Earnings Call Transcript - RM Q3 2020

Operator, Conference Operator

Thank you for standing by; this is the conference operator. Welcome to the Regional Management Corporation Third Quarter 2020 Earnings Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. I would now like to turn the conference over to Garrett Edson with ICR. Please go ahead.

Garrett Edson, ICR

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 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 about forward-looking statements and the risks and uncertainties that could impact the future operating results and financial condition of Regional Management Corp. Also, our discussion today may include references to certain non-GAAP measures. A 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.

Rob Beck, President and CEO

Thanks, Garrett, and welcome to our third quarter 2020 earnings call. I'm joined today by Mike Dymski, our Interim Chief Financial Officer. Simply put, we had an outstanding third quarter, particularly when considering the challenging economic and operating environment. I couldn't be happier with our results and our team's effort. We generated $11.2 million of net income or $1.01 of diluted EPS as a result of quality growth in our loan portfolio, a strong credit profile, disciplined expense management, and low funding costs. Thanks to both rebounding consumer demand and our new growth initiatives, we sequentially grew our total portfolio by $37 million led by $41 million of growth in our core small and large loan portfolio. Our core loan portfolio also grew by $10 million year-over-year. At the same time, the credit quality of our portfolio remained stable, with a net credit loss rate of 7.8% in the third quarter, compared to a 10.6% rate in the second quarter and 8.1% in the prior year period. We ended the third quarter with a 30 plus day delinquency rate of 4.7%, near historic lows and down from 4.8% as of June 30 and 6.5% as of the prior year, even as our borrower assistance program usage held steady at pre-pandemic levels throughout the quarter. Our $144 million allowance for credit losses as of September 30 compares favorably to our 30 plus day contractual delinquency of $49.9 million. The allowance includes $31.9 million reserved for credit losses associated with COVID-19. So we expect delinquencies to begin to normalize from these historic lows; we're confident that we have ample coverage to absorb the associated credit losses. Of course, any additional government stimulus would help us to keep delinquencies low for a longer period of time. As an annualized percentage of average receivables, interest expense in the third quarter improved by 50 basis points to 3.5% compared to 4% in the prior year period. In late September, we completed our largest securitization transaction to date, at a weighted average coupon of 2.85%, further reducing our cost of capital and improving our already ample liquidity and borrowing capacity. We're now a well-established issuer in the ABS market and expect to access the market regularly moving forward. As of October 23, we had $516 million of unused capacity on our credit facilities, and $208 million of liquidity consisting of a combination of unrestricted cash on hand and immediate availability to draw down cash from our credit facility. In sum, we executed well on all facets of our business and we continue to position the company to expand market share and profitability in the coming quarters and years. As we've consistently noted, our Management Team and Board of Directors regularly assess our capital allocation priorities. On the heels of our outstanding third quarter performance, and based on our strong capital position, robust liquidity, and confidence in our long-term strategy and ability to generate excess capital to return to shareholders on a regular basis, our Board of Directors approved a quarterly dividend of $0.20 per share and authorized a $30 million share repurchase program. The quarterly dividend and the repurchase program enable us to return significant value to our shareholders, while at the same time, allowing us to maintain a strong balance sheet and the necessary capital to invest in our long-term growth strategy. Looking ahead, we're excited about our growth prospects. We continue to invest heavily in our omni-channel digital and marketing initiatives as we see considerable opportunities to generate significant growth and expand our market share moving forward. We entered the fourth quarter with $1.1 billion of net finance receivables and thus far in October, we have continued to experience a steady uptick in the number of loan applications and originations, further evidence of rebounding consumer demand, and the early effectiveness of our growth strategy. As I noted on our prior call, we completed the rollout of remote loan closing capabilities across our network in July. Our remote loan closing process enables our customers to extend and expand their borrowing relationship with us from the comfort of their homes, while still allowing us to maintain the exact same underwriting standards that we would apply if the customers were meeting with us in our branches. After only three months, with the new capabilities fully deployed, we completed 16% of September branch originations through the remote loan closing process, a demonstration of our ability to adapt successfully to the new operating environment, while continuing to provide our customers with the best-in-class service and experience that they've come to expect for loans. Over the next 18 months, we expect to test and implement a number of exciting digital growth initiatives. For example, in the third quarter, we experienced early positive results from a test of our larger loan offers to our highest credit quality customers. And a test of direct mail offers to expand segments of our risk response model, which we believe will generate attractive risk-adjusted returns. By early 2021, we expect to complete the migration of our IT infrastructure to the cloud. In the first half of 2021, we plan to roll out and improve the digital pre-qualification experience for our customers, including expanded integrations with existing and new digital affiliates and lead generators. Early next year, we also plan to enter a new state as we continue our footprint expansion. And we intend to pilot a guarantee loan offer program, which will be an alternative to our convenience check loan product and may be fulfilled online with ACH funding into a customer's bank account. In the second half of 2021 and early 2022, we expect to test the digital origination products and channels for new and existing customers. In parallel, we plan to improve our customer experience through the introduction of a mobile app, and the enhancement of our customer portal. Being available at the customer's convenience is imperative now more than ever, and having modern capabilities that further enrich the customer experience will only aid in our ability to retain our current customers and win new customers. We believe that our omni-channel and digital investments will allow us to extend the geographic reach of our existing branches, enter new markets more quickly and with lower branch density, enable new growth and higher average receivables per branch and ultimately further expand our revenue and operating efficiencies, leading to stronger bottom line growth. As we grow and introduce new channels, products and service features, we remain keenly focused on maintaining the credit quality of our portfolio. We're proud of the job we've done in preserving a strong and stable credit profile. Our ongoing credit performance is a testament to the quality of our pre-pandemic underwriting criteria, our custom scorecards, the bridge provided by borrower assistance programs and government stimulus, and our ability to quickly adapt our underwriting criteria as the operating and macroeconomic environment evolves. Our investment in our credit infrastructure over the past several years has paid dividends in 2020 and has positioned us well to pursue our growth initiatives over the long-term. Looking ahead, we plan to continue investing in further improvements in our underwriting, including through alternative data and advanced machine learning tools and models that will expand the use of trended credit attributes. Maintaining a sharp focus on our credit quality will help to ensure that top line expansion translates into sustainable bottom line growth. To aid in the execution of our ongoing initiatives, we announced last month that Harp Rana will be joining us in November as our new Chief Financial Officer. Along with her significant financial and credit expertise, Harp has extensive experience in steering digital initiatives and innovation at Citi, making her an ideal fit for the role. We look forward to having her as a key member of the team. And I would be remiss if I didn't thank Mike for doing an outstanding job in the interim CFO position. I look forward to continuing to work with him in his ongoing role as our Chief Accounting Officer. In summary, I want to thank our team members who continue to perform admirably for an outstanding third quarter performance in all respects. We remain confident in the sustainability of our operating model, the resilience of our customers, and our team's ability to execute in a challenging environment. We're very pleased with our results and with our ability to return capital to our shareholders, and we're excited about what the future holds. I'll now turn the call over to Mike to provide additional color on our financials.

