Q2 2024 LendingClub Corp Earnings Call

Good afternoon. Thank you for attending today's LendingClub 2Q24 Earnings Conference Call. My name is Jayla and I'll be your moderator for today.

Jayla: My name is Jayla, and I'll be the moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Artem Nalivayko, Head of Investor Relations. Artem, you may proceed. Thank you and good afternoon.

Montgomery Shaila: Montgomery Shaila, and I'll be a moderator for today. All eyes will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end.

All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Artem Nalivayko, Head of Investor Relations. Artem, you may proceed.

Artem Nalivayko: I would not like to pass the conference over to our host, Autumn Nalivayko, Head of Investor Relations. Autumn, you may proceed. Thank you in good afternoon.

Artem Nalivayko: Welcome to LendingClub's second quarter earnings conference call. Joining me today to talk about our results are Scott Sanborn, CEO, and Drew LaBenne, CFO. You can find the presentation accompanying our earnings release in the investor relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email. Our remarks today will include forward-looking statements, including with respect to our competitive advantages and strategy, macroeconomic conditions, platform volume, future products and services, and future business and financial performance. However, our actual results may differ materially from those contemplated by these forward-looking papers. Factors that could cause these results to differ materially are described in today's press release and presentation.

Autumn Nalivayko: Welcome to LendingClub second quarter earnings conference call. Joining me today to talk about our results.

Artem Nalivayko: Thank you and good afternoon. Welcome to LendingClub's second quarter earnings conference call. Joining me today to talk about our results are Scott Sanborn, CEO , and Drew LaBenne, CFO . You can find the presentation accompanying our earnings release on the investor relations section of our website.

Autumn Nalivayko: Scott Sanborn, CEO; Andrew LaBenne, CFO. You can find the presentation accompanying our earnings really on the Investor Relations section of our website. On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email.

Speaker Change: On the call, in addition to questions from analysts, we will also be answering some of the questions that were submitted for consideration via email.

Autumn Nalivayko: Our remarks today will include forward-looking statements, including with respect to our competitive advantages and strategy, macroeconomic conditions, platform volume, future products and services, and future 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 presentation. Any forward-looking statements that we make on this call are based on current expectations and assumptions, and we undertake no obligation to update these statements as a result of new information or future events.

Speaker Change: Our remarks today will include forward-looking statements, including with respect to our competitive advantages and strategy, macroeconomic conditions, platform volume, future products and services, and future business and financial performance.

Speaker Change: Our actual results may differ materially from those contemplated by these forward-looking statements.

Speaker Change: Factors that could cause these results to differ materially are described in today's press release and presentation.

Artem Nalivayko: Any forward-looking statements that we make on this call are based on current expectations and assumptions, and we undertake no obligation to update these statements as a result of new information or future events. Our remarks also included non-GAAP measures relating to our performance, including tangible book value per common share, pre-provision net revenue, and risk-adjusted revenue. You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. Now, I'd like to turn the call over to Bob. All right. Thank you, Artem.

Speaker Change: Any forward-looking statements that we make on this call are based on current expectations and assumptions, and we undertake no obligation to update these statements as a result of new information or future events.

Autumn Nalivayko: Our remarks also included non-GAAP measures relating to our performance, including tangible book value per common share, pre-provisioning that revenue, and risk-adjusted revenue. You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation.

Speaker Change: Our remarks also included non-GAAP measures relating to our performance, including tangible book value per common share, pre-provision net revenue, and risk-adjusted revenue.

Scott: You can find more information on our use of non-GAAP measures and a reconciliation to the most directly comparable GAAP measures in today's earnings release and presentation. And now, I'd like to turn the call over to Scott.

Scott Sanborn: And now I'd like to turn the call over to Scott. All right. Thank you, Artem.

Scott C. Sanborn: Welcome, everyone. I'm pleased to report that we had a strong quarter of growth, with originations climbing 10% sequentially to $1.8 billion, pre-provision net revenue growing 13% to $55 million, and gap net income growing 21% to nearly $15 million, all while sustaining our industry outperformance on credit, growing our balance sheet by nearly nine percent year-to-date, and continuing to innovate on a truly differentiated experience for our growing member base. We have calibrated the business to the current operating environment and have achieved a solid foundation from which to efficiently grow.

Scott Sanborn: Welcome everyone. I'm pleased to report that we had a strong quarter of growth, with originations climbing 10% sequentially to $1.8 billion, pre-provisioned that revenue growing 13% to $55 million, in gap net income growing 21% to nearly $15 million. All while sustaining our industry outperformance on credit, growing our balance sheet by nearly 9% year to date and continuing to innovate on a truly differentiated experience for our growing member base. We have calibrated the business to the current operating environment and have achieved a solid foundation from which to efficiently grow. Strong credit performance is key to that growth, supporting higher marketplace loan sales prices and maximizing risk-adjusted revenue from the balance sheet.

Scott: All right, thank you, Artem. Welcome everyone. I'm pleased to report that we had a strong quarter of growth, with originations climbing 10% sequentially to $1.8 billion.

Scott: Pre-provisioned net revenue growing 13% to $55 million and gap net income growing 21% to nearly $15 million.

Scott: All while sustaining our industry outperformance on credit, growing our balance sheet by nearly 9% year-to-date, and continuing to innovate on a truly differentiated experience for our growing member base.

Scott: We have calibrated the business to the current operating environment and have achieved a solid foundation from which to efficiently grow.

Scott C. Sanborn: Strong credit performance is key to that growth, supporting higher marketplace loan sales prices and maximizing risk-adjusted revenue from the balance sheet. Accordingly, it's worth highlighting that we continue to consistently outperform our competitive set with 40% better delinquency rates across all core segments we serve.

Scott: Strong credit performance is key to that growth, supporting higher marketplace loan sales prices and maximizing risk-adjusted revenue from the balance sheet.

Scott Sanborn: Accordingly, it's worth highlighting that we continue to consistently outperform our competitive set, with 40% better delinquency rates across all core segments we serve. Our performance is due to several proprietary advantages, including dozens of custom models, visibility into millions of repayment events across varying economic environments. A team that brings decades of human experience and intelligence to interpreting signals and trends in an asset class and underwriting technology platform that allows us to rapidly respond to changing macro conditions. We're seeing strong returns with stable or improving credit losses across all vintages and within our health for investment portfolio, delinquencies and charge-offs are trending lower as expected as our portfolio ages.

Scott: Accordingly, it's worth highlighting that we continue to consistently outperform our competitive set with 40% better delinquency rates across all core segments we serve.

Scott C. Sanborn: Our outperformance is due to several proprietary advantages, including dozens of custom models, visibility into millions of repayment events across varying economic environments, a team that brings decades of human experience and intelligence to interpreting signals and trends, and an asset class and underwriting technology platform that allows us to rapidly respond to changing macro conditions. We're seeing strong returns with stable or improving credit losses across all vintages. And within our Help for Investment portfolio, delinquencies and charge-offs are trending lower, as expected, as our portfolio ages.

Scott: Our outperformance is due to several proprietary advantages, including dozens of custom models, visibility into millions of repayment events across varying economic environments.

Scott: a team that brings decades of human experience and intelligence to interpreting signals and trends, and an asset class and underwriting technology platform that allows us to rapidly respond to changing macro conditions.

Scott: We're seeing strong returns with stable or improving credit losses across all vintages.

Scott: And within our Help for Investment portfolio, delinquencies and charge-offs are trending lower, as expected, as our portfolio ages.

Scott Sanborn: For marketplace investors, our strong credit stewardship, combined with our bank-enabled innovation, is reinforcing our reputation as a partner of choice. The striving heightened demand which is supporting an increase in origination and incremental improvements in loan sales pricing. Our structured certificate program continues to provide buyers with an attractive alternative to warehouse lines or securitizations. By holding the A-note, we generate fee revenue and capital efficient, risk-remote interest income without enough from seasonal charge. This past quarter, we crossed $3 billion in lifetime origination through the program with a solid pipeline of forward interest. We're also meeting investor demand through our extended seasoning program, which provides us with interest income until we sell the loans.

Scott C. Sanborn: For Marketplace investors, our strong credit stewardship combined with our bank-enabled innovation is reinforcing our reputation as a partner of choice, that's driving heightened demand, which is supporting an increase in origination and incremental improvements in loan sales. Our Structured Certificate Program continues to provide buyers with an attractive alternative to warehouse lines or securitization.

Scott: For Marketplace investors, our strong credit stewardship combined with our bank-enabled innovation is reinforcing our reputation as a partner of choice.

Scott: of Striving Heightened Demand, which is supporting an increase in origination and incremental improvements in loan sales pricing.

Scott: Our structured certificate program continues to provide buyers with an attractive alternative to warehouse lines or securitizations.

Scott C. Sanborn: By holding the A note, we generate fee revenue and capital-efficient, risk-remote interest income without an upfront Cecil charge. This past quarter, we crossed $3 billion in lifetime origination through the program with a solid pipeline of forward interest. We're also meeting investor demand through our extended seasoning program, which provides us with interest income until we sell the loans. We executed over $80 million in seasoned loan sales this past quarter, at prices above our carrying value.

Scott: And by holding the A note, we generate fee revenue and capital efficient risk-remote interest income without an upfront Cecil charge.

Scott: This past quarter, we crossed $3 billion in lifetime origination through the program with a solid pipeline of forward interest.

Scott: We're also meeting investor demand through our extended seasoning program, which provides us with interest income until we sell the loans. We executed over $80 million in seasoned loan sales this past quarter, with prices above our carrying value.

Scott Sanborn: We executed over $80 million in season loan sales this past quarter with prices above our carrying value. Going forward, we plan to continue driving the loan prices up by maintaining strong credit performance, continuing to innovate on products and structures that need evolving investor needs, and re-engaging banks, where we continue to have productive discussions in anticipation of sales beginning in the back half of this year. Obviously, we also stand to benefit from improvements in loan sales pricing and deposit costs should the rate environment turn in our favor in line with current expectations. With strong credit performance and growing marketplace investor demand, we're well positioned to resume growth and help more customers pay off their credit card balances, which stand at historically high levels priced at historically high rates.

Scott C. Sanborn: Going forward, we plan to continue driving loan prices up by maintaining strong credit performance, continuing to innovate on products and structures that meet evolving investor needs, and reengaging banks where we continue to have productive discussions in anticipation of sales beginning in the back half of this year. Obviously, we also stand to benefit from improvements in loan sales pricing and deposit costs should the rate environment turn in our favor, in line with current expectations.

Scott: Going forward, we plan to continue driving loan prices up by maintaining strong credit performance.

Scott: continuing to innovate on products and structures that meet evolving investor needs.

Scott: and Reengaging Banks, where we continue to have productive discussions in anticipation of sales beginning in the back half of this year.

Scott: Obviously, we also stand to benefit from improvements in loan sales pricing and deposit costs should the rate environment turn in our favor in line with current expectations.

Scott C. Sanborn: With strong credit performance and growing marketplace investor demand, we're well positioned to resume growth and help more customers pay off their credit card balances, which stand at historically high levels, priced at historically high rates. We've already delivered real value for our five million members.

Scott: With strong credit performance and growing marketplace investor demand, we're well positioned to resume growth and help more customers pay off their credit card balances, which stand at historically high levels, priced at historically high rates.

Scott Sanborn: We've already delivered real value for our 5 million members. These are highly sought-after customers who tend to be high-FICO and high-income, but also high users of debt. They are digitally savvy and eager to take steps to improve their financial outcomes. And our personal loans are a tool they turn to, to the tangible value we provide. With over 80% saying our products help them keep more of what they earn, and nearly 90% saying that Loming Club is helping them successfully manage their overall debt burden. Strategically, we plan to use our industry-leading capabilities to efficiently acquire more of these customers, use our mobile app to engage them and keep them coming back, and leverage our product innovation engine to build a lifetime lending relationship that serves their needs.

Scott C. Sanborn: These are highly sought-after customers who tend to be high FICO and high income but also high users of debt. They are digitally savvy and eager to take steps to improve their financial outcomes, and our personal loans are a tool they turn to for the tangible value we provide, with over 80% saying our products help them keep more of what they earn and nearly 90% saying that LendingClub has helped them successfully manage their overall debt burden.

Scott: We've already delivered real value for our 5 million members. These are highly sought after customers who tend to be high FICO and high income, but also high users of debt.

Scott: They are digitally savvy and eager to take steps to improve their financial outcomes.

Scott: And our personal loans are a tool they turn to for the tangible value we provide, with over 80% saying our products help them keep more of what they earn, and nearly 90% saying that LendingClub has helped them successfully manage their overall debt burden.

Scott C. Sanborn: Strategically, we plan to use our industry-leading capabilities to efficiently acquire more of these customers, use our mobile app to engage them and keep them coming back, and leverage our product innovation engine to build a lifetime lending relationship that serves their needs. Our Q2 results illustrate the promise of this strategy. We grew originations 10% this past quarter while maintaining flat unit acquisition costs, which are already at industry-leading levels.

Scott: Strategically, we plan to use our industry-leading capabilities to efficiently acquire more of these customers, use our mobile app to engage them and keep them coming back, and leverage our product innovation engine to build a lifetime lending relationship that serves their needs.

Scott Sanborn: Our Q2 results illustrate the promise of this strategy. We grew originations 10% this past quarter while maintaining flat unit acquisition costs, which are already at industry-leading levels. When loan sales pricing improves more materially, we'll be able to restore our inactive marketing channels to drive incremental originations growth. We're also benefiting from investments in efficiency elsewhere in the organization. Within servicing operations, for example, we've upgraded our systems, increased automation, and implemented digital servicing tools. As a result, we've lowered the operational cost to originate a personal loan by one third in the past year. Our mobile app provides a powerful platform for engaging members after acquisition.

Scott: Our Q2 results illustrate the promise of this strategy.

Scott: We grew Originations 10% this past quarter, while maintaining flat unit acquisition costs, which are already at industry-leading levels.

Scott C. Sanborn: When loan sales pricing improves more materially, we'll be able to restart our inactive marketing channels to drive incremental originations growth. We're also benefiting from investments in efficiency elsewhere in the organization. Within servicing operations, for example, we've upgraded our systems, increased automation, and implemented digital servicing tools. As a result, we've lowered the operational cost to originate a personal loan by one third in the past year.

Scott: When loan sales pricing improves more materially, we'll be able to restart our inactive marketing channels to drive incremental originations growth.

Scott: We're also benefiting from investments in efficiency elsewhere in the organization. Within servicing operations, for example, we've upgraded our systems, increased automation, and implemented digital servicing tools. As a result, we've lowered the operational cost to originate a personal loan by one-third in the past year.

Scott C. Sanborn: Our mobile app provides a powerful platform for engaging members after acquisition. Following a limited release earlier in the year, we began marketing the app for personal loan customers more broadly this quarter, leading to a doubling of first-time downloads at the end of the quarter and a roughly 20% month-over-month increase in app users in June. With self-service functionality in the first phase of our comprehensive debt monitoring and management solution embedded in the app, mobile users are finding more reasons to engage with us. In fact, they're logging in about 20 to 25 percent more often than web-only users, providing a growing, active, and engaged audience for communicating new offers and services.

Scott Sanborn: Deception. Following a limited release earlier in the year, we began marketing the app for personal loan customers more broadly this quarter, leading to a doubling of first-time downloads at the end of the quarter and a roughly 20% month-over-month increase in app users in June. With self-service functionality and the first phase of our comprehensive debt monitoring and management solution embedded in the app, mobile users are finding more reasons to engage with us. In fact, they're logging in about 20 to 25% more often than web-only users, providing a growing active and engaged audience for communicating new offers and services.

Scott: Our mobile app provides a powerful platform for engaging members after acquisition.

