Q2 2021 LendingClub Corp Earnings Call
[music].
Good day and welcome to the lending club's second quarter 2021earnings conference call. All participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing Star then zero.
After todays presentation, there will be an opportunity to ask questions.
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To withdraw your question Press Star then 2.
Please note this event is being recorded.
I would now like to turn the conference over to Sameer Gokhale Investor Relations. Please go ahead.
Thank you and good afternoon welcome.
On the lending club's second quarter 2021 earnings conference call.
Joining me today to talk about our results and recent events are Scott Sanborn, CEO and Tom Casey CFO.
You can find the presentation accompanying our earnings release on the Investor Relations section of our website.
Our remarks today will include forward looking statements that are based on our current.
Expectations and forecasts and involve risks and uncertainties.
These statements include but are not limited to the benefits of our acquisition of radius.
That farm volume future products and services.
<unk> business and financial performance, our actual results may differ materially from those contemplated by these forward looking statements.
Factors that could cause these results to differ materially are described in today's press release and our most recent forms 10-K 10-Q, each as filed with the SEC as.
As well as our subsequent filings made with the Securities and Exchange Commission, including our upcoming form 10-Q.
Any forward looking statements that we make on this call are based on assumptions.
As of today, and we undertake no obligation to update these statements as a result of new information or future events and now I'd like to turn the call over to Scott.
Alright, Thank you Samir.
Good afternoon, everybody. Thank you for joining us.
Q2 reflects our first full quarter.
<unk> as a digital marketplace bank, and we significantly outperformed our expectations.
Across the board the actions, we took as we reentered the market drove better results on a faster timeline than we had anticipated.
Notably we achieved record profitability.
Which we expect to sustain and grow as our new recurring revenue stream of net interest income continues to build.
In addition to the benefits received from our recently acquired digital Bank. Our Q2 profitability was driven in large part by revenue growth from our marketplace combined with operating efficiencies.
Across our platform.
Revenue growth in the marketplace was driven by growth in originations, which were up 84% sequentially.
We've resumed marketing and return to a more normalized credit posture with a continued focus on higher quality issuance.
The outperformance of our credit.
Ts relative to our competitor set is driving strong investor demand and we added several new banks and institutional investors to our platform.
Thanks, including lending club bank now make up more than half of our loan funding.
During the quarter, we leaned into our competitive advantages quickly tune our efforts.
Market conditions and tap into the nascent recovery in consumer demand.
I'd note that as the unsecured credit market is recovering fintech is growing faster than the market and we are growing faster than other fin techs.
According to <unk>, which tracks market share data from personal loans, we have returned.
It's to co market leadership.
It's worth highlighting that our sequential revenue growth of 93% outpaced originations growth during the quarter.
This primarily reflects significant growth in our new recurring net interest income revenue stream as we took advantage of our low cost digital bank deposits and grew.
Our loan portfolio.
We expect revenue growth to continue to outpace originations growth as this income stream bills.
Tom will provide details, but it's important to note that as we invested in growing our loan portfolio to build this new revenue stream, we sacrificed about $54 million in potential earning in the quarter.
<unk>.
We did it because we expect holding loans to eventually generate 3 times the earnings compared to selling them.
So the near term tradeoff is more than worth it.
As I mentioned, our strong revenue growth was combined with efficiency gains across the income statement.
We improved our market.
Marketing efficiency by leveraging our marketplace model, which allows us to say, yes to a broader range of customers leveraging our data advantages to enhance our targeting underwriting and pricing models. These models are built on more than 150 billion cells of data and more than a decade of experience across over 65 billion in loans.
We also optimized our application funnel drove automated decision rates back to north of 70% as a result, and in funnel conversion was up significantly reflecting improvements in offer rates take rates and issuance rates.
Furthermore, we continued to focus on serving our large and loyal base of over 3.
On a half million members.
While we are attracting new members to our platform at an accelerating pace a large portion of our loan volume continues to go to our existing customers, reflecting the expanding lifetime value, we're generating and the affinity created by offering seamless access to low cost credit.
Finally, and as I.
I mentioned earlier consumer demand also appears to be picking back up they'll currently remaining below pre COVID-19 levels.
Taken together, we believe we have 1 of the lowest customer acquisition costs, among our competitive set which is a significant differentiator built on our unique advantages, including our large and loyal member base our marketplace.
And our data supremacy.
Yeah.
Along with improved marketing efficiency. We also had a substantial improvement in operating efficiency, reflecting actions. We took over the last 2 years to streamline our expense base.
