Corp.

Thanks, Garrett, and welcome to our first quarter 2020 earnings call. On behalf of everyone at regional management, I hope that you and your families are safe and healthy. These are difficult times for our customers, the communities that we serve and for all of us and our families as the nation struggles to navigate the COVID-19 pandemic. I'd like to take a moment to thank the health care professionals, first responders and other essential workers, who admirably perform their jobs each day to keep our nation safe. I also want to thank the entire regional management team. Our team's response to this crisis has been incredible, both in planning and execution by home office personnel and in the efforts of our brand staff, who continue to work on the front lines to provide outstanding service to our customers. I'm joined by Mike Dymski, our Interim Chief Financial Officer, who will discuss our first quarter financial results. Mike has been with Regional for nearly 7 years and has over 25 years of accounting and financial services experience, including as our Chief Accounting Officer. He's been a solid member of the Regional team, and I look forward to working with him in his new role. Our focus since mid-March has been on serving and supporting our customers during these unprecedented times. While I'll briefly touch upon our first quarter performance, my comments will first focus on a response to the COVID-19 pandemic, including what we're doing to help our customers and how we're positioned to manage through the crisis. We provide our customers with access to responsible and affordable credit solutions. And as a result, our operations are considered essential services under nearly all state mandates. At this time, 98% of our branches remain open to service the needs of our customers while adhering closely to the CDC guidelines for social distancing. Thanks to a successful implementation of our business continuity plans in March, we've been able to operate our branch network largely without interruption. Our headquarters personnel, including our centralized collectors, have also continued to work from home following a seamless migration of our centralized operations to remote work technologies. We're in frequent communication with our customers by phone, e-mail and text message, and our customers also have easy access to their account information and electronic payment options through our online portal. Through these communications, we're able to provide our customers with information about our special borrower assistant programs and to remind them about our convenient electronic payment options, which reduced the need for in-person contact with our branches. We've leveraged our past experience in managing through natural disasters to design and implement programs that have been effective in supporting our customers throughout this crisis. These borrower assistance programs include relaxed criteria for deferrals, fee waivers and special options for our borrowers to make reduced payments and renew their loans. Our special renewal programs of our customers facing hardship to lower their interest rates and extend loan terms in order to lower their monthly payments. In addition, to support our customers, we've enhanced our system capabilities to process these programs electronically over the phone, in the branches by appointment and through our centralized themes. More recently, to make our customers feel more comfortable in interacting with us, we've launched curbside service, which allows our customers to close loans, make cash, check and electronic payments and execute payment deferral agreements without having to enter the branch. And later this month, we plan to roll out a new program that will allow customers to close their loans remotely. We're also supporting our team members throughout the crisis, including by providing continued pay to those team members directly impacted by the virus and by expanding our paid time-off policy, allowing team members the necessary flexibility to take care of their families and other personal needs during these difficult times. Our proven operating model, new custom credit scorecards, experience managing through natural disasters and support of our customers, employees contributed to solid credit performance through the end of April. Building on a stable 30-plus day delinquency position of 6.6% as of March 31, we lowered our delinquency by 120 basis points in April, ending the month with a 30-plus day delinquency rate of 5.4%. We attribute the April delinquency reduction to our borrower assistance programs as well as the government stimulus programs that have taken effect. While it's difficult to calculate the precise impacts attributable to these programs, we believe they are acting as an important bridge for our customers. Approximately 5.6% of the loans in our portfolio at the end of April had been renewed or deferred during the month under our borrower assistance programs, up from an average of approximately 2.2% over the prior 12 months. We specifically tailored our borrower assistance programs to help our customers manage their debt obligations and maintain their creditworthiness during the health crisis. At the same time, in order to qualify for our borrower assistance programs, we also required that our customers remain engaged and active in repaying their loans, including, for example, by requiring at least 1 loan payment in the prior 2 months to qualify for a deferral. The credit quality of our portfolio is clearly our paramount focus during these challenging times, and we are constantly monitoring the changing economic environment. While we've continued to originate new loans, we've done so with appropriately tightened lending criteria. We proactively tightened the