Q1 2022 LendingClub Corp Earnings Call
We affected by their ending.
However, given the potential unprecedented speed and magnitude of rising rates.
We continue to proactively tightened underwriting on the margin stay ahead of pressures that consumers may face.
Our industry, leading and highly efficient marketing engine helped us more than double originations year over year and grow 5% sequentially. Despite seasonal downward pressures, we normally see in Q1.
We crossed 4 million members this quarter, another milestone and a huge competitive advantage.
Our origination mix is now back to our historical range of 50%, new and 50% existing members importantly.
Importantly, approximately half of our new members return to us within five years not only to these repeat members have very low acquisition costs, but they also demonstrate substantially better credit performance.
As a result, we estimate that these repeat members have three times the lifetime value of first time borrowers and we expect these economics to improve as we expand our offering and increased member engagement as a full service bank.
This is a very powerful competitive advantage that should continue to grow as we offer new products to our member base and expand the reach of our current ones and.
In the consumer business, along with further growth in personal loans, we plan to continue growing auto refi and purchase finance loans.
Although their growth rate will be higher their relative contribution to earnings will remain small in comparison to personal loans.
Outside of consumer we expect to grow commercial loans, excluding PPP modestly. These commercial loans are largely secured by collateral or cash flows and should continue to be a good source of revenue and credit quality diversification.
Yes.
We're driving credit marketplace, let us say, yes to more borrowers across the credit spectrum driving marketing efficiency, while we maintain a prudent approach to underwriting.
The attractive returns on our loans are driving strong demand from our marketplace investors, where we continue to add new loan buyers such that the number and diversity of loan purchases is now well above pre pandemic levels.
And innovations like Lts, which allow us to match supply and demand in real time at market optimize prices with fully automated transaction settlement demonstrates the continued evolution of our marketplace advantage in our technology and innovation leadership.
As seen in our consistent outperformance the investments we've made over the past several years are showing strong returns.
The bank acquisition is paper itself within just a year.
Our continually refreshed credit models are delivering compelling returns even in a dynamic environment.
Automation like that enabled by LTE is allowing us to execute more efficiently and effectively than ever before.
Our investments in servicing are delivering record customer satisfaction scores, while also protecting returns.
And ongoing investments in our technology and data foundation will allow us to meet the opportunities of tomorrow and offer new and enhanced products tailored to our customers' needs.
With our powerful and transform business firing on all cylinders, we continue to prudently invest for future growth.
As I said last quarter, there are three key areas of investments loan retention marketing and technology.
So starting with loan retention, our financial transformation is in part being driven by the new recurring revenue stream coming from the high quality loans for holding on our balance sheet.
As such investing in the continued growth of that revenue stream is extremely important as it builds long term income admittedly at the expense of short term results.
Second investment areas marketing, we have a highly efficient marketing engine that allows us to grow origination and to build our member base.
So you can expect us to continue to acquire new members, while seeking to expand overall lifetime value.
And finally, we've been investing to further expand our considerable data advantages and build out our digital banking capabilities.
These investments form the foundation for a multi product digital first bank powered by the business intelligence with a scalable infrastructure that will deliver strong multi year revenue and earnings growth.
Expanding our technology leadership in the quarter, we hired <unk> <unk> as our new CTO.
<unk> has extensive experience in direct to consumer technology organizations, such as Uber, Google and Microsoft the leverage Big data machine learning mobile technologies and cloud computing to deliver on both incredible business and customer outcomes.
He is perfectly suited to lead the technology organization as we not only invest in our future but build it.
Of course, while we remain committed to the above mentioned investments, we will maintain discipline and will moderate the level if conditions dictate.
Looking ahead.
We are raising guidance on revenue earnings and loan originations for the full year.
This reflects our positive momentum from Q1 continuing into Q2.
Balanced by a recognition that conditions could change in the back half of the year.
No we feel very good about how we're positioned to navigate through potential changes, we have strong earnings robust levels of capital and liquidity significant strategic and structural advantages.
<unk>, a well executing team.
That said this is a dynamic environment.