Mike Dymski, Interim Chief Financial Officer

Thank you, Rob, and hello everyone. Let me take you through our third quarter results in more detail. On Page 3 of the supplemental presentation, we provide the third quarter financial highlights; we produced net income of $11.2 million and diluted earnings per share of $1.01 driven by sequential portfolio growth, stable credit performance, and low funding costs. Page 4 displays our portfolio growth and mixed trends through September 30. We closed the quarter with net finance receivables of $1.1 billion, up $37 million sequentially due to rebounding consumer demand and the execution of our new growth initiatives. Our core loan portfolio grew $41 million or 4% sequentially and $10 million or 1% year-over-year. We continue to originate new loans with appropriately tightened lending criteria. As illustrated on Page 5, branch originations further increased from $67 million in June to $82 million in September. Meanwhile, direct mail and digital originations increased from $12 million in June to $27 million in September. Total originations for the third quarter of 2020 decreased 12% over the prior year period. The year-over-year change in total originations has consistently improved for the past five months with September originations increasing 7% year-over-year. We expect fourth quarter originations to decline from third quarter levels as part of our normal seasonal pattern, which should result in modest sequential portfolio growth in the quarter. However, the timing of any new government stimulus check would temporarily reduce loan demand. Turning to Page 7, total revenue declined 1% in the interest and fee yield declined 60 basis points year-over-year, due to the continued product mix shift toward large loans in the portfolio composition shift toward higher credit quality customers with slightly lower interest rates due to enhanced underwriting standards during the pandemic. Interest and fee yield increased 100 basis points sequentially as a result of increased renewal activity and the recognition of unearned revenue on those renewals. In the fourth quarter, we expect interest and fee yield to be 30 basis points lower than the third quarter as of September 30, 80% of our loan portfolio has an APR at or below 36%. Total revenue yield, which includes our insurance net income, decreased 40 basis points year-over-year also due to the change in product mix and portfolio composition shift to higher credit quality customers. As a reminder, customers purchased unemployment insurance coverage from us to help keep their loan payments on track, even during an unforeseen unemployment event. As of September 30, 53,000 or 13% of our customer accounts are covered by unemployment insurance. In the first quarter of 2020, we recorded a $1.3 million IUI reserve related to elevated unemployment claims at the start of the pandemic. Based on IUI claim frequency today, no additional reserves were required in the second or third quarters. In the fourth quarter, we expect our total revenue yield to be 50 basis points lower than the third quarter. Moving to Page 9, our net credit loss rate was 7.8% for the third quarter of 2020, a 30 basis point improvement year-over-year, and 280 basis point improvement from the second quarter of 2020. We expect to see the impact of the pandemic on our net credit loss rate, more prominently in the middle of 2021, with the timing dependent on macro conditions and the impact of any additional government stimulus. Looking to Page 10, the credit quality of our portfolio remained stable. Our 30 plus day delinquency level at September 30 was 4.7%, which was a 10 basis point improvement from the second quarter and a 180 basis point improvement year-over-year. 74% of our core loan portfolio has now passed our scorecard underwriting criteria. In addition, approximately 40% of our total loan portfolio has been originated since April, the vast majority of which was subject to enhanced underwriting standards deployed following the outset of the pandemic. Turning to Page 11, we ended the second quarter with an allowance for credit losses of $142 million or 13.9% of net finance receivable. During the third quarter of 2020, the allowance increased by $2 million, with a base reserve build of $3.5 million from portfolio growth, partially offset by a macroeconomic reserve release of $1.5 million. We ran several updated economic stress scenarios, and our final forecast assumed elevated unemployment in 2020 with