And as we pointed out on the call, the first six months of any vintages, vintage is a little bit choppy as they season. But as you can imagine, as we’re looking at this on a month to month basis, looking at improvement through March, April, May, and even getting an early read on June, July, August, gives us a lot of confidence in that curve continuing to bend. And we look at it again, looking at delinquency, looking at flow to loss and actually looking at loss development, as we look across these vintages. So, we totally hear you on the point inflation is definitely a factor. But again, our kind of more granular analysis gives us a lot of comfort that, one, we boxed the issue to the second half of 2022 and that the 2023 vintages show great improvement — and great improvement as you look month to month, and also gives us confidence in terms of our overall outlook around our retail auto NCOs.
Rick Shane: Terrific. That’s a very helpful answer. Thank you, guys.
Jeff Brown: Thanks, Rick.
Operator: Thank you. One moment for our next question, please. All right. It comes from the line of John Hecht with Jefferies. Please go ahead, John.
John Hecht: Good morning, guys. Thank you for taking my questions, and good luck with everything, JB. Definitely enjoyed working with you.
Jeff Brown: My pleasure. Thank you.
John Hecht: Thank you. Just with respect to NIM this year, how do we think about the yield side? I mean, you guys have obviously done — you’ve been very effective at increasing the new loan yields. How much more is there to go on that front, given rate stabilization and the macro and mix shift?
Russ Hutchinson: Yeah, look, I mean, fourth quarter yield expanded again to 10.8%, giving us 10.69% over the course of the year, a great outcome. And remember, that’s an outcome where we’ve ramped up our concentration in that S tier. And so, we’ve moved up credit at the same time that we’ve moved up pricing. We’ve shown overall a 95% beta on the way up in terms of rates that’s really helped and supported us. Now, as we think about the outlook for auto, I would say, I think we’ve got a couple of natural advantages. Number one, we just see a tremendous amount of application volume and that gives us a lot of information and a lot of flexibility with our dealers in terms of how we have the ability to move up or down and how we have the ability to use pricing as a lever.
That’s a competitive advantage that I think is unique to Ally, just given the scale we have and the depth of our relationships with dealers. And it gives us a lot of confidence in our ability to optimize our yield and on a risk-adjusted basis in order to preserve our yield going forward. At this point, I don’t think we expect our yield to continue to rise, but we do expect that we can basically use credit and pricing to maintain yield, as we move through 2024.
John Hecht: Okay. Very helpful. Thanks. Sorry?
Jeff Brown: Maybe one to add on there is, though obviously new originations continue to come on higher than the overall portfolio yield, so you’ve got this nice natural tailwind that’s going to show itself. So, you would expect the overall portfolio yield to continue increasing for the next several quarters.
Russ Hutchinson: Yes, that’s right. When I talk about yield, I was really focused on the origination yield, maintaining near the level where it is today. But obviously, in the portfolio side, that is a natural tailwind. Also, on the portfolio side, we do have some benefit from, again, ongoing retail auto originations, credit card, corporate finance, at the same time that we see securities and mortgage with obviously lower yields rolling off.
John Hecht: Okay. Great. Very helpful. And then, follow-up question, Russ. You’re peaking charge-offs from the ’22 vintage first half of this year and then maybe some stabilization or favorable movements and losses as we move from there. How do we think about the AOL over the course? Is it stable or do you move it up a little bit through the peak charge-off cycle and then it starts to recede? How do we think about the trajectory there?
Russ Hutchinson: Look, there are a lot of factors that go into the AOL. We have a pretty thorough process. And we’re looking at the macro environment, so there are a whole set of macro assumptions that go into that. I think as I mentioned during the call, some of those build in a natural conservatism in terms of our expectations for the progression of unemployment rates in the near term, and then we also factor in a mean reversion factor. So, we — in our models, we have unemployment kind of mean reverting to 6% over the medium term. And so, a lot of factors that go into that AOL. Hard to comment on the outlook for that going forward, but I think our general expectation is to assume it’s kind of flattish.
John Hecht: Okay. Helpful. Thanks.
Sean Leary: Great. Thanks, John. That’s all the time we have for today folks. If you have any additional questions, as always, please feel free to reach out to Investor Relations. Thank you for joining us this morning. That concludes today’s call.
Operator: Thank you, everybody, and you may now disconnect.