We'll need to process the impact of rate changes and be thoughtful about the speed and degree to which we passed increased funding cost to borrowers ensuring we continue to deliver real value to our members. While also continuing to deliver strong yields for our investors.
I want to thank our lending club employees for helping US achieve these remarkable results and for working together, mostly remotely over the last two years to co create our ambitious future.
Many are now returning to the office for part of the week and it's been great to see everyone and to meet some new cases.
With that I'll turn it over to Tom for his comments, thanks, Scott and Hello, everyone.
I'll be talking about our financial results I will be referencing several slides of our presentation during their prepared remarks.
You may want to have that handy so let's get started.
Got mentioned, we recorded record results for the first quarter with revenues, increasing 10% sequentially and more than doubling year over year to $290 million.
Net income increased to $41 million up 40% sequentially and nearly $90 million year over year.
Our revenues and net income were very strong during the quarter as we had great execution across the business driving strong in period results, while continuing to invest in the future.
I will point you to slide 11% to 13, you can see sequential revenue growth.
Reflected an increase in both marketplace revenue and our recurring stream of interest income.
Marketplace revenue grew 6% to $180 million of loan originations of 5% with our growth investments from Q4 paying off and we continue to leverage benefits for our large member base data and testing efforts.
Recurring net interest income also contributed to growth of $100 million in the quarter, a 20% increase reflecting both the growth in our held for investment portfolio as well as an increase in mix of consumer loans that generate higher yields.
HFC portfolio, excluding PPP loans grew 23% sequentially in the midst of personal loans increased to 69% of <unk> portfolio of 62% at the end of 2021.
During the quarter, we retained 27% or $856 million of new consumer loan originations.
Just seven points or $212 million above the midpoint of the 15% to 25% range, we shared with you previously.
As we said in the past we earn about three times more on loans obtained compared to loans sold.
So while retaining loans reduces our revenue and earnings in a given quarter is an excellent return on equity and provides a very attractive recurring stream of interest income.
Importantly, with our excess capital and strong earnings we now expect to retain approximately 20% to 25% of originations for the remainder of the year.
Moreover.
If we outperform in any given quarter like we did this quarter, we may choose to go above this target range given the attractive ROI on these loans.
You'll see on page 14 of our presentation that in Q1, our net interest margin increased to eight 6% eight 3% in the prior quarter and three 3% a year earlier.
Primarily reflecting a higher mix of consumer loans.
Yields are unsecured consumer loans were down 44 basis points sequentially to 15, 2%, reflecting our strategy to shift our overall mix towards higher quality type loans.
In Q1, we also grew deposits, 27% sequentially to $4 billion, which helps fund our growing consumer loan portfolio.
This increase reflected growth primarily in high yield savings accounts, resulting in an increase in our overall average deposit costs supporting two basis points from 38 basis points in the prior quarter.
And what the forward curve predicting rates to be up about 225 basis points, we expect rates on deposits to increase throughout the year.
We also anticipate higher interest rates the impact on marketplace revenues as loan funding cost for vessels will increase as.
As part of our growth plan, we have deliberately target investors with lower leverage and exposure to capital markets, which should mitigate the impact of rising rates on investor demand.
The ongoing remix of the balance sheet combined with short duration of our product should also allow us to reposition relatively quickly although it could take a few quarters for our business to adjust to changing market conditions.
With regard to credit quality, we remain pleased with the performance of our portfolio and I would point you to page 15, which shows that 30, plus day delinquency rates on our total product portfolio, including sold loans remained low delinquency rates on our retained <unk> portfolio over the last year or below that of the total.
Prime book, and we expect them to increase in line with our expectation as the portfolio seasons overtime.
For the quarter see some provisions for retained loans was $52 5 million.
And total charge offs were approximately $9 million.
At the end of the first quarter, our allowance for loan losses as a percentage of <unk> for our consumer loan portfolio increased to six 6% from six 4%.
Yeah.
Commercial credit quality also remained very strong so we had a modest net recovery during the quarter.
Yeah.
Now, let's turn to expenses and I would point you to page 16.
