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Good morning and my name is Cristal. I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2020 Discover Financial Services Earnings Conference Call. [Operator Instructions] Thank you.
I will now like to turn the call over to Mr. Craig Streem, Head of Investor Relations. Please go ahead.
Christ, thank you very much. And welcome, everybody, to our call this morning. We will begin on Slide 2 of the earnings presentation, which you can find in the Financials section of our Investor Relations website, investorrelations.discover.com.
Our discussion today contains certain forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially. Please refer to our notices regarding forward-looking statements that appear in today's earnings press release and the presentation. Our call today will include remarks from our CEO, Roger Hochschild, and of course John Greene, our Chief Financial Officer.
And after we conclude our formal comments, there will be time for Q&A Session. And we ask you please, to limit yourself to one question, and if you have a follow-up we'd like you to queue back in towards the end and we'll try to accommodate as many participants as we can.
And now it's my pleasure to turn the call over to Roger.
Thanks Craig. And thanks to our listeners for joining today's call. On last quarter's call, we discussed the impacts of the COVID-19 pandemic on our employees, customers, and business. While I am pleased with our execution in the second quarter, we remain in a very challenging environment with considerable uncertainty as our country continues to struggle to stop the spread of COVID-19 and the impact on our economy remains very significant. Of course, the safety of our employees continues to be a top priority. All areas of the firm, including our hundred percent U.S.-based customer service team are operating effectively in a remote environment. And we have informed employees they will not be required to return to our physical locations until after January 1, 2021 at the earliest. Our operating model supports our commitment to providing flexible work arrangements as long as necessary to ensure the safety of our staff and their families.
For our customers we continue to provide an industry-leading service experience, leveraging our digital capabilities and with average answer times in our call centers remaining at pre-pandemic levels of under one minute. Our products are well positioned as consumers increasingly look for value in these challenging times. We are the only major bank with no annual fees on any of our credit cards and no fees on any of our deposit products.
Our leadership position in cash rewards and flexible redemption options, including point-of-sale with Amazon and PayPal are serving us well as consumers are increasingly shopping online and concerns over the safety of travel are limiting the appeal of airline miles. We have continued to support impacted customers with our Skip-a-Pay programs. Since we launched this program in mid-March we have helped over 662,000 customers across all of our products. And in fact, about 60% of total loans enrolled have already exited the program. The Skip-a-Pay program was intended to be a short term option, and we plan to end program enrollments in August. After that, we'll continue to offer assistance to those who qualify on a customer-by-customer basis.
Now to our results for the quarter. We generated a net loss of $368 million or $1.20 per share. The most significant driver of this was a $1.3 billion reserve build in recognition of further deterioration in the macro economic outlook, subsequent to March 31. The credit performance in our portfolio has been stable, and we believe that the actions we've taken over the past few years, including reducing our contingent liability and the additional credit actions we implemented in March position us well. Nevertheless, the reserve build reflects our view that persistent, long-term unemployment will increasingly impact prime consumer lending portfolios.
The pandemic continued to have a significant impact on sales volume, as well as loan growth through the quarter. We saw sales down 16% and 3% lower car loans, while down year-over-year, both compared favorably versus other issuers, principally due to our greater concentration in every day and online spend categories, as opposed to T&E.
Operating expenses of $1.1 billion were flat to the prior year and included a $59 million onetime impairment charge to our Diners business, related to the impacts of the slowdown in global teeny spending. Excluding this operating expenses were down 6% year-over-year. We remain on track to deliver the $400 million of expense reductions we previously announced, even as we continue to invest in core capabilities, including analytics and data science. We expect these investments to strengthen our ability to achieve profitable growth and shareholder value to improve targeting and personalization, better underwriting decisions and enhanced collection strategies, just to name a few of the benefits.
We're also responding to shifts in consumer preferences with our investments in contactless and secure remote commerce. Since the end of 2019, we have seen a 70% increase in contactless spending. I'm pleased to say we are on track to have most of our top 200 merchants enabled for contactless in 2020 and to have contactless cards issued to the majority of our card members by the end of the year.
Consumers have also shifted to much more online spending, which makes our investments in secure remote commerce and our partnership with the other major networks to implement Click to Pay even more significant.
Our disciplined approach to capital management and liquidity remains a top priority for us, particularly in the current environment. We have continued to see very strong demand for our consumer deposit products even as we have been reducing rates. Consumer deposits are now nearly 60% of total funding, and we have reduced our online savings rate 59 basis points since early March.