Specifically, our fixed cost base now reflects the benefits of our business simplification initiatives.
Place them on 2019.
Actions, we took last year to further reduce our expenses.
And efficiency gains from more recent technology investments and our services infrastructure.
Yeah.
So where do we go from here as I've said before it's hard to imagine a better time to be growing a digital bank.
We believe our actions over the past several years, our core capabilities and the overall accelerated trend of digital banking have set us up well to win.
We believe we can deliver sustained profit while investing in our future to bring to life on next generation digital bank that will transform the experience and re imagine banking for our.
Customers.
I want to take a moment to thank our employees for their commitment to our customers our company and our mission we.
We would not have been able to achieve these great results without their dedication and hard work.
So with that I will turn it over to Tom for a more detailed discussion of our financials.
Bank.
Oh.
Thank you Scott the speed of our transformation and the power of our business model was evident in Q2, we far outpaced our expectations as we started to hit an inflection point for earnings growth at lending club for.
For the second quarter of 2021, we reported record net income of 9.
$9 million and diluted EPS of <unk> <unk> per share as we accelerated our return to GAAP profitability.
In Q2 originations were $2.7 billion of which we sold $2.2 billion through our marketplace.
We also retained $541 million of loans as we continue to build a new revenue stream.
Dream by growing our highly profitable consumer loan portfolio.
In Q2 revenue grew 93% sequentially on origination growth of 84%.
As Scott mentioned, we expected revenue growth would outpace origination growth as we continue to grow our new stream of recurring interest income by building our.
Covered loan portfolio.
Consumer loan balances grew 44% to $1.3 billion.
While the total held for investment portfolio grew at 12% to $2.4 billion, reflecting some runoff of PPP loans.
In the second quarter total deposits grew to $2.5 billion.
While deposit rates were in line with <unk> at 29 basis points non.
Noninterest income grew 81% sequentially, primarily due to increased marketplace loan sales, which more than doubled transaction fees to $114 million from $56 million last quarter.
While gain on sales revenue.
<unk> also more than doubled to $19 million.
Net interest income grew sequentially by 148% to $46 million.
Primarily reflecting growth in our personal loan portfolio as the bank NIM expanded from 3.3% to 551%.
As you can see on page 9 of.
This portfolio generates a very attractive interest rate with an average yield of over 15%.
We expect our personal loans to generate risk adjusted margins of 78% overtime as they season.
However, accounting standards require us to recognize expected losses, when we add them for the balance.
The earning and then we recognized the interest income over the life of it alone.
And this is what Scott highlighted earlier in his comment on the income from retaining consumer loans generated 3 times the profitability of market place loans.
Due to this power of benefit we expect continued growth in this portfolio.
We also generated.
Do you think a positive operating leverage during Q2.
As our revenue growth of 93% outpaced on non interest expense growth of only 19%.
Excluding marketing expenses, which are variable expenses and directly tied to origination volumes. Our non interest expense grew by only $10 million from Q1.
Which.
So you don't capture the full quarters expense from the bank acquisition that closed on February 1st on this year.
Our ability to contain expense growth reflects the actions we took over 2 years ago to substantially increase our efficiency, while enabling our infrastructure to scale as we grow.
For example, in the second quarter, our revenue increased.
$99 million and our GAAP earnings improved $56 million moving.
Expect to continue to generate positive operating leverage which will fund future investments in our infrastructure and capabilities.
In Q2, we maintained our marketing efficiency with marketing expenses of $35 million up 80% sequentially.
As we continue to grow origination volume by leveraging our vast data advantage, our loyal member base and our ability to leverage our predictive science day credit decision platform to drive higher conversion rates.
During the quarter, we reported a noncash credit loss provision of $35 million, primarily reflecting the retention of.
$541 million in personal and auto refi loans on the balance sheet.
There were minimal charge offs in the second quarter, and we would expect charge offs to start to normalize gradually over the remainder of 2021 as loans typically season over 9 to 12 months.
1 additional item I wanted to highlight is that our digital bank.
Generated net income of $40 million during the quarter include.
Including a $12.5 million tax benefit primarily from reversing the valuation allowance on its deferred tax assets.
As we generate taxable income at the bank, we expect to continue to utilize our net operating loss carryforward of approximately $160 million.
At the holding company to reduce cash taxes, which will also provide additional regulatory capital at the bank to support loan growth.
The overall improvement in our current performance compared to pre pandemic is significant.
For example in the third quarter of 2019, we produced our highest.