We maintained tight control of expenses as we continue to grow revenue faster than expense.
Expenses grew 42% year over year, reflecting a decrease in expenses as we grew our revenues by 174%.
Expenses were up 3% or 2% sequentially, primarily reflecting $5 million increase in marketing expense.
Which were up 9% driven by loan origination growth and the increased mix of new customers.
Total non interest expense benefited from a $5 million reduction relates to bank integration costs incurred in the fourth quarter.
On an adjusted basis total expenses were up approximately $8 million or 4%.
As integration costs that rolled off were operating at a higher level of efficiency.
With revenue up 10% expenses up 2%, our efficiency ratio improved to 66% from 72% in the prior quarter.
We would expect Q2 to be in a similar range and while our ambition is to continue to drive that number down over time, the macroeconomic environment may put some pressure on that the back half of the year.
More importantly, I'd like to point you to page nine we can see the fundamental shift our business model has had on our margins.
A similar origination level, we delivered over $100 million incremental revenue and over $40 million higher GAAP net income when compared to our pre pandemic pure marketplace model.
This is a profound shift in our business has not only improved our financial performance, but also increases our resiliency and provides us with a new set of tools to manage a dynamic operating environment.
Now, let's move on to capital and our outlook on tax.
We exited Q1 with a strong balance sheet and our CET ratio remains very strong at 16%.
We grew tangible book value to $792 million at the end of Q1 from $752 million and 2021.
Tangible book value excludes our net deferred tax asset of approximately $210 million.
Comprised of $140 million of federal and $70 million of state deferred tax assets.
We continue to maintain a full valuation allowance on this asset.
However, as we continue to see record results our forecasted profitability will result in a release of that reserve.
While timing can amount is uncertain when released it will be a material tax benefit recorded through the income statement and will increase our tangible book value.
We do not expect to pay federal cash taxes. This year, although our effective rate for GAAP reporting will decrease to approximately 27% in the year following the reserve release.
I'll now point you to page 10 to highlight a new metric, we're introducing to help communicate our underlying performance and growth.
Pre tax pre provision income.
As you saw this quarter, we retained 27% of our loan originations and it had a meaningful impact on our reported results as we do further recognition of the origination fee and recognize the upfront noncash C supervision.
And as we continue to grow our loan portfolio. This will continue to impact our reported results.
Importantly, we believe this metric to be a good indicator of our underlying growth rate as it will not be impacted by the percentage of loans, we hold in any given quarter, nor the changes in our effective tax rate as a result of the lease for the tax reserve I mentioned earlier.
So for the quarter, our pretax pre provision income.
With $98 million up $24 million or 33% sequentially, which highlights the terrific trajectory of our new business model.
Now I'd like to talk about our forward guidance and how we are thinking about the rest of the year.
Overall, our results continue to highlight the power of our business model and a relatively steady state.
Our guidance includes our Q1 outperformance and updated expectations for Q2, while carefully considering the increased uncertainty around the environment for the back half of this year.
For the year, we're raising our revenue earnings and origination outlook.
For Q2, we expect to grow revenues to $295 billion to $305 million.
An increase of 44% to 49% year over year.
We expect net income of $40 million to $45 million, an increase of 327% to 380% year over year.
For the year, we are updating our origination guidance to $13 to $13 5 billion.
Compared to our prior expectation of approximately $13 billion.
We're also increasing our revenue outlook by $50 million.
To 1.15 billion to $1 $25 billion with increases in GAAP net income by $50 million with a new range of $145 million to $165 million.
All the guidance for Q2 and full year results do not factor any potential benefit from the release of the valuation allowance and we continue to expect the effective tax rate to be approximately 10% in 2022.
We are off to a terrific start.
New enhanced model provides us with a great deal to make them and we will respond appropriately as business conditions change.
<unk> outperformed the industry.
With that let me turn the call over to the operator for questions.
Lee if people would like to ask a question. Please press star followed by one on your telephone keypad.