Discover has a very strong financial foundation, loyal customers and a proven business model. I am confident that we have taken the correct actions to strengthen the Discover franchise and we are well prepared to continue to drive long-term value to our shareholders and customers.
I'll now ask John to discuss key aspects of our financial results in more detail.
Thank you, Roger. And good morning, everyone. Taking a look at the quarter, we're pleased with our response to the rapidly shifting economic environment, including taking appropriate actions to manage expense, capital, credit and liquidity. Our capital position combined with advances in analytics and credit risk management put us in great shape to return to profitable growth when conditions are right.
Today, a recap of the financial results for the quarter and provide details on our credit performance and loan provisions. Similar to last quarter, I won't review our standard slides on low growth, payment volumes, or revenue and expense, but you can find our traditional disclosures on slides, 11 to 16 in the appendix to this presentation.
On Slide 4, looking at key elements of the income statement, revenue, net of interest expense decreased 7% in the second quarter, primarily driven by lower net interest income due to NIM compression and lower net discount and interchange revenue reflecting decreased sales volume.
Net interest margin was 9.81% for the quarter, down 66 basis points from the prior year. This was driven by three factors. Average loans were flat year-over-year, reflecting the lower sales volume. Loan yields declined as the average prime rate was 225 basis points lower on a year-over-year basis due to Fed rate cuts in 2019 and a 150 basis points cut in March this year. These were partially offset by lower funding costs. We moved aggressively to reduce our deposit rates.
Gross discount and interchange revenue decreased 18%, driven by the decline in sales volume. This was partially offset by a 16% decrease in rewards costs.
Other income was up due to a $44 million gain on sale of an equity investment.
The provision for credit losses was $2 billion and included net charge offs of $767 million, which were up 7% from last year and a $1.3 billion increase in reserves, primarily due to further deterioration in the economic outlook. I'll provide additional comments on credit with the next slide.
Operating expenses were flat to the prior year, but down 6% excluding a one-time item. Marketing and business development expense was 42% lower year-over-year as we responded to the significant slowdown in the U.S. economy. The majority of the expense reduction was in brand marketing and card acquisition costs as we align marketing spend with the impacts of the economic environment and tightened credit criteria. Offsetting this in our Diners Club International business we booked a $59 million non-cash intangible asset impairment charge as a result of the slowdown and cross border travel and entertainment spending. Apart from the one-time impairment charge, we anticipate realizing $400 million of expense reductions from our previous guidance range. We made good progress on the expense front in the second quarter, and we'll continue this momentum through the balance of the year. As the economic environment evolves, we'll continue to monitor and take actions on expenses as conditions warrant.
Turning now to Slide 5, showing credit metrics. Credit performance remained stable in the quarter. Card charge-offs increased 41 basis points from the prior year mainly due to seasoning of loan growth. The credit card 30 plus delinquency rate was down 17 basis points from last year and down 45 basis points from the prior quarter. The lower delinquency rate reflects the overall stability of the card portfolio with a very modest impact from the Skip-a-Pay program. Our private student loan portfolio reported strong credit metrics in the quarter with net charge-off nearly flat to the prior year. The 30 plus delinquency rate went down 25 basis points from the prior year and 18 basis points lower than the prior quarter. Credit performance in this product continues to benefit from tight underwriting and a high percentage of co-signed loans.
Personal loan net charge-offs decreased 90 basis points year-over-year. The 30 plus delinquency rate was 42 basis points lower than the prior year and down 24 basis points from the prior quarter. These credit metrics benefit from disciplined underwriting and our strong customer service and collection efforts. While the overall portfolio performance has been stable through the second quarter, we do expect to see some deterioration in consumer credit in coming quarters.
Moving to Slide 6, which shows our allowance for credit losses. In the quarter, we added $1.3 billion to be allowance primarily due to further deterioration in the macro economic outlook. As we considered the level of allowances needed, we modeled several different scenarios. This scenario to which we gave the greatest weight included a sharp increase in peak unemployment to a rate of 16% recovering to 11% at the end of 2020, followed by a slow recovery over the next few years. We assumed an annualized real GDP decline of 30% quarter-over-quarter or down 10% on a year-over-year basis. The quarterly reserve calculation also included an overlay which considers the impact of the Skip-a-Pay program leveraging our previous experience with disaster relief. We also considered unemployment reports in June and July, which showed higher permanent unemployment and the impact of recent increases in COVID-19 cases.