underwriting standards to reduce our exposure to high-risk lending segments as the COVID-19 crisis developed. We are using our experience and leveraging proprietary data to serve our customers while maintaining an appropriately conservative portfolio risk management program. In terms of new lending, we experienced a clear slowdown in demand in the branches from mid-March into April as customers stayed home. However, branch originations have begun to stabilize, and we are beginning to see slight improvements off the lows in some states. As indicated in the business update that we published in late March, we paused our direct mail and digital programs in the wake of rising unemployment claims and uncertainty around the level of government stimulus. We've since begun to test back into these channels at the higher end of our credit scorecard models, where we have significant room to absorb incremental losses and still deliver acceptable risk-adjusted returns. Despite efforts by states to begin to reopen their economies, we expect our finance receivables to further liquidate in the second quarter. Our financial position entering the crisis was never better. We have a strong balance sheet. We continue to operate with a conservative leverage ratio, and we have substantial capacity to absorb losses while still maintaining positive stockholders' equity. As of March 31, our funded debt to equity and funded debt to tangible equity ratios were 3.09 and 3.21 to 1, respectively. Combining our stockholders' equity of $251.4 million and our allowance for credit losses of $142.4 million provides us with $393.8 million of capacity to absorb losses on our portfolio. This equates to 36% of our portfolio as of March 31. In addition, our business model generates additional margin to absorb further losses. Over the past 12 months, our margin, which we define as total revenue less general and administrative expenses and interest expense, totaled $164.4 million or roughly 15% of our outstanding portfolio as of March 31. This compares to a trailing 12-month NCL rate of 9.5%, providing us additional loss protection. Additionally, we proactively diversified our funding over the past few years in anticipation of a credit cycle shift and continue to maintain a strong liquidity profile. As of May 4, we had $110 million of immediate liquidity, including $50 million of cash on hand and $60 million of immediate availability to draw down cash from our revolving credit facilities. We believe we have enough liquidity to get us through all of 2021 without needing to access the securitization market. In addition, as of quarter end, we had approximately $400 million of unused capacity on our various credit facilities, subject to the borrowing base, allowing a substantial runway to fund future growth. In sum, we believe we have more than adequate capacity to support the fundamental operations of our business throughout the COVID-19 pandemic. Turning back to the first quarter. The fundamentals of our business remains strong. Both receivables and revenue increased by double digits compared to the first quarter of 2019. The network finance receivables grew by 18.4% year-over-year, while revenues grew by 17.5% from the prior year period. Credit performance remained relatively benign in the first quarter with an annualized net credit loss rate of 10.5% compared to 10.7% in the first quarter of 2019. Our 30-plus day delinquency rate was a stable 6.6% as of March 31 compared to 6.9% at the end of the first quarter last year. Offsetting the solid top line was $23.9 million in additional provision for credit losses related to COVID-19 as well as $1.3 million of additional unemployment insurance reserves, the latter of which is reflected in our revenues. We based our COVID-19 reserve provision on our own customized trust scenario that assumes unemployment will peak at 20% and a 34% drop in GDP from peak to trough in the second quarter, with an economic recovery beginning sometime in the second half of the year. This scenario also assumes that unemployment gradually improves, dropping to 7% by mid-2021. Our reserves also assume modest benefits from our borrower assistance programs and from the impact of the government stimulus programs. The degree of offset from the latter remains to be seen. But given the level of direct stimulus and expanded unemployment benefits, we believe most individuals who are receiving unemployment will, on average, earn the annualized equivalent of $35,000 per year over 39 weeks of unemployment. For many of our borrowers, we expect that the expanded unemployment benefits that they will receive will be as much as or more than the wages they earned while working. We believe the stimulus is an important bridge for our clients and for Regional as a meaningful portion of our customers earn less than $35,000 a year. Given our strong balance sheet and liquidity position as well as our enhanced infrastructure, including custom scorecards and centralized collections, we remain confident in our overall business and we believe that we are well equipped to navigate through these challenging times. Looking ahead, while we know that there will be some near-term impacts to our business and the entire U.S. economy as a result of COVID-19, we continue to believe we have a bright future. Once the pandemic has passed and we return to a semblance of normalcy, we expect to be well positioned to take advantage of the longer-term opportunities that we continue to see, namely to further enhance our customer experience while continuing to grow our top and bottom lines. In the meantime, we are keenly focused on credit and supporting our customers through this unprecedented challenge. With that, I'll now turn the call over to Mike to provide additional color on our financials.