Any reason you would like to remove that question. Please press star followed by two again to ask a question Press Star one as a reminder, if you are using a speaker phone. Please remember that pick up your handset before asking your question. We will pause here briefly ask questions are registered.
The first question is from the line of David <unk> with Wedbush Securities. Please proceed.
Hi, Thanks, I wanted to start on loan demand and loan pricing, but first on loan demand.
Curious as to your thoughts so you clearly raised the guidance for the full year I was curious about how the second quarter is trending thus far granted were only a few weeks in but im curious can seeing some of the industry data points. It looks like it might be trailing off a little bit, but curious as to your thoughts there.
Hey.
Yes, we were.
I guess first starting cut on the bigger macro side, a big driver of Tam for us.
Obviously credit card balances that's the primary use case targets.
The secondary driver is as people become more familiar with the acceptability and the low cost theyre coming back to other use cases that first driver.
<unk> balances that you probably have been growing last couple of quarters at a pretty brisk clip.
Unsecured balances are back at pre pandemic levels. So the overall thats.
Constructive for loan demand or for unsecured credit.
So that's one and then I'd say on top of that.
We just feel really good.
And our executing a number of initiatives across product marketing.
And the rest.
It's driving strong demand in terms of the outlook I guess.
We tried to lay it out in the prepared remarks.
A lot of momentum in Q1, we typically see Q1 actually shrink to be down 5% versus Q4, and we actually came up.
That's a positive.
And we do see that momentum continuing into the second quarter, I think and Thats really reflected in our guide.
We're acknowledging that how the back half of the year.
<unk> plays out and what that transition period, it looks like its as we adjust to the new rate environment.
Yeah.
Acknowledging a bit more.
A bit more of a range there. So the guide really reflects Q1 momentum continuing into Q2.
Got it thanks for that and then shifting over to loan pricing.
It looks like the pricing at least on looking at the average balance sheet in the press release it looks like the average yield on the unsecured loans came down in the first quarter versus the fourth quarter, which was a little surprising given the interest rate backdrop could you talk about that as well as clearly the gain on sale margin held in there.
They're pretty strongly for you guys in the first quarter could you talk about loan pricing in the dynamic around gain on sale.
Yeah I'll start with.
Loan demand and they're becoming congestion.
So overall, we're continuing to see very strong demand as we've mentioned in past calls.
Our credit has really outperformed the competitive set over these last couple of years and when you take that.
Combine that with.
Sure.
Our status as a directly supervised financial institution I think that has also brought some investors off the sideline, we actually are continuing to add investors to the platform.
See pretty strong demand overall.
<unk> about that.
Freight environment in the broader macro trends.
I want to talk a little bit about coupon drivers yes.
Yes.
Yes.
So David.
The coupons on the extent of my prepared remarks as railroads bounded if you looked at our.
Our NIM page on page 10 of the earnings release.
We actually bought.
Unsecured personal loans downward on yields from 15, 6% up 52, two this reflects.
As I said in my comments our effort to go hire all of these bones David.
Mixing our assets to the most high quality or higher quality than we had in the previous quarters. The very unique opportunity that we have given our low cost deposits and youll continue to see us.
Move to higher quality loans.
About the year.
It's attractive area for us given the low cost.
And as far as loan pricing and it has been.
Very strongly as Scott mentioned, great demand on our on our project.
Long term investors and had a great quarter and obviously as we said in our prepared remarks interest rates will hold.
Well, obviously impact that a little bit but feel very good about where we are in the quarter.
Second quarter.
Great. Thanks very much.
Thank you Mr Chair Verine.
The next question is from the line of Giuliano well on that.
With Compass point. Please proceed.
Well first of all congratulations on a great quarter, and then continue to prove out.
The earnings power and growth potential.
Well My first question I was curious about was when you think about.
Marketing expenses.
Last quarter, because it knocked out was about 195 to 200 basis points for the full year you guys. Obviously came in much lower recorded 173 basis points I'm.
I'm curious the first part of it is whether you should continue to think about marketing expenses in a similar ZIP code called 199, 5% to 3% of volume or if the outperformance. This quarter was better a better yield on your marketing expenses, because you got to unwind some of the excess performance you would've been closer to that.