Scott: Following a limited release earlier in the year, we began marketing the app for personal loan customers more broadly this quarter, leading to a doubling of first-time downloads at the end of the quarter and a roughly 20% month-over-month increase in app users in June .

Scott: With self-service functionality in the first phase of our comprehensive debt monitoring and management solution embedded in the app, mobile users are finding more reasons to engage with us.

Scott: In fact, they're logging in about 20-25% more often than web-only users, providing a growing, active, and engaged audience for communicating new offers and services.

Scott Sanborn: We're also seeing early sounds of success in the affordability to drive positive payment outcomes and to re-engage inactive members. As members engage with us more frequently, we can do more for them and build what we call a lifetime lending relationship. Today, about half of our members return for a second loan through an expedited process, and this repeat behavior is important for several reasons. First, they return to us at near-zero acquisition costs. Second, their credit performance is up to 20% better than new borrowers with a similar profile. Third, they have high satisfaction rates. In fact, our NPS score for repeat members grows after their second loan and keeps climbing as the relationship builds.

Scott C. Sanborn: We're also seeing early signs of success in the app's ability to drive positive payment outcomes and to re-engage inactive members. As members engage with us more frequently, we can do more for them and build what we call a lifetime lending relationship. Today, about half of our members returned for a second loan through an expedited process. And this repeat behavior is important for several reasons.

Scott: We're also seeing early signs of success in the app's ability to drive positive payment outcomes and to re-engage inactive members.

Scott: As members engage with us more frequently, we can do more for them and build what we call a lifetime lending relationship. Today, about half of our members return for a second loan through an expedited process, and this repeat behavior is important for several reasons.

Scott C. Sanborn: First, they're returned to us at near zero acquisition cost. Second, their credit performance is up to 20% better than new borrowers with a similar profile. Third, they have high satisfaction rates. In fact, our NPS score for repeat members grows after their second loan and keeps climbing as the relationship builds. And fourth, their growing satisfaction leads 83% of our members to want to do more with us, which we're happy to accommodate. Doing more starts with meeting more of their lending needs through innovations like TopUp, which allow existing members to obtain additional funds while maintaining one monthly payment.

Scott: First, they're returned to us at near-zero acquisition costs.

Scott: Second, their credit performance is up to 20% better than new borrowers with a similar profile.

Scott: Third, they have high satisfaction rates. In fact, our NPS score for repeat members grows after their second loan and keeps climbing as the relationship builds.

Scott Sanborn: And fourth, their growing satisfaction leads 83% of our members to want to do more with us, which we're happy to accommodate. Doing more starts with needing more of their lending needs through innovations like top-up, which allow existing members to obtain additional funds while maintaining one monthly payment. Early results are promising with strong response and take rates in a 93% satisfaction rate, which exceeds that of our flagship personal loan product. Clean Sweep, our new line of credit product that allows members to easily refinance newly accumulated debt and pay it back in installment plans, is equally promising with early results above expectations and satisfaction at 90%.

Scott: And fourth, their growing satisfaction leads 83% of our members to want to do more with us, which we're happy to accommodate.

Scott: Doing more starts with meeting more of their lending needs through innovations like TopUp, which allow existing members to obtain additional funds while maintaining one monthly payment.

Scott C. Sanborn: Early results are promising, with strong response and take rates and a 93% satisfaction rate, which exceeds that of our flagship personal loan product. CleanSweep, our new line of credit product that allows members to easily refinance newly accumulated debt and pay it back in installment plans, is equally promising, with early results above expectations and satisfaction at 90%.

Scott: Early results are promising with strong response and take rates and a 93% satisfaction rate, which exceeds that of our flagship personal loan product.

Scott: CleanSweep, our new line of credit product that allows members to easily refinance newly accumulated debt and pay it back in installment plans, is equally promising, with early results above expectations and satisfaction at 90%.

Scott Sanborn: Products like these, which are uniquely enabled by our bank, not only meet new use cases, but they form the basis of a lifetime lending relationship that can keep our members coming back. To enable us to offer these products to the right customer at the right time, we recently launched a pre-approval platform. We're already seeing benefits from the platform with higher offer and response rates and improved credit profiles. This pre-approval infrastructure can be extended outside of Lending Club, and we see it as another potential opportunity for origination growth over the longer term. To test this thesis, we're currently piloting the solution with a partner.

Scott C. Sanborn: Products like these, which are uniquely enabled by our bank, not only meet new use cases, but they form the basis of a lifetime lending relationship that can keep our members coming back. To enable us to offer these products to the right customers at the right time, we recently launched a pre-approval platform. We're already seeing benefits from the platform with higher offer and response rates and an improved credit profile. This pre-approval infrastructure can be extended outside of LendingClub, and we see it as another potential opportunity for Originations growth over the longer term.

Scott: Products like these, which are uniquely enabled by our bank, not only meet new use cases, but they form the basis of a lifetime lending relationship that can keep our members coming back.

Scott: To enable us to offer these products to the right customer at the right time, we recently launched a pre-approval platform.

Scott: We're already seeing benefits from the platform with higher offer and response rates and improved credit profiles.

Scott: This pre-approval infrastructure can be extended outside of LendingClub, and we see it as another potential opportunity for Originations growth over the longer term. To test this thesis, we're currently piloting the solution with a partner.

Scott C. Sanborn: To test this hypothesis, we're currently piloting the solution with a partner. Before I turn it over to Drew, I'll conclude by saying that the company is well positioned for continued success. The historically rapid increase in rates and the resulting downstream impacts on the financial services sector have made for an extremely difficult operating environment these past two years.

Scott Sanborn: Before I turn it over to Drew, I'll conclude by saying that the company is well positioned for continued success. The historically rapid increase in rates and the resulting downstream impacts on the financial services sector has made for an extremely difficult operating environment these past two years. I'm incredibly proud of how the Lending Club team has risen to the challenge. As this quarter's results show, we have calibrated the business to this new environment and further streamlines and focused our operations, all of which will deliver outside benefits as conditions improve. With a historic opportunity in front of us, I look forward to building on our momentum in the quarters ahead.

Scott: Before I turn it over to Drew, I'll conclude by saying that the company is well positioned for continued success.

Speaker Change: The historically rapid increase in rates and the resulting downstream impacts on the financial services sector has made for an extremely difficult operating environment these past two years.

Scott C. Sanborn: I'm incredibly proud of how the LendingClub team has risen to the challenge. As this quarter's results show, we have calibrated the business to this new environment and further streamlined and focused our operation, all of which will deliver outsized benefits as conditions improve. With a historic opportunity in front of us, I look forward to building on our momentum in the quarters ahead. And with that, I'll turn it over to you.

Drew: I'm incredibly proud of how the LendingClub team has risen to the challenge.

Drew: As this quarter's results show, we have calibrated the business to this new environment and further streamlined and focused our operations.

Drew: All of which will deliver outsized benefits as conditions improve. With a historic opportunity in front of us, I look forward to building on our momentum in the quarters ahead.

Andrew LaBenne: With that, I'll turn over to you, Drew. Thanks, Scott. And I'll add that for the two years I've been here, I've been extremely impressed with how the LendingClub team has transformed the business and prepared for the future.

Andrew LaBenne: Thanks, Scott. And I'll add that for the two years I've been here, I've been extremely impressed with how the LendingClub team has transformed the business and prepared for the future. With that, let me walk through the details of our second quarter results, starting with origination. As Scott mentioned, we originated over $1.8 billion, which is a 10% increase over the prior quarter and above the high end of our guidance. The growth was driven by continued product innovation while maintaining tight underwriting.

Drew: And with that, I'll turn it over to you, Drew.

Drew: Thanks, Scott, and I'll add that for the two years I've been here, I've been extremely impressed with how the LendingClub team has transformed the business and prepared for the future.

Andrew LaBenne: With that, let me walk through the details of our second quarter results, starting with originations. As Scott mentioned, we originated over $1.8 billion, which is a 10% increase over the prior quarter and above the high end of our guidance range. The growth was driven by continued product innovation while maintaining tight underwriting standards. On page 10, you can see the origination volumes of the four funding programs, which we describe in detail on the prior page. The issuance in the quarter was once again led by our very successful structured certificate program, which accounted for $885 million of originations.

Drew: With that, let me walk through the details of our second quarter results, starting with originations.

Drew: As Scott mentioned, we originated over $1.8 billion, which is a 10% increase over the prior quarter and above the high end of our guidance range.

Drew: The growth was driven by continued product innovation while maintaining tight underwriting standards.

Andrew LaBenne: On page 10, you can see the origination volumes of the four funding programs, which we described in detail on the prior page. The issuance in the quarter was once again led by our very successful Structured Certificate Program, which accounted for $885 million in originations. We also sold $270 million of whole loans through the marketplace, accumulated $320 million for our held-for-sale extended seasoning program to meet future marketplace investor demand for season loans, and we've retained $335 million in our Help for Investment portfolio.

Drew: On page 10, you can see the origination volumes of the four funding programs which we described in detail on the prior page.

Drew: The issuance in the quarter was once again led by our very successful Structured Certificate Program, which accounted for $885 million of originations.

Andrew LaBenne: We also sold $270 million of poll loans through the marketplace, accumulated $320 million for our helper sale extended seasoning program to meet future marketplace investor demand for season loans, and we retain $335 million in our helper investment portfolio. This quarter, you again saw us increase the amount of poll loans retained on our balance sheet to 36% of total originations, up from 32% in the prior quarter. This was comprised of the helper investment in extended seasoning programs. This level of retention will allow us to keep hold loans on the balance sheet roughly flat through the remainder of the year while maintaining the option to sell loans out of our extended seasoning portfolio at higher prices.

Drew: We also sold $270 million of whole loans through the marketplace.

Drew: Accumulated $320 million for our held-for-sale extended seasoning program to meet future marketplace investor demand for season loans.

Drew: And we've retained $335 million in our Help for Investment portfolio.

Andrew LaBenne: This quarter, you again saw us increase the amount of hold loans retained on our balance sheet to 36% of total originations, up from 32% in the prior quarter. This was comprised of the Help for Investment in Extended Seasoning Program.

Drew: This quarter, you again saw us increase the amount of hold loans retained on our balance sheet to 36% of total originations, up from 32% in the prior quarter.

Andrew LaBenne: This level of retention will allow us to keep whole loans on the balance sheet roughly flat through the remainder of the year while maintaining the option to sell loans out of our extended seasoning portfolio at higher prices. Now let's move on to Pre-Provisioned Net Revenue, or PP&R, which is total net revenue, less non-interest. PPNR was $55 million for the quarter and came in above our estimates. These results were driven by strong execution, as well as a few unique items that I'll call out as I break down revenue and expenses.

Drew: This was comprised of the help for investment in extended seasoning programs.

Drew: This level of retention will allow us to keep whole loans on the balance sheet roughly flat through the remainder of the year, while maintaining the option to sell loans out of our extended seasoning portfolio at higher prices.

Andrew LaBenne: Now let's move on to pre provision that revenue or PPR, which is total met revenue less non-interest expense. PPR was $55 million for the quarter and came in above our guidance. These results were driven by strong execution, as well as a few unique items that I'll call out as I break down revenue and expense. Total revenue for the quarter was $187 million, up from $181 million in the prior quarter.

Drew: Now let's move on to Pre-Provisioned Net Revenue, or PP&R, which is total net revenue less non-interest expense.

Drew: PPNR was $55 million for the quarter and came in above our guidance. These results were driven by strong execution as well as a few unique items that I'll call out as I break down revenue and expense.

Andrew LaBenne: Total revenue for the quarter was $187 million, up from $181 million in the prior quarter. Let's go into the two components of revenue, starting with non-interest income. Non-interest income was $59 million in the quarter, up marginally from the prior quarter.

Drew: Total revenue for the quarter was $187 million, up from $181 million in the prior quarter. Let's go into the two components of revenue, starting with non-interest income.

Andrew LaBenne: Let's go into the two components of revenue, starting with non-interest income. Non interest income was $59 million in the quarter, up marginally from the prior quarter. As I mentioned earlier, the improvement was primarily driven by higher marketplace loan originations and improved average loan sales pricing throughout the quarter, partially offset by fair value adjustments on loans held for sale.

Drew: Non-interest income was $59 million in the quarter, up marginally from the prior quarter.

Andrew LaBenne: As I mentioned earlier, the improvement was primarily driven by higher marketplace loan origination and improved average loan sales pricing throughout the quarter, personally offset by fair value adjustments on loans held for. I'd like to pause here to call out an important dynamic on how the yield on held-for-sale loans will flow through our income streams. These loans will generate a constant yield over the life of the loan, assuming no change in cash flow is...

Drew: As I mentioned earlier, the improvement was primarily driven by higher marketplace loan originations

Drew: and improved average loan sales pricing throughout the quarter, partially offset by fair value adjustments on loans held for sale.

Andrew LaBenne: I'd like to pause here to call out an important dynamic on how the yield on help for sale loans will flow through our income statement. These loans will generate a constant yield over the life of the loan, assuming no change in cash flow assumptions. The revenue impact from health for sale loans will be reflected in both net interest income and non interest income in the following way. The coupon will come through interest income, while the credit losses and changes in fair value, including any upfront discount, will come through the net fair value adjustments line within non interest income.

Drew: I'd like to pause here to call out an important dynamic on how the yield on held-for-sale loans will flow through our income statement.

Drew: These loans will generate a constant yield over the life of the loan, assuming no change in cash flow assumptions.

Andrew LaBenne: The revenue impact from held-for-sale loans will be reflected in both net interest income and non-interest income in the following way. The coupon will come through interest income, while the credit losses and changes in fair value, including any upfront discount, will come through the net fair value adjustments line within non-interest income.

Drew: The revenue impact from held-for-sale loans will be reflected in both net interest income and non-interest income in the following way.

Drew: The coupon will come through interest income while the credit losses and changes in fair value, including any upfront discount, will come through the net fair value adjustments line within non-interest income.

Andrew LaBenne: As the portfolio grows, this will result in higher net interest income, partially offset by incremental fair value adjustments.

Andrew LaBenne: As the portfolio grows, this will result in higher net interest income, partially offset by incremental fair value adjustments. So going forward, the driver of net fair value adjustments will include the above impacts in addition to the day one sales pricing on marketplace levels. Now let's move on to net interest income, which was $129 million in the quarter, up from $123 million in the prior quarter. The increase was primarily driven by growth in our interest-earning assets due to growth in securities related to the Structured Certificates Program, as well as growth in the extended seasoning portfolio.

Drew: As the portfolio grows, this will result in higher net interest income, partially offset by incremental fair value adjustments.

Andrew LaBenne: At the end of the month. So going forward, the driver of net fair value adjustments will include the above impacts in addition to the day one sales pricing on marketplace loans.

Drew: So, going forward, the driver of net fair value adjustments will include the above impacts in addition to the day one sales pricing on marketplace loans.

Andrew LaBenne: Now, let's move on to net interest income, which was $129 million in the quarter, up from $123 million in the prior quarter. The increase was primarily driven by growth and our interest turning assets due to the growth in securities related to the structured certificates program, as well as growth in the extended seasoning portfolio. Net interest income also benefited from one large structured certificate transaction that was accumulated over the quarter and generated approximately $2 million of incremental revenue from the sale. Risk adjusted revenue, which is net revenue less provision for credit losses, increased to $152 million this quarter from $149 million in the prior quarter.

Drew: Now let's move on to net interest income, which was $129 million in the quarter, up from $123 million in the prior quarter.

Drew: The increase was primarily driven by growth in our interest earning assets due to the growth in securities related to the Structured Certificates Program, as well as growth in the extended seasoning portfolio.

