Conn's, Inc. (NASDAQ:CONN) Q2 2021 Earnings Conference Call - Final Transcript
Sep 03, 2020 • 11:00 am ET
offsets increasing yields.
As a reminder, under CECL, we are required to reserve for lifetime expected losses. Last quarter, we recorded an increase in our allowance for bad debts related to future estimated losses associated with the COVID-19 crisis. This quarter, our provision benefited from a decline in the allowance for bad debts as a result of an improving performance and shrinking portfolio balance, which was magnified by higher reserve percentages under CECL. As a result, our second quarter provision for bad debts was $32 million compared to $49.7 million for the same period last fiscal year despite elevated charge-offs during the quarter. Higher charge-offs this quarter were driven by loans originated last fiscal year and were already reserved in our allowance. Our credit spread for the second quarter was 2.2% compared to 8.9% for the same period last fiscal year and reflects the elevated charge-offs associated with accounts originated a year ago.
Despite the decline in our credit spread, credit segment income before taxes was $5 million compared to a loss before taxes of $8.7 million for the same period last fiscal year. The year-over-year improvement was driven by a decline in the provision for bad debts. Which reflects strong cash collections, newer, higher quality originations and the reduction in the portfolio balance as a result of higher cash and third-party sales.
So with this overview, Norm, Lee and I are happy to take your questions. Operator, please open the call up to questions.