Thanks, Rob, and hello, everyone. I hope you and your families are all safe and healthy. I've been with Regional since 2013, and over the past few weeks, I've had the opportunity to catch up with all members of our management team as well as many of our shareholders in the investment community. I look forward to working with all of you and continuing to contribute to Regional's long-term success. 0 First quarter results were a continuation of the strong financial performance achieved over the past 5 years. I plan to discuss our GAAP financial results for the first quarter relative to the prior year. I also plan to present results adjusted for COVID-19 and nonoperating items. I will provide color on the transition to CECL accounting and share the key underlying macroeconomic assumptions used to build the COVID-19 portion of the reserves. Lastly, I will drill down on our first quarter financial performance for loan growth, revenue and expenses. On Page 7 of the supplemental presentation, we provided the first quarter financial highlights. Page 8 illustrates results adjusted for COVID-19 and nonoperating items. We generated a GAAP net loss of $6.3 million or $0.56 per diluted share. Excluding COVID-19 reserves, executive transition costs and the financial impact of our system outage in January, we generated adjusted net income of $12.8 million or $1.14 per diluted share. Flipping to Page 10. We share a year-over-year comparison of each line item of our P&L. Clearly, the $25.2 million of additional COVID-19 reserves had the largest impact on our financial results along with the $4.8 million of nonoperating items. Excluding COVID-19, the increase in our provision for credit losses was roughly aligned with our year-over-year increase in finance receivables. Page 11 displays our net finance receivables as of March 31. Year-over-year, our core loan products grew 22% or $192 million compared to the prior year period. Large loans grew 39% and represented 57% of our total loan portfolio, while small loans grew 3% and made up 40% of the portfolio. On a sequential basis, the total portfolio saw just under 3% liquidation, which is typical seasonality for the first quarter. Although we had another quarter of consecutive year-over-year double-digit portfolio growth, April originations were well below prior year levels. As COVID-19 began to affect the country in March, we acted quickly to tighten underwriting and temporarily paused direct mail and digital origination. These prudent actions, coupled with lower loan demand, will lead to further portfolio liquidation in the second quarter. As Rob mentioned, we have begun testing back into the direct mail and digital channels at the higher end of our credit scorecard models. Turning to Page 12. Total revenue increased 18% compared to the prior year period, driven by a 19% increase in average net finance receivables. Interest and fee yield decreased 50 basis points from the prior year period as large loan growth outpaced higher-yielding small loan growth, which is consistent with our market opportunity and our product mix strategy. In the second quarter, we expect interest and fee yield to be approximately 150 basis points lower than the prior year period based on the ongoing change in the mix of our portfolio. It's worth noting that 78% of our total portfolio has an APR at or below 36% as of March 31. Total revenue yield decreased 40 basis points from the prior year period, primarily due to a $1.3 million reserve for our unemployment insurance product related to elevated unemployment claims in late March. Approximately 12% of the portfolio is covered by optional involuntary unemployment insurance. Customers purchased this credit insurance product from us to help keep their loan payments on track even during an unforeseen unemployment event. While our unemployment insurance claims are expected to remain elevated during 2020, the product does provide an offsetting benefit of reduced net credit losses and provides a bridge for our customers during their unemployment period. Moving to Page 13. Our annualized net credit losses as a percentage of average finance receivables was 10.5% for the first quarter of 2020, an improvement of 20 basis points from the prior year period. We expect to see the impact from COVID-19 on our net credit loss rate more prominently in the second half of 