Range.
If you took down some of your extra volume versus where most of that's probably we're modeling the <unk>.
First quarter.
Yes. Thank you.
So we still feel good about the target that we gave.
92 range.
One of the things that impacted this quarters.
<unk> results as I called out in my comments that we retained 27% of our origination. So we'll hit the marketing line is slightly impacted because we defer those related expenses. So it is a little bit of.
Geography in that statement. So we still feel good feel great about our marketing efficiency.
<unk> two two to drive our marketing and.
So if we can but we.
Feel very good about our position and we feel that's a good range, we don't want to be too thin where were losing opportunities we don't want to be too wide.
Not being as efficient as Directv. So 192 is still the number allows us to do the things we need to do the testing you need to do.
And also.
So that's got to have done a very good quarter.
Volumes were higher than we had expected.
That obviously helps the efficiency as well.
That sounds good.
To touch a little bit.
I go back historically you guys. Obviously, you said it all.
Refined products and also some of the elective medical and kind of spun out their tech loans.
Im curious if theres any sense of the magnitude I realize that the base is smaller and they're growing quickly.
Kind of what the characteristics of those loans look like from kind of more of a yield and capital efficiency perspective.
Yes. So I think your question was about the other other loans beyond personal loans, but you are right they do grow nicely.
With regard to let alone secured products in the near term.
Returns there and the spreads are obviously very very different but we want to have.
The products that we offer to our customers.
All of the thought about each individual pricing of auto loan is about the relationship. It's about the multi product relationship we have with our questions.
Credit benefits, we get from from having multiple relationships with customers.
While we look at it on a straight interest rate returns also much broader lifetime value that we're focused on.
With regard to the.
Purchase finance business very similar characteristics of the unsecured personal loans unsecured products as well very similar customer set and very similar returns on equity.
Okay.
No it sounds good.
One last one.
I'm curious if from a well I guess I realized.
As we have specific timing question, but more so from a mechanical perspective, when you think about potentially reversing the valuation allowance on the deferred tax asset is that something that can be measured.
Different time or is it only annually.
Reason why I asked that is on safety.
But just annualize your current run rate from an unexpected in the first quarter with that realizes.
Hello.
Where do you intend to be very good.
For the full year.
Earn out.
Our deferred tax assets.
Just over four years.
Kind of curious just from a modeling perspective.
My perspective.
If you kind of a catastrophe and your capacity at any point in the year.
In part because.
When we think about the industry as a whole I think there is.
Everything from the way that most of those are modeling the tax rate for next year.
Yes.
It's a good question.
Facts and circumstance based that is.
The ongoing assessment.
Particular, one.
Part of the year.
Companies do.
These reserves are at different times throughout the year.
What I commented on.
Section is that it.
The pace of our growth is obviously, making us think about this more.
We're permanently and while we can't predict exactly when that will be released it is clearly on a trajectory that would indicate that this asset is recoverable now.
We will make the appropriate adjustments.
The reason, we wanted to call out the impact.
On the tax rate is just a very complicated switch from from.
Having net operating losses that hasnt been able to be deducted.
ZIP cash for many many years as you indicated and so the effective rate will go up with the cash flow.
Bill.
Save because of the offset that we get on a roll forward of the NOL.
Feel very very good about our taxes, but it does create some complexity wanted to get into the market.
I can understand where the normalized.
Earnings would be that's why we also put in the pre tax pre.
Pre provision.
Metrics. So you can start to look at it more smoother.
Profile, taking out taking away some of this.
Next day, but the tax change will result in only fully adopted.
That's great well. Thank you for taking my questions and congrats on a great quarter.
Thank you Mr Bill Wagner.
The next question is from the line of Bill Ryan with Seaport Research Partners. Please proceed.
Yeah.
Thanks, and good afternoon couple of questions. One is kind of let's say encompassing.
Youre, having nice margin expansion in the quarter a lot of components to it there's yields deposit costs.
Prepayments, which looks like that may have slowed a little bit in the quarter.