Andrew LaBenne: Net interest income also benefited from one large structured certificate transaction that was accumulated over the quarter and generated approximately $2 million of incremental revenue from it. Risk-adjusted revenue, which is net revenue less provision for credit losses, increased to $152 million this quarter from $149 million in the prior quarter. We introduced this metric two quarters ago as we believe it illustrates the lower-risk nature of the assets we have been using to grow the balance.

Drew: Net interest income also benefited from one large structured certificate transaction that was accumulated over the quarter and generated approximately $2 million of incremental revenue from the sale.

Drew: Risk-adjusted revenue, which is net revenue less provision for credit losses, increased to $152 million this quarter from $149 million in the prior quarter.

Andrew LaBenne: We introduced this metric to quarters back as we believe it illustrates the lower risk nature of the assets we have been using to grow the balance sheet. On slide 12, you can see our net interest margin was flat this quarter at 5.75%, which is a result of improving yields on our interest-turning assets, offsetting the slowing pace of increase in our funding costs. We expected net interest margin to be flat, to slightly down in the third quarter, and then begin to improve on the lag when the Fed lowers interest rates.

Drew: We introduced this metric two quarters back as we believe it illustrates the lower risk nature of the assets we have been using to grow the balance sheet.

Andrew LaBenne: On slide 12, you can see our net interest margin was flat this quarter at 5.75%, which is a result of improving yields on our interest-earning assets, offsetting the slowing pace of increase in our funding costs. We expect the net interest margin to be flat to slightly down in the third quarter and then begin to improve on a lag when the Fed lowers interest rates. Now, please turn to page 13 of our presentation, which refers to the second component of PP&R, non-interest expenses. Non-interest expense was flat to the prior quarter at $132 million.

Drew: On slide 12, you can see our net interest margin was flat this quarter at 5.75%, which is a result of improving yields on our interest earning assets, offsetting the slowing pace of increase in our funding costs.

Drew: We expect the net interest margin to be flat to slightly down in the third quarter and then begin to improve on a lag when the Fed lowers interest rates.

Andrew LaBenne: Now, please turn to page 13 of our presentation, which refers to the second component of PPR: non-interest expense. Non-interest expense was flat to the prior quarter at $132 million, while we did expect expenses to increase when we had our Q1 earnings call. We had some delays in those expenses increases, and some one-time benefits, most notably in compensation expense, which resulted in approximately $5 million of benefit during the quarter. We were also able to deliver stronger-than-expected marketing efficiency to fight the growth in origination volumes. While we continue to remain disciplined on expenses, we do expect a step-up in expenses in the third quarter related to continued volume growth, as well as higher depreciation related to the completion of some of the initiatives you heard Scott discuss earlier.

Drew: Now, please turn to page 13 of our presentation, which refers to the second component of PPNR, non-interest expense.

Drew: Non-interest expense was flat to the prior quarter at $132 million.

Andrew LaBenne: While we did expect expenses to increase when we had our Q1 earnings call, we had some delays in those expense increases and some one-time benefits, most notably in compensation expense, which resulted in approximately $5 million of benefits during the quarter. We were also able to deliver stronger-than-expected marketing efficiency despite the growth in origination volume. While we continue to remain disciplined on expenses, we do expect a step-up in expenses in the third quarter related to continued volume growth, as well as higher depreciation related to the completion of some of the initiatives you heard Scott discuss.

Drew: While we did expect expenses to increase when we had our Q1 earnings call, we had some delays in those expense increases and some one-time benefits, most notably in compensation expense, which resulted in approximately $5 million of benefit during the quarter.

Drew: We were also able to deliver stronger-than-expected marketing efficiency despite the growth in origination volumes.

Drew: While we continue to remain disciplined on expenses, we do expect a step up in expenses in the third quarter related to continued volume growth, as well as higher depreciation related to the completion of some of the initiatives you heard Scott discuss earlier.

Andrew LaBenne: Now, let's turn to provision. On page 14, you will see provision for credit losses was $36 million during the quarter, compared to $32 million in the prior quarter. The sequentially increases primarily driven by higher day one season provision from higher health or investment loans retained in the period, any impact of higher provision in our Siri portfolio due to one office loan. As a reminder, we discontinued Siri originations at the end of 2022. We still have a legacy portfolio of office loans with under $50 million in balances, which were predominantly originated before we acquired Radius Bank.

Andrew LaBenne: Now, let's turn to provision. On page 14, you will see provision for credit losses was $36 million during the quarter, compared to $32 million in the prior quarter. The sequential increase is primarily driven by higher day-one CECL provision from higher health or investment loans retained in the period and the impact of higher provision in our CRE portfolio due to one office loan. As a reminder, we discontinued CRE originations at the end of 2022. We still have a legacy portfolio of office loans with under $50 million in balance, which were predominantly originated before we acquired radio.

Drew: Now let's turn to provision. On page 14, you will see provision for credit losses was $36 million during the quarter compared to $32 million in the prior quarter.

Drew: The sequential increase is primarily driven by higher day-one CECL provision from higher held-for-investment loans retained in the period and the impact of higher provision in our CRE portfolio due to one office loan.

Drew: As a reminder, we discontinued CRE originations at the end of 2022.

Drew: We still have a legacy portfolio of office loans with under $50 million in balances, which were predominantly originated before we acquired Radius Bank.

Andrew LaBenne: These office assets are less than 1% of our whole loan portfolio. One office asset has been downgraded, and we took a 5.3 million dollar reserve on the way. The remaining balance represents an adjusted loan to value of approximately 25% compared to the sale price of the property in 2018. The remaining loans in this portfolio have less than $40 million in balances and are paying according to plan.

Andrew LaBenne: These office assets are less than 1% of our whole loan portfolio. One office loan has been downgraded, and we took a $5.3 million reserve on the loan. The remaining balance represents an adjusted loan to value of approximately 25% compared to the sales price of the property in 28.

Drew: These office assets are less than 1% of our whole loan portfolio.

Drew: One office loan has been downgraded, and we took a $5.3 million dollar reserve on the loan.

Drew: The remaining balance represents an adjusted loan to value of approximately 25% compared to the sales price of the property in 2018.

Andrew LaBenne: Team. The remaining loans in this portfolio have less than $40 million of balances and are paying according to plan.

Drew: The remaining loans in this portfolio have less than $40 million in balances and are paying according to plan.

Andrew LaBenne: On page 15, we have updated our personal loan lifetime loss expectations for each of our annual vintages. We are seeing some modest improvement compared to the expectations we provided last quarter, and the marginal ROVs remain very strong. We early stage results. However, outcomes may vary due to the longer remaining life of the vintage. The 2021 vintage has largely run its course, with approximately 10% remaining of the original principal balance, which will rapidly amortize over the next few quarters.

Andrew LaBenne: On page 15, we have updated our personal loan lifetime loss expectations for each of our annual... We are seeing some modest improvement compared to the expectations we provided last quarter, and the marginal ROEs remain very strong. We have used the range for 2023 loss performance, where we have seen improvement in early stages. However, outcomes may vary due to the longer remaining life of the venue.

Drew: On page 15, we have updated our personal loan lifetime loss expectations for each of our annual vintages.

Drew: We are seeing some modest improvement compared to the expectations we provided last quarter, and the marginal ROEs remain very strong.

Drew: We have used the range for 2023 loss performance, where we have seen improvement in early stage results. However, outcomes may vary due to the longer remaining life of the vintage.

Andrew LaBenne: The 2021 vintage has largely run its course, with approximately 10% remaining of the original principal balance, which will rapidly amortize over the next few quarters. We plan to remove this vintage from the disclosure going forward. The last thing I'll note on credit is net charge-offs were down $14 million, or 17% sequentially. Delinquencies on the consumer portfolio also improved from the previous quarter and were down $9 million. Now let's move to taxes. Taxes in the quarter were $4.5 million, or 23% of pre-tax income.

Drew: The 2021 vintage has largely run its course with approximately 10% remaining of the original principal balance, which will rapidly amortize over the next few quarters.

Andrew LaBenne: We plan to remove this vintage from the disclosure going forward. The last thing I'll note on credit is net charge us with down $14 million or 17% sequentially. The length and season of consumer portfolio have also improved from the previous quarter and are down $9 million sequentially.

Drew: We plan to remove this vintage from the disclosure going forward.

Speaker Change: The last thing I'll note on credit is net charge-offs were down $14 million or 17% sequentially. Delinquencies on the consumer portfolio have also improved from the previous quarter and are down $9 million sequentially.

Andrew LaBenne: Now let's move to taxes. Taxes in the quarter with $4.5 million, or 23% of pre-tax income. As I've mentioned before, we will have some variability in the effective tax rate from quarter to quarter, but our long-term tax rate expectation is 27%.

Andrew LaBenne: As I've mentioned before, we will have some variability in the effective tax rate from quarter to quarter, but our long-term tax rate expectation is 27%. That brings us to net income. Net income for the quarter was $15 million, or $0.13 per share, and our tangible book value per common share increased to $10.75.

Speaker Change: Now let's move to taxes.

Speaker Change: Taxes in the quarter were $4.5 million, or 23% of pre-tax income.

Speaker Change: As I've mentioned before, we will have some variability in the effective tax rate from quarter to quarter, but our long-term tax rate expectation is 27 percent.

Andrew LaBenne: That brings us to net income. Net income for the quarter was $15 million or 13 cents per share, and our tangible book value for common share increased to $10.75.

Speaker Change: That brings us to net income.

Speaker Change: Net income for the quarter was $15 million, or $0.13 per share, and our tangible book value for common share increased to $10.75.

Andrew LaBenne: Now let's move on to guidance. For the third quarter, we anticipate originations growing to a range of $1.8 to $1.9 billion, given the success we're seeing from our recent initiatives that are driving efficient, creditworthy borrower acquisition supported by improving marketplace demand. We are also increasing our PPRR guidance range to $40 to $50 million, reflecting stable revenue and modestly increases in expenses, which I mentioned earlier. And we plan to continue to deliver positive net income in the third quarter, though not at the level seen in the first half of 2024, as we continue to reinvest in the balance sheet to provide stronger returns in 2025.

Andrew LaBenne: Now let's move on to the guide. For the third quarter, we anticipate originations growing to a range of $1.8 to $1.9 billion, given the success we're seeing from our recent initiatives that are driving efficient, credit-worthy borrower acquisition, supported by improving marketplace demand. We are also increasing our PPNR guidance range to $40 to $50 million, reflecting stable revenue and modest increases in expenses, which I mentioned earlier. And we plan to continue to deliver positive net income in the third quarter, though not at the level seen in the first half of 2024, as we continue to reinvest in the balance sheet to provide stronger returns in 2025.

Speaker Change: Now let's move on to guidance.

Speaker Change: For the third quarter, we anticipate originations growing to a range of $1.8 to $1.9 billion, given the success we're seeing from our recent initiatives that are driving efficient, credit-worthy borrower acquisition supported by improving marketplace demand.

Speaker Change: We are also increasing our PPNR guidance range to $40 to $50 million, reflecting stable revenue and modest increases in expenses, which I mentioned earlier.

Speaker Change: And we plan to continue to deliver positive net income in the third quarter, though not at the level seen in the first half of 2024, as we continue to reinvest in the balance sheet to provide stronger returns in 2025.

Operator: With that, we'll open it up for Q&A. We'll now begin our question and answer session. If you'd like to ask a question, please press star followed by one or your telephone keypad. If you're a new resident, would like to remove that question, please press star followed by two. Again, to ask a question, it is star one. As our reminder of you are using the speaker phone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered.

Andrew LaBenne: With that, we'll open it up for Q&A. We will now begin our question-and-answer session. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If, for any reason, you would like to remove a question, please press star followed by 2.

Speaker Change: With that, we'll open it up for Q&A.

Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, it is star 1.

Operator: Again, to ask a question, it is star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered. Our first question is from Giuliano Bologna with the company Compass Points. Giuliano, your line is now open.

Speaker Change: As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We'll pause briefly here as questions are registered.

Giuliano Bologna: Our first question is from Juliano Ballona, with a company Compass Point. Juliano, your line is not open. Well, so congratulations on that. A great quarter. So great to see the progress and finally started to accelerate and improve here.

Speaker Change: Our first question is from Giuliano Bologna with the company Compass Points. Giuliano, your line is now open.

Giuliano Jude Anderes Bologna: Well, congratulations on a great quarter. So great to see the progress, you know, finally starting to accelerate and improve here. Well, the first thing I'm curious about is who you are.

Giuliano Jude Anderes Bologna: Well, so congratulations on a great quarter. It's great to see the progress, you know, finally starting to accelerate and improve here.

Scott Sanborn: The first thing I'm sure you'll ask me was, so the first thing I was curious about asking you about was in terms of some of the loan sales, I'm sure, and you know, kind of roughly we're marking the loan book at the moment and kind of post sale. I'm curious where we're both going to stand at the moment. Yeah, so as far as the mark, we were up about 20 basis points in terms of price, quarter over quarter. So, you know, some improvement in price, which fell very good. And as far as the loan sales, if you look at the marketplace sales and the disclosure, you can just see we were up about 110 million in loans that were sold through the marketplace.

Giuliano Jude Anderes Bologna: So the first thing I was curious about asking you about was in terms of some of the loan sales, I'm sure, and kind of roughly where you're marking the loan book at the moment, which is kind of post sale. I'm curious where both those stand at the moment. Yeah. So, as far as the mark goes, we were up about 20 basis points in terms of price, quarter over quarter. So, you know, some improvement in price, which felt very good.

Speaker Change: The person I'm curious about is...

Giuliano Jude Anderes Bologna: So the first thing I was curious about asking you about was, in terms of some of the loan sales, I'm sure, and, you know, kind of roughly where you're marking,

Speaker Change: Marking the Loan Book at the moment, kind of post-sale. I'm curious where both those stand at the moment.

Speaker Change: Yeah, so, as far as the mark, we were up about 20 basis points in terms of price quarter over quarter, so, you know, some improvement in price, which

Giuliano Jude Anderes Bologna: And as far as the loan sales, if you look at the marketplace sales and the disclosure, you can just see we were up about $110 million in loans that were sold through the marketplace. In terms of the amount that actually were sold quarter over quarter versus put into the health for sale portfolio, it was probably, it was about $50 million, I think, down quarter over quarter. That sounds good.

Speaker Change: which felt very good, and as far as the loan sales,

Speaker Change: If you look at the Marketplace Sales and the Disclosure, you can just see we were up about a hundred and...

Scott Sanborn: In terms of the amount that actually were sold quarter over quarter versus put into the helper sale portfolio, it was probably, it was about 50 million, I think, down quarter over quarter. Sounds good. That's very helpful.

Speaker Change: $10 million in loans that were sold through the marketplace. In terms of the amount that actually were sold quarter over quarter versus put into the help for sale portfolio, it was probably, it was about $50 million, I think, down quarter over quarter.

Giuliano Jude Anderes Bologna: That's very helpful. Then, you know, last quarter and this quarter, you kind of highlighted some conversations that you're having with banks about potentially returning to purchasing loans in the marketplace. I'm curious, you know, the commentary seems like the comments are fairly similar about, you know, hoping to see banks return to buying loans from the marketplace at some point in the second half. I'm curious where things stand or if there's been any progress with those discussions, and is that potentially something that can be a 3Q event or is it more likely a 4Q event? Hey Giuliano, it's Scott.

Scott Sanborn: Then, you know, last quarter and this quarter, you've kind of highlighted some conversations that you're having with banks in terms of returning to purchasing loans in the marketplace. I'm curious, you know, to come to a fairly similar about, you know, hoping to see banks return to buy loans in the marketplace. At some point, in the second half, I'm curious, you know, where things stand, or if there's any progress, if there's discussions and, you know, is that essentially something that could be a 3Q event, or is it more likely for two of them? Hey, Giuliano, it's got, yeah, I'm going to say, the pipeline that continues to be pretty strong.