Revenue quarter at $205 million on volumes of $3.3 billion.
This past quarter, we delivered the same amount of revenue on nearly 20% less origination volume of $2.7 billion.
And there's a similar efficiency story with respect to our expense base.
Again in the third quarter of 2000.
Highest tier we had expenses of $205 million compared to $160 million last quarter, indicating a $45 million run rate.
This reflects our efforts to improve our marketing efficiency and reduce our fixed costs, both of which strengthen our ability to continue to drive margin expansion and improved profitability.
On the night now, let's turn to our financial outlook.
Our strong and sustainable results allow us to significantly raise our guidance.
We are increasing our revenue for the year by a range of $240 million to $250 million and are projecting an increase from GAAP net income.
Our guidance assumes the economy will continue to grow for the remainder of the year.
Albeit at a slower rate.
And we realized there are significant uncertainties due to the ongoing developments with the COVID-19 virus and impact of government actions.
Our outlook also reflects typical seasonality with Q4 originations, reflecting seasonal pressure compared to the third quarter.
Our guidance also incorporates.
Your expectations for increased investments in marketing for loan and deposit growth infrastructure and technology investments.
Specifically for Q3, we expect to generate revenue of $215 million to $230 million on originations of $2.8 billion to $3 billion.
We're also estimating net income.
Rates between 10 and $15 million.
For the full year, we are raising our origination guidance by more than 40% to a range of 9.8 to $10.2 billion.
We're also raising our revenue expectations for the full year by more than 45% to a range of $750 to 700.
Under an $80 million.
We expect to maintain positive GAAP net income over the second half of the year and our guidance implies a range of 25% to $35 million of GAAP net income.
1 thing to note is that our GAAP net income guidance assumes a more normalized tax rate of approximately 15%.
But we're very happy to share our outlook as this has been the product of years of hard work to shift our business model to provide profitability and sustainable growth for years to come.
With that let me turn it over to the operator to begin Q&A.
Operator.
We will now begin the question and answer section.
On to ask a question press Star then 1 on your touch on power.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question Press Star then 2.
At this time, we will pause momentarily to assemble our roster.
And the.
First question comes from Henry Coffey with Wedbush. Please go ahead.
Let me be a little exuberant here this is amazing.
Accomplishment so congratulations.
When I'm looking at the numbers I really have really have 3 sets of questions. So please bear with me.
Your origination fee.
Oh you.
2 to volume increased relative to the first quarter your overhead as a percentage of originations dropped basically from 9% to 6%.
And the yields on the lending club loans.
Held for investment at the bank debt.
From $13.85 to 15 on a quarter so.
Now all of the key profitability metrics improved I was wondering if you could give some insight give us some insight into.
The improvement in origination related fees and.
And the <unk>.
Improvement in yields on the loans held on balance sheet.
Ah Thanks, Henry Indeed on and you know those metrics you can point to I'd say pretty much across the board as we indicated in the prepared remarks pretty much all.
Action ended up and delivering.
On stronger results and in fact more quickly than we anticipated Tom I'll turn it to you to talk a little bit about those those couple of drivers and you called out yeah. So Henry a couple of things first the on origination fee.
This is a product of all of the work he did.
In 2022, but our data in decision science to.
Understand price elasticity, and we were able to generate some additional fee.
As well as the mix we also expanded.
All of our marketing channels and expanded our reach in.
So youre seeing the origination fee growth accordingly.
It's still below what your other public competitor that's in this business, but that's a that's.
That's just a sign of observation.
Yeah, so on the second 1.
On the overhead.
Again, a non.
Not too.
To overstate it but it's it's it's throughout the the numbers youre seeing productivity come through just the operating leverage of of getting that volume up and the scale that we have coming through we've done a lot of hard work resizing the business over the last few years and you're seeing that now.
Now with the with the.
The growth in.
In volumes and revenues, but keep in mind also the revenue is also we have a new revenue stream coming with the net interest income.
Which will further create more operating leverage for the company and then lastly on the.
The yield.
Referring.
To the yield on consumer loans up at 15 on quarter, its really reflecting just the full year a full excuse me the full quarter of ownership.
As we ramped up our our personal loans.
Adding another over $500 million portfolios, there's just a mixed issue.
Henry.
Then I again, the second question.
Can you again, the reserve level that youre, putting up relative to your losses as multiple but that's all the.
Oddities of seasonal can you give us some insight into how the the the lending club combined consumer loan portfolio.
<unk> is performing.
Yeah.