a gradual decline to 9% by the end of 2021. The severity and duration of our macro assumptions remained relatively consistent with the second quarter model. We ended the third quarter with an allowance for credit losses of $144 million or 13.6% of net finance receivable inclusive of $31.9 million of COVID-19 related reserves. We are confident that we are sufficiently reserved if the pandemic continues for an extended period. Looking to Page 12, G&A expenses in the third quarter of 2020 were $43.8 million, up $3.6 million year-over-year, but better than our sequential guidance for the quarter by $0.7 million. As we reposition the business for future growth, we adjusted our workforce in the third quarter and incurred $0.8 million of non-operating severance expense. The savings from these actions will be used to fund our omni-channel and digital investments. We deferred $0.9 million less in loan origination costs on less loan volume in the third quarter of 2020, which increased personnel expense year-over-year. We increased marketing expense year-over-year by $0.9 million to support our growth initiative. Lastly, the third quarter of 2020 included $0.8 million of incremental costs related to new branches that opened since the prior year period. Our operating expense ratio was 17% in the third quarter of 2020, with the items previously noted impacting the ratio by 130 basis points. We remain focused on investing in our digital capabilities and marketing efforts. All to drive new revenue opportunities, enhance our customers’ omni-channel experience, and create long-term operating leverage. In parallel with these efforts, we executed cost management actions including the aforementioned workforce reduction to self-fund a large portion of the digital investment. Excluding marketing expenses, overall expenses in the second half of 2020 are forecasted to be down from the first half of the year, which evidences the self-funding of the digital initiatives. Overall, we expect G&A expenses for the fourth quarter to be higher than the third quarter by $1.7 million, encompassing $1 million of increased marketing and the remainder related to investment in digital capability. Turning to Page 13, interest expense of $9.3 million in the third quarter of 2020 was $1 million lower than the prior year period due to the lower interest rate environment and despite $0.8 million of accelerated amortized debt issue costs incurred during the third quarter of 2020. These costs related to repaying our first securitization, with the proceeds from our latest securitization transaction. In late September, we closed our fourth and largest asset-backed securitization, a $180 million note issuance, with a weighted average coupon of 2.85%; our lowest cost of capital ever. Our third quarter annualized interest expense as a percentage of average finance receivables was 3.5%, a 50 basis point improvement year-over-year. During the third quarter, we purchased $150 million of interest rate cap contracts with three-year terms and a strike rate against LIBOR of 50 basis points. We took advantage of the favorable rate environment and helped secure our funding costs for the future. In the fourth quarter, we expect interest expense to be approximately $9.1 million. Our effective tax rate during the third quarter of 2020 was 27% compared to 25% in the prior year period. In the ordinary course of business, we have non-deductible expenses, taxes on share-based compensation and state taxes in Texas that largely do not vary based on pre-tax income. So these items have a larger impact on our effective tax rate when pre-tax income is lower. Our 27% effective tax rate for the third quarter of 2020 was better than our guidance of 30% as pre-tax income increased on sequential loan growth, strong credit results, and low funding costs. In the fourth quarter, we expect our effective tax rate to be approximately 27%. Page 14 reminds of our strong funding profile, our third-quarter funded debt-to-equity remained at a very conservative 2.6 to 0.1 low leverage coupled with $144 million in loan loss reserves provides a strong buffer for our balance sheet. The completion of the securitization transaction during the third quarter improved our liquidity profile and borrowing capacity even more. In summary, we have more than adequate liquidity and capacity to support the fundamental operations of our business throughout the pandemic. That concludes my remarks. I’ll now turn the call back over to Rob to wrap up.