Speaker Change: That sounds good. That's very helpful. Then, you know, last quarter and this quarter, you kind of highlighted.

Speaker Change: Some conversations that you're having with banks potentially returning to purchasing loans in the marketplace I'm curious, you know, it seems like commentary is fairly similar about, you know Yeah, hoping to see banks return to buying loans from the marketplace

Speaker Change: At some point in the second half, I'm curious, you know, where things stand or if there's any progress with those discussions and, you know, is that potentially something that can be a 3Q event or is it more likely a 4Q event?

Scott C. Sanborn: Yeah, I'd say the pipeline there continues to be pretty, pretty strong. As we said last time, just repeating, you know, we don't expect banks, barring, you know, a more meaningful move downward in rates, 2550 base points, I'm going to get there. We don't expect banks to get back to the same levels as they were prior to the rate increase anytime soon, but we do have a good pipeline of idiosyncratic banks.

Speaker Change: Hey, Giuliano, it's Scott. Yeah, I'd say the, you know, pipeline there continues to be, you know, pretty strong. You know, as we said last time,

Scott Sanborn: You know, as we said last time, just repeating, you know, we don't expect banks borrowing, you know, a more meaningful move downward in rates. 25, 50 base points are going to get there. We don't expect banks to get back to the same levels as they were prior to the rate increase, you know, anytime soon. But we do have a good pipeline of idiosyncratic banks. Let's see, the timing is, you know, bank diligence takes a while. So it's hard to kind of place it specifically. That's what I said. I think, you know, back half of the year, more likely to be a Q4 event.

Speaker Change: Just repeating, you know, we don't expect banks, barring, you know, a more meaningful move downward in rates, 25, 50 base points isn't going to get there. We don't expect banks to get back to the same levels as they were.

Speaker Change: Prior to the rate increase anytime soon, but we do have a good pipeline of idiosyncratic banks.

Scott C. Sanborn: I'd say the timing is, you know, bank diligence takes a while, so it's hard to kind of pinpoint it specifically. That's why I said I think, you know, the back half of the year, more likely to be a Q4 event. Is it possible, some of them, you know, that we get something in Q3? It's possible, but it's kind of timelines that are, you know, driven by a lot of internal processes, so hard to say specifically, but I'd say we continue to feel good about the level of interest there. That sounds very good.

Speaker Change: You know, bank diligence takes a while, so it's hard to kind of place it specifically. That's why I said I think, you know, back half of the year, more likely to be a Q4 event. Is it possible, some of them, you know, that we get something in Q3? It's possible.

Scott Sanborn: Is it possible, some of them, you know, that we get something in Q3 as possible? But it's kind of timelines that are, you know, driven by a lot of internal processes, so hard to say specifically. But I say we, you know, continue to feel good about the level of interest there. That sounds very good.

Speaker Change: But it's kind of timelines that are, you know, driven by a lot of internal processes, so hard to say specifically. But I'd say we, you know, continue to feel good about the level of interest there.

Giuliano Jude Anderes Bologna: And then I'd be curious, you're obviously working on, you know, some of your new programs and rolling them out. You've got a kind of reference for being running ahead of schedule and performing better than expected. When you think about those new programs, are they driving any kind of measurable amount of volume at this point? Or do you expect them to drive an equal amount of volume, you know, for the next two quarters, or is that more of a 25 percent increase for later events?

Scott Sanborn: And then I'd be curious to, you're obviously working on, you know, some of your new programs and going about, you've got a kind of reference from being running ahead of schedule and performing data when we expected. When you think about those new programs, I'm curious, are they trying to bring you kind of any high measurable amount of volume at this point? Or do you expect them to drive, you know, from a cheap equal amount of volume? Yeah, for the next two quarters or something, we're going to 25 for a later event. Yeah, I'd say if you look at, you know, our ability to kind of both deliver top end of the range in Q1 and in Q2, and the fact that we're taking guidance up again, that is really largely a result of the new initiatives.

Speaker Change: That sounds very good, and I'd be curious, you're obviously working on, you know, some of your new programs and rolling them out, you've got a kind of reference on being

Speaker Change: Running ahead of schedule and performing better than expected. When you think about those new programs, are they driving any kind of measurable amount of volume at this point, or do you expect them to drive an equal amount of volume over the next two quarters, or is that more of a 25 for later events?

Scott C. Sanborn: Yeah, I'd say if you look at our ability to kind of deliver the top end of the range in Q1 and in Q2, and the fact that we're taking guidance up again, that is really largely a result of the new initiatives. We're able to do that, by the way, while keeping acquisition costs flat, which is effectively, you know, coming from a selection of these new initiatives. So in the scheme of our total, I'd say they're relatively small, but in terms of what's driving the growth at these efficient acquisition costs, they're more meaningful.

Speaker Change: Yeah, I'd say if you look at, you know, our ability to kind of...

Speaker Change: to both deliver top end of the range in Q1 and in Q2 and the fact that we're taking guidance up again, that is really

Scott Sanborn: We're able to do that, by the way, while keeping acquisition costs flat, right? Which is effectively, you know, coming from a selection of these new initiatives. So in the, the scheme of our total, I'd say they're relatively small, but in terms of what's driving the growth at these efficient acquisition costs, they're more meaningful. As we said, I'd say on the top-up program, you know, both programs are running ahead of expectations in terms of customer response rates and take rates to the offer. Let's take clean sweep. You know, we want to let that run for quite a bit before we really lean into it because it is a different, you know, it's a revolving line; it's a different credit program.

Speaker Change: largely a result of the new initiatives. We were able to do that, by the way, while keeping...

Speaker Change: acquisition costs flat, right, which is effectively, you know, coming from a selection of these new initiatives. So in the scheme of our total, I'd say they're relatively small, but in terms of what's driving the growth at these efficient acquisition costs, they're more meaningful.

Scott C. Sanborn: As we said, I'd say on the top-up program. Both programs are running ahead of expectations in terms of customer response rates and take rates on the offer. I'd say Clean Sweep, you know, we want to let that run for quite a bit before we really lean into it, because it is a different, you know, it's a revolving line. It's a different credit program.

Speaker Change: As we said, I'd say on the top-up program...

Speaker Change: You know, both programs are running ahead of expectations in terms of

Speaker Change: Customer Response Rates and Take Rates to the Offer. I'd say Clean Sweep, you know, we want to let that run for quite a bit before we really lean into it because it is a different, you know, it's a revolving line, it's a different credit program.

Scott C. Sanborn: Top Up is pretty much in line with the underwriting for repeat loans, so we've got a lot of confidence there. And then, you know, the other big piece we think that it's really encouraging to see is that, you know, the satisfaction rates there are really high, right? That people, you know, we're solving slightly different needs with how these products are distributed, or let me say the use case is more perfectly tuned to the consumer needs. So we're really excited to see those, you know, those results come in.

Scott Sanborn: Top up is pretty much in line with the underwriting for repeat loans. So we've got a lot of confidence there. And then, you know, the other big piece we think that it's really encouraging to see is that, you know, the satisfaction rates there are really high, right? That people, you know, we're solving slightly different needs with how these products are distributed, or let me say the use case is more perfectly tuned to the consumer needs. So we're really excited to see those, you know, those results come in. And I'd say, as well as I touch on the call, we're starting to see that, you know, even people who've downloaded the app who are not maybe marketing to through email because they've opted out of marketing emails are seeing these offers.

Speaker Change: Top-up is pretty much in line with the underwriting for repeat loans, so we've got a lot of confidence there. And then, you know, the other big piece we think that it's really encouraging to see is...

Speaker Change: that, you know, the satisfaction rates there are really high, right, that people would, you know, we're solving slightly different needs with how these products are distributed or, let me say, the use case is

Speaker Change: is more perfectly tuned to the consumer needs. So, we're really excited to see those.

Scott C. Sanborn: And I'd say, as I touched on on the call, we're starting to see that, you know, even people who, you know, people who have downloaded the app who are not maybe being marketed to through email because they've opted out of marketing emails are seeing these offers, and we're seeing an uptick there. So it's a way that we engage people who, you know, want to come back to us. So it's all positive early results. Hey, and Giuliano, this is Drew again.

Speaker Change: You know those results come in and I'd say as well as I touched on on the call we're starting to see that you know, even people who

Speaker Change: and people who have downloaded the app, who we're not maybe marketing to through email because they've opted out of marketing emails, are seeing these offers and we're seeing uptick there. So it's a way that we engage people who, you know, to come back to us. So it's all positive early results.

Scott Sanborn: And we're seeing an uptick there. So it's a way to re-engage people who, you know, took to come back to us. So it's a positive way to get involved with all the positive things that we've done. Results.

Andrew LaBenne: Hey, and Giuliano, the jury again. I just wanted to clarify what I said before. We were 50 million lower on whole loan sales, but we're actually 100 million higher on structured certificate sales, so 50 million up net. The one thing I didn't mention, which I think is also worth mentioning, is we also agreed to sell another 80 million out of our extended seasoning health for sale portfolio that closed in July. So yeah, that all up, we're actually up 130 million quarter over a quarter on loan sold out the door, including early July sale.

Andrew LaBenne: I just wanted to clarify what I'd said before. We were $50 million lower on whole loan sales, but we're actually $100 million higher on structured certificate sales, so $50 million up net. The one thing I didn't mention, which is also worth mentioning, is that we also agreed to sell another $80 million out of our extended seasoning health for sale portfolio that closed in July. So, yeah, all up, we're actually up $130 million quarter over quarter on loans sold out the door, including the early July sale. We also, Drew, you might want to talk, we also have a sale of our own, a small A-note sale. Yeah, that's true. We've done that before.

Speaker Change: Hey, and Giuliano, this is Drew again. I just wanted to clarify what I'd said before. We were $50 million lower on whole loan sales, but we're actually...

Drew: $100 million higher on structured certificate sales, so $50 million up net.

Speaker Change: The one thing I didn't mention, which I think is also worth mentioning is...

Speaker Change: We also agreed to sell another $80 million out of our extended seasoning help for sale portfolio that closed in July . So you add that all up, we're actually up $130 million quarter over quarter on loans sold out the door, including the early July sale.

Andrew LaBenne: We also drew; you might want to talk. We also have a sale of our small a note sale. Yeah, that's true. We've done that. We actually, well, it'll close here shortly, but we agreed to sell a small amount of our A notes for the first time to someone who was buying from the structured certificate program as well. And while I don't know that that will be an ongoing program for us, it was good just to test the market and ensure that these securities are as liquid as we believe they are. We sold that just above our current carry.

Speaker Change: We also, Drew, you might want to talk, we also have a sale of our, uh, a small a note sale. Yeah, that's true. We've done that. We actually, well, it'll, it'll close here shortly, but we agreed to sell, uh, a small amount of our a notes.

Andrew LaBenne: We actually, well, it'll close here shortly, but we agreed to sell a small amount of our A-notes for the first time to someone who was buying from the Structured Certificate Program as well. And while I don't know that that will be an ongoing program for us, it was good just to test the market and ensure that these securities are as liquid as we believe them to be. We sold that just above our current carry price. So, also encourage. That is, that's extremely helpful.

Drew: for the first time to someone who was buying from the Structured Certificate Program as well.

Speaker Change: And while I don't know that that will be an ongoing program for us, it was good just to...

Speaker Change: to test the market and ensure that these securities are as liquid as we believe they are. We sold that just above our current carry, so also encouraging.

Giuliano Bologna: So also encouraging. That's extremely helpful. You know, very helpful along the notes.

Giuliano Jude Anderes Bologna: You know, one thing I was curious about was, you obviously have, you know, a fair amount of capital, looking at your C21 ratio of 17.9%. Your tier one leverage ratio is coming down a little bit, obviously, from a balance sheet perspective, but I'd be curious, you know, how much room you have, you know, to kind of keep pushing in the near term and what the governor will be and, you know, and, along those lines, would it make sense to try and pursue some sales of a node? to clear up some capacity on the balance sheet to, you know, push more hold on sale or start hold on retention, or anything like that, you know, over the next few quarters.

Giuliano Bologna: One thing I was curious about was, you know, you obviously have, you know, a fair amount of capital, you know, looking at your C-21 ratio, 17, 1, 9%. It's your one leverage; I mean, down a little bit. Obviously, it goes from a balance sheet, but I'd be curious, you know, how much room you have, you know, to kind of keep pushing in the near term.

Speaker Change: That is, that's extremely helpful, you know, very helpful. One thing I was curious about was, you know, you obviously have, you know, a fair amount of capital, you know, looking at your C2 ownership, 17.9%.

Speaker Change: The Tier 1 leverage rate is coming down a little bit, obviously, from a balance sheet perspective. But I'd be curious, you know, how much room you have, you know, to kind of keep pushing in the near term and what the governor will be and, you know, and, you know, along those lines, would it make sense to try and pursue some sales of A notes?

Andrew LaBenne: And what the governor will be in, you know, along those lines, would it make sense to try and pursue some sales, they notes to clear up some capacity on the balance sheet to, you know, start co-rolling retention or anything like that, you know, over the next few quarters. Yeah, I mean, as of right now, we still have capital for growth, you know, at the bank level from our existing balance sheet. And we have 120 million or so of cash sitting at the whole code that we could deploy down to the bank to further expand the balance sheet.

Speaker Change: to clear up some capacity on the balance sheet to, you know, push more hold on sale or, sorry, hold on retention or anything like that, you know, over the next few quarters.

Andrew LaBenne: Yeah, I mean, as of right now, we still have capital for growth, you know, at the bank level from our existing balance sheet, and we have 120 million or so of cash sitting at the holdco that we can deploy down to the bank to further expand the balance sheet. So, you know, maybe in the distant future, selling the A notes would make sense to make room on the balance sheet.

Speaker Change: Yeah, I mean, as of right now, we still have capital for growth, you know, at the bank level from our existing balance sheet, and we have 120 million or so of cash sitting at the holdco that we can deploy down to the bank to further expand the balance sheet. So, you know, there's

Andrew LaBenne: So, you know, there's maybe in the distant future, you know, selling the A notes would make sense to make room on the balance sheet. But for now, we may, you know, there's also structures where, at origination, we may just sell the A note and the residual at the same time through the structure certificate program. But as of right now, we like the asset on our balance sheet. We like the 20% risk-weighting; it's providing good returns. And so, we still plan to originate and keep that on balance sheet and grow the balance sheet.

Speaker Change: Maybe in the distant future, you know, selling the A-notes would make sense to make room on the balance sheet.

Andrew LaBenne: But for now, and we may, you know, there are also structures where at origination, we may just sell the A note and the residual at the same time through the structured certificate program. But as of right now, we like the asset on our balance sheet. We like the 20 percent risk weighting.

Speaker Change: But for now, and we may

Speaker Change: There's also structures where, at origination, we may just sell the A note and the residual at the same time through the Structured Certificate Program.

Andrew LaBenne: It's providing good returns. And so we still plan to originate and keep that on the balance sheet and grow the balance sheet. That's very helpful.

Speaker Change: But as of right now, we like the asset on our balance sheet. We like the 20% risk weighting. It's providing good returns. And so we still plan to originate and keep that on balance sheet and grow the balance sheet.

Giuliano Bologna: That's very helpful. I think of Monapo as more of a more of my fair share of the Q&A. So, I appreciate the time, and I will come back in here.

Giuliano Jude Anderes Bologna: I think I've monopolized more of my fair share of the Q&A, so I appreciate the time, and I will jump back into the Q&A. Our next question is from Vincent Kentik of the company BTIG. Vincent, your line is now open. Hey, good afternoon.

Speaker Change: That's very helpful. I think I've monopolized more of my fair share of the Q&A, so I appreciate the time and I will jump back into the Q&A. Thank you.