As Scott mentioned in his prepared remarks.
Tier book of business is performing extremely well.
We're very pleased with our loans.
1 with regard to the loans on our books.
On even building that.
Portfolio for 2 quarters now.
We really have not seen any charge offs to.
To speak of but but we have a my comments I mentioned that these will start to mature over the next 9 to overnight in 12 months from origination that's typically where we see charge offs come in so the next couple of quarters, you'll start to see.
A little bit more color on the on the pattern of the charge offs, but overall, we're feeling very good about the credit performance not just the recent vintages that are on our books, but frankly for us.
For the multiple vintages that are still outstanding.
And then my third question. This is more for Scott, but obviously for both of you.
You know what we're seeing today is the advantage of lending club joining up with the bank.
And but.
My real question I think the next opportunity the 1 we're going to see sort of out there is the bank joining up with lending club. So can you.
Can you give us some insight besides getting great loans on their books.
Can you give us some some thoughts about how and in the future. The lending club side of the business will learn to work with the banks things you might offer club members ways, you might enhance relationships between borrowers and depositors.
A certain product sets.
It's pretty much an open opportunity.
Yeah, Thanks, Andrew Youre right.
I think we view this this quarter is really demonstrating that.
The advantages lending club brought to the table right with our with our data.
Our membership base and kind of data science capabilities, adding in the bank to generate new revenue stream lower cost of capital and where we're getting started is obviously this particular financial engine because we this is what is going to.
The profit of the business. So we wanted to get this part of the business to get that momentum going in and as we indicated were.
We expected to get here, but the velocity at which we got here was was faster than we anticipated.
But when we look ahead you know this is really just phase.
Drawn.
<unk> and <unk>.
Taking this engine, we've got which is the ability to acquire really satisfied customers at scale profitably.
And it takes that to do more for those customers. We shared on our previous call that you know 80% of customers.
They wanted to do more with us.
<unk>.
That's the next phase so we've got the we've got the momentum building here. The next thing we'll turn to is the auto business within the bank on and maybe Tom We can plan on talking a little bit more about that next quarter that'll be the next business that we want to take the combination.
1 of the 2 and then to your point the.
The piece after that maybe something for us to talk about after Q4 earnings would be.
What's the role of the bank and really the award winning remember checking product that we've acquired with radius, how we see that fitting in but the you know the.
On the basic story as we see that as a real engagement platform for us its a way rather than people coming back. Once every few years when they need access to low cost of credit we have a way to be communicating with and adding value to our members.
Much more dynamically and much more frequently generating more data.
Uh huh.
On to inform and you know give us insight about what they need and inform our underwriting and all on all.
Also offer more services and do it on a way that is really aligned with the brand right as we right now we're helping people with lending.
The goal here is to you know.
Move moving.
Move wider.
In breadth and help them with their spending and help them with their savings.
Well congratulations on a job well done so thank you all.
The next question comes from.
Bruno Bologna with Compass point. Please go ahead.
Well on Echo what Andrew just said, that's congratulations on an incredible quarter.
Got it.
Then.
Kind of jumping on I'd be curious to get your perspective on some impacts there.
That drove the quarter.
Obviously origination volumes were significantly above expectations I'd be curious if there any channel with a different products within the mix or if there are any credits.
Credit tiers that outperformed or was it or if it was broad based.
Across the board in terms of on generating additional volumes.
Yeah.
Thanks.
Yeah. It was really 1 thing we didn't talk much about but we did talk about it last year when we pulled back on on volume and you know we're in let's call it capital preservation mode.
We had indicated to you all debt we were taking this opportunity to be investing in our infrastructure.
It was both are kind of servicing infrastructure, which we're getting some of the efficiency on loan performance benefits up today, but also our credit decisioning.
Infrastructure.
And what that has allowed us to do is move.
It's kind of a simplistic to say hey, we just went back to marketing.
And you know it doesn't just you don't just turn channels on and they work right you've got a tune things right tune your offer to in pricing.
With the infrastructure, we put in place.
Unable to do it much more quickly.
And so it was really a combination of kind of everything working as we mentioned consumer.
And well below pre COVID-19 kicked back up.
Our take rate and our issuance rate ticked back up to drive funnel conversion investor demand for loans was up which drove pricing up there. So we really saw it across the board in all key metrics.
<unk> demand is great and going back to where.
You previously guided to was retaining somewhere between 15 and 25% of loans and the previous guidance also included relative on a relatively worse net income, resulting from 2021 and I'd be curious now that you're originating.