2020. Flipping to Page 14. On the delinquency front, our 30-plus day delinquency level at March 31 stood at 6.6%, a 30 basis point decline from the prior year period. As of April 30, our 30-plus day delinquencies reduced further to 5.4%, an incremental 120 basis point improvement from March. The implementation of custom scorecards has positioned our portfolio to be resilient throughout economic cycles, as 69% of our core loan portfolio has now passed our scorecard underwriting criteria. Internal borrower assistance programs, which have been part of our business for decades, and the benefits of the federal stimulus have also contributed to low delinquency levels and solid credit performance thus far. In the near term, we continue to focus intently on servicing our existing portfolio and on tighter underwriting of originations. Turning to Page 15. We ended 2019 with an allowance for credit losses of $62.2 million or 5.5% of finance receivables. We implemented CECL accounting on January 1 and increased the allowance to $122.3 million or 10.8% of net finance receivables. During the first quarter of 2020, the allowance increased by $20.1 million, which included a $23.9 million allowance for credit losses related to the economic impact of COVID-19. We ran several macroeconomic stress scenarios, and our final CECL forecast contemplated the following: a 34% peak to trough GDP decline in the second quarter of 2020 and unemployment increasing to 20% in the second quarter of 2020 with a decline to 7% by mid-2021. The macroeconomic scenario was then adjusted for the potential benefit of the federal stimulus and internal borrower assistance programs. Flipping to Page 16. G&A expenses of $46.2 million in the first quarter of 2020 were $8.1 million higher than in the prior year period, which was in line with our expectations. The first quarter of 2020 included $3.8 million of executive transition and system outage costs, along with increased expenses to support 2019 account growth and de novo expansion. Even with our ongoing investments in digital capabilities, de novo expansion and the corresponding account growth, we continue to perform well in managing our expenses as evidenced by the improvements in our operating expense and efficiency ratios. As we anticipated additional portfolio liquidation in the second quarter, we proactively and prudently reduced branch and home office costs and indexed our expense base for portfolio changes during the economic disruption. Including those cuts, we expect G&A expenses in the second quarter to be about $5.5 to $6 million higher year-over-year. Most of the increase is related to lower loan origination cost deferrals and higher expenses from 2019 account growth and de novo expansion. We expect that our second quarter operating expense ratio will increase by approximately 50 basis points compared to the prior year period. Turning to Page 17. Interest expense of $10.2 million was $400,000 higher in the first quarter of 2020 than in the prior year period, primarily reflecting higher average levels of outstanding debt used to finance the strong growth in receivables, offset by a lower cost of funds. Our first quarter interest expense as a percentage of average net finance receivables was 3.6%, a 50 basis point improvement from the prior year period, primarily due to reductions in the fed funds rate. We are forecasting interest expense as a percentage of average finance receivables to be flat sequentially and expect interest expense to approximate $9.6 million in the second quarter. Page 18 is a reminder of our strong funding profile. The $130 million securitization that we completed in October 2019 added borrowing capacity and fixed rate funding at a weighted average coupon rate of 3.17%, our best execution to date. We are forecasting sufficient liquidity to get us through all of 2021 without needing to access the securitization market. As of March 31, we had approximately $400 million of unused capacity on our various credit facilities to fund future growth. Our first quarter funded debt-to-equity ratio was 3.09:1. And as of May 4, we held $110 million of immediate liquidity, including $50 million of cash on hand and $60 million of immediate availability to draw down cash from our revolving credit facilities. That concludes my remarks. I'll now turn the call back over to Rob to wrap up.