Vincent Caintic: Thank you. Next question is from Vincent Kentick with the company BTRG. Vincent, your line is not open.

Speaker Change: Our next question is from Vincent Kentik with the company BTIG. Vincent, your line is now open.

Vincent Caintic: Thank you, Anthony. Thanks for taking my questions. And Paul does in advance for a background noise. A lot of the talks about the change in the environment. So, two points first. And you've kind of highlighted this in your slide deck about how your product compares against the credit card. So, I'm wondering if you could talk about your consumer engagement and how long demand has changed. As credit card rates have been continued to increase, they're able to have more price to the consumer. So, that's 0.1. And then second question, kind of on the environment as well.

Vincent Kentik: Thanks for taking my question, and I apologize in advance for the background noise. I wanted to talk about the change in the environment. So, two points first, and you kind of highlighted this in your slide deck about how your product compares against credit cards. So I'm wondering, talk about your consumer engagement and how loan demand has changed as credit card rates have been continuing to increase if you're able to add more price to the consumer. So that's point one.

Vincent Kentik: Hey, good afternoon. Thanks for taking my question. I apologize in advance for the background noise.

Vincent Kentik: I wanted to talk about the change in the environment, so two points first, and you kind of highlighted this in your slide deck about...

Speaker Change: I'm wondering if you could talk about your consumer engagement and how long demand has changed.

Speaker Change: As credit card rates have been continuing to increase, if you're able to add more price to the consumer, so that's point one, and then the second question is kind of on the environment as well, but...

Vincent Kentik: And then the second question is kind of on the environment as well, but if you could talk about how your investor-partner conversations have changed. You mentioned the bank. I'm just wondering if there's any change, any additional appetite, broadly, and what might be driving that.

Vincent Caintic: But if you could talk about how your investor, investor partner conversations that change too highlighted the banks. I'm just wondering if there's kind of any change in the additional appetite broadly and less likely to add to that. We should. Thank you.

Speaker Change: If you could talk about how your investor-partner conversations have changed, you highlighted the banks. I'm just wondering if there's kind of any change, any additional appetite broadly, and what might be driving that. I would appreciate it. Thank you.

Scott Sanborn: Yeah, so I guess maybe start on the investor side as we indicated, you know, as you're seeing in the sales prices, right? It's incremental, but I'd say steadily quarter by quarter as we've shown the consistency of the credit performance and the results. And we've built the pipeline for demand and structure of certificates, and in all loans, we're, you know, we're definitely seeing upward pressure in a good way on the order book, meaning we got more more people talking to us about purchases, you know, including overall a longer time horizon. And it's one of the reasons we got the confidence in building the help for sale portfolio. Is certainly a couple of the new potential buyers we're talking to are looking to, you know, make bulk purchases out of that portfolio.

Scott C. Sanborn: Yeah, so I guess maybe start on the investor side, as we indicated. You know, as you're seeing in the sales prices, right, it's incremental, but it's steady quarter by quarter as we've shown the consistency of the credit performance and the results, and we've built the pipeline for demand and structured certificates and in whole loans. We're, you know, we're definitely seeing upward pressure in a good way on the order book, meaning we have more people talking to us about purchases, you know, including overall a longer time horizon, and it's one of the reasons we got the confidence in building the help for sale portfolio is that certainly a couple of the new potential buyers we're talking to are looking to, you know, make bulk purchases out of that portfolio.

Speaker Change: Yeah, so I guess maybe start on the investor side, as we indicated, you know, as you're seeing in the sales prices, right, it's, it's incremental, but it's a steadily quarter by quarter, as we've shown the consistency of the credit performance and the results.

Speaker Change: and we've built the pipeline for demand and structured certificates and in whole loans where, you know, we're definitely seeing upward pressure.

Speaker Change: in a good way on the order book, meaning we got more people talking to us about purchases.

Speaker Change: including overall a longer time horizon. And it's one of the reasons we got the confidence in building the help for sale portfolio is.

Speaker Change: Certainly, a couple of the new potential buyers we're talking to are looking to make bulk purchases out of that portfolio.

Scott C. Sanborn: On the consumer side, you know, the interesting thing there is we'll do some research. This will be something we'll release probably later in the year, but we did some of our own research with consumers, and you know, half of all consumers are roughly carrying a credit card balance, and interestingly, it's the same percentage of consumers. They don't know the interest rates on their cards, and then of the 50% who say they do know the interest rates on their cards, they actually don't.

Scott Sanborn: On the consumer side, you know, the interesting thing there is we will do some research; this will be something we'll release probably later in the year. But we did some of our own research with consumers, and, you know, half of all consumers are roughly carrying a credit card balance, and interestingly, it's the same percentage of consumers they don't know the interest rates on their cards. They actually don't; they're wrong because they don't know the card rates have gone up by 500 basis points since the Fed started moving. And, you know, for those of you on the call, most of you probably don't carry a balance, but I challenge you: go try to find your credit card interest rate and look how difficult it is.

Speaker Change: On the consumer side, you know, the interesting thing there is, we'll do some research, this will be something we'll release probably later in the year, but we did some of our own research with consumers and, you know, half of all consumers

Speaker Change: are roughly are carrying a credit card balance. And interestingly, it's the same percentage of consumers. They don't know the interest rates on their cards.

Scott C. Sanborn: They're wrong because they don't know that card rates have gone up by 500 basis points since the Fed started moving. And, you know, for those of you on the call, most of you probably don't carry a balance, but I challenge you, go try to find your credit card interest rate, and see how difficult it is.

Speaker Change: And then of the 50% who say they do know the interest rate on their cards, they actually don't. They're wrong. Because they don't know that card rates have gone up by 500 basis points since the Fed started moving. And, you know, for those of you on the call, most of you probably don't carry a balance, but I challenge you, go try to find your credit card interest rate.

Scott Sanborn: So, you know, they don't make it easy to find for reason. So what we see is that, you know, for higher credit quality consumers, there's still price sensitivity at the top of the range. So the highest like, you know, are the where we're playing with the majority of our portfolio right now higher credit quality consumers. You know, we have passed on call it, you know, 280 ish basis points or so to the consumer, but they really don't know that their cards have moved. So set another way, the saving spread that we're currently providing is amongst the largest we've ever delivered in our history.

Scott C. Sanborn: So, you know, they don't make it easy to find for a reason, so what we see is that, you know, for higher credit quality consumers, there's still price sensitivity at the top of the range, so the highest, you know, where we're playing with the majority of our portfolio right now, higher credit quality consumers, we have passed on, call it, I don't know, 280-ish basis points or so to the consumer It's just if they don't know it, if they don't know that their cards have moved to, you know, an average of 21%. But, you know, I looked at my own card portfolio, and I have a card in my rewards card that has a 34% interest rate, right?

Speaker Change: and look how difficult it is. So they don't make it easy to find for a reason. So what we see is that for higher credit quality consumers,

Speaker Change: There's still price sensitivity at the top of the range, so where we're playing with the majority of our portfolio right now, higher credit quality consumers, we have passed on, call it, I don't know, 280-ish basis points or so to the consumer, but they really don't know that their cards have moved.

Speaker Change: So said another way, the savings spread that we're currently providing is amongst the largest we've ever delivered in our history. It's just, if they don't know it, if they don't know that their cards have moved to, you know, it's an average of 21%,

Scott Sanborn: It's just if they don't know it, if they don't know that their cards have moved to, you know, it's an average of 21%. But, you know, I looked in my own card portfolio and I have a card in my rewards card that's a 34% interest rate, right. So I didn't know that myself. So people just don't know it. So we're seeing strong demand just because the balances are strong. I'd say we think we have an opportunity through education to get take rate up by saying, hey, you know, you're not only carrying a balance; you're paying a lot more than you currently think.

Speaker Change: But, you know, I looked in my own card portfolio, and I have a card in my rewards card that's a 34% interest rate, right? So...

Scott C. Sanborn: So, I didn't know that myself, so people just don't know it, so we're seeing strong demand just because the balances are strong, I'd say we think we have an opportunity through education to get take rate up by saying, hey, you know, you're not only carrying a balance, you're paying a lot more than you currently think, so if we're offering you a loan at, call it 15%, it's actually well below what you're paying on your card, so that's a future opportunity, but overall, I'd say, you know, the constraint right now is not really consumer demand because the balances are large that are out. Okay, that's really helpful.

Speaker Change: I didn't know that myself, so people just don't know it. So we're seeing strong demand just because the balances are strong. I'd say we think we have an opportunity through education to get take rate up.

Scott Sanborn: So if we're offering you a loan at call it 15%, it's actually well below what you're paying on your card. So that's that's a future opportunity.

Speaker Change: by saying, hey, do you know...

Speaker Change: You're not only carrying a balance, you're paying a lot more than you currently think. So, if we're offering you a loan at, call it, 15%,

Vincent Caintic: But overall, I'd say, you know, the constraint right now is not really consumer demand because the balances are large that are out there. Okay, that's a little more.

Speaker Change: It's actually well below what you're paying on your card, so that's a future opportunity. But overall, I'd say, you know, the constraint right now is not really consumer demand because the balances are large that are out there.

Scott C. Sanborn: And maybe to tie into your discussion about the apps, I mean, how do you... in particular, because it does seem like it's a huge opportunity. Yeah, as we said, the big thing we're trying to do is really kind of push up loan sales pricing, because as we push up loan sales pricing, it allows us to unlock more marketing channels. We're, you know, we've got a number of inactive channels because they're on the higher side.

Scott Sanborn: Maybe the tie-in your discussion about the apps. I mean, how do you, I guess, educate the customer about that and maybe the customer know how much savings they can get. We talked about the action of the higher marketing industry and the case anything particular because it does seem like it's a huge job. Yeah, as we said, you know, the big thing we're trying to do is really kind of push up loan sales pricing, because as we push up loan sales pricing, it allows us to unlock more marketing channels where, you know, we've got a number of inactive channels because they're on the higher side, and when we're selling it at discount, it's just not economical, which is why we're leaning into our efficiency initiatives both on, you know, our operation side, but also marketing and product.

Speaker Change: Okay, that's really helpful. Maybe to tie in your discussion about the apps, I mean, how do you...

Speaker Change: I just educate the customer about that and make the customer know how much savings they can get. You talk about the ads, you talk about the higher marketing in this series, if there's anything in particular, because it does seem like there's a huge opportunity with those savings there.

Scott C. Sanborn: And when we're selling at a discount, it's just not economical, which is why we're leaning into our efficiency initiatives, both on, you know, our operations side, but also marketing and product. But as you know, as our performance continues to reinforce investors' confidence as the rate environment moves in our favor, as we get more buyers and, you know, have a bit more scarcity and the availability of the asset, we expect prices to continue to move up.

Speaker Change: Yeah, as we said, you know, the big thing we're trying to do is really kind of push up loan sales pricing because as we push up loan sales pricing, it allows us to unlock

Speaker Change: We've got a number of inactive channels because they're on the higher side, and when we're selling at a discount, it's just not economical, which is why we're leaning into our efficiency initiatives, both on our operations side, but also marketing and product.

Scott C. Sanborn: And as prices move up, we'll open up more, more marketing channels. And then within the marketing we're doing, you know, part of, you know, what our plan is for Deadeye Q is to just make it visible. I mean, it's a bit of a tragedy that the lack of consumer education goes beyond the APR. I mean, people also don't even understand that when they're making the minimum payment, they're going to be paying their credit card debt for 20 years, right? That, that they're, you know, that that's going to be a constant payment in their life.

Scott Sanborn: But as, you know, as our performance continues to reinforce investors' confidence as the rate environment moves in our favor, as we get more buyers and, you know, have a bit more scarcity and the availability of the asset, we expect prices to continue to move up, and as prices move up, we'll open up more marketing channels. And then within the marketing we're doing, you know, part of, you know, what our plan is for Debt IQ is to just make visible. I mean, I, it's a bit of a tragedy that the lack of consumer education goes beyond the APR.

Speaker Change: But as, you know, as...

Speaker Change: Our performance continues to reinforce investors' confidence as...

Speaker Change: The rate environment moves in our favor as we get more buyers.

Speaker Change: and, you know, have a bit more scarcity and the availability of the asset. We expect prices to continue to move up. And as prices move up, we'll open up more marketing channels. And then within the marketing we're doing, you know, part of, you know, what our plan is for DebtIQ is to just make

Vincent Kentik: So part of our goal with Deadeye Q is to really get this information in front of consumers, so that they're aware of what they're paying, they're aware of the size of their balances, and they're able to, you know, easily take action through things like Clean Sweep to, you know, take care of it. Thank you. And then last question, just wanted to clarify for Drew. So the TBNR guide for the third quarter is $40 to $50 million.

Speaker Change: Visible.

Scott Sanborn: I mean, people also, not everybody even understands that when they're making the minimum payment, they're going to be paying their credit card debt for 20 years, right? That they're, you know, that that's going to be a long-standing payment in their life. So part of our goal with Debt IQ is to really get this information in front of consumers so that they're aware of what they're paying, they're aware of the size of their balances, and you're able to, you know, easily take action through things like Clean Sweep to, you know, take care of it.

Speaker Change: I mean, I...

Speaker Change: It's a bit of a tragedy that the lack of consumer education goes beyond the APR. I mean, people also...

Speaker Change: Not everybody even understands that when they're making the minimum payment, they're going to be paying their credit card debt for 20 years, right?

Speaker Change: that that's going to be a longstanding payment in their life. So part of our goal with DebtIQ is to really get this information in front of consumers.

Speaker Change: so that they're aware of what they're paying, they're aware of the size of their balances, and they're able to easily take action through things like Clean Sweep to take care of it.

Andrew LaBenne: Thank you. And then last question, just wanted to clarify for Drew. So the TBNR guys, the third quarter, 40 to 50 million, I guess versus the second quarter, 54 million, so you could subtract 5 million, just like you sort of get to run rate for the third quarter, and then sort of that right in the case of going to run rate for the fourth quarter, you think about sort of the third quarter to get to the real point. You're breaking up a bit there, but I think, you know, so let me sort of say what I think you asked. But yeah, a guy for third quarter, 40 to 50 million in PPRR, you know, obviously I think we're most, most all of us now are anticipating rate cuts in the future.

Speaker Change: Thank you. And then last question, just wanted to clarify for Drew.

Vincent Kentik: I guess versus the second quarter, $54 million, we tried $5 million from the 50-40 to get to a run rate for the third quarter. And then, is that right? I mean, is this a good run rate to look at going forward when you're thinking about sort of the third quarter to get building up? You're breaking up a bit there, but I think, you know, so let me sort of say what I think you asked.

Drew: So the TBNR guy for the third quarter, $40 to $50 million, I guess, versus the second quarter, $54 million. So you would subtract $5 million from the 54 to get to a run rate for the third quarter.

Speaker Change: And then, there's that right, and then there's some good run rates to look at going forward when you're thinking about sort of the third quarter that you've been building off point. But again, thank you.

Speaker Change: You're breaking up a bit there, but I think, you know, so...

Andrew LaBenne: The guide for the third quarter, $40 million to $50 million in PPNR, you know, obviously, I think most all of us now are anticipating rate cuts in the future. Those aren't going to have a substantial benefit given the timing in Q3, maybe more benefit in Q4, at which point, you know, we'll update our guidance, you know, based on kind of where the market's evolving and what we're seeing happening. Okay, great. Thanks so much.

Speaker Change: Let me sort of say what I think you asked, the guide for third quarter, 40 to 50 million in PPNR, you know, obviously, I think most all of us now are anticipating rate cuts in the future. Those aren't going to have a substantial benefit given the timing in Q3.

Andrew LaBenne: Those aren't going to have a substantial benefit given the timing in Q3, maybe more benefit in Q4, at which point, you know, we'll update our guidance, you know, based on kind of where the market's evolving and what we're seeing happening. Okay, great.