Rob Beck, President and CEO

Thanks, Mike. In summary, we exited the third quarter with solid operating results, a strong balance sheet, ample liquidity, stable credit profile, and an exciting long-term growth trajectory. We are very pleased with our performance, our current position, and with our Board of Directors' decision to begin regularly returning excess capital to our shareholders. 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, Conference Operator

Certainly. We will now begin the question and answer session. Our first question is from David Scharf with JMP Securities. Please go ahead.

David Scharf, Analyst

Hi, good afternoon, and thank you for taking my questions. Rob, you mentioned a lot of new growth initiatives for next year, and I couldn't catch all of them. I'm curious about how you prioritize these initiatives as you consider their potential impact on origination volumes over the next 24 to 30 months. Are we looking at new stores, digital convenience checks, or remote closing? How should we approach understanding the changes in the origination model?

Rob Beck, President and CEO

Yes, David, great question and good to hear from you. The growth we observed in the third quarter, specifically the $41 million increase in receivables, can largely be attributed to several new initiatives we implemented. Approximately half of this increase stemmed from testing larger offers for our top credit quality customers and utilizing enhanced analytics in our direct mail program to broaden the segments we target within our risk response models. We have previously mentioned our extended footprint mailing, and we are beginning to see positive early results from these initiatives. The main point to highlight is that our focus is on developing a true omni-channel experience, enabling customers to be served in their preferred manner. We believe this will be vital in the post-COVID landscape. The new rollout planned for next year will facilitate end-to-end digital originations, whether through a mobile app or our portal. With these capabilities, we can not only increase top-line growth and bolster our balance sheet and receivables but also enhance organizational efficiencies. When considering our entry into new states next year, this will enable us to expand into new markets more efficiently with fewer stores and enhance our ability to enter additional geographies at a quicker pace. It’s challenging for me to provide a specific quantification at this point, but our confidence in returning capital to our shareholders reflects our belief in our long-term business model and our capacity to return excess capital to our shareholders.

David Scharf, Analyst

Got it. Understood. I appreciate that. And maybe just one follow up. I guess, with roughly 80% of balances now, it sounded like at or below 36%. You obviously can control based on what types of products you're actually marketing either digitally or direct mail. Did you have a goal in mind time wise or when you would prefer perhaps for the portfolio to be entirely at that level particularly in advance of what potentially could be a different regulatory environment in Washington?

Rob Beck, President and CEO

But stepping back more from a practical standpoint, and no one could predict what's going to happen in Washington, the access to credit that would get taken away, if there's a 36% rate cap, it could impact, I don't know, 100 million Americans. And that's going to have a significant impact on the economy, right, as we're hopefully coming out of COVID. And so while it sounds good that there's a 36% rate cap, I'm not sure from a practical standpoint that's going to be beneficial to the economy and to get through. But again, whichever way it goes, we're well positioned. And we like where we stand.

David Scharf, Analyst

Great. Thanks very much. Congratulations.

Rob Beck, President and CEO

Thanks, David.

Operator, Conference Operator

Thank you. The next question comes from Sanjay Sakhrani with KBW. Please go ahead.

Unidentified Analyst, Analyst

your:

Rob Beck, President and CEO

Hey, Steven, thanks for the question. I'll take the first part and probably kick the reserve question over to Mike. So where we stand now, delinquencies at 4.7% or just off historic lows. And we do expect that delinquencies, as we've said previously, will start to rise. Given where we are in the year, I think right now you're looking at apps and any more government stimulus; you're looking at maybe middle of the year, next year, where you start to see the COVID-related losses come through, of which we are reserved well for. So that's kind of the outlook at the moment. Now, obviously, if there's additional government stimulus, and we don't know the timing or the form, but I would expect that would extend the benefit on the delinquencies and push further out the losses, depending on what the nature of that stimulus is.