On a larger volume earlier on retaining more loans.
How they kind of capital generation to loan your ability to retain 15% to 25% of originations will will unfold because you're obviously generating more capital than you expected, we're going to be a better capital position under.
Taking on more loans faster than you'd probably originally.
You indicated to the market so I'm kind of curious how those 2 play together and if there is.
Any change to that guidance or if there's any room to the I'm sorry on overtime there.
Yeah. So a couple of things to do to capture there is that we would use the 15% to 25%. We think it's a good range to kind of keep a nice healthy marketplace.
But also participate in net revenue stream and grow it.
The way to think about it is as you think about growing originations like we did this quarter you saw us actually increase the amount of purchases. We did so we did about right about 20% this quarter so to the extent.
Place volumes go up that actually funds a lot of the capital that's needed for the provisioning and the catalyst needed.
You saw this quarter on are highlighted on my on my remarks is.
The bank is actually generating GAAP net income as well so its building its own capital.
And starting to be.
Net core growth.
And then also with becoming GAAP profitable. We are also starting to benefit from the utilization of our net operating loss I mentioned of about $160 million. So that all starts to bring additional capital into the bank.
To be able to support the ongoing growth of.
So we still think that that's still a good number of 15% to 25%.
And.
We think that there's sufficient capital generation within the volumes as well as some of the things I mentioned.
On the call and we feel very good about our ability to flex up on flex down depending on the environment.
That's great.
It was more on the funding side honestly, even though the growth of deposit franchise.
Okay.
Well I guess on what I'd be curious about is how much you think you can scale the deposit franchise or how fast you can scale. It and then along similar lines I'm kind of curious if theres been any difference in the mix of.
Marketplace loan buyers on the other side on the platform and if there's any change in demand.
On that side of the platform.
So I'll maybe start on the <unk>.
Investor session on them and you can talk a little bit about the liability so.
There we've seen.
Strong investor demand.
Kind of across the spectrum of Investor types. As we mentioned we've added year to date, both quarter, several new multiple asset managers and multiple banks.
And.
If you recall last quarter, we talked about how as a whole the asset class held up really well.
<unk>.
Last year and lending club, specifically held up better than the competitive set I think 1 of the things. We perhaps didn't anticipate was that our status as a bank does do something for us in multiple ways 1 for banks evaluating assets. They know we're held to the same standards.
From a regulatory perspective.
And the second is you know we're eating our own cooking right. So that gives people a lot of confidence.
And how we view the importance of credit quality, So I'd say those things make rational sense, but she until you see them on action, which we really saw this quarter.
Good day.
There are some benefits that we perhaps underappreciated coming into the combination.
Tom Yes.
Touch on the deposit side I think we commented earlier.
When we close radius, we actually got a lot more deposits than we had anticipated so.
We had a great priming of the pump there.
Sure.
We've been putting some of that net cash to work, we did see growth for the quarter in interest bearing deposits.
I think that'll be a story that will start talking about his R. R.
<unk> generation capability to fund loans.
Thank you.
It's quite important free for everyone.
Standard that unlike what you've maybe seen in other banks, we're actually growing our loans up 12% total.
And our NIM is expanding 200 basis points to 5.5%.
That is a unique characteristic of our model, which is being able to originate and hold loans and grow this income stream.
At today's very low cost deposits, but even as deposits.
<unk> increase.
The margin, we're getting on on our new loan growth.
Well in excess of that and it throws off a very nice return that will drive of expanding Roe.
That's great.
Everyone I appreciate the time on congratulations on a great quarter I'll jump back on Makena.
The next question comes from Steven Kwok with Katie W. Please go ahead.
Hi, guys I like that go on my comments on on.
Congratulations on a great quarter as well.
Quickly around the originations like if I just take the midpoint of guidance it would imply about $2.9 billion hopefully the next 2 quarters, which essentially puts you back at 2019 run rate levels. I was just wondering as we think about going forward.
Alright on how fast can you grow off of that day.
So Steven this is Tom I think.
We are obviously trying to factor in the environment. Obviously, we still are trying to track.
On the path of the virus and what the implications will be.
For consumer spending and the economic the economy.
On a large but we think that you know.
We think this asset class as Scott mentioned his comments.
It's growing very quickly on the fin techs are growing the fastest.
We're not going to give specific guidance.
On how fast we.
We think we can grow and give me a kind of an indication of continued sequential growth in the back half of the year.
But we acknowledge that we have to be thoughtful about what dynamics are in the environment. We obviously think.