Thanks, Mike. We are grateful for all of our team members' incredible efforts as we manage through this unprecedented period. Now more than ever, Regional is playing an indispensable role for our customers to help guide them economically through this pandemic. And as the nation begins to reopen in the weeks ahead, we will continue to be there for our customers and our communities. We believe that the enhancements paid to our balance sheet and our infrastructure over the last few years have made us more resilient and should ensure that we are able to navigate through the challenges, provide our customers with the experience they have come to expect and ultimately emerge positioned to rebound quickly when the economy turns around. Thank you, again, for your time and interest. I'll now open up the call for questions. Operator, could you please open the line?

[Operator Instructions] Our first question comes from David Scharf with JMP Securities.

We appreciate all of the disclosure, particularly the underlying assumptions behind the reserve levels. Rob, I'm just wondering, obviously, there's -- there are 99 unknowns for every 1 known at this point. So we respect kind of the limits we have to forecasting. But I am curious, just given where you are geographically concentrated, are you seeing -- we're under no illusions about, obviously, origination volumes returning in the second quarter. But nevertheless, I'm curious, are there any different behavioral patterns in terms of inbound credit applications or even people being willing to kind of switch to electronic payments more from state to state? And in particular, it may be early, but I'm curious if George's kind of experiment of opening up early has resulted in any discernible behavioral differences among those customers versus maybe some other markets you're in?

Yes. Thanks, David, and great questions. So we're monitoring our activity at a local level, knowing that the states are going to open up on an uneven pace. And even within states, some local counties are going to open up at a different pace. So we're actually have the analytics to look at that activity. At the moment, it's still very early to try to point to any trends. We did say, obviously, in the call here that we saw some early green shoots from the bottom in terms of originations in the second week of April. It's too early to say whether that's a trend. We have seen electronic payments pick up versus where we were pre crisis, which is indicative customers wanting to interact with us digitally. So it's just too early to tell. Now obviously, our 2 largest states are South Carolina and Texas, and they seem to be moving pretty quickly to open up. So it's something we're going to be watching as we look forward going into the -- through the second quarter and the third quarter. And obviously, with strong analytic capabilities, hoping that we can see the trends emerging quickly and be able to take advantage of those opportunities as we see the economies open up.

Got it. Understood. And maybe a follow-up on the delinquency performance from March to April. I know you explained that it was, in large part, driven by both federal stimulus kicking in as well as some of your assistance programs. I just want to make sure I'm clear. In terms of the way the 30-plus day delinquency rate is presented, in your eyes, is this -- should we be viewing this as a 120 basis point monthly reduction sequentially that sort of normalized? Or is part of it just the fact that once some deferrals kick in programs that there's a fair number of people that aren't in the early stage bucket than normally would have been.

Well, the 30-plus will be across all buckets. So if you look at our deferral program, which as you can see from the percentages, the amount of customers that are taking advantage of the various borrower assistance programs, including deferrals, is at 5.6%, up from 2.2% on average last year. So those deferral programs, some portion are in the pre-delinquency bucket, but the majority are in the 30-plus delinquency bucket. So that would bring customers back to current if they took advantage of those deferral programs. Similarly, the government stimulus, and it's hard to be very scientific as to what has driven the drop in delinquencies because as we ask for or accepted deferral to keep the customer engaged, they have to make at least 1 payment at 2 months. Now their ability to make that payment could be driven in part by the government stimulus. And that's the kind of science that's a little hard to break apart as to where we are in terms of how much was due to government stimulus versus how much to the deferral program. But as of a point in time at the end of the month, our 30-plus delinquency bucket stood at the 5.4%.

Got it. And just 1 last quick question, in terms of loan modifications, if there are any, are there any permanent changes to the effective rates on any of the loans as part of the borrower assistance? And should that impact you?

So we do some loan modifications. We did more deferrals than loan modifications in the month of April. And Mike may have more clarity on the specifics. But in general, when we lower the interest rate or extend the terms, it's to reduce the payment for the customer. Mike, do you want to add anything?

Sure. Thanks for the question, David. We have multiple borrower assistance programs and delinquent renewals are one of those programs. And in many cases, in more hardship circumstances, those delinquent renewals do come with rate modifications and term extensions to help the customers through certain time periods. If the customer is revitalized over time and they renew the loan, they will go back into traditional market-based loan terms, but we do carry a certain portion of the portfolio in all cases that have term extensions and rate modifications at the -- more of the stressed end of our modification programs.

Yes. And David, I would just add to this. These programs are well-oiled and time-tested here at Regional. We obviously deploy them, particularly during times of natural disasters and hurricanes. And they're proven to not only bridge the customer through difficult times, but also to reduce losses for Regional.