Mike Dymski, Interim Chief Financial Officer

Sure. Hey, Steven, good afternoon. And your thesis is correct on the reserving for the losses here in 2020 that would release of the reserves would offset those losses when they come through in 2021. So just to give you a little background on the model: we assumed elevated unemployment in 2020 with a gradual decline to 9% by the end of next year. We then made adjustments to the model to account for some of the benefits of our internal borrower assistance programs. In the third quarter, our severity and duration of our assumptions remain pretty consistent with where the second quarter model was. And overall, we're confident that we are sufficiently reserved if the pandemic continues for an extended period. As Rob mentioned, we do expect the delinquency to rise during the fourth quarter. But a lot of that is going to depend on the timing and level of any government stimulus. But in the meantime, we have $31.9 million of COVID-related reserves, which is about a 30% stress on our normal reserve rate that we came into 2020 with on CECL, and so we feel comfortable with reserves being able to cover the impact of COVID losses in 2021.

Unidentified Analyst, Analyst

Great, thanks. And just as a quick follow up, are you seeing anything on the consumer side, as some of the stimulus program has kind of gone away? Want to see if you are seeing anything on it?

Rob Beck, President and CEO

The additional unemployment benefits have ended, and the FEMA funds that were redirected were largely exhausted by the end of September. Consequently, we haven't observed any significant impact on our delinquencies, which are currently at 4.7%. So far in October, we are on track to remain below 5%. In terms of government stimulus, there are various factors that are supporting our customers' needs and the economy as a whole. It’s estimated that around a third of our customers may be utilizing mortgage forbearance programs, with an average benefit of about $1,100 in cash per month. While our customers may be below the average in terms of cash saved, they are also spending less. This combination leads to a significantly higher savings rate, as evidenced by reported metrics that indicate savings have increased by $12 trillion since the start of the pandemic, affecting all income brackets. Debt-to-income ratios have improved, indicating that consumers' balance sheets are quite healthy. Research suggests that of the government stimulus provided, about a third was used to pay down debt, a third for spending, and a third for savings. Therefore, there is underlying support beyond direct government stimulus. However, if additional government stimulus occurs, it will further strengthen the credit side. It's important to note that if stimulus checks are issued, there might be a temporary impact on demand for a month or two as those funds are utilized. Overall, we are in a strong position, and our customers appear to be in relatively better shape. Additionally, we maintain substantial reserves in relation to our current delinquencies.

Unidentified Analyst, Analyst

Got it. Thanks for taking my question.

Operator, Conference Operator

The next question comes from the line of an unidentified participant of Jefferies. Please go ahead.

Unidentified Analyst, Analyst

Hey, guys, thanks for taking my question. I am for John Hecht today. Just wanted to touch on the omni-channel platform, how it's going to affect the cost structure going forward, and what else do you expect to see out of it, especially in like, ‘21, ‘22?

Rob Beck, President and CEO

It's a bit too early to determine how everything will unfold. As you've noticed, we have several initiatives in place; over time, I believe these will enhance our cost efficiency. Serving more customers through digital channels will reduce costs. Entering new states with fewer branches will also lower our origination costs. The reason I can't provide a direct answer is that it largely depends on the pace of implementation, and we are still in the early stages of testing certain aspects, while also investing in expanding our capabilities. Our final outcomes will be influenced by how quickly we can drive change. Throughout this process, we must ensure that we are addressing customer needs with the appropriate capabilities, which is never a straightforward path. We will continue to test, learn, and adapt; I think we’ve become quite agile in this environment during the global pandemic. This agility will greatly benefit us as we digitize our business and develop our omni-channel strategy.

Unidentified Analyst, Analyst

Awesome, thanks. And then another quick one for ‘21 is, how should we think about the branch build-outs? I know you said in your release that we're expecting one for 4Q but going forward or is it too early to tell there?

Rob Beck, President and CEO

A little early to tell, I would tell you this, we are going to enter a new state. So you can kind of pencil in right now approximately 10 new branches; I'm not going to say that they're all going to be in the new state, we do have some opportunities in some of our other regional states we've entered. So you can pencil in 10 for now. We'll get back to you on more details as we finish up our plan for next year.

Unidentified Analyst, Analyst

Awesome. Thank you so much.