Speaker Change: may be more benefit in Q4, at which point, you know, we'll update our guidance, you know, based on kind of where the market's evolving and what we're seeing happening.

Andrew LaBenne: Thanks so much.

Speaker Change: Okay, great. Thanks so much.

William Ryan: Next question comes from Bill Ryan with the company Seaport Research Partners. Bill. Yaline is now open.

Vincent Kentik: The next question comes from Bill Ryan with the company Seaport Research Partners. Bill, your line is now open. Good afternoon, Scott and Drew.

Speaker Change: Next question comes from Bill Ryan with the company Seaport Research Partners. Bill, your line is now open.

William Ryan: Good afternoon, Scott Drew. A couple of questions. First, kind of like on a high level, but, and I think you kind of hit on that a little bit earlier, but in the sense of your volume, we got to, you know, a little bit of bulk in origination expectations from Q2 to Q3. But as you're looking at your business, what Q kind of highlight as goodbye. for more meaningful increases in volume. I think you've kind of alluded to moving into higher cost marketing channels, and that would be reflective of improvements in the fair value of what you're receiving.

William Haraway Ryan: I have a couple of questions. I think you kind of hit on that a little bit earlier, but in the sense of your volume, you got a little bit above the origination expectations from Q2 to Q3. But as you're looking at your business, what do you kind of highlight as the binding constraint? For more meaningful increases in volume. I think you kind of alluded to moving into higher-cost marketing channels, and that would be reflective. But if you can kind of talk about, you know, if that's the impediment to higher volume. Yeah, I mean, Bill, I'd say that that's it. You got it.

William Haraway Ryan: Good afternoon, Scott and Drew.

William Haraway Ryan: A couple of questions. First,

William Haraway Ryan: kind of like on a high level, but and I think you kind of hit on that a little bit earlier, but in the sense of your volume, we got a little bit about the origination expectations from Q2 to Q3.

Speaker Change: But as you're looking at your business, what do you kind of highlight as the binding constraints for more meaningful increases in volume? I think you kind of alluded to moving into higher cost marketing channels, and that would be reflective of improvements in the fair value of what you're receiving.

Scott Sanborn: But if you kind of talk about, you know, if that's the key impediment to higher volume, and if there are any others. Yeah, I mean, Bill, I'd say the simple, that's, that's it. You got it. You know, the fact that we got prices up, call it roughly 20 basis points. And this quarter on the sole volume, that's great news. But versus where we were three years ago, it's still down more than 300. And, you know, that’s, that that margin is effectively what fuels the, you know, some of these are ability to kind of open up some of these other, these other marketing channels.

Speaker Change: But you can kind of talk about, you know, if that's the key impediment to higher volume and if there's any others.

Scott C. Sanborn: You know, the fact that we got prices up, call it roughly 20 basis points this quarter on the sold volume. That's great news. But versus where we were three years ago, it's still down more than 300. And, you know, that margin is effectively what fuels our ability to kind of open up some of these other, more marketing channels. So that's, you know, that's really why we've been focusing on, you know, these key levers around driving up returns to investors by, you know, keeping our delinquencies low so that they're willing to pay more and then, you know, working to bring in a broader set of buyers.

Speaker Change: Yeah, I mean Bill, I'd say the simple, that's it, you got it, you know, the fact that we got...

Speaker Change: prices up, call it roughly 20 basis points this quarter on the sold volume. That's great news.

William Haraway Ryan: but versus where we were three years ago, it's still down more than 300 and, you know, that's...

William Haraway Ryan: That that margin is effectively what fuels the

Scott Sanborn: So that's, you know, that's really why we've been focusing on these two levers around driving up returns to investors by, you know, keeping our delinquencies low so that they're willing to pay more. And then, you know, working to bring in a broader set of buyers. So those are ways we can get the price up without the benefit of the Fed, and, you know, when the Fed moves in our favor, which is looking increasingly likely, that'll, that'll kind of accelerate those efforts over time. So you, but you, you got the, you got the big picture. Okay, in our numbers, bill is, you know, if you look at what we're running out for marketing efficiency on the face of the PNL, right, we're called what, 25 30% below where we were when we were running at, you know, full volume, all channels open.

William Haraway Ryan: some of these, our ability to kind of open up some of these other marketing channels. So that's really why we've been focusing on these key levers around driving up returns to investors by keeping our delinquencies low so that they're willing to pay more, and then working to bring in a broader set of buyers.

Scott C. Sanborn: So those are ways we can get the price up without the benefit of the Fed. And, you know, when the Fed moves in our favor, which is looking increasingly likely, that'll kind of accelerate those efforts over time. So you, but you've got the big picture.

William Haraway Ryan: So those are ways we can get the price up without the benefit of the Fed and, you know, when the Fed moves in our favor, which is looking increasingly likely, that'll kind of accelerate those efforts over time. So you got the big picture.

William Haraway Ryan: Okay, and as a follow-up. And just to get into what you see in our numbers, Bill, if you look at what we're running at for marketing efficiency on the face of the P&L, right, we're, call it what, 25, 30% below where we were when we were running at full volume, all channels open. Okay, and then I know you may not want to answer the next question, but it kind of relates to the bank buyers that may be reentering or entering the market. 4th quarter.

William Haraway Ryan: And the way you can see it in our numbers, Bill, is if you look at what we're running at for marketing efficiency on the face of the P&L, right, we're, call it what, 25, 30% below where we were when we were running at, you know, full volume, all channels open.

William Ryan: Okay, and then I know you may not want to answer the next question, but it kind of relates to the bank buyers that may be re-entering or entering the market in the fourth quarter. But, as far as loan pricing, obviously, banks have historically been the higher bidders given their lower cost to funds. How material could that be to the fair value marks that you're experiencing today? I mean, obviously, you know, that they were a little bit of improvement quarter recorder. But if they actually enter the market, what kind of change in the fair value marks might you see?

Speaker Change: Okay. And then I know you may not want to answer the next question, but it kind of relates to the bank buyers that may be reentering or entering the market in the fourth quarter. But as far as loan pricing, obviously banks have historically been the higher bidders given their lower cost of funds.

William Haraway Ryan: But as far as loan pricing is concerned, obviously, banks have historically been the higher bidders given their lower cost of funds. But how material could that be to the fair value marks that you're experiencing today? I mean, obviously, you know that there was a little bit of improvement quarter over quarter, but if they actually enter the market, what kind of change in the fair value marks might they see, and as a percentage of your Marketplace Richness, how material might it be?

Speaker Change: How material could that be to the fair value marks that you're experiencing today? I mean, obviously, you noted there was a little bit of improvement quarter over quarter. But if they actually enter the market,

Scott Sanborn: And as a percentage of your marketplace recommendations, how material might these banks become? Yeah, I mean, I think for, you know, if they come, if they come back in Q4 as we're, here's where, you know, hoping starting to anticipate, you know, we do expect we'll get some price lift out of that. As far as the fair value marks are concerned, there's a number of dynamics to go into that, but certainly them bank, bank buyers coming into the mix that is driving price, and therefore the fair value marks will create some upward pressure. But we don't take the highest price that we're getting to mark the book.

Speaker Change: what kind of change in the fair value marks might you see, and as a percentage of your marketplace originations, how material might these things become?

Andrew LaBenne: Yeah, I mean, I think for you know, if they come back in Q4, as we're as we're, you know, hoping to anticipate, we do expect we'll get some price lift out of that. As far as the fair value marks are concerned, there's a number of dynamics that go into that, but certainly, bank buyers are coming into the mix that is driving prices, and therefore, the fair value marks will create some upward pressure. But we don't take the highest price that we're getting to mark the book. We actually take closer to the lowest price we're getting to mark the book. And so you're not going to see a large...

Speaker Change: Yeah, I mean, I think for, you know, if they come back in Q4, as we're, you know, hoping, starting to anticipate, you know, we do expect we'll get some price lift out of that.

Speaker Change: As far as the fair value marks are concerned, there's a number of dynamics that go into that, but certainly them...

Speaker Change: bank fires coming into the mix that is driving...

Speaker Change: price and therefore the fair value marks will create some upward pressure.

Scott Sanborn: We actually take closer to the lowest price we're getting to mark the book. And so you're not going to see a large, I wouldn't expect you to see a large moving up in the fair value marks, but in the effective price that we're getting and revenue, that should definitely be constructed. Okay.

Speaker Change: But we don't take the highest price that we're getting to mark the book. We actually...

Andrew LaBenne: I wouldn't expect you to see a large movement up in the fair value marks, but in the effective price that we're getting and revenue, that should definitely be constructed. Okay. And then just part of that question was, how material might they become as a part of your marketplace or your sales? I mean, I think in Q4, we're talking about hopefully bringing in the first few banks into the first couple banks into the mix, which will be constructive. But I think 2025 is probably where we will see, you know, if all goes well, where we would see more lift coming from the banks. OK.

Speaker Change: take closer to the lowest price we're getting to mark the book. And so, you're not going to see a large— I wouldn't expect you to see a large movement up in the fair value marks, but in the effective price that we're getting and revenue, that should definitely be constructive.

William Ryan: And then just part of that question was, how material might they become as a part of your marketplace or your sale? I mean, I think it's you four. We're talking about hopefully bringing in the first few banks into the first couple banks into the mix, which will be constructive, but I think 2025 is probably where we would see, you know, if all goes well, where we would see more lift coming from the pants. Okay, thank you for taking my questions.

Speaker Change: Okay.

Speaker Change: And then just part of that question was how material might they become as a part of your marketplace or your sales?

Speaker Change: I mean, I think in Q4 we're talking about hopefully bringing in the first few banks into the first couple banks into the mix, which will be constructive, but I think 2025 is probably where we would see, you know, if all goes well, where we would see more lift coming from the banks.

Speaker Change: Okay.

Speaker Change: Thank you for taking my questions.

David Chiaverini: Next question comes from David. David Chiaverini, with the company Woodbush Securities.

William Haraway Ryan: Thank you for taking my question. The next question comes from David Chiaverini with the company Wedbush Securities. David, your line is now open. Thanks.

Speaker Change: Next question comes from David Chiaverini with the company Wedbush Securities. David, your line is now open.

David Chiaverini: David, your line is not open. Thanks. The first question. I want to ask about a bigger picture, you know, trends in loan performance of prime borrowers for the upper end of your borrowers versus near prime or the lower end of your borrowers. Any difference in the performance, the credit performance of these cohorts? Let's say, you know, you can see in our disclosures that we're seeing stable to improving performance across all segments. You know, the lower was called the higher yielding lower bicoband segments. Experience the most deterioration, and therefore also experiencing the most recovery, we're seeing returns there be really, really strong.

David John Chiaverini: The first question I want to ask about a bigger picture, you know, trends in loan performance of prime borrowers at the upper end of your borrower base versus near prime or the lower end of your borrower base. Any difference in the credit performance of these cohorts? Let me say, you know, you can see in our disclosures that we're seeing stable to improving performance across all segments. You know, the lower, let's call it the higher yielding, lower FICO band segments experience the most deterioration and, therefore, also experience the most recovery.

David John Chiaverini: Thanks. The first question, I want to ask about bigger picture, you know, trends in loan performance.

David John Chiaverini: of Prime borrowers, or at the upper end of your borrowers versus near Prime or the lower end of your borrowers. Any difference in the credit performance of these cohorts?

Speaker Change: Let's say, you know, you can see in our disclosures that we're seeing stable to improving performance across

Speaker Change: All segments, you know, the lower, let's call it the higher yielding, lower FICO band segments.

Speaker Change: experienced the most deterioration and therefore also experiencing the most recovery. We're seeing returns there be really, really strong.

David John Chiaverini: We're seeing returns there be really, really strong. But I'd say we're, you know, across the board. We're seeing kind of, when I mentioned that we feel like we've really calibrated the environment, we're seeing pretty consistent, stable behavior across the board now. Great, and then a follow-up, kind of, yeah. I was going to say, just more broadly, outside of us, there's a lot to point out to feel good about, right?

Scott Sanborn: But I'd say we're, you know, across the board, we're seeing kind of, you know, when I mentioned that we feel like we've really calibrated the environment, we're seeing pretty consistent, stable behavior across the board now.

Speaker Change: But I'd say we're, you know, across the board, we're seeing kind of, you know, when I mentioned that we feel like we've really calibrated the environment, we're seeing pretty consistent, stable behavior across the board now.

Scott Sanborn: Ray, and they follow up kind of. I was going to say just more broadly outside of us that the broader signals on the consumer, you know, there, there’s lots of point out to feel good about right wage growth outpacing inflation and fairly manageable debt service burden and all the rest. But you know, no, we still have a very tight underwriting box given the cost of funds environment and given our desire to deliver outside, outside yields. We're still underwriting, you know, at a pretty meaningful reduction versus where we were before.

Speaker Change: Great, and then a follow-up, kind of, yeah.

Speaker Change: I was going to say, just more broadly outside of us,

Scott C. Sanborn: Wage growth, outpacing inflation, and fairly manageable debt service burdens and all the rest. But, you know, no, we still have a very tight underwriting box. Given the cost of funds environment and given our desire to deliver outside yields, we're still underwriting at a pretty meaningful reduction versus where we were before. And is it fair to say we've hit a point in the macro environment, kind of an inflection where you're able to convert, you know, borrowers due to the improving macro backdrop? Is that fair to say, based on the origination trends that we're seeing?

Speaker Change: There's a lot to point out to feel good about, right? Wage growth, outpacing inflation, and...

Speaker Change: Fairly manageable debt service burdens and all the rest, but you know, no, we still have a very tight

Speaker Change: underwriting box given the cost of funds environment and given our desire to deliver outside

Speaker Change: outside yields, we're still underwriting, you know, at a pretty meaningful reduction versus where we were before.

Scott Sanborn: And as a fair to say, we've hit a point in the macro environment, kind of an inflection where you're able to convert, you know, borrowers due to the improving macro backdrop, is that fair to say based on kind of the origination trends that we're seeing? I don't know that I would say that the macro is, you know, driving a big change beyond the fact that, you know, consumers have been accumulating balances in cards, right? And I think you're seeing that outside of us again. That's the pace of that is slowing, which I think is a good sign for consumers.

Speaker Change: And is it fair to say we've hit a point in the macro environment kind of an inflection where

Speaker Change: you're able to convert borrowers due to the improving macro backdrop. Is that fair to say, based on the origination trends that we're seeing?

David John Chiaverini: I don't know that I would say that the macro is, you know, driving a big change beyond the fact that, you know, consumers have been accumulating balances on cards, right? And I think you're seeing that outside of us again. I think the pace of that is slowing, which I think is a good sign for consumers. And, you know, we're seeing more, let's say, in general; we feel like consumers have adjusted as well.

Speaker Change: I don't know that I would say that the macro is, you know, driving a big change beyond the fact that, you know, consumers have been accumulating balances in cards, right? And I think you're seeing that outside of us again, that's the pace.

Scott Sanborn: And, you know, we're seeing more; let's say, in general, we're feeling like consumers have adjusted as well, consumers who calibrated themselves to the environment. And we're seeing less of the, let's call it more caught off guard by how their cost of living has been growing, and consumers feel like they've adjusted to the environment. And our boxes adjusted to this environment and, you know, that's giving us a lot of confidence in what we're booking. It as you can see our lifetime loss expectations are either stable or actually coming down since the last time we talked.

Speaker Change: of that is slowing, which I think is a good sign for consumers.

Speaker Change: And, you know, we're seeing more.

David John Chiaverini: Consumers have calibrated themselves to the environment, and we're seeing less of the, let's call it, more caught off guard by how their cost of living has been growing. And consumers feel like they've adjusted to the environment. Our box is adjusted to this environment.