Looking forward, where do we go here from the margin and last quarter I think you talked about 16%, but you kind of just look at the mix of loans and what's happening and suggest it could go eventually above that but if you could talk a little bit about the dynamics of the margin going forward.
I'll go ahead and ask my follow up question, which is just on the nature of your loan buyers in the marketplace.
I know our discussions in the past you've kind of indicated and you alluded to it earlier in the call.
And then a lot of your buyers are most of your buyers are not securitizers, but if you can maybe provide a little more granular.
Aspect to that.
Yes.
Yes, so first on the margin.
We are in a very unique situation in that we still have not fully invested the portfolio didn't invest in the portfolio.
We started a year ago and Youre seeing us increase the.
The mix of consumer of unsecured consumer loans.
That particular, 9% now we have more room to go and we're generating more more capital and funding is good and so what you have.
This rate versus mix dynamic going on so the fact that we're able to continue to mix the portfolio.
Really does mute some of the impact of higher rates.
It also allows us even go higher quality credit.
You've been giving up some of the additional yield.
Still very very strong net interest margins.
Notwithstanding the changes in the environment. So we are definitely benefiting from now but not fully invested and also relates to the balance sheet and sold the outflows.
In the first quarter, which also allows us to remix that portfolio. So those are some of the dynamics around.
The margin on prepayments.
Really not much change yet.
Some prepayments due to to modulate throughout the year, but not much in the first quarter no no really significant impact on the <unk>.
Neil.
As far as loan buyers as you kind of summarize it we've been.
Very very pleased with the law.
Long term relationships that you've had with these investors.
We've obviously are our highly.
Ah connected with them to make sure that we're delivering very very good risk adjusted returns.
And that.
Dependent on the capital markets or other investors.
And that allows that.
Two to continue to deliver them those good returns out of this.
Subject to them.
Gyrations in the capital markets. So I feel very good about that we haven't done a securitization ourselves.
Our funding base is quite strong our investor base.
A real real benefit and strategic advantage. So I'll, just I'll talk a little bit on the investor base.
Do you think about pre <unk>.
<unk>.
And pre bank versus today.
We've really thought about making a fairly deliberate shift.
The thing that change obviously, our own bank balance sheet is in the mix that does change the dynamic.
In terms of our ability to price.
But also the confidence that a gift card loan buyers that we're being disciplined about credits.
The other the other thing that's changed is that we ourselves made use of the capital markets.
Funding mechanism, we no longer do that and we've also kind of pivoted our mix of loan investors to those that are not.
Overly reliant on that.
On the vehicles. So you can think of if you look at our mix today.
More investor that we had our individual levels of concentration are lower and they represent accrue.
Is not reliant on capital markets for.
Their funding.
There are banks, probably about half of the funding comes from banks, including us.
There are.
Asset managers and then the asset manager side. There's a lot of these are individual vehicles that are really dedicated to funding marketplace loans, often individual LP is behind that.
Typically relatively low leverage.
And they.
Our mandate, if you will our investment mandate.
In the asset class. So we feel really good about the mix that we've got and the level of demand that we have from them.
As I mentioned in the prepared remarks, we're actually continuing to investors.
Okay. Thanks for taking my question.
Yeah.
Thank you Mr. Ryan.
The next question is from the line of John Rowan with Janney. Please proceed.
Good afternoon guys.
Just to.
Go back to the tax issue.
In your release, the DTA and Theres.
Our benefit to equity one.
Do you guys have penciled out what the impact to capital ratios are and if so does that give you.
More confidence to grow to grow the bank.
Yes.
Questions on it.
It is a complicated one so everyone knows that.
In the in the release of the reserve.
Our tax assets on your books.
That was not recognized previously obviously your tangible book value goes up which is great.
And your capital will go up.
It may not go up dollar for dollar, but John and it's something that is.
Is subject to some additional work based on timing and level of disease.
But Jim I've called out the federal and state complicated calculation, but there will be some benefit.
<unk>.
Two the regulatory capital.
However that will be at the holding company and not in the bank. So we will increase our total available capital, but we'd be at the holding company.