Our next question comes from Ryan Carr with Jefferies.

So just curious, in the borrow assistance programs that have gone into place over the past several weeks and months, what percentage of your loans have been modified under those programs? And then beyond that, you had noted some impact that you've been seeing from the stimulus. Notably, a lot of your customers are under that annualized amount of what they'd be earning through to the Cares Act. So I'm curious what impacts are you seeing from the stimulus to date? You noted the delinquencies are down 120 basis points month-over-month in April, but do you foresee an impact on originations moving forward? And what have you seen to date just given -- is the consumer going to be flushed with cash? And is there going to be a reduced need? I'm curious to hear your trend -- your thoughts on trends going forward.

Yes. Thanks, Ryan. I appreciate that. So the percentage of our portfolio in terms of number of loans is 5.6% that have taken advantage of the borrower assistance programs. So that's up, as I said, from a little over 2% historically. In terms of the way forward and the impact of the stimulus, look, we saw like many others did when the initial checks hit, some increase in payments, but we didn't see from an overall standpoint through April year-to-date, really much of a material impact in payments versus what we would have expected. Now as we go forward and we think about loan demand, there's a lot of factors that go into that, that make it hard to judge what the trends are going to look like. Clearly, first and foremost is states starting to open up their economies, consumer confidence starting to rebound. Those are all going to be factors. The government stimulus clearly is a benefit to a degree we don't know. We're still evaluating how that stimulus is coming through and impacting on the credit line. We believe it's having an impact. But to the degree it is, it's more art over science at this point in time. Will that impact demand going forward is also difficult to say. There's just a lot of factors and a lot of unknown right now to figure out how that might impact demand. I would say the biggest impact demand right now is really just consumer confidence. The economy is being shut down and people not entering the branches or seeking lending loans at this time.

And a follow-up to that. You noted that each loan is different in terms of what you modify, whether it be interest rate reduction or extending the tenure. Within that, how do you -- and how do the customer’s request the modifications to the loan? Can they do it online from the portal, like you see with some banks or do they have to call you? Or do they have to come into the branch? And within that as well like how do you make that decision for the criteria changes?

Well, so we contact our clients through phone calls, texts, e-mails as well as on our customer portal to let them know what customer assistance programs are available to them. So that real-life contact with them, particularly when we get them on the phone, we assess what their needs are and what program may best fit their needs. We're able to do the deferrals over the phone so they don't have to come into the branches. And as indicated in our earlier call, we're starting to do remote loan closings for borrowers that want a renewal. So we've got the tools in place to meet those needs of the customers through these programs.

Our next question comes from John Rowan with Janney Montgomery Scott.

Just 2 questions. If -- in the absence of loan originations, how fast is your loan portfolio amortized down?

Yes. That's not something we've ever disclosed in terms of the duration of our assets. The tenure on the loans when we put them on at origination, for small loans average 21 months, and for large loans, 44 months is the average of that origination.

Okay. So it's safe to assume that the effective duration is well over a year then for the portfolio?

Yes. I mean, that sounds about right.

Okay. I appreciate the information you guys gave about your unemployment assumptions. It does seem as if your assumptions are more aggressive than some of your peers who have come out and basically said that they were using a 9% assumption because that's what Moody's was forecasting at the time they closed their books. Can you give us an idea that when you made that assumption, how have -- how has that projection changed? Because it does seem like you guys have included, frankly, a late -- or more of this pandemic into the reserve here in 2Q than, like I said, what we've seen from some of your peers and that's all for me.

Yes. I don't want to speculate as to what decisions others made and clearly, large banks are similar in that range. The way we've looked at it is, over the last 6 weeks, there's been $30 million of unemployment claims filed. And if you just look at the trajectory of that, you're already heading towards the high teens on an unemployment rate. And from a credibility standpoint, given that we're announcing earnings at 6 weeks after that level of filings, I just don't think it would be prudent of us to not reflect a reserve that is indicative of that level of unemployment, at least at a near-term peak.