Speaker Change: Let's say in general we're feeling like consumers have adjusted as well. Consumers have calibrated themselves to the environment and we're seeing less of the

Speaker Change: let's call it more caught off guard by how their cost of living has been growing and consumers feel like they've adjusted to the environment. Our box is adjusted to this environment and, you know, that's giving us a lot of confidence in what we're booking. And as you can see, our lifetime loss expectations are either stable or actually coming down since the last time we talked.

Scott C. Sanborn: And, you know, that's giving us a lot of confidence in what we're booking. And, as you can see, our lifetime loss expectations are either stable or actually coming down since the last time we talked. And then the last one for me is, as it relates to, you know, potential Fed rate cuts, all else being equal, are you able to, you know, opine on how much of a benefit to loan pricing or gain on sale margins could occur for each 25 basis point rate cut? I mean, there's two ways of getting benefits.

Scott Sanborn: Great, Frank, thanks for that. And then last one for me is, as it relates to, you know, potential Fed rate cuts, all else being equal, are you able to, you know, opine on, you know, how much of a benefit to loan pricing or gain on sale margins could occur for each 25 basis point rate cut? I mean, there's two ways of benefits that's right. First is going to be deposit costs, which you saw this quarter. You know, our pace of increase has slowed. And so we would expect, depending on our growth aspirations, right, if we're growing the balance sheets out, sir, we're going to want more deposits.

Frank: Great Frank, thanks for that and then last one for me is as it relates to you know potential Fed rate cuts

Speaker Change: All else being equal, are you able to, you know, opine on, you know, how much of a benefit to loan pricing or gain on sale margins could occur for each 25 basis point rate cut?

David John Chiaverini: That's right. First, there will be deposit costs, which you saw this quarter. You know, our pace of increase has slowed. And so we would expect, depending on our growth aspirations, right, if we're going to balance the book faster, we're going to want more deposits. But over time, as rates come down, applying 25 basis points across our entire deposit base, that's going to be a pretty meaningful good guy when we're able to move. And then on the investor side of the house, you know, there are some for asset managers purchasing. These are kind of fairly formulaic deals based on the forward curve.

Speaker Change: I mean, there's two ways it benefits us, right? First is going to be deposit costs, which you saw this quarter, you know, our pace of increase has slowed. And so we would expect, depending on our growth aspirations, right, if we're going to balance sheet faster, we're going to want more deposits. But over time, as rates come down.

Scott Sanborn: But over time, as rates come down, you know, applying 25 basis points across our entire deposit base, that's going to be a pretty meaningful good guy when we're able to move. And then on the investor side of the house, you know, there's some, for the asset managers purchasing, these are kind of fairly formulaic deals based on the forward curve. So as rate expectations solidify and come down, we're going to, and again, on a lag, because these are multi-quarter deals, but we'll start to see that come through in pricing there.

Speaker Change: you know, applying 25 basis points across our entire deposit base.

Speaker Change: That's going to be a pretty meaningful good guy when we're able to move. And then on the investor side of the house...

Speaker Change: There's some, for the asset managers purchasing, these are kind of fairly formulaic deals based on...

Speaker Change: the forward curve. So as rate expectations solidify and come down, and again on a lag because these are multi-quarter deals, but we'll start to see that come through in pricing there.

Scott Sanborn: Agreed. And pretty directly.

Scott Sanborn: Great. Thanks very much.

Speaker Change: Agreed.

Speaker Change: and pretty directly. Great.

Scott C. Sanborn: So as rate expectations solidify and come down, we're going to, again on a lag because these are multi-quarter deals. But we'll start to see that come through in pricing there, and pretty directly. Great, thanks very much. Next question comes from Reggie Smith with the company J.P. Morgan. Reggie, your line is not open.

Speaker Change: Great. Thanks very much.

Reginald Smith: Next question comes from Reddysmith with the company JP Morgan Reggie. Yalan is not open. Thank you. I appreciate all the disclosure. The slide we show, I think, the four different funding options, obviously, the pros and cons to each.

Speaker Change: Next question comes from Reggie Smith with the company J.P. Morgan. Reggie, your line is now open.

Reginald Lawrence Smith: Thank you. I appreciate all the disclosure. On the slide we showed, I think the four different funding options, obviously the pros and cons of each. I'm curious, you know, longer term, how do you think about the optimal mix of funding? And then also kind of thinking about your leverage ratio? Where do you think that kind of settles out?

Reginald Lawrence Smith: Thank you. I appreciate all the disclosure. The slide we show, I think the four different

Scott Sanborn: Curious, you know, long term, how do you think about the optimal mix of funding and then also kind of thinking about your leverage ratio? Where do you think that kind of settles out longer time? Yeah, listen, I think the, they all have different characteristics on how they hit the balance sheet and if they hit the balance sheet and the income statement. And obviously, in this environment, we've leaned into the structure certificates where, you know, we're getting the lower risk weighting, we're getting the upfront gain that's been very valuable to us at a time where maybe the rest of the marketplace is pulling back.

Reginald Lawrence Smith: Funding options, obviously the pros and cons to each. I'm curious, you know, longer term, how do you think about the optimal mix of funding? And then also kind of thinking about your leverage ratio.

Andrew LaBenne: Yeah, listen, I think they all have different characteristics on how they hit the balance sheet and if they hit the balance sheet and the income statement. And obviously, in this environment, we've leaned into the structured certificates where, you know, we're getting the lower risk weighting, we're getting the upfront gain, that's been very valuable to us at a time where maybe the rest of the marketplace has been pulling back.

Speaker Change: where do you think that kind of settles out longer term?

Speaker Change: Yeah, listen, I think they all have different characteristics on how they hit the balance sheet and if they hit the balance sheet in the income statement.

Speaker Change: And obviously, in this environment, we've leaned into the structured certificates where, you know, we're getting the lower risk weighting, we're getting the upfront gain that's been very valuable to us at a time where maybe the rest of the marketplace has been pulling back.

Scott Sanborn: Ideally, over time, we would like to get more loans into health or investment, where we're going to earn the longest, the longest returns for the business three times, where we sell it. But at the same time, we want to keep capacity for the marketplace and make sure we're keeping our partners and selling effectively through that. The one, the one place where that is relatively new for us as the extended seasoning and the helper sale. And I think that's where you will see the most optionality in terms of how we use the balance sheet. Because while prices are low right now, we're seasoning those loans, we're getting, we're not taking the upfront Cecil, and we're getting an effective return.

Speaker Change: Ideally, over time, we would like to get more loans into healthcare investment, where we're going to earn...

Andrew LaBenne: Ideally, over time, we would like to get more loans into healthcare investment, where we're going to earn the longest, you know, the longest returns for the business three times where we sell it. But at the same time, we want to keep capacity for the marketplace and make sure we're keeping our partners and selling effectively through that. The one place where that is, you know, relatively new for us is the extended seasoning and the helper sale.

Speaker Change: the longest, you know, the longest returns for the business three times.

Speaker Change: where we sell it. But at the same time, we want to keep capacity for the marketplace and make sure we're keeping our partners and selling effectively through that.

Speaker Change: The one place that is relatively new for us is the extended seasoning and the helper sale. And I think that's where you will see the most optionality in terms of how we use the balance sheet.

Speaker Change: Because while prices are low right now, we're seasoning those loans, we're getting...

Andrew LaBenne: And I think that's where you will see the most optionality in terms of how we use the balance sheet. Because while prices are low right now, we're seasoning those loans, we're getting, we're not taking the upfront seasonal, and we're getting an effective return. But as prices improve, we're going to have the option to sell that and take the gain and then create room on the balance sheet for more loans and notes to put on in the future. So I think it will, Reggie, I think it will depend a bit on the environment and where we see it going.

Scott Sanborn: But as prices improve, we're going to have optionality to sell that and take the gain and then create room on the balance sheet for more loans and a notes to put on in the future.

Speaker Change: We're not taking the upfront CECL and we're getting an effective return.

Speaker Change: But as prices improve, we're going to have optionality.

Speaker Change: to sell that and take the gain and then create room on the balance sheet for more loans and A notes to put on in the future.

Andrew LaBenne: So I think it will, Reggie. I think it will depend a bit on the environment and where we see it going, but we're going to be optimizing across the four mechanisms for the economics at that point in time in long term. As far as the leverage rates are concerned. Just as on the leverage ratio. Go ahead, Richard. Sorry, you got leverage. I'll follow up. Go ahead. Yeah, I wasn't going to tell you anything. Now I'm just kidding; it's, we still, we still have room to expand the balance sheet, and you can see that as our leverage ratio is coming down.

Speaker Change: I think it will, Reggie, I think it will depend a bit on the environment and where we see it going, but we're going to be optimizing across the four mechanisms for the economics at that point in time and long term.

Andrew LaBenne: But we're going to be optimizing across the four mechanisms for the economics at that point in time and in the long term. As far as the leverage rates are your second question, just based on the leverage ratio. Go ahead, Rich. I wasn't going to tell you anything.

Reginald Lawrence Smith: As far as the leverage rates are concerned, we'll have to wait and see.

Speaker Change: Just based on the leverage ratio.

Andrew LaBenne: No, I'm just kidding. We still have room to expand the balance sheet, and you can see that as our leverage ratio is coming down. We haven't disclosed a target because we're going to continue to use our stress testing capabilities and the target mix of the balance sheet longer term to have that leverage target evolve. But just know right now, between room on the bank balance sheet and the cash as a whole code, we have room to continue expanding the balance sheet and putting more assets on the balance sheet, um, and then just kind of following up on the extended reasoning uh just so we understand Would those have been the same entities that would have bought sole loans previously? And if so, like, what do you think it will take to kind of get them back into it? into that. Bucket.

Richard: Go ahead, Richard.

Richard: I wasn't going to tell you anything, no, I'm just kidding.

Andrew LaBenne: We haven't disclosed a target because we're going to continue to use our, our stress testing capabilities and the target mix of the balance sheet longer term to, to have that leverage target of all. But just know right now between, you know, room on the bank balance sheet and the cash of the whole code we have room to continue expanding the balance sheet and putting more assets on the balance sheet.

Speaker Change: We still have room to expand the balance sheet, and you can see that as our leverage ratio is coming down. We haven't disclosed a target because we're going to continue to use our stress testing capabilities and the target mix of the balance sheet longer term.

Richard: to have that leverage target evolve. But just know right now between, you know, room on the bank balance sheet and the cash as a whole code, we have room to continue expanding the balance sheet and putting more assets on the balance sheet.

Scott Sanborn: And then it's kind of following up on the extended evening, just to understand, are those the, they didn't buy in those, would those have been the same entity that would have bought all loans previously. And if so, like, what do you think it will take to kind of get them back into that bucket? I think I got an extension of that is, to your knowledge, like, how are these portfolios performing relative to your investors, pinch marks? My, my guess is that they're probably doing a little bit better than the investors were expecting; maybe I'm off with that.

Speaker Change: And then just kind of following up on the extended reasoning, just so we understand, are those the...

Speaker Change: Thank you for buying those.

Speaker Change: Would those have been the same entities that would have bought sole loans previously?

Speaker Change: And if so, like, what do you think it will take to kind of get them back into that?

Reginald Lawrence Smith: And I guess an extension of that is, to your knowledge, how are these portfolios performing relative to your investors' benchmarks? My guess is that they're probably doing a little bit better than the investors were expecting. They may be satisfied with that. Yeah, no, I think, let me, let me, I might answer your question a little bit differently, just to, first of all, let's talk about how investors are doing with the loans they've been purchasing recently. Keep in mind, most of our purchases this year have actually been through the Structured Certificate Program. And I think it's been very successful.

Speaker Change: Bucket. And I guess an extension of that is, to your knowledge, like how are these portfolios performing relative to your investors benchmarks? My guess is that they're probably doing a little bit better than the investors were expecting. Maybe I'm off with that.

Scott Sanborn: Yeah, no, I think, let me, let me, I might answer your question a little bit differently. Just to, so first of all, let's talk about how investors are doing with the loans they've been purchasing recently. Keep in mind most of our purchases this year have actually been through the structured certificate program, and I think it's been very successful. I think the, you know, the residuals are performing very well, meeting and exceeding expectations, and that's why we're seeing demand come through that program. And we expect that to continue on the extended seasoning. You know, these are essentially the same loans we put on balance sheet. Sometimes the mixes in the grades that we're putting on are a little bit different based on where we think investor demand is going to be in the returns we're seeing.

Andrew LaBenne: I think the residuals are performing very well, meeting and exceeding expectations. And that's why we're seeing demand come through that program, and we expect that to continue. On the extended seasoning, you know, these are essentially the same loans we put on balance sheets. Sometimes the mixes in the grades that we're putting on are a little bit different based on where we think investor demand is going to be in the returns we're seeing.

Speaker Change: Yeah, no, I think, let me, let me, I might answer your question a little bit differently just to, so first of all, let's talk about

Speaker Change: how investors are doing with the loans they've been purchasing recently. Keep in mind, most of our...

Speaker Change: Purchases this year have actually been through the Structured Certificate Program, and I think it's been very successful. I think the, you know, the residuals are performing very well, meeting and exceeding expectations, and that's why we're seeing demand come through that program.

Speaker Change: And we expect that to continue. On the extended seasoning...

Speaker Change: These are essentially the same loans we put on balance sheets. Sometimes the mixes in the grades that we're putting on are a little bit different based on where we think investor demand is going to be in the returns we're seeing. We've done sales to whole loan buyers that have bought from us previously.

Andrew LaBenne: We've done sales to whole loan buyers that have bought from us previously. We've done a sale to a new buyer, and we've actually done a sale using extended seizing loans through the Structured Certificate Program as well.

Scott Sanborn: We've done sales to hold on buyers that have bought from us previously. We've done a sale to a new buyer, and we've actually done a sale using extended season loans through the structured certificate program as well. So it's really just on balance sheet loan inventory where we can have more control of when the sale happens, and we can provide more scale. In one cell, then we can work accumulating from origination for the deal, so someone comes to us and said, hey, I want to buy 300 million because all of a sudden I have investor capital and I need to put it for you, so we say great.

Speaker Change: We've done a sale to a new buyer. We've actually done a sale

Andrew LaBenne: So it's really just on balance sheet loan inventory where we can have more control of when the sale happens, and we can provide more scale in one cell than we can if we're accumulating from origination for the deal. So if someone comes to us and says, hey, I want to buy $300 million because all of a sudden I have investor capital and I need to put it to use, we say, great, the price on that's going to be this versus the price you want us to accumulate is this.

Speaker Change: using Extended Seizing Loans through the Structured Certificate Program as well. So it's really just on balance sheet loan inventory where we can have more control of when the sale happens and we can provide more scale.

Speaker Change: in one cell than we can if we're accumulating from origination for the deal. So if someone comes to us and says, hey, I want to buy $300 million.

Speaker Change: because all of a sudden I have investor capital and I need to put it for use. We said, great, the price on that is going to be this versus the price if you want us to accumulate is this.

Scott Sanborn: The price on that's going to be this versus the price if you want us to accumulate as this, and we can have a different conversation on the dynamics around price and size given it's already available on the balance sheet. for sale. So more flexibility for us, more flexibility for buyers.

Andrew LaBenne: And we can have a different conversation on the dynamics around price and size given it's already available on the balance sheet. So more flexibility for us, and more flexibility for buyers. And if I could sneak one last question in, you kind of alluded to this, but I was just curious, with some of your agreements, are there any that you've agreed to where the pricing is expiring or up for renegotiation? So, for instance, you know, maybe you had agreed for a year-type relationship at a certain price, and it may be rolling off in a few months. Is that happening with any

Speaker Change: And we can have a different conversation on the dynamics around price and size, given it's already available on the balance sheet for sale.