Turning to Slide 7, which detailed sales trends by category through mid-July. Total card sales volume decreased 16% in the second quarter. The greatest weekly decline was in mid-April when total sales were down 33% for the week ending April 18, since then we've seen steady improvement across almost every category as the economy reopened. Sales were down just 3% through the first half of July. Since then we have seen steady improvement across almost every category as the economy reopened. We continue to see positive trends in retail, which were up 7% in the second quarter and 15% in the first half of July. Within the retail category, home improvements has been exceptionally strong up 19% in the quarter on high consumer demand. We also benefited from adding Home Depot to our 5% rewards category. Strong online spending growth also contributed to solid retail sales in the quarter. Travel, restaurants and gas continue to be the most negatively impacted categories.
Slide 8 highlights enrollment trends in our Skip-a-Pay program which offers relief to customers experiencing financial stress due to the pandemic. We saw the peak in the cards program during the first week of April at $673 million. First time enrollments have steadily decreased since then. In the week of July 12, enrollment's decreased to just $35 million. To date, we enrolled a total of $3.4 billion in card loans. However, the majority of customers needed only one month of assistance and as of July 13, over 70% of card loans were no longer enrolled. Off those, out of the program approximately 80% have returned to making payments.
Moving to Slide 9. Our common equity Tier 1 ratio increased 40 basis points sequentially, mainly due to decline in loan balances. In March, we suspended our share buyback program in response to the economic environment at the time and it remained suspended to-date. We've continued to fund our quarterly dividend at $0.44 per share of common stock in line with requirements provided by our regulators and approved by our Board of Directors. Our preliminary stress capital buffer was set at 3.5% with the final SCB expected towards the end of the third quarter. We will determine our share repurchase and dividend actions subject to the final stress capital buffer, any other regulatory limitations and board approval.
Our liquidity portfolio remains strong with $27 billion in liquid assets and has increased over $7 billion from March 31. Since the onset of the pandemic, we have been a leader in reducing rates on our consumer deposit products. Nevertheless, we've continued to see strong demand with average consumer deposits increasing 22% year-over-year and now making up 60% of total funding. We'll continue to look for opportunities to reduce deposit costs.
To summarize the quarter we're pleased with our results, given the extremely challenging environment. We took swift action on expenses and are continuing to invest in core capabilities, so we're prepared for the recovery when it comes. Outside of a one-time item, operating expenses were down as we started to benefit from our expense reduction programs. Credit performance remained stable, but some deterioration is expected in the coming quarters. We took a conservative reserving approach and added $1.3 billion to the allowance for credit losses, and finally capital and liquidity both remained strong. While we remain conservative given the continued level of economic uncertainty, we feel good about the actions we've taken to date and the strength of the Discover franchise.
Before we open up the call for Q&A, I wanted to announce that after a career in consumer finance, including many years at Discover, Craig Streem has informed us of his desire to retire. I am sure most, if not all of you have interacted with Craig over that time and enjoyed a great relationship with him. He has been an important partner to Roger, our leadership team and for me. He has been a wonderful team member and a terrific help with my transition into the company. Craig is going to continue to lead the IR Team until his successor has been named and is in place. So you will have plenty of opportunity to wish him well, as we all do. That concludes our formal remarks.
So I'll turn the call back to our operator to open up the lines for Q&A.
[Operator Instructions] We will take our first question from Sanjay Sakhrani with KBW.
Thank you. Good morning. I'm glad you guys are doing well and congratulations, Craig.
I guess my questions on the reserve build. I'm curious if you feel like with this reserve build that you're pretty much done provided there's no significant change to the macro outlook. And then I know John, you mentioned the forbearance or the Skip-a-Pay has positively impacted delinquencies by a modest amount. But maybe you could just talk about what will drive the impacts that you are expecting in the next few quarters in credit quality? Thanks.
Hey, Sanjay its Roger. I'll cover the first part and then pass it to John. So in the reserve we – I think took a conservative approach and use the – an economic outlook that was considerably worse than the end of Q1. Under CECL, as you know, right that is reserved for the life of loan for the loans we have on our balance sheet. And so further reserve increases would mean that we add further deterioration in the economic environment or would be based on the growth of the balance sheet as we look ahead.
And I'll pass it to John for the second one.