Our next question comes from Giuliano Bologna with BTIG Research.

Starting out on the commentary that you made around the unemployment benefits being at about $39,000 versus your portfolio income rates being closer to $35,000. Do you know -- are you looking at that on your state exposure or on a nationwide basis?

Yes. So on that one, the number that we've been referring to, $35,000 annualized is the average unemployment benefit at the state level, plus the special $600 ticket for the first 16 weeks at the federal level, plus the $1,200 stimulus check if you're an individual. Now obviously, if you're a married couple or a family of 4, that stimulus check goes up, but we didn't factor that in. When you annualize that number, I think it's $29,000, it comes to $35,000 annualized. And as we said, a meaningful portion of our customer base earns less than $35,000. So some portion are going to make more than if they were employed.

That makes a lot of sense. Then thinking about on the origination side. Obviously, you gave great April data. Within April, are you seeing an inflection? Or is there any kind of trajectory on a week-to-week basis as we kind of exit April versus earlier in the month?

What I'd tell you is, as I said earlier, the second week of April was probably the low point. We've seen some improvement in the second half of April. How that looks going forward, as I said, depends on a lot of different factors. Now one thing that we noted is we did pause our direct mail program and digital originations. We have now restarted those programs after adjusting to the higher credit scores for our mailing and still achieving appropriate risk-adjusted returns. So we should see those channels pick back up. As you can tell in April, it was very small for those channels. So that should provide some tailwind for us. Obviously, we're not mailing at the same level as we would have in the past because we've tightened the credit box. But that will be part of the opportunity, and we're going to learn from those mailings and from those digital originations. And so as we see learnings from that, we'll have opportunities we expect later in the year as the economy picks up.

That makes a lot of sense. I just have 1 kind of minor follow-up to that. Is there a good sense of thinking of -- you obviously tightened your credit box, do you have a sense of how much of your originations in kind of the normalized environment before this cycle would have been cut out by your tightening versus the demand?

We're not putting a number on that. What I would say is we're just being prudent to make sure that where we tighten, we're doing in a way that what we are originating is going to deliver appropriate risk-adjusted returns, given the stressed environment.

Our next question comes from Bill Dezellem with Tieton.

A group of questions. And I'd like to start with the $30 million of branch originations in April. Do those include renewals? Or are those all new loans?

No, that would be renewals as well.

Okay. And then the approval rate that you have experienced in April of this year versus April of last year, how does that compare?

Yes. Bill, it's not something we've historically disclosed. I don't think we're seeing a material change in approval rates as much as just lower demand at this point.

So your tightened credit standards haven't had a meaningful impact in reducing originations then?

Well, I think you got to look at it in 2 different ways, right? So on the digital side and the direct mail program, clearly, it was a, what we call, a real direct tightening because we exited those space until we could recalibrate and decide how we wanted to enter back in. On the branch side, the tightening started in the month of April. So you may not see the full impact of the tightening at this point in time.

That's helpful. And then I'd like you to pontificate, if you would, on your 1 day overdues, they're down as of the end of March. And the question is, do you think that there's anything to do with customers simply being unemployed and home and, therefore, more attentive to their bills and less distracted and actually paying on time for that reason? And if it's something different, why do you think your 1 day and over past dues fell?

Look, I think it can be a couple of things, right? There were some deferrals in the 1- to 29-day bucket. I think it can be, as I said earlier, the government stimulus. You can have people that now are more flushed with cash and pay down and didn't slip further like they might have done historically. There's probably lots of factors going into that, that we're still analyzing.

This concludes the question-and-answer session. I would like to turn the conference back over to Rob Beck for any closing remarks.

Thanks, operator, and thanks, everyone, for joining. As I said earlier, Retail has never been in a stronger position, entering into this crisis with our strong balance sheet and strong liquidity profile. We do see plenty of opportunities post the crisis. We are focused on all the things we've talked about, our customer collections, credit quality, managing our costs and ultimately preserving capital. But we are investing in digital and looking to position ourselves for the post crisis when the economy rebounds. So I appreciate your questions. And look forward to talking further again.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.