Scott Sanborn: And if I could sneak one last question in, you kind of alluded to this, but I'm just curious, with some of your agreement, are there any that you agreed to with a pricing is expiring or up for renegotiations or, for instance, you know, maybe you had agreed for a year type relationship at a certain pricing that maybe rolling off in a few months? Is that happy with any of your structures? Yeah, normally, you know, when we independent, yeah, when we, when we set up these structured certificate programs with buyers, we have some buyers where we're going one quarter in advance, meaning you're going to do three purchases with us and we set a formula on the spread at which those will price.

Speaker Change: So, more flexibility for us, more flexibility for buyers.

Speaker Change: And if I could sneak one last question in. You kind of alluded to this, but I was just curious. With some of your agreements, are there any that you've agreed to where the pricing is expiring or up for renegotiation? So, for instance, you know, maybe you had agreed for a year type.

Speaker Change: relationship at a certain pricing that may be rolling off in a few months. Is that happening with any of your structures?

Andrew LaBenne: Yeah, normally, when we set up these structured certificate programs with buyers, we have some buyers where we go one quarter in advance, meaning you're going to do three purchases with us, and we set a formula on the spread at which those will price. So the price isn't locked in, but the pricing formula is locked in for the next quarter. That's pretty typical.

Speaker Change: Yeah, normally, you know, when we...

Speaker Change: When we set up these structured certificate programs with buyers, we have some buyers where we're going one quarter in advance, meaning

Speaker Change: You're going to do three purchases with us, and we said...

Scott Sanborn: So the price isn't locked into the pricing formula; it is locked in for the next quarter. That's pretty typical. We have some arrangements, which I would call the minority of the sales we've been making, that have been extended out for a couple quarters on a more complex formula that gives us incentives to raise prices and depends on where market rates are.

Speaker Change: a formula on the spread at which those will price. So the price isn't locked in, but the pricing formula is locked in for the next quarter. That's pretty typical.

Andrew LaBenne: We have some arrangements, which I would call the minority of the sales we've been making, that have been extended out for a couple quarters on a more complex formula that gives us incentives to raise prices and depends on where market rates are. So there are different programs out there, but as we said before, we're not looking to lock in all our deals for the next year because the pricing is still not ideal from our perspective where we are, and I think there's opportunity to raise prices as we go forward.

Speaker Change: We have some arrangements, which I would call the minority of the sales we've been making, that have been extended out for a couple quarters.

Speaker Change: on a more complex formula that gives us incentives to raise prices.

Scott Sanborn: So there are different programs out there, but as we said before, we're not looking to lock in all our deals for the next year because the pricing isn't, you know, still not ideal from our perspective where we're at, and I think there's opportunity to raise prices as we go forward. Thank you.

Speaker Change: and depends on where market rates are.

Speaker Change: So, there are different programs out there, but as we said before, we're not looking to lock in all our deals for the next year because the pricing isn't, you know, still not ideal from our perspective where we're at, and I think there's opportunity to raise price as we go forward.

Speaker Change: Thank you.

Bradley Capuzzi: Next question comes from Brad Kapoozy with a company 5%. Learned Brad, your line is not open.

Andrew LaBenne: Thank you. The next question comes from Brad Capuzzi with the company Piper Sandler. Brad, your line is now open. Good afternoon, congratulations on a great quarter. Most of my questions have been answered, but just wanted to ask a quick one.

Speaker Change: Next question comes from Brad Capuzzi with the company Piper Sandler. Brad, your line is now open.

Bradley Capuzzi: I'd like to have the name Congrats on a great quarter. Most of my questions have been answered, but just wanted to ask a quick one. You know, I know you mentioned a lot of the origination growth is driven by, you know, loan pricing and its capacity to keep originating. You know, how are you feeling about the consumer? I know current metrics are improving, but what factors does macro uncertainty and the health of the consumer have to do with the willingness to increase originations? Yeah, I mean, as we mentioned, we're keeping a, I think we said a lot last call.

Bradley Michael Capuzzi: Hi, good afternoon. Congrats on a great quarter. Most of my questions have been answered, but just wanted to ask a quick one. You know, I know you mentioned

Bradley Michael Capuzzi: You know, I know you mentioned a lot of the origination growth is driven by, you know, loan pricing and the capacity to keep originating. But how are you feeling about the consumer? I know credit metrics are improving, but what factors does macro uncertainty and the health of the consumer have to do with the willingness to increase origination?

Bradley Michael Capuzzi: A lot of the origination growth is driven by, you know, loan pricing and the capacity to keep originating.

Speaker Change: How are you feeling about the consumer? I know credit metrics are improving, but what factors does macro uncertainty and the health of the consumer have to do with the willingness to increase originations?

Scott C. Sanborn: Yeah, I mean, as we mentioned, we're keeping a, I think we said last call, we feel good. We've, you know, this hasn't been a quarter or two; we've had multiple quarters in a row of consumer performance coming in at or for kind of ahead of expectations. So we feel quite good about what we're booking.

Speaker Change: Yeah, I mean, as we mentioned, we're keeping a, I think we said last call, we're, we feel good, we've, you know, this hasn't been a quarter or two, we've had multiple quarters in a row of consumer performance coming in at or kind of ahead of expectations.

Scott Sanborn: Well, we feel good. We, you know, this hasn't been a quarter or two. We've had multiple quarters in a row of expect of consumer performance coming in at or for kind of ahead of expectations. So we feel quite good about what we're booking. We are still optimizing for returns for investors, right? And still trying to draw, you know, we're delivering just in terms of straight IRRs on the asset. We're delivering the highest returns we've ever delivered, really, outside of, you know, abnormal periods like the post-COVID period, but on a consistent basis. And so we're, we're keeping the conservative box, not because we've got a lot of concerns about the outlook so much as we just want to make sure that we're driving returns up to investors so that we can get it back in terms of pricing.

Scott C. Sanborn: We are still optimizing for returns for investors, right? And still trying to, you know, we're delivering, just in terms of straight IRRs on the asset, we're delivering the highest returns we've ever delivered really outside of, you know, abnormal periods like the post-COVID period, but on a consistent basis. And so we're keeping a conservative box not because we've got a lot of concerns about the outlook so much as we just want to make sure that we're driving returns up to investors so that we can get it back in terms of price and then, you know, metrics.

Speaker Change: So we feel quite good about what we're booking. We are still optimizing for returns for investors, right, and still trying to, you know, we're delivering, just in terms of straight IRRs on the asset, we're delivering the highest

Speaker Change: returns we've ever delivered really outside of, you know, abnormal periods like the post COVID period, but on a consistent basis. And so we're we're keeping a conservative box, not because we've got a lot of concerns about the outlook so much as we just want to make sure that we're driving returns up to investors so that we can get it back.

Scott Sanborn: Back.

Scott Sanborn: And then, you know, metrics are needed. Go ahead. Yeah, just a last one for me, just one more competitive standpoint. Have you seen competitors pull back or push for growth? And what do you see APRs trending in the space? Yeah, I mean, the space remains pretty competitive and dynamic, like all the ways over the 15 plus years we've been doing this. We've seen veterans come in and out. We see some irrational behavior. We've seen people, you know, dropping coupons, going out in terms, you know, changing where they operate on the spectrum. I'd say, as usual, we kind of maintain the course and aren't chasing any of that because, you know, over time, it comes home to roost.

Bradley Michael Capuzzi: That's charged. Yeah, just the last one for me on a, you know, just from a competitive standpoint, have you seen competitors pull back or push for growth? And what do you see APRs trending in the? Yeah, I mean, the space remains pretty competitive and dynamic. Like, like always, over the, you know, 15 plus years we've been doing this, we see new entrants come in and out, we see, I think, some irrational behavior, we've seen people, you know, dropping coupons, going out in terms, you know, changing where they operate on the spectrum And because, you know, over time, it comes home to roost.

Dr. Chardy: Go ahead, Dr. Chardy.

Dr. Chardy: Yeah, just the last one for me on a, you know, just from a competitive standpoint, have you seen competitors pull back or push for growth? And where do you see APRs trending in the space? Thanks.

Speaker Change: Yeah, I mean, the space remains pretty competitive and dynamic, like always, over the, you know, 15 plus years we've been doing this. We've seen new entrants come in and out. We see, I think, some irrational behavior. We've seen people...

Speaker Change: You know, dropping coupons, going out in terms, you know, changing where they operate on the spectrum. I'd say, as usual, we kind of maintain the course and aren't chasing any of that.

Scott Sanborn: So I would say yes, we're seeing change, but it's the normal change we see in the space, which is new entrants coming in and or people who are trying to achieve their own objectives, changing their behaviors, not necessarily in response to macro or consumer.

Speaker Change: because, you know, over time it comes home to roost.

Speaker Change: So, I would say, yes, we're seeing change, but it's the normal change we see in the space, which is new entrants coming in and or people who are trying to achieve their own objectives, changing their behaviors, not necessarily in response to macro or consumer.

Scott Sanborn: Thank you.

Scott Sanborn: That's a great.

Scott Sanborn: Thank you.

Speaker Change: Thank you. That's it from there.

Scott C. Sanborn: So I would say, yes, we're seeing change, but it's the normal change we see in the space, which is new entrants coming in and or people who are trying to achieve their own objectives, changing their behaviors, not necessarily in response to macro or consumer. Thank you. Thank you. Our next question comes from Tim Switzer with the company KPW. Tim, your line is now open. Hey, good afternoon.

Timothy Switzer: Next question comes from Tim Switzer with the company KBW. Tim. Your line is now open. Hey, good afternoon. They're taking my questions. What do they know what to ask about you? You've touched on the credit a few times here, but I believe I remember you guys' guidance last quarter was forward and that charge-off dollars to decline, but the rate to continue increasing and the net charge-off rate improved, you know, fairly meaningfully this quarter.

Speaker Change: Thank you. Our next question comes from Tim Switzer with the company KPW. Tim, your line is now open.

Timothy Jeffrey Switzer: Thanks for taking my questions. One of the things I want to ask about credit. You've touched on it a few times here, but I believe I remember your guys' guidance last quarter was for net charge-off dollars to decline, but the rate to continue increasing, and the net charge-off rate improved fairly meaningfully this quarter. Were returns just that much better than you expected, or what was happening there? What are your expectations, I guess, going forward? Is it still net charge-off dollars to decline?

Timothy Jeffrey Switzer: Hey, good afternoon. Thanks for taking my questions.

Timothy Jeffrey Switzer: One of the things I wanted to ask about, you've touched on the credit a few times here, but I believe if I remember, your guys' guidance last quarter was for net charge-off dollars to decline, but the rate to continue increasing.

Andrew LaBenne: We're trenches that much better than you expected, or what was having there, and what are your expectations, I guess, going towards the net charge up dollars to decline. Yeah, I would say it improved and better more than we expected, and you saw that also in the vintage disclosures that we put out there. So, you know, I think we've seen pretty rapid improvement. I think dollar charge-offs will continue to improve; might be a bit more modest. The charge-off rate probably could go in a bit in either direction at this point, but I think we should continue to see dollar charge-off improvements as we go into the next quarter on the health and investment portfolio.

Speaker Change: And the net charge-off rate improved fairly meaningfully this quarter. Were returns just that much better than you expected, or what was happening there? And what are your expectations, I guess, going forward? Is it still net charge-off dollars to decline?

Andrew LaBenne: Yeah, I would say it improved more than we expected, and you saw that in the vintage disclosures that we put out there. So I think we've seen pretty rapid improvement. I think dollar charge-offs will continue to improve, but the charge-off rate... probably could go a bit in either direction at this point, but I think we should continue to see dollar charge-off improvements as we go into the next quarter on the healthcare investment portfolio. Great, okay. And if I could have one more quick one, then we're going to get to the end here.

Speaker Change: Yeah, I would say it improved and better more than we expected and you saw that also in the vintage disclosures that we put out there. So, you know, I think we've seen pretty rapid improvement. I think dollar charge-offs will continue to improve, might be a bit more modest. The charge-off rate

Speaker Change: probably could go a bit in either direction at this point, but I think we should continue to see dollar charge-off improvements as we go into the next quarter on the healthcare investment portfolio.

Andrew LaBenne: Great, okay. If I get one more quick one, we're going to have the end here, but you guys mentioned to step up in expenses, and I think your comment was along the lines of the $5 million benefit this quarter relative to your expectations. So, should we expect a $5 million increase quarter of a quarter, and it's all that on the depreciation line, or are there some other areas too? Not all on the depreciation line, although that will be some of it. Keep in mind if originations go up, marketing will spend will go up. So, you're going to that's included in the expenses going up, guidance that we're giving there.

Timothy Jeffrey Switzer: But you guys mentioned a step up in expenses, and I think your comment was along the lines of there being a $5 million benefit this quarter relative to your expectations. So should we expect a $5 million increase quarter over quarter? And is all that on the depreciation line, or are there some other areas too?

Speaker Change: Great, okay. And if I could have one more quick one, I know we're getting to the end here, but you guys mentioned a step up in expenses, and I think your comment was along the lines of there's a $5 million benefit this quarter relative to your expectations. So, should we expect a $5 million increase quarter over quarter? And is all that on the depreciation line, or are there some other areas too?

Andrew LaBenne: Not all on the depreciation line, although that will be some of it. You know, keep in mind if originations go up, marketing spend will go up. So you're going to, that's, you know, included in the expenses going up guidance that we're giving there. You know, without giving you a number, I mean, you're probably not in the wrong ballpark there in terms of where the numbers are going. But, you know, as I predicted expense increases this quarter, I was wrong. So there is some volatility in the line in terms of how it's going to come through. Okay, yeah, totally understandable.

Speaker Change: Not all on the depreciation line, although that will be some of it. Keep in mind, if originations go up, marketing spend will go up, so that's included in the expenses going up guidance that we're giving there.

Andrew LaBenne: You know, without giving you a number, I mean, you're probably not in the wrong ballpark there in terms of where the numbers are going, but you know, as I predicted, expense increases this quarter and was wrong, so there is some volatility in the line in terms of how it's going to come through. Okay, yeah, totally understandable.

Speaker Change: You know, without giving you a number, I mean, you're probably not in the wrong ballpark there in terms of where the numbers are going. But, you know, as I predicted, expense increases this quarter and was wrong, so there is some volatility in the line in terms of how it's going to come through.

Timothy Jeffrey Switzer: That's all for me. Thank you, guys. And now, I'd like to turn the call back over to Artem Nalivayko for additional questions. Thank you, Jayla. So we have some additional questions that were submitted via email, but I actually think we covered off all the questions in the analyst Q&A. So with that, we'll wrap up our second quarter earnings conference call. Thank you for joining us today. And if you have any questions, please email us at IR@LendingClub.com. Thank you. That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.

Andrew LaBenne: That's all for me. Thank you, guys.

Speaker Change: Okay, yeah, totally understandable. That's all for me. Thank you guys.

Artem Nalivayko: And now I'd like to turn the call back over to Artem Nalivayko for additional questions. Thank you, Jailis. So we have some additional questions that were submitted via email, but I actually think we covered off on all the questions in the analyst Q&A.

Speaker Change: And now I'd like to turn the call back over to Artem Nalivayko for additional questions.

Artem Nalivayko: Thank you, Jayless. So we had some additional questions that were submitted via email, but I actually think we covered off on all the questions in the analyst Q&A. So with that, we'll wrap up our second quarter earnings conference call. Thank you for joining us today. And if you have any questions, please email us at IR at LendingClub.com.

Artem Nalivayko: So, with that, we'll wrap up our second quarter earnings conference call. Thank you for joining us today. If you have any questions, please email us at iratlinningclub.com. Thank you.

Operator: That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.

Speaker Change: Thank you.

Speaker Change: That will conclude today's conference call. Thank you for your participation and enjoy the rest of your day.