Operator, Conference Operator

The next question comes from Bill Dezellem with Tieton Capital. Please go ahead.

Bill Dezellem, Analyst

Thank you. You walked through a number of new digital initiatives over the course of the next 12 or so months. Could you please highlight which one of those is going to have the greatest overall impact on the business? Number one. Number two, which one do you expect to have the biggest impact on loan growth? And number three, the one that you expect to have the biggest impact on credit?

Rob Beck, President and CEO

So Bill, it's great to hear from you. We're not planning to make any drastic changes with these initiatives; however, there are several projects we are pursuing that we view as significant growth opportunities. Entering new states always provides a solid pathway for growth. Additionally, we're enhancing our ability to use data for more effective and efficient mailing and considering ways to increase the reach of our branches, all of which will positively influence our performance. Importantly, we don't have to prioritize one over another; many of these initiatives can be implemented simultaneously and integrated into our operations. As we digitize and enhance our end-to-end capabilities for underwriting both new and existing borrowers, we will unlock remarkable growth potential. Regarding credit, we are maintaining a strong focus on it, especially in light of the pandemic. As we introduce new strategies, we will remain very focused on the underwriting practices we've established; in fact, during the third quarter, all of these were conducted under our current underwriting standards. It's important to mention that since the pandemic began, we've revamped about 40% of our portfolio, and the majority of new receivables have been added with stricter or improved credit underwriting, including higher FIFO cut-offs, lending less to certain sectors, more thorough income verification, and leveraging various information sources to guide our direct mail strategy from a risk perspective. We will continue to enhance our credit framework, moving beyond our current custom scorecards to leverage a wider array of data elements. Beyond 2023 or 2024, we are discussing adopting over a thousand additional variables, which some other companies utilize, employing machine learning for a more sophisticated underwriting process. By combining these elements with available tools today, particularly in digital underwriting to mitigate fraud, we expect to drive revenue growth through these new strategies while exercising tight control over our credit to ensure sustained returns for the business.

Bill Dezellem, Analyst

Thank you. I have another question. How much does the category of a person's employment matter? Specifically, I'm interested in knowing what percentage of your customers are restaurant servers or work in hospitality and other higher risk areas.

Rob Beck, President and CEO

Yes, we have the ability to sort by industry; obviously, there's always going to be some noise in the data based on your sources of information, whether it's something that has been reported accurately by the customer or not. So we have the ability to look at that. We have the ability, and we have suppressed certain industries like oil and gas for our direct mail program as an example. So we have the ability to look at that. We know that proportion in our portfolio, not just in aggregate but at the state level. And of course, we look at the performance of the business at a very granular level. But clearly, as we continue to build out our data analytic capabilities in the credit side, we'll just get better and better at it.

Bill Dezellem, Analyst

And your credit has been great. But have you seen a difference in behavior amongst customers, either geographically or by type of employment or a type of employer category?

Rob Beck, President and CEO

Yes, performance has been pretty consistent across all our states. Obviously, if someone's unemployed, there's more stress. There's obviously been a lot of support for the unemployed, which I think improves the performance of that segment, along with all the other support that's out there in the economy in general, whether it's forbearance programs and alike. So, but the performance is pretty steady across the portfolio. And we're pleased with where we are, but we're also watching it like a hawk. And I think that's what you would expect us to do, and we're reserved obviously for any stress that comes.

Bill Dezellem, Analyst

Great. Thank you. And Mike, thanks for the great job you've done.

Mike Dymski, Interim Chief Financial Officer

Thanks for the kind words, Bill.

Rob Beck, President and CEO

Thanks, Bill.

Operator, Conference Operator

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

Rob Beck, President and CEO

Yes, thank you, operator. And thanks, everyone, for joining. As I said, we're really pleased with the results this quarter. Obviously, the environment is still uncertain. And, top of mind for us is the safety and health of our employees and our customers. We remain there for our customers. We are seeing and have seen a pickup in demand. And we're encouraged about where the future holds. I will tell you that, I'm very confident in the strength of this business. And, just to highlight some facts: with $272 million of equity, we have $208 million of available liquidity as of October 23, $144 million of loan losses, and $507 million of unused borrowing capacity to support our growth and our earnings in the quarter, all of which were up strongly since the second quarter. So we're confident in the strength of our business. We're optimistic about the future for the business and the growth opportunities. And we are watching the environment closely. And we're prepared, and we remain nimble to address whatever challenges face us as a business. So thanks for joining the call, and have a good day.

Operator, Conference Operator

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