Yes. So Sanjay, just to echo those comments, we feel very good about the overall reserve and the conservative approach we took especially given when you look at the overall portfolio performance that we've seen today and actions we've taken backs as far as 2017 on the personal loans business. So overall we feel very comfortable with our reserve today. And as the economic conditions unfold, that'll have an impact either plus or minus on the overall reserve. The forbearance programs have acted exactly as we had hoped. They've helped some customers managed through the pandemic and as I said in my prepared remarks, most – the high majority of the people who entered the card program have exited and are repaying. So a very, very mild impact to delinquency reporting as well.
I'm just curious, is there a specific number in terms of the amount of benefit from the forbearance impact?
Yes. So it's actually relatively small and the delinquency numbers somewhere between 5 basis points and 10 basis points.
Okay. Great. Thank you.
Your next question comes from the line of Bob Napoli with William Blair.
Thank you, and good morning. Craig, it's been a long time. Congratulations and I hope you have some great plans. We’ve been talking for long time?
Thanks Bob. Yes. Thank you.
Roger, so you've been with Discover a long-time. You've seen a lot of recession's and changes. I just wanted – I was hoping you could give some thoughts on what you see are going to be a permanent changes to the industry. And maybe just, I mean, if he could get John, since you could give us some color on how much of your spend today is online and what it was prior to the pandemic?
Sure. So I was going to say in my 20 plus years at Discover, I've seen a lot of things, but I've never seen anything like this in terms of this speed and magnitude of the impact the pandemic has had on the economy. I don't think any of us in business has seen this. Nevertheless, I feel like we were very, very well positioned for this going in, and I think over the long-term what you've seen is really an acceleration of some trends that were already there. So the migration out of branch to digital channels, which again as always been part of our business mode. Consumers shifting from physical to digital purchases and there I think our advantage of having our proprietary network and the work we're doing with other major networks on SRC will be helpful. For a physical purchases, the shift to contact less, so those are really some trends that have been there, but have accelerated in a very significant way as a result of the COVID pandemic.
And Bob, in terms of the sales trends, we haven't – we haven't broken it down out between brick-and-mortar and online. But what I – what I can point you to is retail in my prepared comments in terms of the growth we've seen there, a lion's share of that has been as a result of online retailers and you know the major players there, which is driving I’ll say further demise of the brick-and-mortar retailers and accelerating the digital channel for card. Things that Discover offers in terms of the network and our secure remote commerce that we're working on, all those will position us well for that growing trend.
Thank you.
Your next question comes from the line of Don Fandetti with Wells Fargo.
Hi, good morning. Kind of a short-term question, and if you could talk a little bit about the NIM outlook in the near-term? And then Roger, longer-term coming out of the credit crisis if I recall you guys came out and took share, and we're positioned pretty well. I know we're in the midst of this, but how are you thinking about the other side of this – the consumer is going to have a fair amount of savings. And do you look at these types of opportunities as market share gain, or is that too premature to be thinking about that?
Okay. So when I start with NIM question? So in the first quarter, our NIM was 10.21%, and then in the second quarter it came down to 9.81%. I'm not going to give a bunch of detail here, but what I can say is, we look at the second quarter as likely the trough on NIM overall. What we've been able to do is execute pretty well in terms of deposit pricing and our funding stack has meant such that more expensive funding sources are fading away, and we're getting a benefit there. So since the pandemic, just to give you some details we decreased our online savings by about 60 basis points. That's an immediate benefit to net interest margin in the company. And then through the balance of the year, we're going to continue to look for opportunities. So some of that will be based on the funding of our balance sheet, and some of it will be based on the competitive environment that we're dealing with.
Yes. And in terms of gaining share, I think it's never too early to think about that. It feels like we're gaining share in the card business in terms of loans and sales this quarter, from what I've seen from competitors reporting, and that's within the significantly tightened credit box that we have. One of the capabilities we've been working on is, is just the ability to react more quickly and that helped us react very quickly to the pandemic in terms of tightening credit across our products. But that should also help when job losses abate and it becomes time to widen the credit box as well. So we feel good about our capabilities and our ability to gain share across all of our products.
Thank you.
Your next question comes from the line of Moshe Orenbuch with Credit Suisse.
Great, thanks. I guess I was – I was hoping you could talk a little bit about the performance that you've seen with respect to borrowers that are exiting forbearance, and the fact that you're assuming kind of 11% unemployment at year-end. So as we think about the likelihood of either needing more or less reserving like, how do you think about the information that we're going to get over the next several months in terms of how we think about the reserving levels as we go forward?