And not in the bank. So obviously, we have some some work to do to.
Normalized our capital.
It is.
This is a net capital and once it occurs.
Okay. Thank you very much.
Thank you Mr. Allen.
The next question is from the line of Steven Fox with total revenue expected.
Congrats on a good quarter and thanks for taking my question just given the broader macro uncertainty could you talk about what youre seeing around the health of your customer base and then also specific trends that youre monitoring.
Yeah.
No.
We feel quite good about the customer we're focused on first.
You mentioned this before but I reiterate.
Consistent focus right our growth is coming from the same high quality customer that we've had.
For 15 years.
17, plus $1 billion worth of loans.
I'm into the pandemic with a strong balance sheet low.
Debt to income coverage strong coverage ratios all the routes.
It did not overly benefit from government stimulus and therefore are not overly feeling its withdrawal and.
As you can see in the industry overall.
I think.
With both due to the pandemic driven reality as well as personal choices.
Really delever quite a bit so.
And you combine that with the low unemployment is just the profile of <unk> funds average FICO of 727 average income of our book.
With 113000 or so.
It's a very solid consumer.
As I mentioned on the call.
Couple of things I'd, just maybe go a little deeper on that.
Performance of our loan book continues to be strong.
<unk> and delinquencies remained below.
Pre pandemic levels, which as we have priced an underwritten to those pre pandemic levels.
A reminder, that our.
Very short duration loan.
So we can get a read on performance.
Quite quickly.
You start to see what's happening let's call it six seven months in.
The other thing I would note.
We've got all kinds of.
Call it early.
Early warning monitoring things that we're looking at.
Right at which <unk>.
People are pausing auto payments or switching bank accounts these kinds of things that.
Give us an early indicator as destructive and then the final is.
And also just being proactive about what our expectations are in.
We're looking at.
We're factoring into our underwriting right now already that cost of living will be going up that the student loan payments could be resuming. So those are the kinds of things that we're not waiting to respond to data we're responding to.
Around kind of expectations about what's happening. So again overall feel good about our books feel good about how our portfolio is performing and we are being prudent growth and where we're focused bank.
We're focusing on more shifting slightly more up market and we're proactively tightening.
And the expectation of a potential for a more adverse environment.
During the year.
Got it got it and just given the dynamic interest rate environment that we're in are you seeing any change in appetite.
Whether it's on the consumer side or from the institutions that are buying the paper.
Curious to see if you have any if you're seeing anything there.
Well I mean I think.
Got it.
Indicated in.
In an earlier comment I made I mean, we're seeing continued momentum from Q1 to Q2.
And that is both in terms of consumer interest in the product and responding to our initiatives as well as our loan buyers now that said of course, there is anxiety on the part of.
The broader market around the rate and pace at which prices go up.
Expectation that we will have to reprice.
Loans to match funding cost for investors, we've talked about this I think.
Last call, which is that since our the market that we're going after is credit cards credit cards pretty tight supply and we will be able to pass that cost increase on to borrowers.
But we'll be thoughtful about the pace at which we do that based on how the overall market is moving.
Got it thanks for taking my questions.
Thank you Mr. Clarke.
Now, we'd like to turn it over to <unk> to answer some questions submitted by our retail investors. Please proceed.
Great. Thank you well, we actually just have one question and that was from what we could invest for asking.
The board has considered diverting cash buildup.
Building up the company's loan portfolio to Opportunistically repurchasing lending stock.
Really a question of investing in the portfolio versus a share buyback.
Yes.
At this point.
Still see incredible compelling use of our capital.
Two to grow the balance sheet and invest in the future.
At this point.
The board decision.
Decision to deploy.
Deploy capital into the buyback program.
We will consider all things going forward, but at this point, we have no no buyback program in place.
Thank you for the opportunity to grow our core business.
Great well, thanks, Tom and thank you all for joining us earnings.
Follow up questions. Please contact Investor relations. Thank you thanks, everyone.
That concludes today's call. Thank you for your participation you may now disconnect your lines.
Uh huh.
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