Vincent Caintic: Okay. It’s very helpful. Thanks very much.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Mark DeVries with Deutsche Bank. Your line is open.
Mark DeVries: Hi, can you hear me now?
Jon Witter: Yeah.
Mark DeVries: Okay, great. Thank you. Sorry about that. I had a couple follow-up questions on credit. Just wanted to clarify some of the comments made. Jon, I thought I heard you indicate that part of the reason for the rise in delinquencies is related to some of the enrollment and some of these borrower assistance programs. Did I hear that correctly? And if so, what’s kind of the dynamic there? Are you moving them into a status that has to be treated as delinquent? Is there something else affecting that?
Jon Witter: Yeah. So, it’s really a fairly mechanical answer. When someone enters one of our payment programs, before we can re-age them to current guidelines and standards, say, they have to make, I think it’s typically three qualifying payments. And so, in a past world, we may have collected on that customer. In a past world, they may have gone through to default. In a past world, several years ago, they may have used forbearance and been brought current more quickly. Here we have to see that period of positive pay before we can re-age them. And so, as we parse apart the delinquency data and we look at what portion of it is driven by, what I would call, normal sort of delinquent situations versus which are caused by this phenomena of customers making payments, but waiting to re-age, that’s what we believe has driven sort of the small increase that we talked about.
Mark DeVries: Okay. Got it. That’s helpful. And it sounds like you’re still pretty confident about year-over-year improvement in the charge-offs this year included, whether charge-off comes in at the low end or the high end of that guidance range. Should we expect charge-offs to be kind of higher in the first half of the year and then start trending down in the back half of 2024?
Jon Witter: Yeah. There is a seasonality to our charge-offs, which I think always occurs because — and I think we’ve talked about this on past calls. The most likely time, unfortunately, when a borrower gets into financial distress is pretty soon after they’ve entered repayment. These are young borrowers. They may not have sort of built up any savings at that point. They may be experiencing disruptions, moving into the labor force. They may just not have yet the same financial habits that they would have later in life. And so, we always see a period of seasonality in our results, and I think you should expect that same pattern of seasonality to persist in ’24.
Mark DeVries: Okay. I understood. Thank you.
Jon Witter: You’re welcome. Thank you.
Operator: Thank you. Please standby for our next question. Our next question comes from the line of Rick Shane with JPMorgan. Your line is open.
Rick Shane: Hey, guys, thanks for taking my question. Look, historically, this has been an industry that was concentrated amongst three originators. Two have essentially exited the business. There’s been some conversation about new entrants. But at the end of the day, what is the binding constraint in terms of your market share?
Jon Witter: Rick, I think…
Rick Shane: Other than 100%?
Jon Witter: Look, we absolutely continue to face, I think, lots of good competition in this business, Rick. And again, I’m not sure I want to go much deeper in predicting what’s going to happen with the latest set of news. We’ll see that play out over the next couple of months, but there are very formidable smaller, private, and other players that we compete against. And at the end of the day, I think what sort of binds our market share potential is a little bit of competition, it’s a little bit of customer choice, it’s a little bit of different marketing strategies and focusing on different parts of the credit spectrum. At the end of the day, we love our 55% market share. We think there’s an opportunity for it to go up a little bit.
It’s obviously grown nicely over the last three years. But I don’t think anyone should expect that we will be 70%, 80% market share player. I think there will always be good competition in the market, and quite frankly, we welcome that. I think it makes us better when we’ve got great competition out there. I think it’s better for the customers. So, I would expect there to be that limit probably driven by a number of different factors and forces.
Rick Shane: Got it. Okay, that’s helpful. Thank you. Look, Moshe asked a question sort of trying to dimensionalize growth — asset growth prospects. And we’re in this unique window right now where there is a lot of market share up for grabs, gain on sale has improved. And so, potentially the economics are shifting — clearly are shifting to be more favorable than they were at the end of last year or at the end of ’23. When you think about what the priority will be, imagine a scenario where volumes — market share is better than you’re looking for, gain on sale is solid, that gives you the ability to hit the high end of your earnings guidance, but it also potentially gives you the ability to form enough capital to grow beyond your 2% to 3% range.