Moshe, thanks for the question. So, and it's a great question, and honestly it's a bit of art and science. So what we have seen in terms of customers exiting is about 80% of those customers are making payments and is – and close to 80% of those are making full payments. So we're feeling very good about the customers coming out of the programs. Now to be honest, those segments inherently are likely to be a little bit more risky. So we continue to watch the differentiation on customers who elected to enter into one of the Skip-a-Pay programs to see if there's any potential issue, but as you step back from it, the overall size of the portfolio versus the customers who have elected to go into Skip-a-Pay program relatively small, right? So...
Right.
So we're looking at the impact as very, very mild. The delinquency trends have been, from my standpoint very, very encouraging and I think that's, that's a function of some of the government stimulus, function of our collections operations and the value of a credit card overall versus other payment forms or other payment forms as well as what it means in terms of ability to operate in the digital economy. So we like the fact that our portfolio has a high concentration of credit cards, and we also think that we'll come here to the top on the payment prioritization through even a tough downturn.
Your next question comes from the line of Betsy Graseck with Morgan Stanley.
Hi, good morning.
Good morning.
Craig, I'm going to miss you.
Likewise Betsy. Thank you. I appreciate that. Thanks.
Okay. So back to work. The question I have is just around the reserving level. I know you already addressed one question on that earlier in the Q&A, but I've been getting some investor questions regarding how to think about the reserves that you're building today versus the loss experience you had during the great financial crisis? Now granted it's very different environment, but the unemployment rate is relatively high and a little bit higher than what we had during the GFC.
So I thought I'd take the opportunity to ask you how you would answer that question. How should I think about what the right reserving level is for today's book versus the losses that you had during the 2008 crisis? Thanks.
So let me start by talking a bit about the unemployment rate and then I'll pass it to John to talk on the reserves. I think the unemployment rate we're seeing now is very different. And we've talked a bit about temporary unemployment, as well as the impact on sort of entry level retail, entry level hospitality, entry level restaurant. And so you can't map total unemployment to loses and a prime card base the way that you saw that pattern in last downturn. And so things like permanent unemployment, you need to adjust to that.
And so we're not just looking at the raw unemployment numbers as we do our modeling. I'll pass to John to talk a bit about the reserve.
And then Betsy, just one other piece and it's a relatively important difference here when you go back in time on the great recession versus where we are today. So, the overall the industry, the quality of the originations is much better today than it was at the great recession or prior to that. In general, higher FICOS across every single form of lending product. Delinquency levels coming into the recession – this recession versus the Great Recession are lower. Consumer financial obligation load is significantly lower today than it was coming into the Great Recession and debt service load was also lower today.
So the consumer is stronger coming into this recession than coming into the Great Recession. The traditional links between unemployment and delinquency and charge-offs, we're trying to model that. It's really hard to nail that down right now, given all the government stimulus. But overall, as I look at where we are today and based on our underwriting and where card loan comes into payment priorities, I feel like we're very, very well positioned versus where the company was coming into the Great Recession.
And then we also talked about inactive lines. We've taken inactive lines down nearly numbers close to $70 billion. So we're prepared for the worst, but I feel like we're in a better position.
And you've got this really high savings rate going on right now. I mean do you use that in your analysis as a kind of bridge to a lower unemployment rate as you're thinking about reserving?
Yes. We didn't actually quantify that. But as we were making determinations on economic scenarios and frankly, the overall quantum of reserves and reserve coverage, it was a point that helped us get to where we arrived.
Got it. Okay, thanks very much.
[Operator Instructions] Your next question comes from the line of Mark DeVries with Barclays.
Yes, thanks. Could you give us a little more color about what we should expect from delinquency and charge-off formation in the coming quarters? And how, if at all, those expectations and your reserve levels are impacted by your expectations for benefits from different forms of government stimulus and different forms of lender forbearance across your customers' different financial obligations?
Okay. So a tricky question. So I'll start with how we're expecting delinquencies and charge-offs to roll in. So as I said earlier, the books held up really, really well. Delinquency levels have come down. We do think some of that is as a result of stimulus. We also feel like our teams are doing a great job in terms of interacting with our customer base to help the customers get through tough times, those that are experiencing some trouble. The trajectory of charge-offs, based on what we're seeing right now, looks like we would expect elevated charge-offs starting more in the fourth quarter and then coming into 2021. Frankly, it's tough to call right now because we're modeling out unprecedented scenarios here.