There's a if there's if theres more upside more demand, we think we're well positioned.
2.2 cash.
<unk>.
The share that we've we've demonstrated in the second quarter.
If demand.
Improve so we can go ahead, Scott maybe just add.
A little color on you know kind of what's happening underneath the covers so 1 macro industry on 1 specific lending club so within the industry.
Given the state of consumer balance sheets government stimulus all those pieces.
The credit card consolidation as part of the business, which has been our major loan use case that.
That that demand temporarily is is down more significantly.
Industry use cases, correspondingly we've seen growth in other use cases home improvement loans major purchases. That's 1 that's that's on industry as a whole that's what we're seeing and we don't expect that to be durable right as the economy reopens, you're already seeing many categories are.
That has been lagging in spending or taking.
He then up again credit card spending start to pick back up so we think that'll drive that and then the next is what are we doing and with our focus on our membership base and as we lean into the new banking capabilities, we're really increasing the utilization and the usage of the product price.
On to a rather than waiting for you to rack up credit card debt, which we then refinance for you.
If you're going to make a major purchase come just come to us first.
That's something that we're actively driving by making that.
The fact that we know these members know.
Know them well.
And are able to offer a really really seamless experience for that returning member.
Is activity, we're driving that's why we said look there.
I don't I don't think anyone has a perfect crystal ball for the period ahead, but.
The market there.
The market is anticipated to grow.
Uh huh.
It's starting we believe that we.
We can.
Maintain leadership on even growth slightly faster than the market tier of the <unk>.
Capabilities of the combined entity.
Got it and just a follow up around the.
The consumer side.
As stimulus wears off are you starting to see.
A bit of a pent up demand and the need for your loans and Scott.
Yeah, I think that's right.
As we mentioned this quarter, it's hard to read so getting him a perfect a.
Perfect view is hard because there's so many dynamic things going on but yes, we are.
And we are seeing a tick up on consumer demand and we saw that quarter over quarter.
And we do think it's because you know as the economy reopens people resume spending.
In other categories.
That that's driving that's driving demand and you know the thing the important thing we'd point out is unlike.
On the model prior to the acquisition.
We're now able to grow revenue faster than we're growing loan volume, which is an important thing to think about as you're looking ahead.
Got it thanks, and thanks for taking time out Scott to answer my questions and congrats on the quarter.
Yeah.
Yeah.
Okay.
Again, if you would like to ask a question press Star then 1 to join the queue.
The next question comes from John Rowan with Janney. Please go ahead.
Good evening guys.
Hey, Joe.
I will echo everyone's sentiment on the good quarter.
But just a couple of housekeeping questions. The allowance build in the bank was quite significant sequentially.
Are we at the right level of allowances going forward to where we should see that percentage hold steady with growth.
Thank you I think 2 things are happening John.
1 is the <unk>.
Mix will change slightly quarter to quarter. So each type of loan gives us slightly different index, but that's just a little bit of a mix.
The other thing you'll see is that the it.
It will be impacted by.
The accretion because you remember this season.
The present value number on the day of origination so you've got those type of those dynamics, but I don't think those would be.
That material.
The number as you see the portfolio start to mature I think that number will stabilize a little bit, but obviously grew quite a bit on an absolute dollar amount reflecting debt.
As <unk> retained about $200 million more loans in the quarter.
Okay, and then just to clarify.
The guidance on the back half of the year reflects a normalized tax rate of 15% I'm just curious why taxes, when you have $160 million NOL.
NOL or is that 15% still eating away at the NOL between.
Between what would be 15% and maybe a more normalized 20 ish percent rate.
Unfortunately, it's it's state tax driven some states of.
Of.
Cause the ability to utilize.
NOL carryforwards, so youre seeing the impact of that.
In the in the financials that were projected for the rest of the year.
So when the NOL is exhausted what will the tax rate be.
We think it's probably somewhere in the 25% to 27% range, we'll obviously make sure we understand that.
Get a better view once we start getting to that but I'll.
So it's a ways out at $160 million Nols, it's about.
The rate of call it 28% that's about $550 million of.
Of earnings So we have a ways to go but we don't expect to be paying a lot on cash taxes in the in the near term or even medium term.
Okay. Thank you.
Okay.
This concludes our question and answer session I would now like to turn the conference back over to Sameer Gokhale for any closing remarks.
Okay, great. Thank you Tom and thank you all for joining US today, if you have any questions.
I'll tell you the contact Investor relations and we'll be happy to assist you.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
On speed.
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Yes.
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