But I think a good way to think about it is charge-offs elevating in 2021, perhaps peaking in the later part of 2021, depending on the economic scenario that we're dealing with and then starting to tail off in 2022.
In terms of delinquency, delinquency will – we think will start to tick up in the fourth quarter, perhaps as early as the third quarter, but we're not seeing any indicators yet and then continue into 2021.
In terms of the government programs, we did nothing in our modeling to reflect what's been kicked around right now in Washington in terms of the next round of stimulus. So I think that could certainly push out the curve a little bit in terms of both delinquency and charge-offs.
Yes. I mean, I think, as you think about the importance of the government programs, it's less about the $1,200 check that a family gets as you think about life of loan losses and what that will support. It's really the impact of those on the overall economy and keeping the trough from being too deep. So to John's point, we really think about it just in terms of at a macro level as opposed to what those checks may do in one month for a given household.
Okay, got it. Thank you.
[Operator Instructions] Your next question comes from the line of Meng Jiao with Deutsche Bank.
Hi, good morning guys. A quick question, I guess, on the average balance sheet. I saw that average cash and securities were up materially this quarter. Just trying to get a sense on how you guys are thinking about the securities portfolio and whether or not you would extend duration to pick up some yield given the NIM at trough in 2Q? Thanks.
Yes, we’ve been pleased with how – actually, how the balance sheet has come together. Certainly, the asset side has been strong as we talked about in the prepared comments. On the liability side, we've seen great appetite on our – for our deposit products, which is positive. We have also been able to avoid wholesale funding. We're not looking to substantially change any of the duration of any of the liabilities that we see on the balance sheet. We've effectively added interest rate, basically a balanced interest rate risk position. So we're feeling good about that.
Cristal?
Your last question comes from the line of line of Kevin Barker with Piper Sandler.
Good morning. So we've seen a lot of controversy around the dividend on with several competitors or even some other banks. I was just wondering how much – how you think about the dividend going forward and how much of a priority is to maintain it given some shareholders look at it as important or just maybe how you think about it, given the trajectory of your earnings?
Yes, so I would guide you to sort of looking back over the last 10 years where you've seen a very clear strategy from Discover. Given the high returns we generate from our business, an important part of how we manage capital is returning it to shareholders in the form of a dividend, and we've had historically a measured increase to those dividends as well as buying back stock. And we're very disciplined and, to a lesser extent, involved in M&A.
So that's what we like to do. I would say until the environment improves, it's quite safe to expect continued heavy regulatory focus on return of capital. And so we will have to adjust our strategies accordingly. Certainly, if they keep going with the four quarters rule, that's something that – again, it will depend going forward, but that's something that we've looked at. But I think we're going to watch and work with our regulators on this, but management's intent is unchanged. And so we'll have to see how it goes.
Okay. And then regarding your comments on the charge-off rate peaking into late 2021, I mean, I think, we would have expected a little bit more of a big bulge coming out of the deferral periods and the expiring of a lot of the stimulus. Could you just talk about how the – what the cycle is going to look like or how you envision it playing out with charge-offs playing out in the early 2021? And then what it looks like in the back half?
Yes. So we're seeing that the portfolio continues to be really, really stable, as I said. The payment programs, we saw obviously, the disclosed level of entries into the programs and then a surprisingly high number from our perspective exiting after one payment, which to me was a good sign. As they exited, the payment percentage or payment rate of those customers has held up very, very strong. So we're comfortable with that.
So if you just look at where we are as of June 30 and then just do a kind of straight role model it out, it's hard to see any massive increases in charge-offs for the balance of the year even if things deteriorate from the consumer standpoint. So that means what we're likely to see is charge-offs grow through the year slowly and then, I wouldn't call it a bulge, but a higher level of overall charge-offs in the middle to second half of 2021.
Now that's what – that's how we're seeing it today. I certainly would caveat that and say that consumer behavior is really difficult to predict here in a time such as this. Sorry, I can't be more specific on that.
Yes, it’s very uncertain time, I understand. Thank you.
I will now turn the floor back over to Craig Streem for any additional closing remarks.
Thanks Cristal. Just thank you, everybody, for your interest. As always, we're available, get back to us if you need any follow-up. Thanks. Have a good day.
Thank you.
This concludes today’s conference call. You may now disconnect.